# Demonstrate an understanding of economic decision-making of different actors

Demonstrate an understanding of economic decision-making of different actors

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· Font: Arial 12,5 pts.

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## Demonstrate an understanding of economic decision-making of different actors

Description and information of the task:

You have to answer the questions of the exam. All the information is contained in the text, thus you do not to make any hypothesis.

1.- Making predictions.

There is a growing interest in the practice of endurance sports like running or cycling. To achieve a greater performance in these disciplines, athletes consume energy gels which provide them sources of carbohydrates and proteins.

However, the basic formulation of these products can also be used in other applications with highest added value and consequently some the producers are leaving the market of energy gels.

Finally, some researchers have estimated that the demand of energy gels can be considered as elastic, because there are other ways to get carbohydrates and proteins and the price elasticity of supply has a value of 0.32.

Considering these situations, make a prediction about the evolution of the prices and quantities in the market of energy gels. (5 points)

2.- We are in a company which produces chairs and tables. We have only 1 line where we produce chairs and/or tables indifferently. Our production is 100% automated, thus the only resource we consider is wood. From our production department we know that when the production level is 100% efficient, we get the following figures:

· Maximum level of production of chairs: 150,000 units

· Maximum level of production of tables: 50,000 units

· Wood employed in 1 chair: 7.5 kg

Our tables and chairs have always the same weight, regardless the quantity produced. With this information answer the following questions (5 points):

a. Amount of wood consumed when the production is 100% efficient.

b. Which of the following options is the best for our company and why:

1. Produce 110,000 chairs and 12,000 tables

2. Produce 90,000 chairs and 20,000 tables

3. Produce 15,000 chairs and 50,000 tables

d. What is the opportunity cost to produce 1 chair?

3.- Our company is producing sweatshirts for the general clothing market. We have carefully estimated that

· When our selling price is €30, we sell 3,600 units

· When our selling price is €50, we sell 2,000 units With this data, answer the following questions (5 points):

1. What is the value of the Price Elasticity of the demand in the observed interval? Should we consider the demand at this interval as elastic or inelastic (why?)

2. Considering that our actual price level is 35€/unit, and we want to increase our revenues, which is the best option, increasing the price by 3% or decreasing the price by 3%. Why?

4.- In our market we have observed the following figures

With this data, answer the following questions (5 points):

1. Can you provide an explanation about constant decrease of prices?

2. At what level prices will stop decreasing (estimate the concrete price level)?

Submission:

· Via Moodle

· Week 6, November 2nd, 11:15

Weight: This task is a 30% of your total grade for this subject. It assesses the following learning outcomes:

· Demonstrate an understanding of economic decision-making of different actors.

· Understand the relationship between economic theory and practice

· Evaluate real life situations with practical application of the acquired tools and knowledge

Rubrics Rubrics apply to each question

Description

The student demonstrates an excellent understanding of the concepts.