Impact of Economic Variables on Demand for Schmeckt Gut's New Product

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ECON6000 ECONOMIC PRINCIPLES & DECISION MAKING
ASSESSMENT 3- REPORT

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Executive summary
This paper contains a report directed to the board member of Schmeckt Gut which is looking
to launch a new product in the market. Under the process for the launch of the new product,
the research department of the company has collected market data and information. This
paper articulates projections of the chosen variable and finds out how the change of the
variable impacts the demand for the product.

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Table of contents
1.0 Introduction..........................................................................................................................4
2.0 Methods................................................................................................................................4
3.0 Discussion............................................................................................................................4
4.0 Recommendations..............................................................................................................13
5.0 Conclusions........................................................................................................................14
Reference..................................................................................................................................15

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1.0 Introduction
Schmeckt Gut is a company that is going to launch a new product in the market. Thus, the
research department of the company has collected data and information about different
variables of the market that can help in the determination and the forecasting of the demand
for the new product. This study carries out a regression analysis on the collected data to get
an insight regarding the forecasted demand for the product.
2.0 Methods
A multiple linear regression has been done using the collected data of the research
department of Schmeckt Gut. The results of the linear regression have been interpreted in the
paper to present a clear picture of the impacts of the variables on the demand for the new
product.
3.0 Discussion
Matching of different projections
Income, inflation, unemployment, and tariff which are a tax, in this case, are all related to
each other in the macroeconomic platform. Therefore, some of the projections regarding the
increase in the value of the variable can be matched using economic theories and concepts.
Scenario 1: 7% increase in income, 0% tariff and 2% inflation
Income of the consumers can directly influence the inflation level of the economy. Sodeyfi
(2016) pointed out that, income increases the purchasing power of the consumers of the
market that in turns shifts the demand curve for the goods and the service towards the right. If
the single product is considered the demand curve for that product will shift to the right and
increase the price. Apart from that, according to the principle, the rise in income can also
increase the aggregate demand for all the goods and services of the economy (Shackle, 2017).
This 7% increase in income of the consumer can shift the aggregate demand to the right side
leading to a higher overall price level and output. However, the tariff rate which is the tax
rate on imported goods can reduce the impact of an increase in income on the inflation of the
economy (Flammer, 2015). The consumer may use their increased income to buy goods from
the foreign economy that will hardly influence the inflation level of the domestic economy.
The Laffer curve which depicts the relationship between the tax rate and the tax revenue