ECON6000 Economic Principles: Project Management & Market Strategies

This assignment delves into the application of economic principles within project management, focusing on demand elasticity, pricing strategies, and market structures. It addresses problems related to Schmeckt Gut's energy bar venture, analyzing the impact of price changes on demand, calculating price elasticity, and assessing cross-price elasticity with competitor products. The analysis identifies the market as oligopolistic and suggests strategies like predatory pricing to enhance market penetration. The document provides calculations and justifications for optimal pricing decisions based on revenue maximization and demand analysis. Desklib offers this and other solved assignments to aid students in their studies.

Running head: PRINCIPLE OF PROJECT MANAGEMENT
Principle of project management
Name of the student:
Name of the University:
Author note

1PRINCIPLE OF PROJECT MANAGEMENT
Table of Contents
Answer to problem A:................................................................................................................2
1..............................................................................................................................................2
2..............................................................................................................................................2
Answer to problem B:................................................................................................................2
1..............................................................................................................................................2
2..............................................................................................................................................3
3..............................................................................................................................................3
4..............................................................................................................................................4
Answer to problem C:................................................................................................................4
1..............................................................................................................................................4
2..............................................................................................................................................4
Reference:..................................................................................................................................5

2PRINCIPLE OF PROJECT MANAGEMENT
Answer to problem A:
1.
Elasticity of demand is one of the crucial factors that determine the impact of change
in price. If the elasticity of demand is low, then it defines that in case of change in price there
will less impact and if the elasticity is high, then it depicts that the change in price will lead to
high amount of variation in the quantity demanded (Buer, 2016). In case of normal good,
there exist a negative relationship between the change in price and the elasticity of demand,
and considering the given product normal in nature, it can be said that under different
elasticity of demand of the same, it will entail the variation in quantity demanded by the
consumers with change in price.
2.
For the smooth introduction of the new product it would be ideal for the board to
survey for the information regarding the same and justify the elasticity of demand and market
scope. It will allow the firm to determine the impact of change in price on the production of
the firm in future and in present scenario price determination will be possible for the firm.
Answer to problem B:
1.
Price ($ per energy bar) [P] Quantity demanded (thousands per day) [Q] TR = P * Q
1.00 30 30
1.50 25 37.5
2.00 20 40
2.50 15 37.5
3.00 10 30
Figure 1: Total revenue from price and quantity demanded
Source: (Created by Author)
As per the above figure, it can be seen that the firm can gain maximum revenue of
40$ and the optimum price would be 2$ per energy bar.
Price elasticity of demand at the price of 2$ per energy bar is as follows:

3PRINCIPLE OF PROJECT MANAGEMENT
Ed = % change in demand / % change in price
= [(20-30) / {(20+30)/2}] / [(2.00 – 1.00) / {(2.00 + 1.00)/2}]
= - 0.60
Therefore, price elasticity of demand is – 0 .60
2.
a.
Price elasticity of demand in case of rise in price from $1.00 to $2.00 is as follows:
Ed = % change in demand / % change in price
= [(20-30) / {(20+30)/2}] / [(2.00 – 1.00) / {(2.00 + 1.00)/2}]
= - 0.60
Therefore, Price elasticity of demand is – 0 .60
b.
Price elasticity of demand in case price is $1.50 is as follows:
Ed = % change in demand / % change in price
= [(25-30) / {(25+30)/2}] / [(1.50 – 1.00) / {(1.50 + 1.00)/2}]
= - 0.45
Therefore, Price elasticity of demand is – 0 .45
3.
Cross elasticity of demand for Fly High’s energy bars is as follows:
Ec = % change in Fly High’s quantity demanded / % change in quantity demanded from Gut
= [{(9-11)/10}/ {{2-3)/2.5}]
= 0.5
Therefore, Cross price elasticity of demand is – 0 .50

4PRINCIPLE OF PROJECT MANAGEMENT
4.
As it can be seen from the cross price elasticity, with rise in the price of the Gut Bar,
there will be rise in demand of the other one and vis-à-vis. In addition to this, cross price
elasticity is positive that depicts both the products are substitute to each other.
Answer to problem C:
1.
Market of the energy bars is oligopoly in nature because there are more than two
firms that operate within the same framework. Under oligopoly market structure it is hard for
the new entrant to enter into the market and thus for the smooth introduction of the same
within the market it will be ideal to the firm to ensure elasticity of demand (Sharma et al.,
2015).
2.
In the light of given scenario, it can be argued that it will be helpful for the firm to
perform as per the elasticity of demand and utilise the predatory pricing strategy with the mix
of non-price practice to entice the market demand.

5PRINCIPLE OF PROJECT MANAGEMENT
Reference:
Buer, M. C. (2016). ELASTICITY OF DEMAND. In Routledge Revivals: Economics for
Beginners (1921) (pp. 36-39). Routledge.
Sharma, G. M., Pereira, M., & Williams, K. M. (2015). Gluten detection in foods available in
the United States–a market survey. Food chemistry, 169, 120-126.