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Diminishing Demand for FineApps’ Canteen Food: Indifference or Incidental?

CASELET, MANAGERIAL ECONOMICS
ET Cases, 8 pages
AUTHOR(S) : Vandana Jayakumar and Dr. Nagendra V. Chowdary

Case Preview

Diminishing Demand for FineApps’ Canteen Food: Indifference or Incidental?

 

On January 20th 2015, Rajeshwar Goyal (Rajeshwar), HR and Administration Head of FineApps Pvt. Ltd. (FineApps), while having breakfast in the office canteen, was deliberating on the canteen-related problems that had been plaguing the company since a couple of months. Nine months ago FineApps had offered a perk, free oriental cuisine (lunch), for all the employees, which had elated the employees. However, within a short time employees seemed no longer interested in the canteen food. While consuming canteen food was a matter of personal choice, Rajeshwar wondered on the reasons behind the disinterest and the solution to the problem as
every month, FineApps paid a huge sum to the vendor providing canteen services.

FineApps Pvt. Ltd.

FineApps Pvt. Ltd. (FineApps), a Pune-based mobile app development company, was founded in April 2012 by two friends – Amit Khanna (Amit) and Prateek Mittal (Prateek). Amit was the CEO and Prateek was the COO of FineApps, which began its operations with 10 employees (including the two Co-Founders). As time progressed, FineApps grew by leaps and bounds, adding more and more employees to keep up with the increasing business requirements..................

Teaching Note Preview

Diminishing Demand for FineApps’ Canteen Food: Indifference or Incidental?

 

Synopsis

This caselet revolves around the canteen-related dilemmas faced by Rajeshwar Goyal (Rajeshwar), the HR and Administration Head at FineApps Pvt. Ltd.  (FineApps), a Pune-based mobile apps development company. FineApps offered several perks to its employees being an employee friendly organization. However, the perk of free oriental food for lunch in office canteen, initially well-received, started posing problems for FineApps. Not all the employees consumed the free canteen food although the company was paying for all of them to the canteen service provider as per the agreement. In discussing the problem, the caselet throws light on the concepts of utility and the Law of Diminishing Marginal Utility. It also showcases instances that help in understanding other related concepts such as Consumer Surplus, Paradox of Value, Economics of Addiction, Indifference Curves, Marginal Rate of Substitution and Budget Line. Enabling a discussion on these concepts, the caselet helps students identify a solution to Rajeshwar’s dilemma.

Prerequisite Conceptual Understanding

  • • Paul A. Samuelson, et al., “Demand and Consumer Behavior”, Economics, 19th Edition, McGraw Hill Education (India) Private Limited, 2010 – To have an understanding of the concept of utility and other related concepts

 

Case Positioning and Setting

This caselet can be used for:

  • • MBA Program in Managerial Economics course – To understand the concept of utility and how it shapes consumer behavior and demand

 

Assignment Questions

  • I. Using the case facts, illustrate the manifestation/operation of the following concepts: (a) Utility, (b) the difference between Cardinal Utility and Ordinal Utility, (c) Consumer Surplus, and (d) The Law of Diminishing Marginal Utility. Why are these concepts important for understanding the consumer behavior of a rational consumer?
  • II. How do you think an understanding and appreciation of the concepts of (a) Paradox of Value and (b) Economics of Addiction, would be helpful in  understanding the consumer behavior of a rational consumer? How would the case facts help in understanding the purport of these two concepts?
  • III. .....................................

 

Preamble to this Caselet Analysis

This caselet helps understand the concept of utility and all the other related concepts – Cardinal Utility vs Ordinal Utility, Marginal Utility and the Law of  Diminishing Marginal Utility. The caselet aims to help correlate the aforementioned concepts with consumer demand and consumer behavior. During the  classroom discussion, the concepts were first explained using appropriate examples and then the students/participants were asked to relate the same to case facts. The classroom discussion was orchestrated as shown in Exhibit (TN)-I.....................

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Abstract


This caselet's purpose is to introduce and illustrate the concept of indifference curves. FineApps' Pvt. Ltd. (FineApps), a Pune-based mobile apps development company, founded in April 2012, was quite an employee friendly company as was evident from the various perks and facilities offered to its employees. In April 2014, another new perk was offered to the employees - FineApps replaced the small cafeteria with a large canteen providing free oriental cuisine to all the employees. The new facility, which was very well-received by the employees initially started showing signs of distress after 9 months of its inception. There was a diminishing trend in consumption of canteen food. Rajeshwar Goyal (Rajeshwar) - the HR and Administration Head at FineApps - was in a dilemma as the company was paying for lunch for all the employees every month. What were the reasons behind the diminishing trend in consumption of canteen food? In trying to identify the probable answers, the caselet helps understand related concepts in Economics such as the Law of Diminishing Marginal Utility, Consumer Surplus, Paradox of Value, Economics of Addiction, Indifference Curves, Marginal Rate of Substitution and Budget Line.



Pedagogical Objectives

  • To understand the concepts of and interconnectedness between Utility (including cardinal and ordinal utility), Consumer Surplus and the Law of Diminishing Marginal Utility
  • To understand how the concepts of ‘Paradox of Value’ and ‘Economics of Addiction’ help in understanding consumer behavior better
  • To understand the relevance and operation of Indifference Curves in the context of consumer behavior with the properties of Indifference Curves and Marginal Rate of Substitution

Case Positioning and Setting

This caselet can be used for:

  • MBA Program in Managerial Economics course - To understand the concept of utility, the law of diminishing marginal utility and other related concepts




This Case Pack Includes:
 - Abstract
- Caselet
- Teaching Note (**ONLY for Academicians)
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