MANAGERIAL ECONOMICS

&
BUSINESS STRATEGY
CHAPTER 2, 3, AND 4 – LO 1, LO6, AND LO 7
 Welcome!!
We’re GROUP One

ALMIRA DIKA PUTRI 11P20001

AULIA AL AZIZI 11P20002
BAGAS RADITYA PUTRA 11P20003
DAMARJATI PRANATA 11P20004
Learning Objectives 1, 6, 7
01 Chapter 2 – Market Forces : Demand and Supply
• Number 12
• Number 13
• Number 22

02 Chapter 3 – Quantitative Demand Analysis

• Number 11
• Number 13
• Number 14

03 Chapter 4 – The Theory Individual Behaviour

• Number 13
• Number 16
• Number 18
 CHAPTER 2
Question no 12 (LO1, 3, 5):
Congress is wiling to agree to the lobby of Sugar Producers to add levy of $0.5 per pound on all imported raw
sugar that is the primary component of your product. I addition, Coke and Pepsi plan to launch an aggressive
advertising campaign deigned to persuade the buyers that their brand are much more superior to generic soft
drinks. How will this impact the equilibrium and the quantity of generic soft drink?

Answer:

When the sugar price is rising, we assume that the

price will also increase, resulting lowered demand q
uantity towards our product. This condition is getting
worse because the competitor have an aggressive a
dvertising. It affect our market share to be lowered
 CHAPTER 2
Question no 13 (LO 1,3,5):
Higher cigarette prices do not deter smoking. “The law of supply and demand indicate that
higher prices are ineffective in reducing smoking. In particular, higher cigarette prices will reduce
the demand for cigarettes. This reduction in demand will push the equilibrium price back down to
its original level. Since the equilibrium price will remain unchanged, smokers will consume the
same number of cigarettes”. Do you agree or disagree on this view?

Answer:
If we’re looking on things that shifting the demand, such as income, advertising, and prices of
related goods, (page 33) the statement might be true.
If the income still fitting on the increase on cigarette prices, then the cigarette still being the
normal goods to certain people. Also, if seeing the stereotypical of cigarette advertisment, it
persuading the society to be a “real man” if you a smoker. Cigarettes also do not have a similar
subtitute goods, so smoker still be looking for cigarette like their basic needs.
 CHAPTER 2
Question no 22 (LO 1,3,5):
Price Gouging : Selling necessary commodities at price that grossly exceeds the
average selling price for the 30 days prior to the emergy.
Assuming that the law is strictly enforced, What are the economic effects of the price
gouging statute? Explain

Answer:
Price gouging in post disaster markets not only have negative effects on consumers
but also have reciprocal effects on the sellers. If selling in a state with price gouging
laws, businesses suffer the consequences of their actions. Not only are they
reputations in the community tarnished but government fines will also cost a hefty fee.
 CHAPTER 3
Question no 11 (LO 1,4):
Revenue a smartphone manufacture was $2.3 Million for 9 months. In yoy increased
by 85%. Management increasing the revenue 108% in shipments, despite 21% drop
in average blended selling price. It’s surprising that the revenue increased while
average selling price of its phone.

Answer:
The elasticity of the smartphone is >1, which is elastic. Reffering to elasticity formula,
quantity over the price. And also, smartphone is the secondary stuff.
 CHAPTER 3
Question no 13 (LO 1,3):
Big G raised cereal prices by 4 percent. The result of this price increase, the volume of all cereal
sold by Big G dropped by 5 percent, what can you infer about the own price elasticity of demand
for Big G creal? Can you predict whether revenues on sales of its Lucky Charm brand increased
or decreased?

Answer:

%Px =4
%Qx =5
Eqx,Px = %Qxd/%Px
= 5/-4
= -1,25
-1,25 > -1
Inelastic demand, increase in price leads to reduce in total revenue ( revenue decreases)
 CHAPTER 3
Question no 14 (LO 1):
If Starbuck’s marketing departement estimates income elasticity of demands is 2,6.
Assuming that economic boom (expected to increase consumers’ income by 6% over
the next year), What impact the quantity of coffee Starbucks expects to sell?

Answer:
So, if the estimates income elasticity of demands is 2,6, Therefore:
Income = Price x Quantity
EQ,P = %𝞪Q / % 𝞪 P
%𝞪Q = 2,6 x 6
= 15,6%
So, impact the quantity of Coffee expects to sell will increase 15,6% at the economic
boom
 CHAPTER 4

Question no 13 (LO 6):

Buy 3 get 4 for tires. Each tires usually cost $40, if consumer has $360 to spend on tir
es and other goods, how does this deal impact the consumer’s opportunity set?
Answer:
$40 x 3 = $120/4 = $30 each tires instead of $40 each tires
The opportunity set increases
 CHAPTER 4
Question no 16 (LO 7):
An internal study at Mimeo Corporation revealed that each of its worker assembles
three photocopiers per hour and is paid $6 for each assembled copier. The company
doesn’t have the resource to supervise the worker but there is an inspector that
checks the quality of the copier before they are paid. You have to evaluate new
proposal designed to cut cost, by giving the employee $16/hour at fixed rate. Would
you favour the plan?
Answer:
If the economy is in low condition or recession, the demand for copier is low, then it
will be not favorable to pay the employee at fixed price. However, when the demand
is strong, it is favorable to use the new plan since the company will pay their
employee at lower wage than before.
 CHAPTER 4
Question no 18 (LO 6):
If average 15-years old purchases 100 song downloads from iTunes and buys 20
cheese pizza in a typical year. If cheese pizza are inferior goods.
Would the average 15-year-old be indifferrent between receiving a $50 gift certificate
for iTunes and $50 cash? Explain
Answer:
Yes, average 15-year-old would be different when he receive $ 50 gift certicate for
iTunes and when he received $50 cash.
Because they have another needs, cheese pizza, so when they received $50 cash,
they will buy a higher taste of food or goods and they can still purchases song
downloads from iTunes. But, if they get $50 gift certificate for iTunes, the other needs,
in this case is cheese pizza, is still inferior goods.
Thank you
From Group 1