Expert answer:Economics’s Question
Expert answer:Long-Term Investment DecisionsAssume that the low-calorie frozen, microwavable food company from Assignments 1 and 2 wants to expand, and has to make some long-term capital budgeting decisions. The company is currently facing increases in the costs of major ingredients.Use the Internet to research government policies and regulation.Write a six to eight (6-8) page paper in which you:Outline a plan that managers in the low-calorie, frozen microwaveable food company could follow in anticipation of raising prices when selecting pricing strategies for making their products’ response to a change in price less elastic. Provide a rationale for your response.Examine the major effects that government policies have on production and employment. Predict the potential effects that government policies could have on your company.Determine whether or not government regulation to ensure fairness in the low-calorie, frozen microwavable food industry is needed. Cite the major reasons for government involvement in a market economy. Provide two (2) examples of government involvement in a similar market economy to support your response.Examine the major complexities that would arise under expansion via capital projects. Propose key actions that the company could take in order to prevent or address these complexities.Suggest the substantive manner in which the company could create a convergence between the interests of stockholders and managers. Indicate the most likely impact to profitability of such a convergence. Provide two (2) examples of instances that support your response.Use at least five (5) quality academic resources in this assignment. Note: Wikipedia does not qualify as an academic resource.Your assignment must follow these formatting requirements:Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.The specific course learning outcomes associated with this assignment are:Propose how differences in demand and elasticity lead managers to develop various pricing strategies.Analyze the economic impact of contracting, governance and organizational form within organizations.Use technology and information resources to research issues in managerial economics and globalization.Write clearly and concisely about managerial economics and globalization using proper writing mechanics.!!!!!!PLEASE SEE ATTACH RUBRIC AND ASSIGNMENT 1 & 2!!!!!!!
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Assignment 3: Long-Term Investment Decisions
Unacceptable
Fair
Proficient
Criteria
Below 70% F
70-79% C
80-89% B
1. Outline a plan that Did not submit or Partially outlined Satisfactorily
managers in the low- incompletely
a plan that
outlined a plan
calorie, frozen
outlined a plan
managers in the that managers in
microwaveable food that managers in low-calorie,
the low-calorie,
company could follow the low-calorie, frozen
frozen
in anticipation of
frozen
microwaveable
microwaveable
raising prices when
microwaveable
food company
food company
selecting pricing
food company
could follow in
could follow in
strategies for making could follow in
anticipation of
anticipation of
their products
anticipation of
raising prices
raising prices
response to a change raising prices
when selecting
when selecting
in price less elastic.
when selecting
pricing strategies pricing strategies
Provide a rationale for pricing strategies for making their for making their
your response.
for making their products response products response
Weight: 15%
products response to a change in
to a change in
to a change in
price less elastic. price less elastic.
price less elastic. Partially provided Satisfactorily
Did not submit or a rationale for
provided a
incompletely
your response.
rationale for your
provided a
response.
rationale for your
response.
2. Examine the major Did not submit or Partially
Satisfactorily
effects that
incompletely
examined the
examined the
government policies examined the
major effects that major effects that
have on production
major effects that government
government
and employment.
government
policies have on policies have on
Predict the potential policies have on production and
production and
effects that
production and
employment.
employment.
government policies employment. Did Partially predicted Satisfactorily
could have on your
not submit or
the potential
predicted the
company.
incompletely
effects that
potential effects
Weight: 15%
predicted the
government
that government
potential effects policies could
policies could
that government have on your
have on your
policies could
company.
company.
have on your
company.
3. Determine whether Did not submit or Partially
Satisfactorily
or not government
incompletely
determined
determined
regulation to ensure determined
whether or not
whether or not
fairness in the lowwhether or not
government
government
calorie, frozen
government
regulation to
regulation to
Exemplary
90-100% A
Thoroughly
outlined a plan
that managers in
the low-calorie,
frozen
microwaveable
food company
could follow in
anticipation of
raising prices
when selecting
pricing strategies
for making their
products response
to a change in
price less elastic.
Thoroughly
provided a
rationale for your
response.
Thoroughly
examined the
major effects that
government
policies have on
production and
employment.
Thoroughly
predicted the
potential effects
that government
policies could
have on your
company.
Thoroughly
determined
whether or not
government
regulation to
microwavable food
industry is needed.
Cite the major reasons
for government
involvement in a
market economy.
Provide two (2)
examples of
government
involvement in a
similar market
economy to support
your response.
Weight: 15%
4. Examine the major
complexities that
would arise under
expansion via capital
projects. Propose key
actions that the
company could take in
order to prevent or
address these
complexities.
Weight: 15%
5. Suggest the
substantive manner in
which the company
could create a
convergence between
the interests of
regulation to
ensure fairness in ensure fairness in
ensure fairness in the low-calorie, the low-calorie,
the low-calorie, frozen
frozen
frozen
microwavable
microwavable
microwavable
food industry is food industry is
food industry is needed. Partially needed.
needed. Did not cited the major
Satisfactorily
submit or
reasons for
cited the major
incompletely cited government
reasons for
the major reasons involvement in a government
for government market economy. involvement in a
involvement in a Partially provided market economy.
market economy. two (2) examples Satisfactorily
Did not submit or of government
provided two (2)
incompletely
involvement in a examples of
provided two (2) similar market
government
examples of
economy to
involvement in a
government
support your
similar market
involvement in a response.
economy to
similar market
support your
economy to
response.
support your
response.
Did not submit or Partially
Satisfactorily
incompletely
examined the
examined the
examined the
major
major
major
complexities that complexities that
complexities that would arise under would arise under
would arise under expansion via
expansion via
expansion via
capital projects. capital projects.
capital projects. Partially proposed Satisfactorily
Did not submit or key actions that proposed key
incompletely
the company
actions that the
proposed key
could take in
company could
actions that the
order to prevent or take in order to
company could address these
prevent or address
take in order to
complexities.
these
prevent or address
complexities.
these
complexities.
Did not submit or Partially
Satisfactorily
incompletely
suggested the
suggested the
suggested the
substantive
substantive
substantive
manner in which manner in which
manner in which the company
the company
the company
could create a
could create a
ensure fairness in
the low-calorie,
frozen
microwavable
food industry is
needed.
Thoroughly cited
the major reasons
for government
involvement in a
market economy.
Thoroughly
provided two (2)
examples of
government
involvement in a
similar market
economy to
support your
response.
Thoroughly
examined the
major
complexities that
would arise under
expansion via
capital projects.
Thoroughly
proposed key
actions that the
company could
take in order to
prevent or address
these
complexities.
Thoroughly
suggested the
substantive
manner in which
the company
could create a
stockholders and
managers. Indicate the
most likely impact to
profitability of such a
convergence. Provide
two (2) examples of
instances that support
your response.
Weight: 15%
6. 5 references
Weight: 5%
7. Writing Mechanics,
Grammar, and
Formatting
Weight: 5%
8. Appropriate use of
APA in-text citations
and reference section
Weight: 5%
9. Information
Literacy / Integration
of Sources
Weight: 5%
could create a
convergence
convergence
convergence
convergence
between the
between the
between the
between the
interests of
interests of
interests of
interests of
stockholders and stockholders and stockholders and
stockholders and managers.
managers.
managers.
managers. Did not Partially indicated Satisfactorily
Thoroughly
submit or
the most likely
indicated the most indicated the most
incompletely
impact to
likely impact to likely impact to
indicated the most profitability of
profitability of
profitability of
likely impact to such a
such a
such a
profitability of
convergence.
convergence.
convergence.
such a
Partially provided Satisfactorily
Thoroughly
convergence. Did two (2) examples provided two (2) provided two (2)
not submit or
of instances that examples of
examples of
incompletely
support your
instances that
instances that
provided two (2) response.
support your
support your
examples of
response.
response.
instances that
support your
response.
No references
Does not meet the Meets number of Exceeds number
provided
required number required
of required
of references;
references; all
references; all
some or all
references high references high
references poor quality choices. quality choices.
quality choices.
Serious and
Partially free of Mostly free of
Error free or
persistent errors in errors in grammar, errors in grammar, almost error free
grammar,
spelling,
spelling,
grammar,
spelling,
punctuation, or
punctuation, or
spelling,
punctuation, or
formatting.
formatting.
punctuation, or
formatting.
formatting.
Lack of in-text
In-text citations
In-text citations
citations and / or and references are
and references are
lack of reference provided, but they
error free or
section.
are only partially
almost error free
formatted
and consistently
correctly in APA
formatted
style.
correctly in APA
style.
Serious errors in
Sources are
Sources are
the integration of
mostly integrated consistently
sources, such as
using effective
integrated using
intentional or
techniques of
effective
accidental
quoting,
techniques of
plagiarism, or
quoting,
failure to use intext citations.
10. Clarity and
Information is
Coherence of Writing confusing to the
Weight: 5%
reader and fails to
include reasons
and evidence that
logically support
ideas.
paraphrasing, and paraphrasing, and
summarizing.
summarizing.
Information is
partially clear
with minimal
reasons and
evidence that
logically support
ideas.
Running Head: DEMAND ESTIMATION
1
Demand Estimation
Institutional affiliation
Date
DEMAND ESTIMATION
1. Elasticities computation
In computing the elasticities for each of the independent variable in each case, the following
calculation is considered;
At the point when P = 500, C = 600, I = 5500, A = 10000 and M = 5000, by making utilization
of the regression equation,
QD = – 5200 – 42*500 + 20*600 + 5.2*5500 + 0.2*10000 + 0.25*5000 = 17650
The Price elasticity is = (P/Q)*(dQ/dP)
Based to our regression equation distinguished above, dQ/dP = – 42.
In this manner, the value flexibility EP= (P/Q) * (- 42) = (- 42) * (500/17650) = – 1.19
In like manner,
EC = 20 * 600/17650 = 0.68
EI ¬= 5.2 * 5500/17650 = 1.62
EA = 0.20 * 10000/17650 = 0.11
EM = 0.25 * 5000/17650 = 0.07
2. Implications for each of the computed elasticities
It is very critical to understand the implications for the computed elasticities in each case. This
makes it effective to understand if the business can be able to increase the price of its product in
order to make as many profits as possible, or if the business needs to cut the prices to be able to
entice as many clients as possible hence makes it effective to attract many customers and make
2
DEMAND ESTIMATION
3
more profits. Price elasticity is – 1.19. This demonstrates a 1% expansion in the cost of the item,
which makes the amount requested to drop by 1.19%. Accordingly, the request for this item is to
some degree versatile. Therefore, an increment in cost may push clients away. Cross-price
elasticity is 0.68. In the event that the cost of a contender’s item goes up by 1%, at that point
amount requested of this item will increment by 0.68%. This item is genuinely inelastic to a
contender’s cost and there is no should be worried about the contender since their evaluating
won’t influence deals.
Income elasticity is 1.62. This demonstrates a 1% ascend in the normal region salary will help
the amount requested by 1.62%. In this perspective, the item is versatile and the organization can
settle on the choice to raise the cost if the normal wage rises. Advertisement elasticity is 0.11
which implies that a 1% expansion in promoting costs will raise the amount requested by just
0.11%. In this manner, a request is somewhat inelastic to promoting. Hence, the greater notice
doesn’t consequently imply that an organization can raise the cost since that still could push
clients away (McGuigan, 2014).
As for microwave stoves in the range, elasticity is 0.07, which demonstrates a rise of 1% in
quantity of broilers in the zone expanding the amount requested by a minor 0.07%. Accordingly,
in this angle, the request is inelastic and the evaluating system can essentially skirt this
component. Thus, the amount requested is touchy to the cost of an item and the salary of
individuals however to some degree insensitive to our rival’s cost and totally heartless to
promoting and the measure of microwaves existing in the region.
3. Should the firm cut its price to increase its market share or it should not
DEMAND ESTIMATION
4
Based on my own opinion, I think the firm should not cut its price to increase market share.
Definitely, when the firm cuts its price, it is likely that many customers will have to buy their
products and thus a lot of demands will take place. Customers will be attracted by the products
which will make it effective for the firm to make a lot of profits as possible. The competition will
also be low for this firm because the same products are sold at a cheap price compared to other
firms in the market. Furthermore, the elasticity is a little-finished solidarity. Income is expanded
when the level of flexibility is one. On account of that, a value lessening will raise the amount
requested and will prompt a net pick up in deals as flexibility moves towards solidarity.
4. A. The demand curve for the firm is as below, as well as the computations
Q = -5200 – 42(P) + 20(600) + 5.2(5500) + 0.2(10000) + 0.25(5000)
Q = 38650 – 42P
Demand Curve
700
600
600
500
Price
500
400
400
300
300
P
200
200
Linear (P)
100
100
0
0
10000
20000
Demand
30000
40000
DEMAND ESTIMATION
5
B. the Corresponding supply curve is as below;
Supply Curve
700
600
600
500
Price
500
400
400
300
300
200
200
100
100
0
0
10000
20000
30000
40000
50000
Supply
C. the Equilibrium price and quantity are calculated as below;
38650-42P = -7209.89+79.0989P
38650+7209.89 = (79.0989+42) P
In this case, 121.0989P= 45859.89, to find the value of P,
Therefore, P = 378.6978
Q= 22744.6924
D. The numerous major factors that result to fluctuations in supply and demand for the
low-calorie, frozen microwavable food;
DEMAND ESTIMATION
6
A few factors could lead to fluctuations in supply and demand for the low-calorie, solidified
microwavable nourishment. One factor could be shopper’s tastes change; this could be useful for
the sustenance or awful relying upon which way their tastes change. In the event that they chose
they never again like the essence of the sustenance, this will hurt the request of the nourishment.
The inverse can be said if the tastes change in support the sustenance the request will increment
in this manner the supply should likewise increment. Contender’s valuing can likewise influence
the free market activity on the off chance that they offer comparative quality in their item and
they diminish their value buyers could change to spare some cash. Cost of the real item could
influence the free market activity, in the event that they item ends up noticeably accessible at a
much lower cost the request will increment because of buyers stocking up on the item in dread of
the cost expanding sooner rather than later.
5. Rightward shifts and leftward shifts crucial factors
A rightward shift in the demand curve demonstrates that the item is by and large effectively
looked for after and the demand is incredible. The inverse can be a side for a leftward shift; it
showed the item isn’t sought after. There are a few explanations behind movements in the
demand curve for low-calorie, solidified microwavable sustenance. A move to the privilege
could demonstrate more buyers are getting a charge out of the taste and availability of the
nourishment. It could likewise demonstrate that the buyer feels the value point is at an attractive
point. The inverse can be the side for a move to one side. Shoppers could discover solidified
nourishment less engaging and choose to look for other sustenance choices which will influence
the request of the item. The cost could likewise be considered too high for the promoted item and
customers look for a less expensive option (Skoufias et al., 2011).
DEMAND ESTIMATION
7
References:
McGuigan, J. R. (2014). Managerial economics: applications strategies and tactics (13th ed.).
Stamford, CT
Skoufias, E., Di Maro, V., Gonzalez-Cossio, T., & Ramirez, S. R. (2011). Food quality, calories,
and household income. Applied Economics, 43(28), 4331-4342.
Running Head: BUSINESS ECONOMICS
1
Business Economics
Name
University Name
Date
BUSINESS ECONOMICS
2
Effectiveness of the Market Structure
Cedarlane is an old brand in the low calorie microwavable foods industry. The company
prides itself in that it is a family owned business with an intricate yet close relationship with its
customers. Over the years, Cedarlane has grown from strength to strength become a dominant
brand in the food market (Drewnowski, & Eichelsdoerfer, 2010). Among the many products
available, breakfast, lunch and light dinner meals are on the table so to speak. The workforce has
grown from the founder Robert and his grandmother, to a workforce of over 200 employees.
The company has been in existence for over thirty years. It is one of the leading
manufacturers of healthy and also delicious frozen food items in the United States and Wal-Mart
amongst other retail stores are selling the brand in their stores. The frozen food items are
predominantly Mexican, Italian and also cuisine meals from the Mediterranean. Its leading
strategy is that it provides meals to diverse communities who would otherwise, not have access
to such meals (Gottlieb, & Joshi, 2010). Most of the meals range from 230 to 260 calories which
are high in protein and low in cholesterol and are also gluten free with the prices ranging $3.99
to $4.99.
Healthy Choice a huge competitor of Cedarlane is a brand of foods that are refrigerated
and are low in calories. The company just like Cedar Lane has been in the market for a long
time and is under the ConAgra conglomerate. The company however works tirelessly in its
adverts and or media campaigns spending over $90 to $100 million in 2009. Its food variety
includes soups, ice cream, bread, side dishes and also a wide array of sauces. The pricing also in
the range of $4 to $5 per meal.
What is noticeable about the two brands is that the quantity supplied does not meet the
quantity demanded. In addition to this, the frozen food market is quite odd compared to other
BUSINESS ECONOMICS
3
markets. Consumers expect the portion size to remain the same even with a change in price.
Cedarlane and Health Choice have had a hard time battling this phenomenon. Consumers expect
that the prices of the items, if it changes, the portions to remain the same. Once you change the
portion, you quickly end up losing a customer. This then goes to show that both companies do
not have complete and or accurate information on the correct portion size that is ideal for the
consumers right at the onset. Price wars have prevailed between the two brands but not to a large
extent. What happens is that, the two set to make their pricing based what the competitor is
doing; it serves as a guide.
Factors Changing the Market
Information obtained through extensive research and analysis might result in a market
changing from perfectly competitive to imperfectly competitive. The change in the market
structure is a byproduct of the information obtained (Bilgin, 2016). The reason for saying this is
that, through the information at hand, an organization can choose to differentiate its products
with that of the competitor. Once products among competitors seize to be homogenous,
preferences will then emerge amongst consumers from whom to buy goods and services. Once
preferences emerge, that in itself shifts the market entirely as it can lead to one company
dominating the market or other competitors as a result of the increased demand and ultimately
supply of the products.
Price is another tool through which a market structure can significantly change. In a
perfect competition market like structure, prices are the same and products are homogenous
(Bogart, 2008). The products can remain homogenous but what if one of the competitors changes
its price to a lower price for the same product? Of course, consumers will shift to buy from that
organization and in turn reduce the demand for products of its competitors.
BUSINESS ECONOMICS
4
The effect of the two on the operations of the organizations is that, companies might have
to be more aggressive in its pricing strategy, advertising in order to reach more consumers and
add to its sales …
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