Assignment 1
I. Suppose that the Wall Street Journal reports that the prices of PC components are expected to fall by 5-8 percent over the next six months. Apply demand and supply analysis to evaluate the following two scenarios.
Scenario 1: You manage a small firm that manufactures PCs. What are the implications for your company? How would you prepare (think about contracts/suppliers, inventories, human resources, marketing)?
Scenario 2: You manage a small software company. How would you prepare (again think about contracts/suppliers, inventories, human resources, marketing)?
II. Refer to the required reading assignment (articles on the increase in Montgomery County's minimum wage) and answer the following questions.
Who would bene?t and who would be worse o? if Montgomery County implements a minimum wage of $15/hour?
The Dunkin' Donuts Franchisee claims that 130 jobs would be lost as a result of an increase in the minimum wage. Explain why or why not this is a plausible consequence. How would you conduct a study of the issue?
MANAGERIAL ACCOUNTING AND ECONOMICS 505
Assignment 2
I. The following cross-price elasticities have been estimated for some goods in the U.S.:
Cross-Price Elasticity
Transportation and outdoor recreation
-0.05
Food and outdoor recreation
0.15
Clothing and food
-0.18
You are the owner of a small rural grocery store. You recently read in the Wall Street Journal that the price of recreation is expected to increase by 15 percent. How would you expect your store's sales of food products change (show your work)? What is the relationship between food and recreation?
II. You are the are the manager of a small meat processing plant. Your research department estimates that the income elasticity of demand for grain fed beef is -1.94. You recently read in the Wall Street Journal that the recession will end soon, and consumer incomes are projected to rise by 10 percent over the next 3 years. How will this forecast affect your purchases of grain fed cattle? What type of good is grain fed beef?
III. Think about the concept of elasticity how it could be applied more generally. Define the own advertising elasticity of demand for a product (X) and discuss what that would measure. Define cross-advertising elasticity of demand between good X and Y and discuss what that would measure. What sign (positive or negative) would you expect these elasticities to have? How would you decide if a good were advertising elastic or inelastic?
IV. Refer to the reading assignment, With Gas Prices Less of a Worry, Buyers Pass Hybrid Cars By," The New York Times, May 14, 2015, and answer the following questions.
What factors do buyers consider when purchasing a new car?
Why has demand for hybrid automobiles fallen in recent years?
List two goods for which lower gasoline prices will reduce demand, and two goods for which lower gasoline prices will increase demand.