L'Oreal says weight loss drugs are impacting beauty and skincare sales
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Supply, demand and prices, Elasticity, Firms' costs, profits and decisions
What happened
L'Oreal says the use of weight-loss drugs (GLP-1s) is affecting its beauty and skincare sales, with its CEO calling this "a very important phenomenon" for the company.
The economics
This illustrates how a change in demand affects a market: if consumers using GLP-1 drugs buy fewer beauty and skincare products, the demand curve shifts left, lowering the equilibrium price and quantity when supply is unchanged. Students can draw a supply-and-demand diagram showing a non-price factor (consumer preferences or health behaviour) shifting demand.
Evaluation
However, the actual impact on L'Oreal's revenue and profit depends on the price elasticity of demand for its products and whether it can adjust its product mix; a short-run sales change may not reflect a long-run trend, and other factors such as consumer confidence and competition also matter.
Practice question
Using the example of L'Oreal's sales being affected by weight-loss drugs, analyse how a change in consumer preferences affects the equilibrium price and quantity in the beauty products market, and discuss the role of price elasticity of demand.
Read the article ↗ · Draw the diagram in the Diagram Lab
Where it fits in the syllabus
- Supply, demand and prices: How a change in demand or supply in one market moves its equilibrium price and quantity.
- Elasticity: How strongly quantity demanded or supplied responds to a change in price or income.
- Firms' costs, profits and decisions: How firms decide output, prices and investment from their costs, revenue and competition.
- IB Economics: Demand, Supply and Elasticity
- A-Level Economics: Supply and Demand
- AP Microeconomics: Supply, Demand and Market Equilibrium, Production, Cost and Perfect Competition
- IGCSE Economics: Demand and Supply, Business Economics