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I need assistance writing a business proposal. I have to select a new and realistic good or service for an existing industry. I need to write the economic analysis section of a business proposal. This will include statements about the market structure and the elasticity of demand for the good or service, based on text book principles. I need to create hypothetical data, based on similar real world products to estimate fixed and variable costs.

Discuss the following:
Identify market structure
Identify elasticity of the product

Include rationale for the following questions:
How will pricing relate to elasticity of your product?
How will changes in the quantity supplied as a result of your pricing decisions affect marginal cost and marginal revenue?
Besides your pricing decisions, what are your suggested non-pricing strategies? What non-pricing strategies will you use to increase barriers to entry?
How could changes in your business operations alter the mix of fixed and variable costs in line with your strategy?

Please see the attached file for a business proposal checklist.


Solution Preview

Step 1
The new product we will introduce will be laundry detergent single packs called Shine. These packs will have a powerful detergent, fabric softener, colour safe bleach, strain remover, and brightener. In addition, each pack will be in the form of a leaf and a book of 25, 50, and 100 leaves will be sold. Each leaf will have exotic aromas. The customer can select among chamomile blossoms, saffron, cinnamon, and vanilla oil. The combination of functions and exotic smells will make leafs unique and different from any other similar product in the market.

Step 2
The market is that of household detergent. The market structure is monopolistic competition. In this form of market structure there are many producers and that sell products that are differentiated from one another and hence are not perfect substitutes. The detergents in the market are differentiated from one another by branding and quality and so are not perfect substitutes. The market in which household detergent is sold has real or perceived non-price differences. The differences however are not so great as to eliminate other goods as substitutes. The detergents in the market are close but imperfect substitutes. The detergents perform the same basic function of cleaning clothes but have differences because some include fabric softener, bleach, fabric refresher, strain remover, brightener, and fragrance.

Step 3
There is a positive cross price elasticity of demand between Shine and other detergents. it is estimated that cross price elasticity of demand between Shine and Tide Pods is +0.81, the cross price elasticity between Shine and Gain is +0.32, and the cross price elasticity between Shine and Method is +0.24. Shine also has high income elasticity.

Step 4
Pricing will relate to the elasticity of my product. The most pertinent elasticity in case of Shine is the cross elasticity of demand. The cross elasticity of demand measures the responsiveness of the demand for a good. it is measured as the percent change in demand for the first good that occurs in response to a percent change in price of the second good (Andrés Vázquez, 1998). Since, the market structure of the detergent market is monopolistic competition; each product in the market is a substitute for but not perfect substitute for other products. For example, Cheer TrueFit is a substitute for ...

Solution Summary

The answer to this problem explains a business proposal. The references related to the answer are also included.