Econ6000 economic principles decision making - what impact

Question

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.

Year	Quarter	T	Demand	Income	Tariff	Number of	Inflation
2011	Q1	1	260.3297	15500	5	15	2.2
2011	Q2	2	267.9888	15841	5	15	1.88
2011	Q3	3	311.3787	16110.3	5	15	1.26
2011	Q4	4	307.1164	16754.71	5	15	1.22
2012	Q1	5	306.1142	17391.39	5	15	2.93
2012	Q2	6	359.8001	18156.61	5	16	3.04
2012	Q3	7	288.8254	18501.58	5	16	3.17
2012	Q4	8	306.6604	18890.12	5	16	2.41
2013	Q1	9	295.9627	19589.05	10	16	1.35
2013	Q2	10	335.9408	20431.38	10	16	2.17
2013	Q3	11	286.3944	21126.05	10	17	2.93
2013	Q4	12	323.6386	21696.45	10	17	2.58
2014	Q1	13	329.1326	22000.2	10	20	1.45
2014	Q2	14	342.5879	22352.21	10	20	2.59
2014	Q3	15	302.5452	22799.25	10	20	3.65
2014	Q4	16	370.6793	23825.22	7.5	20	1.54
2015	Q1	17	371.3411	24635.27	7.5	20	3.63
2015	Q2	18	445.1766	25423.6	7.5	20	2.22
2015	Q3	19	441.171	26338.85	7.5	23	2.82
2015	Q4	20	446.9891	27471.42	7.5	23	3.26
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