ECONOMICS Economics Name of the student Name of the university

Running head: ECONOMICS
Economics
Name of the student
Name of the university
Author note

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Table of Contents
Part A.........................................................................................................................................3
Answer 1....................................................................................................................................3
Answer a.................................................................................................................................3
Answer b................................................................................................................................3
Answer c.................................................................................................................................4
Answer 2....................................................................................................................................4
Anwer a..................................................................................................................................4
Answer b................................................................................................................................5
Part B..........................................................................................................................................6
Answer 3....................................................................................................................................6
Answer a.................................................................................................................................6
Answer b................................................................................................................................7
Answer 4....................................................................................................................................8
Answer a.................................................................................................................................8
Answer b................................................................................................................................9
Part C..........................................................................................................................................9
Answer 5....................................................................................................................................9
Answer a.................................................................................................................................9
Answer b..............................................................................................................................11
Answer c...............................................................................................................................11
Reference list............................................................................................................................12

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Part A
Answer 1
Answer a
The demand side factrs which are respnsible for the recent sccess of spotify in Latin
America since half the opulation of latin america is below 30 which states that as the young
population loves music and also uses social media more , they are the core audience of of
spotify. The rising middle class of latin america was also growing and therefore more people
were able to pay the fees for entertainment. The rise in young population and the yung
population of latin america made lead to the rise in demand for Spotify. The Latin market is
also radio driven, they have the habit of listening to radio
Answer b
The supply drivers for Spotify subscriptions are that licensing in latin america is very
easy for spotify. The prediction of Morgan Staley states that it is predicted that subscriptions
will double in the next five years to 220 million paid subscribers. The bank also epects that
by 2023, spotify will have 53 million paid subscribers in Asia, africa aswell as in middle
east .
Answer b
The demand side factors which are respnsible for the recent sccess of spotify in Latin
America since half the opulation of latin america is below 30 which states that as the young
population loves music and also uses social media more , they are the core audience of of
spotify. The rising middle class of latin america was also growing and therefore more people
were able to pay the fees for entertainment. The rise in young population and the young
population of Latin America made the demand for Sotify increase.

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Answer c
The cross price elasticty of demand is known to measure the responsiveness of the
amount of quantity demanded for a good to a change in price of another good. The cross price
elasticty is measured by taking the change in percentage in the quanity demanded of one
good by deviding it by the prcentage change in the price of other good.
Numerical example: when the price of product A increases from $10 to $15 per gram and as
a result consumer will demand more B and demnd increases from 30 per grm to 40 per gram.
Cross elasticty : [(40-30)/(15-10)]*(10/30)
= 2/3 = 0.71
Increase in the price of Apple will lead to increase in the demand for Spotify since both the
gods are substitute in nature. Therefore when the prce of Apple will increase, people will
switch to Spotify
Answer 2
Anwer a
The demand for audio streaming platform largely depends on the variety of musics
played. The demand for Spotify will therefore increase when more hit and popular musics
will be played. The musics of the top musicians will be playing a huge role for the demand of
the famous audio streaming platform.Therefore, when the top musicians refused to broadcast
their music on spotify, the demand for Spotify will be hampered. Spotify will find it quite

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P1
P0
S
D1
D0
Q0 Q1 Quantity
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difficult to compete in the market for music streaming since top musicians refused to
broadcast their music on Spotify. The popular songs of the top musicans have a high demand.
Therefore, broadcasting the musics of top musicians will benefit Spotify since people wil be
hearing it more.
Answer b
Popular musics are known to highly influence the demand for Spotify. When Taylor
Swift boycotted broadcasting her music Spotify, there was a decline in demand for Spotify.
Since there are presence of large number of substitutes of Spotify, people will switch to other
audio stramingplatforms where Taylor Swift broadcasts her usic. Taylor Swift is known to
have a huge fan base all around the world where millions of people subscribes for listening to
her music. Therefore, her boycotting Spotify will lead to huge loss for the company.

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The diagram above shows that when Taylor Swift stopped the boycott and also agreed for her
music to be streamed on Spotify, people will be subscribing Spitify more. This also means
that the demand for Spotify will increase. When Taylor Swift will allow her music to be
streamed on Spotify, the demand of the famous audio streaming platform will increase.
When demand increase, the demand curve shifts rightward from D0 to D1. The equilibrim
point will also change. The new intersection point of D1 and P1 will be the new equilibrium
point. When the demand for Spotify will increase, it can increase its buisness for raisng
revenue.
Part B
Answer 3
Answer a
There are many competitors of Adidas which means Adidas operates in monopolistic
competition market. Some of the competitors of Adidas are Nike, Callaway Golf Company,
PUMA SE, Fila, Converse, New Balance, K Swiss and many more.
The shoes market is getting more competitive in nature in terms of sales as there are presence
of lot of substitutes in the market. One of the reason why Adidas is considered as the
monopolistic competition since there are large number of buyers as well as sellers in the
market. Adidas is known to have more than ten competitors in the world which is quite
similar to the perfect competition. Another feature of adidas is that there is product
differentiation where each of the substitutes is slightly different from one another. The
product differentiation is a situation when the buyers of the product is completely different
from the product with each other. It is also known to use its unique style of the three stripes
design. All the companies although produces the sports item, however they are slightly
different from each other. There are differences in design, skills and the material used. The

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third characteristics of adidas which termed it to be monopolistic it its different marketing
strategy. Adidas differentiates its products are made known to the buyers through promotion
and unique advertisement policy. These costs constitute a substantial part of the total cost
under monopolistic competition. There are also free entry and exit of the firms in case of the
sports industry.
Answer b
Celebrity endorsements are known to be a well established marketing strategy from a
long time. The connection between the product and brand is known to have a positive effect
on the purchasing behaviour of the consumer. The sports companies such as adidas and Nike
are prime examples of those organizations in which their brand marketing strategy is known
to incorporate variety of celebrity endorsements. Athletes with a celebrity status is known to
form an important part of the advertising system. The status of the celebrity persuade
consumers for committing to the brand which they advertise and also affect the consumer’s
ideologies with regards to the social aspects of the firms. The celebrities are used in various
endorsements with film and sports celebrates among the most commonly utilised. There is a
positive relationship with the return of investments. With the rising importance of the social
media, in the purchase journey of the shopper, the companies are evolving and stepping up
the endorsement game across various channels. In the present age where everyone spends
most of heir in social media, there is a huge chance that the clarities will have a he impact in
the lives of the people. However, if the celebrity or the athlete is involved in the controversy,
it can negatively affect the growth of the products of that particular brand.
Adidas is known to have contracts with the international celebrities like Snoop Dog, Pharell
Willard,, kayne West and Rita Ora which lead to a very strong trustworthy image of the
brand. However, the other brands also known to have a good brand image specially Nike
which is known to be the leading company in the sports field.

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Answer 4
Answer a
When investment increases, it is known to raise the output level which also raises
employment an income. Therefore, when the investment increases there will be also an
increase in the aggregate income by a multiple of that investment. Therefore when adidas is
known to increase its investment in the digital marketing, it will increase the aggregate
demand AD to the right which leads to the increase in level of income in the economy.
The increase in investment in the digital retail market will increase in the general level of
income in the economy. The rise in the aggregate demand will be increasing the level of
gross domestic product in the economy which is similar to the level of income as it measures
the income level of the country. The change in the aggregate demand is known to have a
greater effect on the impact of the equilibrium national income. This takes place due to the
investment multiplier effect. The rise in investment will be increasing productivity which will
also increase the output of the economy the rise in output of the economy will lead to
economy expansion which will create more employment. As a result of this, it will lead to
rise in the aggregate demand which shifts the AD curve outwards from AD to AD1. When

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the investment will be increasing from P0 to P1, the level of output will increase from Q0 to
Q1.
Answer b
Macroeconomic risks are the financial risks which are associated with the
macroeconomic factors. The macroeconomic risk will also influence the volatility of
investments, portfolios and assets of the companies. The macroeconomic risks is that risk
which takes place as a result of slowing economy which generally takes place due to poor
investment performance as a result of reduced demand, earnings growth and profit margins.
All the investments which are dependent on one way or the other on healthy functioning
economy are potentially subject to risk.
Part C
Answer 5
Answer a
The graph above shoes that real personal income is less than real gross domestic
product. The graph also shows that the gross domestic product have increased from the year
1995 to 2019. The gross domestic product is also highest in the year 2018 which is more than

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18 billion and the least was in 1995. Both the real personal income of the United States and
the real gross domestic product moved in the same way where in 2000 it increased a little and
then in 2001, it went down. However in the year 2007, both the real personal income and the
real gross domestic product have increased sharply and then from 2008 to 2010, it went to
recession. Though the real personal income increased a little in the year 2013, the trend
however remained same for the gross domestic product.
The gross domestic product is known as the total value of goods and services which is
produced by economic activity in an economy whereas the personal income is the amount of
money received by the people in an economy from their economic activity. Both the concepts
are related to each other since they typically sow similar trends when the gross domestic
product increases, personal income also increase. The reason behind his is that the GDP is
usually divided by population for obtaining the personal income.
The Early 2000s recession took place in the year 2001 which lasted for 8 months where the
unemployment rate was 6 percent. The recession in the year 2001 took place basically due to
the burst of the dot com bubble. The terrorist attacks which took place in September, business
outlays facing loss and the collapse of the dot com bubble resulted to recession in 2001.
Although US faced such shocks, the period of recession was still short and brief. The second
recession was named as the Great Recession which took place from 2007 to 2009. It lasted
for more than a year where the rate of unemployment was 10 percent. The subprime
mortgage crises have led to the collapse of the housing bubble of the United States. The
falling housing assets led to the global financial crisis which led to collapse of many financial
institutions of USA. The great recession in the United States had been a severe financial crisis
which are combined with a deep recession which lasted till June 2009.

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Answer b
A rise in the consumption is known to raise the gross domestic product by the similar
amount. The current income similar to GDP is also an important determinant of the
consumption. Therefore, an increase in income will raise the consumption. Consumption is
the value of goods and services which are bought by the people. The consumption is also
termed as the largest component of Gross domestic product. The economic performance of
the country is also measured in terms of consumption level and dynamics. Here is a strong
association between consumption, gross domestic product and the income. High level of
income and consumption increases the standard of living. However, it does not increases the
living standard that much in case high income developed countries which are known to be
more proficient in investment ad in R &D activities.
Answer c
The gross domestic product is used for measuring the economic performance of a
country. When the growth of the gross domestic product of a country will be low, the bank
will be increasing the rate of interest which slow down the growth of the business. Therefore
when GDP falls, the companies will start laying off workers and use various cost cutting
measures for saving the cash. A significant change in the gross domestic product will have a
significant impact on the stock market. The increase in consumption and gross domestic
product therefore will be benefitting both Adidas and Spotiy. Both these companies can
invest in those countries whose GDP is high since it will help them in earning profit.

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Reference list
Bauer, M.J.R., 2018. Principles of microeconomics.
Baumol, W.J. and Blinder, A.S., 2015. Microeconomics: Principles and policy. Nelson
Education.
Cowen, T. and Tabarrok, A., 2015. Modern principles of microeconomics. Macmillan
International Higher Education.
Iossa, E. and Martimort, D., 2015. The simple microeconomics of public‐private partnerships.
Journal of Public Economic Theory, 17(1), pp.4-48.
Kreps, D.M., 2019. Microeconomics for managers. Princeton University Press.
Martimort, D., Menezes, F., Wooders, M., Iossa, E. and MARTIMORT, D., 2015. The
Simple Microeconomics of Public-Private Partnerships. Journal of Public Economic Theory,
17(1), pp.4-48.
Postlewaite, A. and Horner, J., 2017. Report of the Editor: American Economic Journal:
Microeconomics. American Economic Review, 107(5), pp.743-48.

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