BEA683: Economics for Managers Group Assignment, Semester 1, 2018

This document provides a solution to an Economics for Managers assignment, likely for the course BEA683. The assignment covers topics such as the impact of baby boomers on the retail market, marketing strategies, and an analysis of Qantas airlines within the Australian airline industry, including supply and demand considerations and recommendations for improvement. It also delves into cross-price elasticity, particularly in the context of the Australian mining industry and the shift towards alternative energy sources like LNG, discussing managerial implications and demand forecasting. The analysis references articles from the Sydney Morning Herald and academic sources to support its findings and recommendations.

Economics assignment
Name of the student:
Name of the University:
Author note

Table of Contents
Answer 1:...................................................................................................................................3
Task 1:....................................................................................................................................3
Task 2:....................................................................................................................................3
Answer 2:...................................................................................................................................4
Task 2:....................................................................................................................................4
Answer 3:...................................................................................................................................6
Task 2:....................................................................................................................................6
Reference:..................................................................................................................................9

Answer 1:
Task 1:
According to the predication of the Chris Richardson as the baby boomers become
older it will lead the sale of the retail market to become double compared to the present
situation. Further, it will change the national spending pattern too.
Secondly it has been argued by the given article that the shopping malls are in
dilemma that whether the requirement of bookstore is higher or the sanity tope music that are
being bought by the baby boomers. Considering the rising numbers of the baby boomers, it
has become hard for both the retail stores and shopping malls to determine the ideal solution
(Sullivan and Hyun 2016). Thus the demand in this can be determined through the change in
the pattern of the expenditure of the baby boomers.
Task 2:
One of the best marketing approach has been provided by the Euro RSCG media
director Ann Morrison, who argues in favour of market division for the different type of baby
boomers and not to retrofit them by age within a group of product. It would be seem hard as
first to serrate the market of the baby boomers due to numerically large number of them, who
is accounted for 20% of the present US population (Ortman, Velkoff and Hogan 2014).
However, it can be done utilising baby steps. It would rather aid the company to penetrate the
market demand of these baby boomers easily.
Another trust worth marketing approach has been provided by the marketing man
Nick Goddard who entails that it would be beneficial for the firm to market their product
from broader perspective rather than for the baby boomer specific (Armstrong et al. 2015). It
would help the product to larger amount of population and can enjoy the demand bonanza.

Answer 2:
Task 2:
a) Selected article: https://www.smh.com.au/business/companies/reluctant-americans-are-
behind-qantas-quest-to-develop-a-cargo-class-20180417-p4za6z.html
b)
i)
Considering the selected article it can be seen that the report published in the Sydney
Morning Herald talks about the Qantas airlines, which is the largest market player in the
country. At present, in Australia, there are only two large market players who provides both
the domestic as well as the international flight service. The firms are namely Qantas and
Virgin Blue, who enjoys 98% of the market share in the nation (Bamber 2015). To be precise,
Qantas is accounted for 62% of market share in the domestic flights when it comes to the
international flights, then it enjoys a healthy 28% market share that makes it the market
leader within its industry in the Australia (Shaffner, Mills and Helms 2017). Next to this
Virgin Blue is accounted for the 36% of the domestic market share and 8% of the
international market share that makes it the second largest player within the Australian airline
service industry (Hasan, Akhter and Kamruzzaman 2016). Though there are few small market
players in the country who provides limited service in domestic regions, however, there
market share is too low to consider. Under this situation it can be told that the Australian
airline industry a duopoly market (Gregson et al. 2015).
ii)
According to the selected article it can be perceived that there is higher demand of the
Qantas’s service in the international market due to its high number of flights to Australia
from USA. Considering the figure 1, it can be seen that as the service of the Qantas airline

increase in abroad it will reduce the price, which will enhance the market share higher for the
firm through enhanced quantity demand.
Figure 1: Supply and demand framework of Qantas airline
Source: (Created by Author)
The newspaper report highlights that the Americans are the fourth largest inbound
visitors to the Australia who sums up 14% of total tourists to the country. American airline
market being an oligopoly market, face collusive pricing policy that makes it hard for the
Qantas to penetrate it. Price elasticity of the demand is high in presence of the substitute
option. In addition to this, it has been seen recently that, though the short run cost of the firm
has been enhanced, it has managed to gain super normal profit in long run. The number of the
visitors during the year 2016 has enhanced substantially compared to the previous year and
presently it is as high as 711,400 people (Zhang, Sampaio and Fu 2016). The report also
highlights that the tourists from the United Kingdom visits Australia in higher number,
however the American tourists spend more that aids the domestic economy to become strong.
21% of the total US visitors to Australia comes from Los Angeles and to meet the demand of

the passengers Qantas fly 14 hour flight straightaway from California to Australia (Melis,
Silva and Silvestre 2017). The newspaper report highlights that the Qantas is aimed to
introduce flights to London by 2022 and new cargo service to US, which is easy a market to
penetrate due to reluctant nature of the present market players (Bourke 2018).
iii)
Being the senior manager of the Qantas Airline, it can be seen that the firm has been
performed well since last one and half decades and it has enhanced its market share
substantially over the time. During the 2015 there was certain fall in the growth of the
Qantas, due to the fall in the demand of the airline service by the US citizens (Button 2017).
One of the major reason for this reduction in demand of the Australian air service was recent
recession and along with this, it has also been found that the US passengers fell that it take
too much time to fly from US to Australia (Hampson et al. 2014). In addition to this, it has
also been seen that the price of the Qantas airline is substantially higher than the US
counterparts that makes it hard for the Qantas to entice the market demand for their service.
Under this situation being the manager of the firm, it would be ideal to provide the following
recommendations:
 Pricing policy of the firm need to be competitive and the firm has to go off its market
power factor while deciding prices for the international market
 It would be ideal for the firm to introduce the cargo class service as soon as possible
in order to reduce the long haul of the flights, which can substantially reduce the
travel timing
 Though the firm has initiated its operation to introduce new non-stop route from
London to Perth, however, it would be ideal for the firm to do something same for the
US passengers too

 Providing offer of exclusivity and affordable pricing within quality service can be
beneficial for the firm
 Advertising the Qantas and provide it much amount of exposure will allow it to get
introduced to a whole lot of people, which can ultimately enhance the position of the
firm
Answer 3:
Task 2:
a)
In Australia, recently it has been seen that the mining boom that arise during the year
2015 is already over due to the shift of the international demand. Presently there has been rise
in the demand of the alternative source of energy, which according to the selected newspaper
report is LNG (Duke 2018). Due to the change in the price of the Australian coal mining
products in the international mining product market, International Energy Agency argues in
favour of the alternative energy resource like gas that can aid the economy to become the
highest energy exporter in the world. In order to study the effect of cross price elasticity of
the same, below article has been selected:
https://www.smh.com.au/business/the-economy/2018-the-end-of-the-resources-boom-as-
falling-commodity-prices-bite-20180107-p4yyaa.html
b)
i)
Two factors that can influence the cross price elasticity is:
1. Price of the product
2. Demand of the product
According to the theory of the cross price elasticity, if the price of a product changes,
then the quantity demanded is also tends to change in presence. In the case of the selected

article it represents that the demand of the Australian core mining output has been changing
due to the change in the demand of the same in the international market (Grace, Kivell and
Laugesen 2014). As the market has reduced demand, price has also fell for the Australian
mining product. As the report highlights, there is almost no change in the domestic
consumption rather the export has decreased because foreign market is already saturated with
the existing level of production, and further rise in production will lead to fall in price;
however it cannot enhance the demand of the same (Olmstead et al. 2015). Contrary to this,
there is expected rise in the gas production as the demand of the same has been rising in the
recent days and the price is also on rise.
ii)
Managerial implications that can be perceived from the estimate:
It indicates the trade cycle: cross price elasticity aids to determine the fact that there
will be change in the quantity demanded due to the change in price. However, it also entails
that in case of the necessary and luxury goods, it demand change to remain unaltered even if
there is change in the price. thus, cross price elasticity, determine that normal goods tends to
face higher demand during prosperity with lower price and the reverse happen in the case of
the recession, when the price is higher (Hong, Misra and Cilcassim 2016). Thus managers
can understand the product lifecycle and determine the price depending upon the same.
Helps to forecast the demand: Utilising the cross price elasticity it can be seen that
the mangers can forecast the demand of the product. If the product has moderate amount of
positive cross price elasticity, then with the change in the price demand will also rise and in
the case of the negative cross price elasticity, there will be fall in the demand and vis-à-vis
(Sun 2017). Depending upon this managers can determine the future price.

Reference:
Armstrong, G., Kotler, P., Harker, M. and Brennan, R., 2015. Marketing: an introduction.
Pearson Education.
Bamber, G.J., 2015. Low-cost airlines’ product and labor market strategic choices: Australian
perspectives. Members-only Library.
Bourke, L. (2018). Reluctant Americans are behind Qantas' quest to develop a cargo class.
[online] The Sydney Morning Herald. Available at:
https://www.smh.com.au/business/companies/reluctant-americans-are-behind-qantas-quest-
to-develop-a-cargo-class-20180417-p4za6z.html [Accessed 24 Apr. 2018].
Button, K. ed., 2017. Airline deregulation: international experiences (Vol. 1). Routledge.
Duke, J. (2018). 2018 ‘the end’ of resources boom as commodity price drops bite. [online]
The Sydney Morning Herald. Available at:
https://www.smh.com.au/business/the-economy/2018-the-end-of-the-resources-boom-as-
falling-commodity-prices-bite-20180107-p4yyaa.html [Accessed 27 Apr. 2018].
Grace, R.C., Kivell, B.M. and Laugesen, M., 2014. Estimating cross-price elasticity of e-
cigarettes using a simulated demand procedure. Nicotine & Tobacco Research, 17(5), pp.592-
598.
Gregson, S., Hampson, I., Junor, A., Fraser, D., Quinlan, M. and Williamson, A., 2015.
Supply chains, maintenance and safety in the Australian airline industry. Journal of Industrial
Relations, 57(4), pp.604-623.
Hampson, I., Fraser, D., Junor, A., Quinlan, M. and Gregson, S., 2014. Aircraft Maintenance
in Australia: Issues and Prospects. International Labour Press Conference.
Hasan, M.Z., Akhter, S. and Kamruzzaman, M., 2016. Identifying macroeconomic risk
factors in Australian airline companies. In International Multidisciplinary Conference on
Sustainable Development, Dhaka, Bangladesh, 22-23 January 2016 (pp. 76-92).

Melis, D.J., Silva, J.M. and Silvestre, M.A., 2017. Characterisation of the anthropometric
features of airline passengers and their impact on fuel usage in the Australian domestic
aviation sector. In 17th Australian International Aerospace Congress: AIAC 2017 (p. 529).
Engineers Australia, Royal Aeronautical Society.
Olmstead, T.A., Alessi, S.M., Kline, B., Pacula, R.L. and Petry, N.M., 2015. The price
elasticity of demand for heroin: matched longitudinal and experimental evidence. Journal of
health economics, 41, pp.59-71.
Olmstead, T.A., Alessi, S.M., Kline, B., Pacula, R.L. and Petry, N.M., 2015. The price
elasticity of demand for heroin: matched longitudinal and experimental evidence. Journal of
health economics, 41, pp.59-71.
Ortman, J.M., Velkoff, V.A. and Hogan, H., 2014. An aging nation: the older population in
the United States (pp. 25-1140). United States Census Bureau, Economics and Statistics
Administration, US Department of Commerce.
Shaffner, E., Mills, A.J. and Helms Mills, J.C., 2017. Reading Qantas History: Discourses of
Intersectionality and the Early Years of Qantas. In Insights and Research on the Study of
Gender and Intersectionality in International Airline Cultures(pp. 445-469). Emerald
Publishing Limited.
Sullivan, P. and Hyun, S.Y.J., 2016. Clothing retail channel use and digital behavior:
Generation and gender differences. Journal of Business Theory and Practice, 4(1), p.125.
Sun, C.H.J., Chiang, F.S., Guillotreau, P., Squires, D., Webster, D.G. and Owens, M., 2017.
Fewer fish for higher profits? Price response and economic incentives in global tuna fisheries
management. Environmental and Resource Economics, 66(4), pp.749-764.
Zhang, Y., Sampaio, B. and Fu, X., 2016. Duopoly competition between airline groups with
dual-brand services: the case of the Australian domestic market.