Last week, you chose an industry to serve as your hands-on example for the application of some key economic concepts. In that assignment, you collected the story of your industry—the who, how, and when of its existence.
This week, we’ll look at the numbers of the industry—how big it is or isn’t. This assignment will ask you to collect some key numbers for the industry and assess their implication. You will face some of the key challenges that you will face as a manager. First, how much does price matter? Second, what will the future hold?
In this assignment, you will first be guided to discover the quantity and price of goods sold in your industry’s market. How much is sold at what price this year and for the last few years? What is the product’s elasticity? You’ll use these values to assess how responsive demand in your industry is to price and interpret what that means.
Second, you’ll face the challenge that every business manager faces—the future. Of course, no one knows the future. Yet, it is critical that we operate as if we do. Planning is a business imperative. What future should your industry expect? To answer this question, we need a critical application of the concept of forecasting.
Directions
1. Using the table below, choose the industry that most closely aligns with your chosen industry. Select the price elasticity value from the list below for your industry.
Some Real-World Price Elasticities of Demand (All elasticities are in absolute values)
Metals- 1.52
Electrical engineering products- 1.39
Mechanical engineering products- 1.3
Furniture- 1.26
Motor vehicles- 1.14
Instrument engineering products- 1.1
Professional services- 1.09
Transportation services- 1.03
Gas, electricity, and water- 0.92
Chemicals- 0.89
Drinks (all types)- 0.78
Clothing- 0.64
Tobacco- 0.61
Banking and insurance services- 0.56
Housing services- 0.55
Agricultural and fish products- 0.42
Books, magazines and newspapers 0.34
Food- 0.12
Oil- 0.05
Source: Microeconomics, Parkin, p. 87
Then, on a Word document or Excel spreadsheet (to be submitted at the end of this assignment) answer the following questions.
Given that price elasticity you have selected:
– Is the quantity sold elastic or inelastic with respect to price?
– If price rose 20% in your industry, by how much would sales go up or down?
– If price rose 20%, by how much would total revenue from sales of the good, go up or down?
2. Now, install a forecasting and analysis tool using Excel or Google Sheets. The following guides will help you install and activate the Excel (or Google Sheets) tool that will make it possible for you to predict the future:
Excel ToolPak https://nationalu.brightspace.com//content/enforced/51189-LMBA605-25552-2304/Excel%20ToolPak.docx?_&d2lSessionVal=V0cRuXZXhbA7k2CoiIdq7iZiF&ou=51189
Google Sheets OpenSolver
You can also view Microsoft’s Analysis Toohttps://nationalu.brightspace.com//content/enforced/51189-LMBA605-25552-2304/Google%20Sheets%20OpenSolver.docx?_&d2lSessionVal=V0cRuXZXhbA7k2CoiIdq7iZiF&ou=51189lPak guide.
3. Collect data for the last few years for your industry and enter it into a spreadsheet:
(Annual for twenty years or more; quarterly for at least 5 years; or monthly for at least two years).
You will want to collect:
• Industry Sales Data ($ and Quantity)
• Key Firm Sales Data ($ and Quantity)
• Cost to produce the good or profitability
4. Now that you have this tool installed and a collection of data from your industry in a spreadsheet, you can create predictions for the future. You will use the tools in the Excel Analysis pack to predict your industry’s future a couple of different ways.
– Use the Moving Average tool to predict sales for the next year.
– Use the Exponential Smoothing to predict sales the next year.
– Is there any other data that you would like to collect to help predict the future sales of your industry?
– What do you expect will happen in this industry for the next few years?
Add your answers to the same Word doc or Excel spreadsheet and upload it to this week’s assignment.
