Impact of Schmeckt Gut Energy Bar Availability on Demand in Atollia

ECONOMIC
PRINCIPLES AND
DECISION MAKING
STUDENT ID:
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Problem A
Based on the data provided, the key aim is to outline the potential impact of Schmeckt Gut being
offered at an additional store on the demand of this product in Atollia. In order to achieve the
same, research department has provided some data which can be used to determine the linear
regression model whereby one of the independent variables would be the store count while
Schmeckt Gut energy bar demand acts as the dependent variable. The excel based regression
output on the basis of the data provided is exhibited as follows.
With regards to the task at hand, the key observation in the multiple regression model output
shown above is the slope coefficient associated with number of stores which comes out as
5.1687. It is apparent that the slope coefficient is positive which would hint towards higher
demand for the energy bar if the product availability is extended to more stores. The magnitude
of the slope indicates that a unit change in the stores where the product is available would lead to
change of demand per person by 5.1637 in the direction of change of stores. Further, it can also
be concluded that the slope coefficient pertaining to the store count in terms of product
availability is statistically significant. This is true even at 1% significance level since the p value
associated with slope is lower than 0.01 (Barro, 2017). The regression result therefore indicate
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that increasing the availability of Schmeckt Gut energy bar to more stores would lead to higher
demand for the energy bar amongst the people of Atollia.
Problem B
1) The impact of tariffs in connection to estimate the Schmeckt Gut energy bar demand can be
carried out based on the multiple linear regression model which has been computed above.
The slope coefficient in the context of tariffs on the import of energy bar is negative which is
indicative of the fact that higher amount of tariffs would result in lower demand of the
product owing to price being higher for the consumer. The coefficient value has been
computed as -6.247 which would indicate that a change in tariff by 1 percentage would result
in per capita demand of the Schmeckt Gut energy bar being altred by 6.247 in the opposite
direction. This would imply that if the tariff on imports is cut by only 1%, the per capita
demand of Schmeckt Gut energy bar would surge by 6.247 units which is quite significant.
Of all the independent variables that have been used to estimate the demand of Schmeckt Gut
energy barin Atollia, the tariff rate is the most important and statistically significant as the p
value associated with the slope of this variable is the lowest. Therefore, lower tariff rate
would potentially lead to higher amount of trade which would make both the countries i.e.
Industria and Atollia better off on account of efficient allocation of scarce resources based on
comparative advantage (Koutsoyiannis, 2015).
2) The economic effects related to tariffs are summarized using the following diagram.
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