Baby Milk Case Study

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Recommended: Concepts of microeconomic

Introduction
The scope statement is an analysis among the economics students. It represents deeper understanding on how microeconomics issues and concepts work on decision making and planning. The case study also helps to comprehend how and why the policy and regulation are being imposed in the market. Furthermore, it assists in discovering the various behaviour of consumer that leads to their respective decision and thus affects the whole economy.

Brief summary of the article:
Chinese families are scouring the globe for powdered baby milk because supermarkets in U.K including market leaders Tesco (TESO) and Sainsbury’s are facing shortage of baby milk formula powdered which damage the confidence level in local supplies.
China's demand for …show more content…

China’s low class family changed rapidly into the middle class family. Therefore, they cut off the consumption of low standard or inferior goods and move towards the branded products which treated as necessity. Therefore the demand of foreign produced baby formula has risen faster compared to local baby milk. Another economics issue in the article is demand of powdered baby milk increased which leads to the shortage of the product in the market. One factor that affected the demand of baby milk is melamine-tainted baby milk led to the death of six children and caused thousands of children to fall ill. There is also an issue of black market due to the shortage caused by product …show more content…

The income elasticity of demand measures the responsiveness of quantity demanded to changes in income. It can be calculated by dividing the percentage change in quantity demanded by the percentage change in income. The China’s baby formula income elasticity is calculated negative thus considered it as inferior good. This is because the quantity demanded falls when income rises. Income elasticity for foreign produced baby milk, UK’s product, it is positive but less than one indicating a normal and necessity good. From the articles, the middle class families grow considering the income also increases. Thus, it leads to a rise in quantity demanded for foreign produced baby

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