Instructions:

Provide written answers to the following 2 problems. Discuss and explain sufficiently.

Problem A:

As discussed in Module 1, Schmeckt Gut plans to introduce the Schmeckt Besser energy bar on the
market.

1. In your own words, what is the importance of the topic ‘Elasticities’ for this undertaking?
Explain this to the Board of Schmeckt Gut.

2. What do you suggest the Board instruct the Schmeckt Gut Research Department to do
to ensure a smooth introduction of the Schmeckt Besser energy bar. Your answer should
be related to the topic of Elasticities.

Problem B:

Records of the demand schedule for the Schmeckt Gut Energy Bar in Industria in 2010 reveals the
following table:

Price Quantity demanded

($ per Energy Bar) (thousands per day)
1.00 30
1.50 25
2.00 20
2.50 15
3.00 10

The Board of Schmeckt Gut would like to receive information to the following questions:

1. What is the price that will maximise Schmeckt Gut’s total revenues and what is the price
elasticity of demand at that price?
2. The Board asks you to investigate the following scenarios:
a. What is the price elasticity of demand when the price of the Schmeckt Gut Energy
Bar increases from $1.00 to $2.00?
b. What is the price elasticity of demand when the price of the Schmeckt Gut Energy
Bar is $1.50?

ECON6000 Assessment 2 brief- Module2

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 3. The Research Department of Schmeckt Gut has identified that a decline in the price of the
Schmeckt Gut Energy Bar from $3.00 to $2.00 increases the quantity of our energy bars sold
from 10 to 20 (thousand per month). At the same time, they identified that this decline in
the price reduces the quantity of Fly High’s energy bars sold from 11 to 9 (thousand per
month).
a. The Board asks you calculate the cross-elasticity of demand for Fly High’s energy
bars sold with respect to the price of our Schmeckt Gut Energy Bar.
4. The Board would like you to investigate whether the Schmeckt Gut Energy Bars and the Fly
High Energy Bars are complementary goods, substitute goods or is there no
interdependence between the two products? Explain!

ECON6000 Assessment 2 brief- Module2

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