Finding/Analysis

This survey comprises of students and one working adult from the age group of 18-26. Below are the demographics of their monthly spending.

Pie chart of monthly expenditure of all 15 respondents

Below is a tabulation of the findings from 15 samples of our survey. 

Table 1: Tabulation of findings

Demand

Demand is measured by the number of consumers who are willing and able to purchase a product at different price levels. Our findings highlight three factors of demand.

1. Consumer's Income 

According to the table, 87% of our respondents say that they will not purchase Nutella if they are in a lower income group. Thus, when the income of consumers decrease, the demand for Nutella will decrease. Because demand varies directly with the income of consumers, Nutella falls under the normal goods or superior goods category. 

2. Price of Related Goods

Our survey shows that when price of complimentary goods like bread and biscuit/crackers increase, 46.7% of respondents will still buy Nutella while around half, 53.3% will choose for a cheaper spread. Although in theory complementary goods share a similar demand and the demand for Nutella bought to decrease, because of taste and preference (by far the only tasty chocolate spread), the demand shift is small. However, our respondents agree that 86.7% will buy a cheaper perfect substitute (chocolate spread). The demand for Nutella decreases because a change in the price of a substitute good will cause an inverse change in the demand for Nutella. As of now, there are no perfect substitutions for Nutella because it belongs in a monopolistic market structure.

3. Taste/Preference of consumers

Our findings show that 50% of our respondents agree that Nutella is their first choice of spread. Many consumers prefer Nutella over other spreads because it is chocolate flavoured.  

Table 2: Consumers' rating of Nutella

The table above shows that Nutella appeals to the majority because of its taste. Even though Nutella is fatty, 80% agree that they will still buy it. It seems many can’t resist chocolate! Hence, this factor does not cause any change in the demand for Nutella because as long as Nutella maintains its quality, the demand will remain constant. 

Demand Theory and Price Elasticity

The law of demand mentions that ceteris paribus, when the price of a product increases, the demand decreases. The price elasticity of demand on the other hand measures the sensitivity of consumers on the price change. The income elasticity of demand measures the response of consumers to change of their income in purchasing a good. 

1. Price elasticity of demand

Bar chart of respondent's response to price increase

According to our survey, when the price of Nutella increases, majority of our respondents are neutral to it, showing that it has no effect on their decision to purchase Nutella. This shows that the law of demand cannot be applied in this case. We can conclude that the price elasticity of demand for Nutella is inelastic. Factors that contribute to the inelastic demand are:

a. Few perfect substitutes

The higher the number of substitutes, the greater the price elasticity of demand. However, in a monopolistic competition, few perfect substitutes exist. Consumers who purchase Nutella specifically want a chocolate spread, so a price change has little effect.  

2. Income elasticity of Demand

As mentioned before, Nutella falls under the normal good category. In theory, when the income increases, the quantity demanded for Nutella increases.  This is backed by our statistics which show that 80% feel Nutella is a luxury, while 20% feel it is a necessity (who might constitute chocolate spread fans). Majority are willing to forgo Nutella if their income is low, but if they can afford it, consumers are willing to buy Nutella.