Assignment: Economic Principles & Decision Making

Length: Up to 3000 words.

Learning Outcomes

1. Interpret and successfully apply economic concepts of supply and demand for effective organisational problem solving.

2. Apply quantitative methods to forecast complex business variables including demand, supply, production and costs.

3. Critically analyse production processes and cost functions and classify the main forms of market structures as well as recommend appropriate pricing and strategies.

4. Critically evaluate the role and impact of various forms of government intervention in the economy including the implications of competition and deregulation policy for managerial practices.

Instructions:

Schmeckt Gut plans the market launch for the Schmeckt Besser energy bar in Atollia within the next couple of months. The Research Department of Schmeckt Gut has conducted a market analysis of Atollia. The results are provided for you in the supplied EXCEL file.

Based on international sources, the Research Department is comfortable in working with the following scenarios on the future development of average income in Atollia, the inflation rate development and tariff rates on imports from Industria:

- Income growth: 1% increase or 3% increase or 5% increase or 7% increase

- Inflation rate development: 2% increase or 3% increase or 4% increase or 5% increase

- Tariffs on imports from Industria: 7.5% or 10% or 5% or free trade

Note: These developments are not necessarily matched to each other in the sequence shown above; meaning that we do not know if the 1% increase in income is associated with a 2% increase in inflation rate and a 7.5% tariff rate.

Your task:

Your task is to write a 3,000-word report addressed to the Board of Directors of Schmeckt Gut in which you address the following:

- Do you think you can match the different projections? That is, do you think that a 5% increase in income is associated with a 10% tariff rate and a 2% inflation rate? Explain by linking your discussion to the following concepts:

o supply and demand
o aggregated demand and aggregated supply
o the Philipps Curve, and
o the Laffer curve.

- What impact would the different predictions of income development, inflation rate development and tariff rate development have on the potential demand of Schmeckt Gut? Conduct a multiple regression analysis using data in the supplied Excel file and then interpret the results. Fully discuss and explain their implications.

- Make recommendations as to what the Board of Directors should do under each of your scenarios, based on your matching of the predictions.

The precise format of the report will be informed by research undertaken by the student using the Torrens University library. Formal document sections such as executive summary, table of contents and appendices are not counted in the word count. Assume that the prescribed word limit is literally a limit and that the board will reject any report that breaches it.