The market for premium organic skincare and cosmetics is highly income-elastic, as consumers treat luxury personal care items as non-essential discretionary purchases. During the 2023 domestic energy crisis, household utility bills rose by an average of 40%, severely reducing discretionary household income. Consequently, revenues across premium organic cosmetic brands dropped by 12% over the financial year, whilst the total volume of organic products sold fell by approximately 16% as consumers switched to cheaper generic alternatives or cut back on personal luxury spend.
Explain, using the information in Extract B and a relevant demand and supply diagram, the impact on the market for premium organic cosmetics of the 2023 energy cost spike.
