HM5003 Economics for Managers Assignment Sample

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HM5003 Economics for Managers Assignment Sample

Question 1:

Pakistan families are reportedly still hungry and homeless six months after floods. Forced to endure a ‘humiliating’ life in tent cities, waiting for stagnant water to recede, villagers say they have been abandoned by Shah Meer Baloch in Dadu. Suppose you owned a grocery shop selling rice among other commodities. Due to effects of the floods that affected your store, some rice is brown and mixed with sand. Consumers always complain and prices are not predictable. Use your knowledge of microeconomics to address the task below:

Use two graphs to explain the factors that affect demand for your grocery shop especially rice a food of Pakistan.

ANSWER (box will enlarge as you enter your response)

Question 2:

John was a high school teacher earning a net salary of $54,000 per year. After working for one year, he quit his job to start his own milk bar business. In order to start the business, John borrowed $40,000 from the bank and was paying 5% interest per year. John also withdrew $50,000 from his savings account, on which he had been earning 5% interest per year.

John’s first year of business can be summarised as follows:

Required:

Use the information above to answer the following questions:

a. Calculate John’s average variable costs and average total fixed costs. Assume you produce 70,000 cups of milk and yoghurt altogether.

2 Marks

ANSWER

b. Calculate John’s accounting profit and economic profit, then advise whether or not John should return to his teaching job or continue with the milk bar business? Show your calculations.

8 Marks

ANSWER

Question 3:

Pakistan has a well-established Fast-Moving Consumer Goods (FMCG) distribution system. With a population of 235.82 million and a population density of 318.09 people per square kilometre, the country’s FMCG distribution system is dominated by six (6) major multinationals: Muller & Phipps, AG&C, Premier Group, Procter & Gamble (P&G), United Distributors Limited (UDL) and Elite Brands Ltd.

Required:

a) Examine the market structure for the Pakistan Fast-Moving Consumer Goods (FMCG) distribution system, using market structure for University Assignment Help characteristics to explain your answer.

ANSWER

b) Use a micro-economic figure to explain the elasticity of demand for the Pakistan Fast-Moving Consumer Goods (FMCG) distribution system.

ANSWER

Question 4: (10 marks)

Suppose the following information is extracted from Pakistan Bureau of statistics in 2023 fiscal year after the floods (production in units: price is per unit).

Required:

Use the information in this table to answer the questions that follow.

a. Calculate Pakistan’s 2020 nominal GDP, real GDP, and GDP deflator. Show your work.

ANSWER

b. According to State Bank of Pakistan, Sensitive Price Indicator is designed to assess price movement of essential consumer items at short intervals, on a weekly basis, so as to take corrective measures. As per a report issued by the Pakistan Bureau of Statistics, the prices of 23 essential commodities have increased in just one week ending on August 25, 2022. Among the items that have become expensive, the price of tomatoes increased by 43.09%, onions by 41.13%, potatoes by 6.32%, eggs by 3.43%, garlic by 2.23%, dry milk by 1.53%, dal mash by 1.12%, cigarettes 2.26%, and LPG 1.95%. The items whose prices dropped include dal masoor which fell by 1.18%, vegetable ghee by 1%, cooking oil by 0.51%, sugar by 0.07% and mustard oil by 0.07%.

Based on these changes, examine the future inflation expectation in Pakistan. 4 Marks

ANSWER

Question 5:

“The floods have affected everyone but the impact is on the poor and labourers more than anyone,” says Rasool. “They don’t have anyone in the government. They don’t have any voice here. Rich and powerful people are getting money and all the help.” Rasool says he has heard many stories of corruption in the province. Overall damages are estimated at US$14.9 billion, equivalent to 4.8% of GDP in 2022.

Required:

a) Did the floods cause economic expansion or a recession? Explain your answer using the Aggregate demand and aggregate supply model.

ANSWER

The floods that occurred in Pakistan caused an economic recession, which could be explained by the model of Aggregate Demand and Supply.

Aggregate Supply Shock The flood completely creamized infrastructures, lands (aggriculture inclusive), and houses. This damaged vital sectors like agriculture and industry and reduced the overall productive capacity of the economy. Agriculture is one of the major contributors to the GDP of Pakistan; hence, the destruction of crops such as rice, sugarcane, and cotton brought about a fall in output. This is an AS curve shifting leftward, implying a fall in the supply of goods and services (Engelhardt 2021, p. 435(3)).

Aggregate Demand Impact: The floods also impacted consumer spending, investment, as well as government spending. Many families, given the general destruction, lost their means of earning any form of income and other valuables that reduced their purchasing power in light of the flooding. This therefore shifts the AD curve to the left since overall demand for goods and services falls. With businesses facing reduced demand, they are likely to invest less, further weakening AD.

Inflation and Stagflation Since this pulls the AS to the left, prices are higher when fewer goods are out on the market; that is a sure cause of inflation. However, the aftereffect of such inflation produces reduced economic output coupled with increased unemployment, which again is certain stagflation (Mihaljek 2023, p. 410(2)). The resulting recession, when both AD and AS go down together, means that there's a reduction in output and a reduction in employment, hence pushing the economy into recession. Consequential to this, economic activities contract with estimated damages at US$14.9 billion, 4.8% of GDP, further exacerbating poverty and inequality (Rasool 2024)

Hence, with AD-AS model, the floods led to the recession by decreasing both aggregate supply and aggregate demand in the economy.

b) Use a macroeconomic graph to explain how the government of Pakistan used taxation as a fiscal policy instrument to support economic recovery after the floods.

ANSWER

Therefore, taxation policy has been the one which a government in Pakistan has probably harnessed most for fiscal policy so as to help economic recovery they have faced after drastic floods. Basically, a governmental policy adjusts taxes with the intention of stimulating an economy or taking care of the businesses and population that are affected by the calamity (Rasool 2024)

Taxes Reduction/Expansionary Fiscal Policy: In trying to cushion the economy from the effects of floods, there could have been a need to reduce taxes mainly on basic goods and services.

A reduction in either income tax or sales tax increases disposable incomes of the household and therefore increases spending. We have a rightward shift of the aggregate demand curve and hence stimulation of recovery. A reduction in taxes for businesses allows them to recover from losses and therefore investments and production can take a complementary turn upwards, boosting aggregate demand. The government temporarily suspended import duties on essential items, like food and medicine, to make them available and more affordable (Verges-Jaime 2023, p. 428(2)). This helped in the stabilization of supply chains, while keeping prices under control to avert consequent inflationary pressures.

In addition, increased government spending by the government most likely was undertaken for reconstruction and relief with the help of deficit financing. This fiscal stimulus supports overall economic recovery.

END OF FINAL ASSESSMENT

Engelhardt, L.M. 2021. Keynesian Supply Shocks and Hayekian Secondary Deflations, Quarterly Journal of Austrian Economics, doi: https://doi.org/10.35297/qjae.010108.
Han, J. and Zeng, C. 2023. The Effects of Downstream Entry in a Vertical Mixed Oligopoly: The Role of Input Pricing, Journal of Economics, doi: https://doi.org/10.1007/s00712-023-00831-0.

Mihaljek, D. 2023. Inflation and Public Finances in the 2020s: Editor's Introduction to the Thematic Issue of Public Sector Economics, Public Sector Economics, doi: https://doi.org/10.3326/pse.47.4.

Rasool, M. 2024. Pakistan 2022 Floods and Food Crisis, HM5003 BM1 T2 Case Study, http://austrade.gov.au/pakistan-flood-crisis.
Verges-Jaime, J. 2023. Fiscal Austerity Vs. Expansionary Fiscal Policy: On the Results of these Opposed Economic Policies Applied to Fight Recessions, Journal of Economic Policy Reform, doi: https://www.proquest.com/scholarly-journals/fiscal-austerity-vs-expansionary-policy-i-on/docview/2886465814/se-2.

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