ECON6000: Economic Principles and Decision Making

This assessment allows you to apply your knowledge on the concepts and ideas discussed during the Modules. This assessment draws on your work for assessment type 2 (modular short written assignments).


Schmeckt Gut plans the market launch for the Schmeckt Besser energy bar in Atollia within the next couple of months.

The Research Department of Schmeckt Gut has conducted a market analysis of Atollia. The results are provided for you in the EXCEL file.

Based on international sources, the Research Department is comfortable in making the following predictions on the development of average income in Atollia, the inflation rate development and tariff rates on imports from Industria:

Income: 1% increase or 3% increase or 5% increase or 7% increase

Inflation rate development: 2% increase or 3% increase or 4% increase or 5% increase

Tariffs on imports from Industria: 7.5% or 10% or 5% or free trade

Note: These developments are not necessarily matched to each other in the sequence shown
above – meaning that we do not know if the 1% increase in income is associated with a 2% increase in inflation rate and a 7.5% tariff rate.

Your task:

Your task is to write a 3,000 word report to the Board of Director of Schmeckt Gut in which you address the following:

Do you think you can match the different projections? For example, do you think that a 5% increase in income is associated with a 10% tariff rate and a 2% inflation rate? Explain by linking your discussion to at least all of the following concepts. These must be discussed:

supply, demand and aggregated demand and aggregated supply, the Philipps Curve and the Laffer curve.

What impact would the different predictions of income development, inflation rate development and tariff rate development have on the potential demand of Schmeckt Gut? Conduct a multiple regression analysis (in log-linear form) with interpretation of the results.

Discuss and explain.

Discuss what the Board of Directors should do under each of your scenarios, based on your matching of the predictions

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