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Assessment 3: Report Page 1 of 5 ASSESSMENT BRIEF Subject Code and Title ECON6000 Economic Principles & Decision Making Assessment Assessment 3: Report Individual/Group Individual Length Up to 3000...

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Assessment 3: Report
Page 1 of 5
ASSESSMENT BRIEF
Subject Code and Title ECON6000 Economic Principles & Decision Making
Assessment Assessment 3: Report
Individual/Group Individual
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
ecommend 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.
Submission By 11:59 PM AEST/AEDT Friday at the end of Module 6
Weighting 40%
Total Marks 40 marks
Context:
This assessment allows you to apply your knowledge on the concepts and ideas discussed
during the Modules. This assessment draws on your work for assessment 2.
Assessment 3: Report
Page 2 of 5
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
To
ens University li
ary. 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
eaches it.
Assessment 3: Report
Page 3 of 5
XXXXXXXXXXFinal report clarifications
1. If the government in Atollia wants reduce consumption of imported products they may
increase tariffs. In this question you are required to test what will happen if, say for example,
5% increase in income is associated with 2% inflation rate, etc.
2. You need to predict how changes in average in income, tariffs, and inflation would impact on
the average demand. In this case, you need to run regressions once again.

For example, Income 3%, 5% or 7%. If you multiply the income column with these percentage you will get the
values for all 3 scenarios.

Tariffs 7.5% , 10% , 5% or free trade. Same as above

Inflation is a Nominal Income (indicated as “average income”) minus inflation. That can also
e incorporated. Example: income of 15000 – 3% inflation


Conducting a multiple linear regression (in log linear form) which is Log Y = α + β1X1
+β2X2 +β3X3 + β4X4. The log is in base e so you need to put in Excel the formula = LN
(average demand). In case, you want to know more about how to do it in excel, do go youtube
with these keywords or see the links below.


That should be interpreted as the impact of these variables (variable 1, etc) on the demand.
Say, with + sign increase, with – sign (increase in tariff, which is actually tax, and its impact
on demand).

Another hint: according to Laffer Curve as taxes (tariffs in our case) increase from low levels,
tax revenue collected by the government also increases. It also shows that tax rates increasing
after a certain point would cause people not to work as hard or not at all, thereby reducing tax
evenue and as a result their real income.
Or:
According to Phillips; Decreased unemployment in an economy co
elates with higher rates
of inflation (up to a certain extent). That does not necessarily translates into greater total real
income in the economy but we could assume that more people will be employed affecting
sales dependant on the number of stores (this is just an assumption).

XXXXXXXXXXhttps:
www.youtube.com/watch?v=wBocR96UdyY
XXXXXXXXXXhttps:
www.youtube.com/watch?v=O7TMCYuDbDc
XXXXXXXXXXhttps:
www.youtube.com/watch?v=tlbdkgYz7FM&t=23s

https:
www.youtube.com/watch?v=wBocR96UdyY
https:
www.youtube.com/watch?v=O7TMCYuDbDc
https:
www.youtube.com/watch?v=tlbdkgYz7FM&t=23s
ECON6000 Assessment 2
ief Page 3 of 5
Learning Ru
ics

Assessment
Attributes
Fail
0-49
(Unacceptable)
Pass
50- 65
(Functional)
Credit
66-75
(Proficient)
Distinction
76-85
(Advanced)
High Distinction
86-100
(Exceptional)
Grade Description Evidence of unsatisfactory Evidence of satisfactory Evidence of a good level of Evidence of a high level of Evidence of an
(Grading Scheme) achievement of one or more achievement of course learning understanding, knowledge achievement of the exceptional level of
of the learning objectives of objectives, the development of and skill development in learning objectives of the achievement of learning
the course, insufficient relevant skills to a competent relation to the content of the course demonstrated in objectives across the
understanding of the course level, and adequate course or work of a superior such areas as entire content of the
content and/or unsatisfactory interpretation and critical quality on the majority of the interpretation and critical course demonstrated in
level of skill development. analysis skills. learning objectives of the analysis, logical such areas as
course. Demonstration of a argument, use of interpretation and
high level of interpretation methodology and critical analysis, logical
and critical analysis skills. communication skills. argument, creativity,
originality, use of
methodology and
communication skills.
Knowledge and Limited understanding of Knowledge or understanding of Thorough knowledge or Highly developed A sophisticated
Understanding of required concepts and the field or discipline. understanding of the field or understanding of the field understanding of the
economic concepts knowledge discipline/s. Supports or discipline/s. field or discipline/s.
of supply and Resembles a recall or summary personal opinion and
demand Key components of the of key ideas. information substantiated by Discriminates between Systematically and
assignment are not evidence from the assertion of personal critically discriminates
addressed. Often conflates/confuses research/course materials. opinion and information between assertion of
assertion of personal opinion substantiated by robust personal opinion and
with information substantiated Demonstrates a capacity to evidence from the information
25% by evidence from the explain and apply relevant research/course substantiated by robust
esearch/course materials. concepts. materials and extended evidence from the
eading. research/course
materials and extended
Well demonstrated reading.
capacity to explain and
apply relevant concepts. Mastery of concepts
and application to new


ECON6000 Assessment 2
ief Page 4 of 5
situations/further
learning.
Critical reasoning,
presentation and
defence of an
argument and/or
position in context of
organisational
problem solving

25%
Specific position (perspective
or argument) fails to take into
account the complexities of
the issue(s) or scope of the
assignment.

Makes assertions that are not
justified.
Specific position (perspective or
argument) begins to take into
account the issue(s) or scope of
the assignment.

Justifies any conclusions
eached with arguments not
merely assertion.
Specific position (perspective
or argument) takes into
account the complexities of
the issue(s) or scope of the
assignment. Others’ points of
view are acknowledged.

Justifies any conclusions
eached with well-formed
arguments not merely
assertion.
Specific position
(perspective or
argument) is expertly
presented and accurately
takes into account the
complexities of the
issue(s) and scope of the
assignment.

Justifies any conclusions
eached with well-
developed arguments.
Specific position
(perspective or
argument) is presented
expertly, authoritatively
and imaginatively,
accurately taking into
account the
complexities of the
issue(s) and scope of
the assignment. Limits
of position are
acknowledged.

Justifies any conclusions
eached with
sophisticated
arguments.
Analysis and Limited synthesis and Demonstrated analysis and Well-developed analysis and Thoroughly developed Highly sophisticated
application with analysis. synthesis of new knowledge synthesis with application of and creative analysis and and creative analysis,
synthesis of new with application. recommendations linked to synthesis with application synthesis of new with
knowledge related Limited analysis/synthesis. of pretested models and /
Answered Same Day Nov 20, 2020 ECON6000

Solution

Soma answered on Dec 02 2020
156 Votes
I. Introduction:
Schemeck Gut is planning to expand its business beyond the domestic market and trying to penetrate in the market of Atollia. The firms is now looking forward to launch its product Schmeckt Besser energy bar in Atolia in the next few months. In this volatile, uncertain and highly competitive business world, venturing out a new market is a challenging task. Launching a new product involves lot of money, effort and time. Thus, if the product fails to penetrate in the new market, it would be waste of huge money. The market demographics are significantly different from the domestic market. The marketing research department has conducted a thorough and detailed market analysis about all the key variables that influence the demand for the energy bars in Atollia market. This market analysis helps to take all necessary precautionary actions to minimize the risk and improve the profitability.
The marketing Research department of Schemeck Gut has considered three key variables while conducting the market research. The major variables that affect the demand for energy bars are the income of the potential consumers, the tariff rate and the number of stores where the energy bars will be sold. Based on the given data supplied by the research team and the theories and models of economics, this cu
ent study has estimated the demand equation for the energy bar in the market of Atollia. The estimated demand function would provide a clear idea how the demand for energy bars is affected by the variables. The research study also examines the different projections of income growth, inflation rate and the tariff rate and their implications on the final business outcome. Based on the findings and analysing different predictions, this research study also provides some important recommendations to the Board of Directors for each changed scenario.
II. Key purpose of the study:
The key purpose of this study is to estate the potential demand function for Schmeckt Besser energy bar in Atollia market. The major aim is to examine how the demand for energy bars responds when the combination of changed variables are in effect. For example, the study investigates the outcome of 1% rise in income coupled with 2% inflation rate and 10% increase in tariff rate. The major objective is to move beyond formulating the potential demand function and analyse the market outcome when the changed scenario occurs for two or more variables together. The study also examines whether different projections can be matched in the market. With the help of multiple linear regression tools, economic theories and concepts, this study puts an attempt to address the effects of predicted changed sequence of different variables.
III. Import tariff: an overview
Import tariff is explained as trade protection policy that impose a tax on the imports. Import tariff is nothing but a tax on imports intending to reduce the imports of a particular commodity. When the import tariff is imposed, the price of the imported goods will rise resulting a drop-in import. The key intention is to protect the domestic industries from foreign competition. Microeconomic theory suggests this as the infant industry argument to justify this trade protection policy. Import tariff is imposed to give the protection to domestic producers from the stiff foreign competition. The welfare effects of tariff can be shown with the help of fundamental demand – supply diagram:
Price
SS
Autarky price
Pw+T
Pw
DD
Q2
Q1
Q’
Q
Quantity

Pw is te world price as shown in the above diagram. When the tariff is imposed, the world price has increased from Pw to Pw+T . As a result, the imports have reduced from QQ’ to Q1Q2. As far as the welfare effects is concerned, there is a reduction in the consumer surplus. Consumers are worse off as they have to pay higher price because of the tariff. On the other hand, tariff is an important source of revenue for the government. The tariff revenue is shown by the blue rectangle in the above diagram. In case of launching the energy bars in Atollia, if the tariff rate is too high then it would difficult for Schemeck Gut to enter in the market due to higher import price.
IV. Import tariff: how it influences aggregate demand and aggregate supply
Import tariff has macroeconomic implications too. It affects both the aggregate demand and aggregate supply. When the tariff is imposed, the imports will come down. A fall in imports with exports remain the same will cause the net exports to rise. Net exports is a key component of aggregate demand thus a rise in net exports resulting from the imposition of tariff would shift the aggregate demand curve to the right. Import tariff also affects the aggregate supply as it makes the imported resources expensive. The firms that use imported resource will experience a rise in cost of production. As a result, the aggregate supply curve will shift to the left. A rightward shift of the aggregate demand curve combines with a leftward shift of the aggregate supply curve will cause the price level to rise. But the effect of real output remains uncertain- whether the output will increase, decrease or remain the same that all depends on the relative shift of the curves. If the aggregate demand curve shifts in a greater magnitude then the real output will rise and if the aggregate supply shift at a higher magnitude then the real GDP will fall. It will remain same if both the curves shift in equal magnitude.
V. Phillips curve:
Phillips curve shown a negative relation between the inflation rate and the unemployment rate. The inverse trade -off between these two variables is only relevant only in the short run but not in the long run. In the long run, the Phillips curve becomes vertical depicting the fact that unemployment rate does not depend on the inflation rate in the long run. The short run and the long run Phillis curve is nothing but the mi
or image of short run and long run aggregate supply curve. Phillips curve shift when the supply shock occurs. Supply shock directly affects the aggregate supply curve and the Philips curve. It is important to note that when the supply shock raises the expected inflation, the shift of the Phillips curve is found to be temporary. But if the supply shock does not raise the expected inflation the shift is found to be temporary. The cost of reducing inflation is known as sacrifice ratio that shows how much output has to lost in order to reduce the inflation by 1%. If the inflation rate is too high in the economy it would other way imply a fall in purchasing power. It would in turn adversely affect the average demand for the energy bars. Again, if the unemployment rate is low, we can assume that more people will be employed in the stores that could make a positive contribution to increase the sales of energy bars. Thus, Schmeckt    Gut considers the inflation rate as one of the important factors and closely monitor the trends of this key economic variable....
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