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Economic Principles And Decision Making

Economic Principles And Decision Making

Economic Principles And Decision Making

This is a solution of Economic Principles And Decision Making Assignment Economic Principles And Decision Making can help your company cope with aging systems and limited resources that can lead to fragmented business solutions.[A9] 






By viewing the several activities of consumers, the business professionals are making various decisions in order to make development in the economic structure of the organisation. The current trade market is ever changing therefore; the management of any organisation is make vital decision in order to respond according to the demand of the consumers. Therefore, the topic helps the researcher to understand vital key points regarding decision- making in the context of activities of a certain organisation namely Schmeckt  Gut.    

Part A

Q1: Importance of Elasticity


In order to measure the strength and weaknesses in the marketing strategy of Schmeckt Gut and to analyse the basic demands from their consumer, it is important to analyse the elasticity of the companies productivity and decision- making ability. With the help of elasticity concept, the management of the firm can regulate the change in market price of some product and services offered by the company. In order to set appropriate pricing for the product or service, the management of the aforesaid firm need to consider the elasticity demand of the market as inappropriate change in price of a particular product can impact the demand in quantity of the product that can cause a huge loss in the business (Epstein, 2018). Due to improper pricing strategy there is a possibility of falling to get the desired revenue from the business. It can be understood easily that the firm has incurred a loss if the product demand is elastic. On the contradictory, the firm is able to gain a good amount of revenue from their business if there is a static demand of their product in the market. Therefore, the organisation cannot maximize their profitable amount by ignoring the effect of price elasticity or elasticity of demand for the product. Many organizations in the market are not giving so much importance to the elasticity while making pricing decisions for their product and hence, they are unable to calculate the effective price as they have no data about the previous pricing strategy for the same product. As a result, they are often failed to relate the pricing decision with the elasticity of demand for the product in the market (Cvitanovic et al. 2016).     

Q2: Suggestion to the Board of Directors for introduction of company’s’ energy bar.


In order to introduce any new product in the market, it is important to examine the demand of the product in the existing market. In this context, for introducing Energy Bar in the market, the Board of Directors of Schmeckt Gut need to analyse the market properly in order to get a brief idea about the demand of the Energy Bar among the consumer groups. In addition to that, they need to keep in mind that there are lot of expectations from the suppliers, partners and most importantly the loyal consumers of the company on the new product. Therefore, before introducing the product in the market they need to set the pricing of their Energy Bar in such a way that can able to hold the interest of the consumers to get the product (Kruglanski & Gigerenzer, 2018). In order to deliver the product that is the Energy Bar in affordable price to the consumer groups, it will be the best practice for the management of the aforesaid organisation to make proper segmentation of their customer group according to their buying nature and efficiency. Hence, they can able to set proper pricing to their Energy Bar depending upon the quality of the product that is designed for several customer groups.           

Part B

Question 1: To identify the price maximizing the company' revenue

 we find the average price of per energy bar for a period of 5 days is $ 2.

In a similar way, the average quantity demanded per day across a period of 5 days is 20 thousand energy bars.

Let the profit-maximizing price per quantity be x.

Now, we can develop the linear demand function as follows:

Q(X)= 20-2x

Now the revenue function is as follows:

R(x)= (20-2x)*x

To find the profit-maximizing price: 20-2x=2

Or, we get 18=2x

Or, x=9

Here, we have equalized the marginal revenue function to the dollar price of the quantity demanded. This, when interpreted in the graph, is designated as the point of equilibrium.

The point of equilibrium is the point where the demand equalizes with the supply (Li, Zhao, & Chen, 2016).  

To calculate the change in the price elasticity of demand:

Change in price= 9-2 = $ 7

Change in Quantity= 20-30 = -10

Therefore,( -10/7)*2/20 = -0.14

Question 2:

a) To identify the price elasticity with respect to demand:

Change in Price = 2-1 = 1

Change in Quantity= 20-30 = -10

Price elasticity of demand = 0.033

b) To identify the price elasticity with respect to demand

Change in Price= 1.50-1= 0.50

Change in Quantity= 25-30 = -5

Price elasticity with respect to demand = 0.033

Question 3:

a)      To identify the cross-price elasticity with respect to the demand

Change in the price of the energy bar= 3-2 = 1

Change in the quantity demanded of the energy bar of= 11- 9 = 2 thousand per day

Cross-price elasticity=

(½)*(9/2)= 4.5

To find the cross-price elasticity, we have taken the change in the quantity demanded of the company Schmeckt Gut and the change in the price of the energy bar of the company Fly High.

Question 3:

It can be concluded that the energy bar of the company Schmeckt Gut and the energy bar of Fly Highs are substitute goods (Rosato, 2016). It can be note form the report presented that as soon as the price was decreased from the $ 3 to $ 2, the quantity demanded increased to 20 thousand per day from 10 thousand per days. This evidence verified the fact that the energy bar of the company Schmeckt Gut is a normal good since the reduction in price is accompanied by the increase in the overall demand of the quantity. Since, the energy bar of Fly High is a substitute good, the increase in the quantity demanded of the energy bar of the company Schmeckt Gut is accompanied by the decrease in the quantity demanded of the energy bar of the company Fly High. The energy bar of both the company can also be identified as interlinked goods since the price change in one of the goods has the potential to impact the change in the quantity of the other good.



Part C

Q1: Suggestion to the Board of directors relating to the market structures.


By viewing the four different types of market structure that is perfect competition, monopolistic, oligopoly and monopoly market structure, the management of the aforementioned company need to implement different strategy for launching their Energy Bar in the market. If the market structure is perfect competition based, then they need to make slightly different in their Energy bar that can able to draw the customer interest over the same product introduced by other firms (Friedman & Zeckhauser, 2018). For monopolistic competition structure market they need to place their Bar in such a way that can be affordable to the consumer groups and they can dominant in the market. For oligopoly market structure, the competition for the said firm become less and the possibility to get success in the business become greater as there are very less number of competitors. Finally, if the market structure is monopoly in which they are going to launch their Energy Bar, there is the maximum possibility to obtain maximum profit from the business as the aforesaid organisation is the main dominator in the market (Maine et al. 2015).      


Q2: Identify a specific task identifying specific market structure analysis.




First of all, the research department of Schmeckt Gut need to evaluate the demand of their Energy Bar in the market. Thereafter, before setting the pricing of the product they need examine the type of the market structure in which they wish to launch their product. For the market research they need to conduct several surveys among the consumer group in order to get a brief idea about their preferences that is vital to launch the product smoothly in the market (Frydman & Camerer, 2016). In addition to that, they need to measure possible market risks that are existed in the market and need to make crucial decisions and need to implement adequate strategies in order to mitigate those possible risks that can hamper the business flow.    






The above study has concluded that economic principle is essential for a business organisation to determine the profitability and productivity range. Moreover, Schmeckt Gut Company has decided to launch an energy bar that requires the appropriate decision making that are associated with economic principle. Moreover, the company has considered proper decision making process in order to analyse the market position as well as market feasibility. Moreover, it has been found that some economic principles have played significant roles in order to launch the energy bar. The economic principles decide the resource utilization as well as cash flow management of the organisation.






Epstein, M. J. (2018). Making sustainability work: Best practices in managing and measuring corporate social, environmental and economic impacts. Routledge. Asd



Friedman, J. A., & Zeckhauser, R. (2018). Analytic Confidence and Political DecisionMaking: Theoretical Principles and Experimental Evidence From National Security Professionals. Political Psychology39(5), 1069-1087. Asd



Frydman, C., & Camerer, C. F. (2016). The psychology and neuroscience of financial decision making. Trends in cognitive sciences20(9), 661-675. Asd



Kruglanski, A. W., & Gigerenzer, G. (2018). Intuitive and deliberate judgments are based on common principles. In The Motivated Mind (pp. 112-136). Routledge. Asd



Li, N., Zhao, C., & Chen, L. (2016). Connecting automatic generation control and economic dispatch from an optimization view. IEEE Transactions on Control of Network Systems, 3(3), 254-264. Retrieved on 18th October 2018 from:





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