Recession and Cosmetics Demand Research Paper Example | Topics and Well Written Essays - 1000 words

Recession and Cosmetics Demand - Research Paper compositors caseTherefore a decline in their real income makes closes and services relatively valuable.In economics affect is influenced by a number of factors and this include determine, price of substitutes and income. For a regulation near as the price of this good increases then the involve for this product declines, assuming that all the goods in an economy are normal goods and that enhancives are substitutes to highly luxurious goods then it is evident that a decline in the income of consumers will guide into a relative increase in the price of the luxurious goods which will be substituted with less expensive cosmetics. This is referred to as the substitution effect, the following diagram shows the effect of an increase in price on the demand.Consumers destiny to maximize their utility, in order to maximize utility consumers want to increase the get along units of goods consumed, however the total units of goods and se rvices purchased is determined by the budget line and the indifference curve, for this reason therefore the decline in income results into a decline in the real income and therefore consumers will only purchase a a few(prenominal) units of goods, in order to maximize utility the consumer will opt to purchase... The article states that the employment train and togment funds in the cosmetics industry increases in a recession, this can be explained by the multiplier effect, as the take of demand increases as discussed to a higher place investors anticipate higher demand and as a result they invest more, more enthronization mean that the level of employment in this industry will increase. Therefore investment is influenced by the high demand in this industry.This scenario can also be explained by the substandard good concept, the demand for inferior goods decline as the income of consumers increases, at a certain level of income consumers no interminable demand the inferior good s and therefore it is true to state that as the income level declines the inferior good demand increases, the following diagram shows the changes in the demand curve as income increase for an inferior goodFrom the above diagram it is evident that as the level of income increases the demand increases however at a certain level of income an increase in income will result inot a decline in demand. For this reason therefore cosmetics peculiarly lipstick can be considered as an inferior good whereby during economic hardships and the level of income is declining the demand for this good increases, it is also true that when income increases the demand for this good declines. ConclusionFrom the above discussion it is evident that the article states that the cosmetic industry does not change as expected, in the first case we associate cosmetics with the theory of inferior goods whose demand declines as income increases and therefore demand may increase as the level of income declines in a r ecession. Consumers also experience an increase in relative prices as their real income declines, this means that as consumer