the project on the study of economics of chhatwala

8/8/2019 The project on the study of economics of chhatwala

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ECONOMICS I

THEECONOMICSOFPUSH

CARTCHAATWAALA

FATARAM

ID.NO.1808

1ST

YEAR,B.A.,LL.B.(HONS.)

DATE OF SUBMISSION: 5TH

AUGUST 2010

National Law School of India University

NAGARBHAVI,BANGALORE 560242


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TABLE OF CONTENTS

INTRODUCTION3

RESEARCH METHODOLOGY4

CHAPTER1. OVERVIEW OF CHAAT VENDOR.6

CHAPTER2.PRICE DETERMINING METHODOLOGY..7

CHAPTER3.TARGET MARKETAND WORKING TIME...10

CHAPTER4.EFFECTS OF INFLATION.13

CONCLUSION.16

BIBLIOGRAPHY17


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INTRODUCTION

The central objective of a firm is to create and manage market through playing an important

role between the buyers and sellers. Sellers main aim is to earn maximum profit and buyers

buy for their need and satisfaction as well. Both buyers and seller collectively form the

market, and through their actual or potential interaction, they decide the price of a particularproduct.

1A firm faces lot of problems before to enter in the market i.e. what goods to

produce and in what quantities, how to produce it and for whom particular are produced,

what is the demand of particular product which the firm is going to produce. These problems

are solved by firm through the markets that coordinates the action of individual consumer and

firms. This project revolves around how a chaatwaala do their business in a market? How do

they determine the price and the place of sale? What will be competition they face in the

market? Researcher will try to explain all these questions elaborately with example of some

chaatwaalas. This whole project is b-pased on the detailed survey of chaatwaalas. It explains

whole business of street vendors who are nomadic and change location according to their

selling

In this project researcher will explore the fact and explain why Dhanraj, Salim and Sumer

paliwal came to Bangalore for their business and why they choose particular location. This

paper explains how a small firm handles itself in a drastic condition like in monopolistic

competition and inflation etc. All these factors described through the primary survey on four

chaatwaalas of who use to stand their cart in Nagarbhavi.

1Robert S. Pindyck, et al, Microeconomics, Pearson edition, 7, (6

thedi.)2008


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RESEARCH METHODOLOGY

AIM AND OBJECTIVE

The central aim and objective of this project is to study the cottage industries in the form of

chaatwaalas. It describes the firms decision on production of product, price and the target

market. This project also explains how a firm sustain itself in market i.e. in monopolistic

competitions, inflation etc. and how it gives satisfaction to its customer.

SCOPE AND LIMITATION

Scope and limitation of this research is the limited geographical extension of market. There is

limited no. of firms on this particular subject. There is limited secondary data available on

chaat vendor.

RESEARCH QUESTIONS

In this paper researcher will try to attempt the following question elaborately on the basis of

survey of four chaatwaalas.

a. How does a firm determine the market price of a particular product?

b. How does a firm decide its target market?

c. How does a firm manage in the growing competition after entering to a particular market?

d. Why do some people migrate from one place to another for the business?

e. what is the impact of inflation on a firm?

CHAPTERISATION

This paper will cover some specific chapter on the firm with comprehensive and analytical

study.

Chapter1.Titled as, Overview of chaat vendors This chapter will explore the price

calculation strategy of particular product of the firm with example of four different

chaatwaalas.


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Chapter2.Pricedeterminingmethodologythischapterwilldescribeaboutthefirmsselling

location.Howafirmdoesdecidehisparticulartargetmarket? Itwillalsoexplainthereason

whythesefourchaatvendorsselectedtheparticularmarket?

Chapter3.Target Marketandworkingtimethischapterwillstudytheparticularmarketof

sale.Targetmarketisverynecessaryforafirmtosaleitsproducts..

Chapter4. Titled as Effect of Inflation this chapter will explain the impact of increase in

priceofgoodsandservicesonthefirm.Howdoesafirmhandletheeffectofinflation?

STYLE OF WRITING

Thestyleofwritingisbasisonanalysiswithexampletoelaboratethetheoreticalpart.

MODE OF CITATION

ThispaperfollowstheNLSguidetouniformmodeofcitation.

SOURCE

Thispaperincludesprimaryaswellassecondarydatabutresearchersmainfocusison

primarydata.


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CHAPTER-1

OVERVIEW OF CHAAT VENDORS

Chaat isanameofquickfood,oftenfound instreetofmanyIndiancities.Chaatissoldby

street vendor commonly known as chaatwaala onpush cart, cycle, where the chaatwaala

prepares the snakes and serves on smallplate orbowl.Now who is chaatwaala or chaat

vendor? A chaat vendor isa nomadicperson who can folds his shop and move from one

placetoanotherforhissale.Hechoosesaprosperousandhealthiermarket.

On thebasis of interview researcher will try to explain what the real scenario of chaat

vendorsinNagarbhavi.Thesechaatvendorshaveperfectaswellasmonopolisticcompetition

in the market. First we will discuss theperfect competitive market. In this type of market

individualperson cant affect theprices of the goods and services. The homogeneous

productshavethesamepricesandallthefirmsfacehighlyelasticdemandcurve.Inthistype

ofmarket,firmshavefreedomtoenterandexitinthemarketandmarginalcostofproduction

isapproximatelyequaltocostofproduction.AllChaatvendorshavesamepricesbecauseof

competitionamongthechaatwaalassoithelpstheconsumersinpurchasing.

Nowwewillproceedtowardsthemonopolisticcompetition.Thewordmonopolisticmadeby

two elements that is monopoly and competition The monopolistic competition is one in

whichtherearealargeno.offirmsproducingsimilarbutnotidenticalproducts2.

There isafairmonopolisticcompetitionsamongchaatwaalasand theothersimilarkindsof

restaurants,bakeriesetc.TheexistenceofBhairavsweetsandchaatkeepthechaat

.3

Vendorstomorecompetitiveinthemarkets.

Figure1. Monopolisticcompetitivefirminshortrun

2Allan C. De Serpa, Microeconomic theory issue, and application, (Arizona state university), 1985

3http://www.amosweb.com/cgi-bin/awb_nav.p l?s=wpd&c=dsp&k=monopolistic+competition,+short-

run+production+analysis


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CHAPTER2

PRICE DETERMINING METHODOLOGY

Thecentraltaskofthispaperistoexplainthepricedecidingmethodologyusedbydifferent

chaatwaalas.Everyfirmfirstdecidethesellingpriceofhisproductbeforeenteringtomarket.

Sellingpriceisthemainbasisofanyfirms.Itdecidesfirmsprofitandfutureaswell.Selling

pricevariesfromfirmtofirmbecauseitdependsonvariousfactorsi.e.costofrawmaterials,

transportation charge, wages of employee, machinery, maintenance and other expenditure

likeuseofpower,wateretc.Samekindoffirmscanhavedifferentpricesbecauseitdepends

onhowtheydecidethepriceoftheirproductandwhatisthequalityofrawmaterialtheyuse

toproduce theproduct. If differencebetween sellingprice and cost ofproduction or cost

priceismoreitpromotesanentrepreneurtoenlargehisbusiness.4Everyfirmownerwantsto

producecommodityatlowerpricebecausetheirprimarygoalistomaximizeprofit

Cost of production: - Generally the costprice is total expenditure incurredby firm on

productionofitsproductandtillreachingittomarketmeansthecostofrawmaterial,rentof

land, the wages of, andprofit of stock employed is raising,preparing andbringing to the

marketetc.Inotherwords,thepriceofanyproducedcommoditywill,underthepressureof

competition,beequaltoitscostofproduction.5

Market price or selling price: -Theactualpriceatwhichanycommodityiscommonlysold

iscalleditsmarketprice.Itmayeitherbeaboveorbeloworexactlythesamewithitscostof

production.Usuallywhentheprofitisaddedinthecostofproductionitbecomessellingprice

which seller uses to sell hisproduct in the market thats why it is also known as market

price:6 Chaatwaalas use different methodology to determine their sellingprice. The set of

these methods ofproductionavailable to each single firm is independent of the sizeof the

firmitself.

Allthechaatwaalasarenotequalinpricedeterminationtheyusedifferentformulaaccording

totheirownideas. Manjunathfocusesonprofithiscentralobjectiveistoincreasetheprofit

because he is willing to expand hisbusiness. He decides sellingprice after calculating the

productioncostandotherexpendituremadeonproductionHedecidesthesellingpriceby

4RavindraH.Dolkiya & AjayN.Oza, MicroeconomicsformanagementStudents,2

ndEdition,2004,12,

(Oxforduniversitypress.)5Editedby, JohnEatwellet al,ThenewPalgrave,ADictionaryofEconomicsvol.1, 698 (1998).

6http://www.wisegeek.com/what-is-market-price.htm


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ai i t uni profit rat on per unit of product for example hi formula i li e thi ( hi

particular data i onl for chart7

2. Salim works under a wholesale dealer so he has no monopol over price determination,

selling price is determined by his master with his consent and he has monopoly over the

target sell and location of sell He works on the basis of contribution. His targetis to sellmore and more that he can get more contribution.8

. Dhanrajs: strategy is slightly different from others he changes his selling price according

to location and his selling price are different at station to station. He said this planning give

me more customer satisfaction. He change selling price according to customer.9

4.Regarding to Sum r paliwalthis is his a lternate business, he works in a sweet shop until

4: P.M. on the contract basis. Afterthis he starts his cart at 5: PM everyday .He carries raw

material from the owner of sweet shop.10

11Fi ure2. Show when

the income of the consumers increase the demand curve shift to the ri ht meansconsumer purchase more quantity of goods(From Q1 to Q2) at the increases price P1 to

P2

7Base

on inte vie with anjunath, 20rd

Ju y, 2010.8 ccording to researcherssurvey, 23

thJu y, 2010.

9Based on survey with Dhanraj, 23

rdJu y, 2010.

10Interview with Sumer pa iwa , 27th Ju y, 2010.

11http://www.investopedia.com/university/economics/economics3.asp


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Belowfigureshowstheincomeoftheconsumerincreasesthedemandofgoodsalsoincrease

becausetheyhavemorepurchasingpowernomatterwhatisthemarketprice.Nowtheywill

paymoremoneyascomparetoearlier.

Table1.Showsthecostofproduction,totalrevenueofthefirmanditalsoshowstheprofitof

thefourdifferentchaatwaalas.

Figure3. Graphshowstheprofitofchaatvendorsearnedinaday.

0

50

100

150

200

250

300

350

a j at Sali a raj S er ali

al

Per day profits of chaatwaalas

Series 1

Nameof

Chaat

vendors

Costof

raw

material

Transportation

charge

Equipment

maintenance

cost

Other

exp.

Total

marginal

revenue

TotalCost

of

production

Profit

Manjunath Rs.1080 Rs.20 Rs.100 0 Rs.1500 Rs.1200 Rs.300

Salim Rs.1300 Rs.50 Rs.120 Rs.80 Rs.2000 Rs,1500 Rs.500

Dhanraj Rs.14 0 Rs.80 Rs.150 Rs.100 Rs.20 0 Rs.1840 Rs.230

Sumer

paliwal

Rs.680 Rs.40 Rs.50 Rs.30 Rs.1000 Rs.800 Rs.150-200


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CHAPTER3

TARGET MARKET & WORKING TIME

Inthischapterresearchersprimarygoalistoexploretheanalyticalsurveyofanentrepreneurtodecidehistargetmarket.

Everyperson lives in his own mode of lifeaccording to his income, qualification etc. and

thats why they have different-different choices. They have their ownpurchasingpower in

bothquantityandquality.Someone likestoeat infivestarhotelsandothersdonthavetoo

muchmoneytospendforthiskindofenjoysotheyprefersmallrestaurantorstreetvendor.

.Apart from this an entrepreneur have to noticebefore entering to aparticular market i.e.

taste, timepreference, income, location, age, occupation knowledge and other factors that

consumerdemandforspecificgoodsandservicesthe individualtransaction isthebasicunit

of analysis marketpower and competitive12

. Every hawker or street vendor decide his

location to keep eyes on all these factors. It is also important to know that ifhe decides

particularlocationthanhowmanycustomershewillgetthere. Possiblyiftheylivethesame

levelof life,thantheirpurchasingpowerwillbesimilar. Incontexttochaatwaalasonday

firstwhentheystartedtheirbusinesstheydoitandgetgeneralideaaboutthepeoplewhocan

purchasefromthemandtheychooseoneofthesegroupsasourtargetmarket.Generallythey

choosethoseplaceswheretheycangetmultiplenumberofcustomerwithprosperousmarket

likemoviecinema,showroom,college,school,industriesetc.

Manjunath A longqueueofschoolandcollegegoing students forcedhim tostarts from

hisowncolonythanheproceedingtoward thePadamshreecollegewithselling inthestreet

and he reaches at 1:30 PM to college when the college time is over and abig crowed of

studentsarecomingoutfromtheirclasseshome.Itisverycrucialtimeforstudentsbecause

they are coming after study at least 5-6 hour and feel very hunger and they want to eat

something, instantaneously so theyprefer to eat from street vendor. After this he starts to

movetowardtheNagarbhavi.

Nagarbhavi: It is the finalandprosperous target market forManjunath. He reachesat 5:00

PM toNagarbhavicircleherehegetfoursidedcustomerandalsopermanentcustomerand

12DavidB.Eastward,TheEconomicsofconsumerbehavior, (1985).


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there isparking as well as open space is availablebehind his cart for customer toparking

theirvehicle.13

2. Sali : Why Sali ca e to Bangalore for his business and hy he choose these

particular location?

Basically Salim is from Mujahpurnagar; (Uttar Pradesh).He came to Bangalore for his

welfare.Hismaster iswholesaledealerofgrocery items inBangaloreand inUtterPradesh.

Hehasbeenworkingunderhimsince last 8 yearsandhewon the trustofhis master thats

whyhepulledhimtoBangalore.Heishappytoworkunderhismaster.

a)Salims target market is like thishestartsfrom Vijayanagarat 8:00AM andhedoesnot

standhiscartat fixstand,hestopshiscartwhereverhegetcustomerandhisroute isfrom

Vijayanagar toNagarbhaviandback to Vijayanagaratabout 8:PM .In whole way he sale

doortodoorbecausemanypeoplewillingtopurchaseattheirdoor.14

3. Dhanrajs journey fro Uttar Pradesh to Bangalore

Originally he is from a small village of Luck now. Following are the main reasons which

migratedhimtoBangalore.InhisopinionBangaloreismoreprosperouscityandpeoplehave

more to spend on food and other things. Instead of this Bangalore is morepopulated as

comparetoanycityofU.P.andchaatvendor isnegligibleascomparetopopulationso it is

veryeasytoselecttargetmarketinanypartofcityandpossiblywecangetmanycustomers

atasinglelocation.Pricedifferenceisalsotherestandshiscartat Kamachipaliat 8:PM and

thanNagarbhavi at 3:00PM and stand in front of Aishwarya Bakery , here he get many

customer whoprefer to eatpanipuri etc. rather than fast food andalso this is thebiggest

reasontostandherebecauseofNLSIUhegetmanystudentsintheevening.15

4) Su er pali al (fro Pali in Rajasthan)

Market forces pulled hi to Bangalore: RajasthanipeoplecoveredalmosteverypartoftheBangalorecitythatswhyhisfocusisonNorthIndianfoodbothinmenuandontaste.Other

importantreasonswhichimpressedhimtoworkherearethehugedifferenceinwagesof

13Supra

14Supra

15 Supra


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working as compare to Rajasthan. For similar kind of work one can get twice money in

Bangalore. Climate of Bangalore also impact him to stay here, itpromote him todo work

wholeday.Bangaloreisveryadvanceineducationandtechnologywhichprovideadifferent

levelofeducationtotheirchildren incomparisontoRajasthan.16Economicconditionofthe

marketisfarbetterthanRajasthan.TherearelotofjobandopportunityinBangalorewhilein

Rajasthan the climate is not in favour to the farmer. It is the main reason that most of the

peoplewanttomigratetoanyotherplaceforbetterlife.

16Supra


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CHAPTER4

EFFECTS OF INFLATION

A street vendors get up early in the morning and starts his cart toward the market for thepurposeofhisearning,thansomeonecometowardhimholdinganewspaperinhandandsay

youknowthepricesofthisandthisgoodsraisedtothislevel,nosoonerhefinishhistask,the

vendorgetabignervousshockandstarttocringe.ThewordInflation isveryBedforany

industries. It is the most uneasy time forbothbuyers and sellers. It creates nervousness in

their mind. It affects the wholebusiness verybadly. Thispaper explains what is inflation

actually?Howdoes it impact to theownerofsmall firm,andhow do they try toovercome

thisproblem. Apersistentincreaseinthelevelofconsumerpricesorapersistentdeclinein

thepurchasingpowerofmoney,causedbyan increase in theamountofavailablecurrency

withthepeopleorwiththemarket.1

Theaverageratesofgoodsandservicesincreasesover

theperiodsoftimes.Sotheowneroffirmworryaboutthathowcantheypurchasethesame

amountofrawmaterialfortomorrowbytodaysearning.Itobstructstheproductionactivity

and reduces the savings. Generally inflation forces the firm to increase theprice of their

productbutincreasesinpricemakeadverseeffectoncustomer.Inthisunfavourablesituation

theowneroffirmtriestofindanyalternatesolutionthattheirprofitremainsalmostsame.

AsperManjunathwheneverthereisainflationtheusuallyhedoesntincreasesthepriceall

atonce,because it impactthecustomerandtheydontreadytopayanymoremoneywhich

theyusedtopayearlierthusitcanpossiblethattheno.ofcustomerdecreasesgradually.He

waitsfordecreasingthepriceforsometime,ifthepricesdontgoingdownthanheincreases

sellingprice slightly. Thisplanning is favourable forbothbuyers and sellers,because

customerdoesntnoticeitcarefullybutprofitmargingoesdownperunitofproduct.Soagain

achievethesametargetofprofithealwaystriestosellmoreunitsofproduct.Inthiscrucial

timeDhanrajfollowssome distinct technique, instead increase in thepricehecutdown the

amount in quantitybecause chaat is selling on thebasis of unit and not on measurements.

Thisstrategyisgoodbecausecustomercantabletoidentifythesame.

17http://www.morganstan leyindividual.com/customerservice/dictionary/Defau lt.asp?letter=I


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Co parison of price history: sellingprice of any commodity or article change with

changingthecostofrawmaterial,income,wagesoflabour, Govt.intervention,transportation

charges cost of machinery etc. When theprice of raw material, transportcharge increases

chaat vendor doesnt increases the sellingprices and they use some specific formula likegenerallytheydecreasethequantityofinthesameandcustomeralsonotnoticeit.Theprice

ofchaatincreasesgraduallythanalsodemandisalsoincreasing.

PRODUCT 2006 200 2008 2009 2010

ALUCHAAT 6 8 8 10 10

SAMOSACHAAT 7 8 8 10 10

KATORICHAAT 8 8 10 10 10

CHURMURCHAAT 8 10 10 12 12

PANIPURI 5 6 8 10 10

BHELPURI 10 10 15 15 20

Table2.Comparisonofchaatpricesofpastfiveyears.

Cost of ra aterial: Costofrawmaterialincreasedgraduallyduringthepastfiveyear.It

increaseinrawmaterialforcethefirmstoincreasetheirmarketprices

COMMODITIES 2006 2007 2008 2009 2010

POTATO 8 12 15 20 22ONION 6 9 12 16 16

EDIBLEOIL 45 50 55 58 64

HALDI 80 86 92 116 120

DHANIA 120 145 155 180 200

TOMATO 8 10 14 16 24

REDCHILLI 120 135 145 165 180

TURMERIC 20 25 35 42 45

Table3.Tableshowstheimpactofinflationonthepricesofdomesticgoods

Tableshowsthatthepricesofcommoditiesincreasesmorethan100%inpastfiveyears.


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Figure4. Showstheeffectofinflationonthepricesofrawmaterial

This figure shows the graphical representation ofprices of raw material at the time of

inflation. It isbasedontable3.Itdescribesthe levelofinflationwhich isverybadforboth

buyersandsellers;itreducesthevalueofmoneyorpurchasingpowerofthecurrency. Most

of thepopulation of India is engaged in agriculture, due toperpetual famine and drought

affectsthecropproductionverybad.Theproductionofcropisnotsufficienttofeedthishuge

amountofpopulation.This istheparamountreasonbehindthe inflationmainly indomestic

goods.

0

50

100

150

200

250

2006 2007 2008 2009 2010

P tat

Oni

n

Edible il

Haldi

Dhania

T mat

ed hilli

Turmeric


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CONCLUSION

Thispapershowsthecomprehensivebutanalyticalstudyofcottage industries.Inthispaper

wedescribed theroleof market indeterminationofprice, locationand timeofworkof the

small household industries. All these factors vary in according to the different kinds of

marketand itdecide the demand of theparticularproduct in the market.We explained the

effectof income on the demand throughagraphbecause increase in incomealso increases

thepurchasingpowerof money.Weshowed thepolitenessof thefirmowner towards their

customerinsatisfactionandtheirneedaswell.Wediscussedthevariouspricedetermination

methodologiesofthechaatwaalas.Wealsoexplainedthefirmsmultipleideasofselectionof

the target market. We described monopolistic competitionamong the chaatwaalas, Bhairav

chaatandothersimilar kind of restaurant. We learned theplans of chaatwaalas to face the

increasedcompetitionintheparticularmarketalthoughtheyallsaleatthesamepricethereis

no close substitution of thisparticularproduct in theNagarbhaviand thats why consumer

havenochoicesatall.Itelaboratelystatedthewholestepsforanentrepreneurtoestablisha

firm inthemarketandallthe ideaswhichafirmrequiresafterentertothemarket.Inthese

paperswecomparedthepricesofhouseholdgoods.Wealsoexplainedtheimpactofinflation

on the raw materials which areadverselyaffectedby the inflation.Table no. 3showed the

pricesofrawmaterialsoflastfiveyears;itconcludedthesepricesaffectednotonlybutalso

dailylifeofeverypersonbecauseallthesecommoditiesaredomesticgoods.Welearnedthe

chaat vendors ideas to avoid the direct impact of inflation on their firms and customer as

well.

WebrieflyexplainedthereasonbehindcomingofDhanraj,SalimandSumerpaliwalintothe

Bangaloremarketandalsolearnedabouttheirplanningofstarttheparticularfirm.Theseall

paper said theplanning to a new entrepreneur to start a small firm in market and the

descriptiveprinciplestomanagementinalltheconditions.


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BIBLIOGRAPHY

1.DavidB.Eastward,TheEconomicsofconsumerbehavior, (1985).

2. Microeconomics and Behaviour, Robert H. Frank, MC Graw Hill International Edition,

1991

3. Microeconomics3rd

Edition,RobertS.Pindyck,DanielL.Rubinfeld,2001

4. Microeconomics for management Students, Ravindra H. Dolkiya & AjayN. Oza, (2nd

Edition,2004,Oxforduniversitypress.)5 Microeconomic Theory Issue, and Applications, Allan C. De Serpa, Arizona State

University,1985

6. Modern Microeconomics,2nd

edition,A Koutsoyiannis,1979

7. The new Palgrave A dictionary of economics editedby John Eatwell, Murre milgate,

peterNewman,vol.1, (1998)

Websites

1.http://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k=monopolistic+competitio

n,+short-run+production+analysis

2. http://www.investopedia.com/university/economics/economics3.asp.

3.http://www.morganstanleyindividual.com/customerservice/dictionary/Default.asp?letter

=I.

4. http://www.wisegeek.com/what-is-market-price.htm.


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the project on the study of economics of chhatwala

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