TASK A – WHY BUY LUXURY WATCHES?
When asking the question of why buy luxury watches, I believe that there are various answers to this question. However, I feel that the truth is a base of the value of the watch is to the buyer how it makes the owner feel. The price of the watch itself has to take into account the research and development of the product, marketing and materials used that pay a contributing element to price, but that only takes it so far.
The complicated part of pricing is typically driven by the perceived value which is usually made up of certain elements such a brand, history and uniqueness.
A good example of why buy a luxury watch is to compare two almost identical watches from different brands, one known worldwide as a luxury brand and the other being a newcomer to the market with less brand history. The Rolex Military Submarine ref 5517 and the Steinhart Ocean Vintage Military. The price difference between these two watches is quite large, the Steinhart model priced at $500 U.S dollars and the Rolex being an antic is only available to purchase through auction at a price of $150k dollars. Both models are made of the same steel, with identical 300-meter water resistance, further, they both Swiss made mechanical movements. So ultimately what is the difference?
The Rolex is an original design in comparison to the Steinhart is just a homage. The original 5517 Rolex having a historical rich background interlaced with British Military history. When looking at the Rolex brand in detail being founded in 1905 it’s the older of the two businesses Steinhart only being established in 2001. Known worldwide as a symbol of international luxury that has For over a century, Rolex watches have accompanied explorers and achievers around the world, from the top of the highest mountains to the deepest reaches of the ocean (Rolex, 2017). Unlike Steinhart which most people would never have heard of.
Another comparison that could be made between the two companies is their craftsmanship, Rolex having their own in-house craftsman whereas the Steinhart simply contains an off the shelf estimated time of arrival component. For certain people, the importance of owning a piece of original history would be worth the price difference of $150K, no matter of the difference in material value.
Understandably this may seem a rather extreme example, however, I think it illustrates my point. To certain individuals, the subject of pricing can be an intricate and within the world of luxury goods it is often asked as a debatable question such as “What are certain people willing to pay?”. However most watches cost over $1000, you as the customer are not just paying for the watch but also components such as marketing, the brand and the history of material quality.
TASK B -Explain changes in the price of natural gas and why the price fluctuations have been so great.
Figure 1 below shows the price of natural gas over the previous eight years. From figure 1 it can be seen that the price of natural gas has fluctuated a great deal throughout this period. This is due to a variety of different factors, both external and internal to the industry, for example, Japan the 2011 Tohoku earthquake and tsunami. In an essay of 1500 words I will be using an economics analysis to explain why the changes in the price of natural gas over the periods of 2009 to 2017 and why the price fluctuations have been so great…
Natural gas prices are mainly a function of market supply and demand. (EIA,2016) Since there is an obliged here and now contrasting options to gaseous petrol as fuel for warming and power age in the midst of exceptionally ask for periods, changes in supply or request over a concise period may realize huge esteem changes. Costs themselves frequently act to modify free market action.
Factors in the supply-side that impact costs fuse gas age, net imports and underground stockpiling levels. Increments in supply tend to pull costs down, while a reduce in supply tend to drive costs up. Height in costs tend to prompt an extraordinary generation rate, imports and arrangements from capacity inventories. Declining costs tend too prompt conflicting effect.
Factors on the request side fuse atmosphere (temperatures), fiscal conditions and perineum costs. Chilly atmosphere (low temperatures) extends enthusiasm for warming, while at the same time sweltering atmosphere (high temperatures) increase enthusiasm for cooling which increase combustible gas ask for by electric power plants. Budgetary conditions affect enthusiasm for vaporous oil, especially by makers. Demand may be coordinated by oil fuel costs, which may be a preservationist substitutes for combustible gas for control generators, producers, and broad building proprietors. Higher ask for tends to provoke higher expenses, while cut down demand can incite bring down expenses. Addition and diminishment in costs tend to decline or augmentation ask.
Factors impacting Natural Gas Prices
Because of compelled choices for vaporous petroleum use or manifestations in the nearby term, even little changes in supply or demand over a concise period can realize far reaching esteem improvements that bring free market action indeed into modify. Addition in supply general result in cut down expenses and decreases in supply tend to incite increases in costs.. Additions looked for after generally provoke higher expenses, while decrease prominent tend to incite bring down expenses. Along these lines, higher costs have a tendency to direct or diminish ask for and engage age, and lower costs tend to have the opposite effects.
Three significant supply side components affecting expenses
– Measure of vaporous petroleum age
– Level of vaporous petroleum away
– Volumes of vaporous petroleum imports and tolls
Three significant demand side segments impacting costs
Varieties in winter and summer atmosphere
Level of budgetary issues improvement
Openness and expenses of battling powers
Financial development can influence Natural gas demand and prices
The quality of the economy impacts petroleum gas markets. Amid times of monetary development, increments sought after for products and enterprises from the business and mechanical parts may expand gaseous petrol utilization. Monetary related increment in utilization can be especially solid in the business area, which utilizes flammable gas as a fuel and a feedstock for making numerous items, for example, manure and pharmaceuticals.
Rivalry with different powers can impact gaseous petrol costs
Some huge volume fuel purchasers scubas power makers and iron, steel and paper factories can with between flammable gas, coal and oil, contingent upon the costa of each fuel. At the point when the cost of alternate powers fall, interest for flammable gas may build petroleum gas costs. At the point when the cost of contending fills rise in respect to the cost of flammable gas, exchanging structure those powers to petroleum gas may expand gaseous petrol request and costs. In 2016 , more power was produced from gaseous petrol than coal (https://www.eia.gov/todayinenergy/detail.php?id=31672) out of the blue on record, and a flammable gas was the biggest wellspring of general power age.
Why petroleum gas costs are so low?
Four reasons, I found that clarify why petroleum gas costs are so low:
Capacity might be too full. The immediate issue at the present minute in time is that the office used to store common gasses turn out to be too full at specific focuses in the year, when this happens there is little space left for extra flammable gas supply to be beaten up amid the mid year months. Moreover hotter winter has had impact to the over-supply of gaseous petrol since the winter’s draw down from the underground stockpiling was else at that point anticipated.
(Figure 3. Walk 22 figure by the US Energy Information Administration indicating genuine petroleum gas away (red) contrasted with expected range.)
2. Little development in chronicled employments. One of the basic reasons why there is a bungle amongst free market activity is the way that since 1997, US petroleum gas utilization has stayed near level, paying little mind to value (Figure 4, underneath). With low costs in 2011, utilization ascended by 2.2% of every 2011 contrasted with 2010.
Figure 4. US gaseous petrol utilization by end utilize, in view of EIA information.
Gaseous petrol costs as of late have been sufficiently low to contend with coal costs. Indeed, even at these low cost levels, there has been little increment in mechanical request, and no impact on private and business utilization (for warming of structures, high temp water, and cooking).
Modern request used to be the biggest wellspring of gaseous petrol utilize, however this has been inclining descending. Some portion of this descending pattern is likely identified with ventures moving abroad for reasons identified with compensation. (Part might be identified with spiking petroleum gas costs, also.) Residential and business utilize has not been developing since heaters have been ending up more proficient, and on the grounds that more consideration is being paid to protection and other preservation measures.
Figure 5. US dry gas supply, partitioned between US delivered and net imports.
3. Supply doesn’t drop rapidly. Petroleum gas supply (Figure 5, above) does not drop immediately when costs drop too low in light of the fact that long lead times and expansive speculation is expected to expedite supply line. Petroleum gas makers have obligation to benefit and are regularly looked with “utilize it or lose it” leases, so are reluctant to stop, inspired by a paranoid fear of not having the capacity to make utilization of their venture. A decrease in cost might be supported, so the maker does not feel the impact as fast as something else, and make fitting move.
Productivity of individual wells depends on appraisals of long haul future creation and future costs– things which are not in the slightest degree certain. Some little makers may not know about how unfruitful current costs truly are.
There is likewise the issue of vast oil and gas organizations experiencing issues “supplanting their oil saves,” and requiring petroleum gas stores to substitute for oil saves. These huge oil organizations will purchase petroleum gas organizations, regardless of whether the cost would appear to be dreadfully high, given late costs. These eager purchasers enable generation to continue growing, making a more noteworthy over-supply circumstance before a shake-out happens.
It may be noticed that supply (Figure 5) is really not rising rapidly, but rather given the moderate ascent popular (2.2% of every 2011), it is overpowering the framework. In 2011, US creation of dry flammable gas expanded by 7.8% more than 2010, however this expansion is mostly counterbalanced by a balanced by a decline in imports. At the point when net imports are incorporated, US dry gas supply for 2011 is up by 3.9% more than 2010. The low development in flammable gas request in 2011, or more the warm winter stretching out into 2012, has been sufficient to deliver low petroleum gas costs.