1. Kasper Pearl
Marie Kuyumgyan

2. What is Kasper pearl ? Monopolistic competition
A pearl wholesale company

3. What are pearls and who buys them?
Pearls are formed within a shell of a pearl oyster
Scarce
homogeneous goods
Demand for pearls are inelastic
Only rich people buy pearls
Veblen good
‘Show off’ good
Luxury item

4. Demand and supply of pearls

5. Competitors A LOT of similar wholesale market Pearl farmers
Especially in Japan where 50% + of the pearls are cultivated
Pearl farmers
Since there is a large competition… supply will decrease because demand will decrease eq = higher
High total cost

6. Currently At it’s break-even price
No profit as total revenue is equal to total cost
Large surplus
Earns normal profit
Since the fixed cost of pearls are very high, the total average cost is high thus, the price of pearls are high which makes the company at its current break –even price

7. Plan: open different branch in Hong Kong and China
Next step
Plan: open different branch in Hong Kong and China
To increase profit and revenue and should continue to allocate their labor resources in the same way to avoid experience law of diminishing marginal returns and decrease efficiency.

8. Cons Pros Less overseas air fee Higher total average cost
Demand for pearls is higher
In Hong Kong no import tax
Less overseas air fee
Expensive start up cost
Higher total average cost
(explicit cost)

9. Product differentiation
Appearance
Shape, color, material, packaging
Service
Home delivery, guarantees, assistant, parking
Quality
Increase or decrease quality
Change in market size and consumer taste and preferences
Brand reputation/image
Advertise by spending money and persuade customers
All to target audience, and increase market size

10. Does not successfully differentiate its goods

11. Successfully differentiate its goods

12. Short run/ long run Short run Long run Start up cost Wage for labor
Largest amount allocated
Staff efficiency
Long run
Colossal PR work
Target audience is different
Have to increase market size
Gain the consumers trust so they can choose Kasper pearl over the other companies
Increase market size

13. Stakeholders Benefit Potential employees Construction workers
China/Hong Kong Government
Loss
Chinese importer (Middleman)
Japanese government
Airplane transportation
Risk will be that middlemen

14. All in all…
Ceteris paribus, company should consider opening branches in Hong Kong and China, differentiate their goods so the company can lower average cost and profit + revenue will increase.