Sarah Farid

900113953
18-10-2014
ECON 302
Dr. Tarek Selim
Research Assignment 2
This is a brief summary about the three products I have chosen:
1) Fondue Pot
The service I have chosen is a restaurant or food service. Its called The Fondue Pot. It is a
restaurant located in the heart of Heliopolis. The reason why I chose it is because it is very
unique and differentiated from other restaurants. For those who dine there it soon becomes
obvious that the service you are receiving is not only food but also entertainment. The experience
itself is the most distinguishing factor of the restaurant. As opposed to other restaurants you do
not just simply order food and have it served at your table. Instead you choose the dish you
would like to order and the waiters bring you the necessary ingredients tools and instructions you
need to prepare the dish yourself. According to its website: The Fondue Pot is not just a dining
place; it is a place to truly Savour the Experience. Fondue is a communal meal, encouraging
family and friends to gather and enjoy the experience together. We are very excited about
introducing such a new experience as we are aiming at encouraging people to enjoy the company
of their friends and family through cooking and sharing their food.
2) WhatsApp
Almost everyone is aware of the mobile messaging app called WhatsApp. It is a social
networking service that has in the past 5 years taken the mobile industry by storm. WhatsApp is
the most globally popular messaging app with 600 million users. It is a superior alternative to
texting to anyone who can afford a phone that can support the application. This is because it is
virtually free ($1 per year) and so it is much cheaper than normal SMS text-messaging. It also
allows for sending photos videos audio messages and for sharing of locations.

3) Panadol
Panadol is a pain reliever and fever reducer sold in virtually every pharmacy in Egypt and around
the world. It is an over-the-counter medicine that constitutes a major chunk of market share of
the pain reliever market worldwide.

Fondue Pot

WhatsApp

Panadol

Good/Service

Service

Service

Good

Type of Product

Luxury (could be

Bandwagon Neutral

Normal

Unitary Elastic p =1

Slightly Inelastic p

bandwagon)
Price Elasticity

Elastic p >>1

=0.8
Cross-price Elasticity

Independent c= 0

Independent c= 0

Independent c= 0

>1

Neutral =0

=0

(with respect to the

two other products)
Income Elasticity

Analysis of Table:
a Fondue Pot: I classified this restaurant as a luxury product because as income increases I
would increase my consumption of this service at a rate that is more than proportional to the rate
of increase of my income. It is not a good that the average consumer consumes regularly because
it is priced at a relatively high level. In addition its price elasticity is greater than 1 (i.e. since it is
not a necessary or normal good I am quite sensitive to an increase in price and so I will consume
substantially less if this occurs). Fondue Pot is an interesting example because even though it is a
luxury product it may also be considered a bandwagon product because individual consumption
is a positive function of the consumption of others (to a certain extent). The more friends you
have that are willing to consume the service the more often you are likely to go and consume it
yourself.
b WhatsApp: Since WhatsApp is a service which is virtually free consumption is independent
of income so it is a neutral good. The most distinguishing characteristic about WhatsApp as a
product is that it is a bandwagon service. This means that my individual demand as a consumer is
a positive function of the demand of others. It is a social networking application meaning and so
the more acquaintances use it the more you will demand it. There have been rumors about the
price of WhatsApp increasing after the company has been acquired by Facebook. This made me
consider the price elasticity of WhatsApp and I believe that if the price of the service were to go
up for any reason demand would decrease proportionally (unitary elasticity) since it is not a
necessity nor is it a luxury good. In this sense it can be classified as a normal good.
C Panadol: Panadol is a medicine which is relatively easy to acquire. It is an over-the-counter
medication and it is relatively cheaply priced. If its price were to go up I believe demand would
decrease at a slightly less than proportional rate since Panadol has become a household name for
pain relief. Even though there are substitutes Panadol is well known for its effectiveness and
safety. I believe price elasticity would be around 0.8 so it is considered between a necessary and

normal good but it is closer to being a normal good (since it is not a life-saving drug). It is
neutral to changes in income.

Since all the products are completely unrelated their cross-price elasticity = 0 (i.e. they are
independent of one another.)

Before conducting this analysis I did not realize that a luxury product could be considered a
bandwagon product as well. In general luxury goods are associated with exclusivity and are more
likely to be snob goods. However in the case of The Fondue Pot the more the merrier! I realized
the more my friends and family consume this service the more I do as well as the presence of a
group of people to go with is an essential part of the experience.

There are many similarities between WhatsApp and Panadol even though the two products are
completely unrelated. Both are neutral to changes in income and both can be considered normal
goods.