Reference no: EM132533538
GSFM7223 Economics For Managers - UNITAR International University
Problem 1
Vinson Bhd. and Malakoff Bhd. serve the same market. They have constant average costs of RM3 per unit. The firms can choose either a high price (RM15) or a low price (RM8) for their output. When both firms set a high price, total demand is 20,000 units which is split evenly between the two firms. When both set a low price, total demand is 28,000, which is again split evenly. If one firm sets a low price and the second a high price, the low priced firm sells 25,000 units and the high priced firms only 2,000 units.
Required:
a. Analyse the pricing decisions of the two firms as a non-co-operative game and answer the following;
i. Construct the pay-off matrix, where the elements of each cell of the matrix are the two firm's profit.
ii. Derive the equilibrium set of strategies.
iii. Explain why this is an example of the prisoners' dilemma game.
b. Discuss TWO (2) main arguments against cartels.
Problem 2
Government activities have a powerful effect on the economy. It guides the overall pace of economic activity, attempting to maintain steady growth, high levels of employment, and price stability.
a. In a period of general economic decline, there is a drop in the stock market and an increase in unemployment. Explain FOUR (4) factors that cause recession.
b. Explain TWO (2) fiscal and TWO (2) monetary policies that a government could deploy to dampen the impact of a recession.
c. What are the tell-tail sign that the Malaysian economy is "head south" at the present situation?
Problem 3
The table below gives the hypothetical production of a country called Xanadu. This country produces only four goods.
|
|
2017
|
2018
|
|
Good
|
Price
|
Quantity
|
Price
|
Quantity
1,100
|
|
A
|
RM3
|
1,000
|
RM5
|
|
B
|
RM10
|
2,500
|
RMII
|
2,600
|
|
C
|
RM18
|
4,000
|
RM20
|
4,200
|
|
D
|
RM5
|
3,200
|
RM8
|
3,600
|
a. Calculate nominal GDP in 2017 and 2018.
b. Calculate real GDP in 2018 expressed in base-year price (2017).
c. What is the economic growth rate for this country in 2018?
d. The table below shows total GDP for selected Asian countries and the breakdown of GDP into its four components.
|
|
GDP
(in
billions of US
dollars)
|
Per
person (in US dollars)
|
Consumption
|
Investment
|
Government
|
Net export
|
|
|
Y
|
|
C
|
I
|
G
|
(X - M)
|
|
Malaysia
|
198
|
7,234
|
50
|
14
|
14
|
22
|
|
Singapore
|
190
|
40,425
|
41
|
27
|
11
|
21
|
|
Thailand
|
265
|
3,917
|
55
|
22
|
13
|
10
|
|
Indonesia
|
551
|
2,396
|
57
|
31
|
9
|
3
|
|
Philippines
|
165
|
1,800
|
74
|
14
|
11
|
1
|
|
Hong
Kong
|
134
|
19,107
|
61
|
23
|
9
|
7
|
From the above table, comment on the Malaysian economy as compared to its neighbours.
Problem 4
Magma Electronic Bhd. produces head set and market it online. The management is contemplating of reducing the price by 10% to increase its total revenue as the economy outlook is not favorable currently. The customer can be divided into two distinct groups. The table below shows how these groups respond to the discount.
|
|
Volume of sales before
10% discount
|
Volume of sales after
10% discount
|
|
Group 1
(sales per week)
|
RM10,000
|
RM8,500
|
|
Group 2
(sales per week)
|
RM15,000
|
RM14,600
|
a. Calculate the price elasticity of demand for Group 1 and Group 2.
b. Briefly explain how the discount will affect the total revenue for each group.
c. If the company wants to increase total revenue, what price strategy should it employ?
d. Discuss with illustrations how the knowledge of cross-elasticity and income-elasticity of demand of the firm's product helps managers in making business decisions.
Attachment:- Economics For Managers.rar