Economic Principles and Decision Making Assignment - Atolia Case Study

This economics assignment delves into the relationship between tariff rates and the demand for energy bars, using regression analysis to determine the significance of this relationship. The assignment presents a regression model with the null and alternative hypotheses, along with the summary output, ANOVA table, and coefficients. The analysis concludes that tariff rates do not significantly impact the demand for energy bars. Furthermore, the assignment explores the benefits of free trade, including reduced tariff barriers, increased exports, and economies of scale. The comparative advantage theory is also discussed, emphasizing the specialization of countries in commodities with lower opportunity costs. The assignment concludes that an agreement between the Industrial economy and Atollia would benefit both countries, promoting economic growth. The regression results, showing a low Multiple R and R-squared value, further support the conclusion that there is no significant correlation between tariff rates and energy bar demand.

ECONOMIC PRINCIPLES AND
DECISION MAKING

TABLE OF CONTENTS
PROBLEM A...................................................................................................................................3
PROBLEM B...................................................................................................................................4
PROBLEM C...................................................................................................................................5
REFERENCES................................................................................................................................6

PROBLEM A
1.
Regression
Null hypothesis (H0): There is no significant difference in the mean value of tariff rates and
average demand of energy bars.
Alternative hypothesis (H1): There is a statistical significant difference in the mean value of
tariff rates and average demand of energy bars.
SUMMARY OUTPUT
Regression Statistics
Multiple R
0.0067
29
R Square
4.53E-
05
Adjusted R Square
-
0.0525
8
Standard Error
25.191
92
Observations 21
ANOVA
df SS MS F
Signific
ance F
Regression 1
0.54595
1
0.54
5951
0.00
086
0.97690
7
Residual 19
12058.0
3
634.
6329
Total 20
12058.5
7
Coeffi
cients
Standar
d Error t Stat
P-
value
Lower
95%
Upper
95%
Lower
95.0%
Upper
95.0%
Intercept
114.70
7
20.0045
6
5.73
4042
1.59
E-05
72.8369
7
156.5
77
72.836
97
156.57
7

Tariff rate on
imports of energy
bars
-
0.0764
3 2.60595
-
0.02
933
0.97
6907
-
5.53075
5.377
883
-
5.5307
5
5.3778
83
By doing assessment it has found that tariff rates do not have significant impact on demand
for energy bars. Referring this, it can be presented that tariff rates will not place direct and
significant impact on demand pertaining to energy bars in Atolia. Thus, impact of offering
products at another store is lower on demand.
PROBLEM B
1.
Interpretation: Outcome of statistical evaluation shows that assessed p value is higher than the
standard value such as 0.05. Referring this, it can be presented that null hypothesis is true
and other one false. Hence, statistical assessment clearly exhibit that tariff rates or aspects
do not have significant impact on annual average demand of energy bars per person.
2.
Graphical presentation

PROBLEM C
1. Benefits of Free trade
There are various benefits, which will be beneficial for trading between two countries-
1. Reduced tariff barriers-
It is advantageous for Industrial economy to trade with Atollia because reduction in tariff
leads to decrease prices and consumers are benefited. Imports prices will gradually decrease and
hence, customers may be benefited.
2. Increased exports-
Exports would increase by leads to overall enhancement in the economic growth. This
will also help in decreasing unemployment rate of a country.
3. Economies of scale -

Specialising in particular commodities will be helpful for country as it increases
competitive advantages by lowering costs and more efficiency in exports leading to increase
benefits for the economy (Benefits of free trade. 2017).
Here, Comparative Advantage Theory can be explained, which means to specialise
commodities in countries having low opportunity cost, and economic welfare of all countries can
be increased in a better way. Free trade is helpful to countries in specialising in commodities in
that items in which comparative advantage is seen for them. It can be analysed as per the result
of regression analysis; tariff rates have no significant influence on energy bars. Hence,
Government of Industrial can be benefited by having agreement with Atollia for increased
economic growth.
The regression results provide that Multiple R is 0.0067 which means that no correlation
exists between variables. While, R square is 0.000045 clarifying 0 % of regression line fits
model. Adjusted R square is -0.5 which is negative means that R square is zero reflected in
calculation and model is poor in fitting for data. Standard error is 25.19 showing deviation is
much from the mean. The information is carried out by total of 21 observations in sample.
Hence, by complying with linear regression equation, no significant difference is found between
variables.

REFERENCES
Online
Benefits of free trade. 2017 [Online]. Available Through:
<https://www.economicshelp.org/trade2/benefits_free_trade/>.