Reference no: EM133716388 , Length: word count:2500

Economics for Managers

Question 1

After the 2019 Australia bushfires, "A survey conducted in January 2020 found that 26% of Australian businesses had already been affected by the bushfires".

Required:
Assume you owned a business firm on the shores of Lake Conjola on the south coast of New South Wales dealing in grain, wheat products and tourism products, answer the questions that follow.

a) Examine the factors that affect demand for your goods and services.

b) Assume due to the bushfire destruction of farmland, major cities in Australia experienced milk shortage. Also, assume the price of milk increased to AUD 1.90 from AUD 1.50 before the bushfires. Further, assume that due to the bushfire devastation, the consumption for milk fell from 73,000 litres per day to 71,000 litres per day in Melbourne.

(i) Use the midpoint formula to calculate the price elasticity of demand for milk in Melbourne.
(ii) Is milk a necessity in Melbourne? Explain your answer.

Question 2
As the bushfires devastated most of the farmland, major cities such as Melbourne, Sydney and Brisbane started to experience shortage in household products such as milk and bread. As business in household foodstuffs became lucrative, Mary decided to quit her job as a secondary school teacher earning AUD 6,000 per month to start her own milk and bread kiosk business. To start the business Mary decided first, to utilize her rental property from which she was earning AUD 3000 per month. Second, Mary decided to use AUD 60,000 she had saved in Commonwealth Bank. Mary was earning 2.5% interest per month. Mary's expenditure during the first month of March include expenses on fixed assets, vairaibles materials that include wages. The table below summarises Mary's expenditure and sales for the first month of her business in March 2020 as follows:

Mary's March 2020 Business Summary

Items Purchased (Procured)	Cost (AUD)/Item
Milk Section cash flow
1 Milk commercial freezer	4,000
1 milk truck	12,000
Cost of monthly  packaging materials (Packaging materials  depend on sales. Assume, this is the average cost of packaging materials).	2,000
1 cashier (wages depend on hours worked. Assume, this is the average monthly wage )	3,000
Commercial Cool room installation	15,000
Bread Section cash flow
2 Bread Mixers (Cost per bread mixer of 14,000 per machine )	14000
Commercial refreigrator	3,500
2 Support Workers: (wages depend on hours worked. Assume, 3000  is the average monthly wage per worker)	3000 (Per Worker)
Cost of monthly bread dough sweeter ingridients (Depending on demand - Assume this is the average expenditure per month)	4,500
Bread van	20,000
Dough proofer machine	2,000
Bread heavy duty oven	8,000
2 Sheet pan racks (Cost per sheet pan rack is 1000)	1,000
Bakeware tools (Asorted bakeware tools include: bread pans, muffin tins, cake pans, knives and spatulars)	5,000
i.       Assume 30,000 litres of milk are purchased and sold per month. ii.      Assume 20,000 loaves of bread are produced and sold per month

Required:
Use the table to answer the questions below.

a. Calculate Mary's total cost and average total cost for each section (Milk and bread section). Exclude implicit costs.

b. Calculate Mary's variable cost and average variable cost for each section. Exclude implicit costs.

c. Assume Mary sells milk at AUD 1.50 per litre. Also, assume Mary sells each bread pack at AUD 3.00. Calculate Mary's accounting profit and economic profit for the month of March 2020.

Question 3

Range Rover is a luxury car withheadquarters in Whitley Coventry, United Kingdom. The brand Range Rover, is a line of vehicles owned British brand, Land Rover. Other brands that make up the parent company include Jaguar Land Rover. Currently, the brand is owned by Indian automaker, Tata Motors.

Range Rover, the brand of Land Rover operates in major cities of Australia with headquarters in North Ryde, New South Wales.

Required:

Assume the figure below represents the short run cost curves for Range Rover in Melbourne and answer the questions that follow.

a. Use two characteristics to explain the market structure for Range Rover.
b. Calculate the profit or loss for Range Rover.
c. Assume you are the Range Lover Marketing Manager, examine the differentiation and non-price techniques that you could employ to increase sales for your company.

Question 4

a. Assume you owned a business firm on the shores of Lake Conjola. Also, assume you expect severe inflation due to shortages created by the bushfires. Examine Future inflation decision making expectations that could affect your business.

b. The Figure below represents labour force and employment in Australia before the bushfires devastation. Assume E_0 is the equilibrium demand and supply for labour before the bushfires. Also, assume that in order to attract people to seek employment after the bushfires, the government of Australia increased wages from AUD20 to AUD25 per hour. Answer the questions that follow.

(i) What was the employed population in Australia before the bushfires?
(ii) Did the increase of the wage cause a shortage or surplus of labour. Show your calculations in order to provide your answer.
c. Refer to the case study provided. Examine the effects of unemployment for a country such as Australia.

Question 5

a. Suppose the following information was published by the Australian Bureau of Statistics in 2022. Calculate Australia GDP in 2022.

Item	Amount (AUD billion)
Prohibited elephant tusks from endangered species seized in Australia	100,500.00
Government expenditure	99,510.75
Household consumption	49,800.25
Microchips used in computer manufacturing	30,500.00
Hi-tech intermediate components used in manufacturing sector	40,000.00
Cotton exports	31,500.00
Private sector investment (I)	70,900.75
Components used in the manufactrure of tractors	90,555.75
Computer exports	32,200.00
Gifts to Australian citizens	70,000.00
Fish exports	600,000.65
Government  investment in semi government firms	90,9900.25
Value of second-hand cars sold	20,000.50
Value of second-hand garments sold	30,600.90
Agriculture implements exports	3,456.49
Other exports	36,000.00
Imports	30, 000.50

b. "The bushfires burned more than 46 million acres (72,000 square miles) - roughly the same area as the entire country of Syria".

Required:
Following the case study, examine the economic impact of the bushfires on Australia.

Annex: Tutorial Case study - Disastrous Australia 2020 Bushfires