Managerial Economics: Competition, Markets and Pricing - Sem I 2018/19

This assignment delves into various aspects of managerial economics, focusing on market competition, pricing strategies, and the impact of anti-competitive practices. It examines cases such as price-fixing in the canned tuna market, the cost of overseas money transfers from Australia, and the European Union's competition policy. The assignment also analyzes Google's alleged abuse of dominance in internet search and Android mobile devices. Furthermore, it explores the supply and demand dynamics in the market, particularly concerning luxury Swiss watches and crude oil prices in different regions. Finally, it discusses consumer preferences and product lifecycle stages, using Apple products as examples, highlighting pricing strategies and their potential impact on demand. Desklib provides a platform for students to access similar solved assignments and study resources to enhance their understanding of these concepts.

MANAGERIAL ECONOMICS1
Managerial economics
By (Name)
Course
Instructor’s Name
Institutional Affiliation
The City and State
The Date

MANAGERIAL ECONOMICS2
Question one
Part A
The companies were fixing prices so as to extend the market prices of products highly with an
intention of dominating the market by earning higher profits. The companies intended to
reduce or prevent market competition that could low down their sales. This is can be
considered as an anti-competitive practice (Kilian & Lutz, 2009).
Part B
The shift in the price of canned tuna will greatly lead to a change in the price of raw tuna. If the
price of canned tuna increases, then the price of raw tuna will also increase. Also, if the price of
canned tuna reduces, then the price of raw tuna will also reduce because the two work hand in
hand. (Kilian & Lutz, 2009).
Part C
Merger and Acquisition activities among suppliers in this market led to the dominance in the
market of canned tuna. Also, the companies were in the position to control distribution and
also rationalize production. Therefore, the companies were in the position to fix their prices in
the market so as to increase their earnings (Kilian & Lutz, 2009).
Part D

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In the US market, collusion and price-fixing impacted consumers by; increasing the prices of
goods which leads to their decline in the purchasing power. Also, collusion and price fixing led
to the deadweight loss in the US market (Tang & Xiong 2012).
Question two
Part A
The cost of sending money overseas form Australia in regard to other G20 countries has led to
financial cuts and constraints via successive governments. This has led to the formation of the
diplomatic network among the G20countries which is deficient and leaves out Australia within
the economies of the G20 countries.
Part B
The four largest banks in Australia include the following; Commonwealth Bank of Australia,
National Australia Bank, Weptac Banking Corporation and ANZ Banking Group. Also, major
online money transfers companies include; currency fair, "Term of reference”. The complaints
of the firms created much concentration on the financial sector that the banks benefit from
through financial motorization and financial stability promotion (Filardo & Lombardi 2018).
Part C
The price competition among providers of foreign exchange services to the customer and small
businesses in Australia will involve extensive analysis and investigation such as public
consultation. Also, the inquiry will aim at examining why the exchange rate Google are not the
exchange rates got form "Big four banks" (Filardo & Lombardi 2014).

MANAGERIAL ECONOMICS4
Question three
The EU has adopted the competition policy with an intention of maintaining the market
competition within the single markets of Europe through regulating anti-competitive acts by big
companies. The EU has implemented the following tools to fight anti-competitive behavior;
liberation, state liberation, cartels, and Antitrust (Kilian & Lutz, 2009).
Question four
Part A
The European Union allegations indicate that Google abused the dominance of internet search
in the European market by only its online shopping market. The activities would push Google
competitors down whenever searches are done in that they can’t be seen by their customers
(Auffhammer et al 2008).
Part B
Google defended and responded to the European case by claiming their intention was to full fill
their wish. In this case, Google claimed that both their advertisers and customers wanted them
to control their search engines (Chari & Christiano 2017).
Number five
Part A
European Union allegations against Google involved the illegal practices that were performed
regarding "Android mobile devices" with an intention of strengthening Google dominance of
the search engine. These activities would lead to the dominance of Google of the search engine.

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The activities have not given a chance other companies to compete for innovation on the
market(Chari & Christiano 2017).
Part B
Google responded to the EU case by claiming that the commission described its competitors
too small and illustrates that Google operates in a big market. The claims that if the EU
implements the policy, it would lead to the production of the poor result from search engines
making their solution unjustified (Chari & Christiano 2017).
SUPPLY AND DEMAND IN THE MARKET AND PRICES
Number six
Part A
In the past years, China was the leading driving force of the rapid growth for Luxury Swiss
watches until recently when it changed. The exported luxury Swiss watches by 2014 was at
6.3%. Recently, the growth in the exportation of Swiss watches increased by SFr fourteen
million from Sfr forty-five million (Davig et al 2015).
Part B
In order to limit gifting of watches, the government of China implemented various policies such
as; anti-corruption policy, this policy limits the spending and giving of watches among
government officials. As a result of the government corruption policy, the sales of Swiss Luxury
watches has reduced by a quarter (Davig et al 2015).
Part C

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In order to support prices and protect profit margins, Richemont and other suppliers are
supposed to adopt the following steps; first, adjusting their sales goals so as to reflect their
several objectives. Second, establishing discount policies to its customers, the companies are
required to establish various company policies to achieve sales (Chari & Christiano 2017).
Question seven
Part one
United States
The prices of United States crude oil have reduced by 3% due to the geopolitical concerns in the
market for oil. In addition, the prices of crude oil had risen in the US but later it was lifted by the
decline in the drilling practices in the US. The oil prices hit the United States by $80 for each
barrel as geopolitics created fears leading to the disruption of product supply (Chari &
Christiano 2017).
Saudi Arabia
In Saudi Arabia, the prices of oil have declined from $113 to $50 for each barrel. The collapse of
oil prices in Saudi Arabia is estimated at 60%. The decline in the price of Oil in Saudi Arabia is
associated with geopolitical factors such as wars and foreign policies. Considerably, the world
demand for oil is estimated at only ninety-two million barrels per day whereby Saudi Arabia is
supposed to supply forty percent of the total demand (Gerald & Smith 2012).
Iraqi

MANAGERIAL ECONOMICS7
Iraq is continuously facing the problem of reduced prices of oil. Despite the old statistics from
Iraqi export and production that indicates an increase in the prices of Oil, the country is still
facing the problem of fading oil prices. The fading of oil prices is related to the blocking of oil
production by the government in the north of the country (Hamilton & James, 2008).
Iran
The prices of Oil in Iran are considered to have faded by at least twenty-five percent whereby
each barrel costs $45. The challenges facing Iran's oil supply is not only an effect of the current
conditions in the oil market but also the local political conditions (Chari & Christiano 2017).
Russia
The decline of fading oil prices in Russia cannot be directly observed but it creates various
impacts on the economy by worsening the country's' geopolitical situation. In addition, the
situation leads to the introduction of the economic crisis in the economy of Russia (Stock et al,
2007).
CONSUMER PREFERENCES AND PRODUCTS
Question eight
Part A
The products of Apple have gone through various stages and Product Life Cycle that is to say;
introduction, growth. Maturity and decline stages. At the introduction stage Apple has "iPhone
XR and XS". At the growth stage, Apple has "iPhone X" which is experiencing high market
increase and sales. At the maturity product life cycle, Apple has “iPhone 8". iPhone 4, 5, 6, and
7 are at the decline stage of Apple in the product lifecycle (Gong & Muluan 2012).
Part B

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IPhones:
Apple has introduced iPhone SR and Sx so as that replaced iPhone X so which is already in the
growth stage of the product lifecycle.
iwatch
Apple has introduced the latest iWatch version "iWatch Series 4" that replaced "iwatch series
3".
Mac
In 2018, MacBook introduced a new MacBook known as "MacBook air" that replaced MacBook
Pro. Therefore, MacBook air is now in the introduction stage and MacBook Pro is in the growth
stage.
iPad
This year, Apple has introduced a new version of iPad "12.9-inch iPad pro (2018)". The iPad has
replaced "11-inch iPad Pro (2018)" which is in the growth stage
Part C
iPhone: The pricing of the new Apple iPhone XS is $1,449 and iPhone XR is starting at $749.
Therefore, this pricing strategy for apple may slightly reduce the demand for the products
unless some discounts are offered.
iPad: The latest iPad pro costs around $800. This is quite cheap compared to iPhones.
Therefore, the demand for iPad is expected to increase hence increasing the sales of Apple.
iwatch: The latest watch series 4 costs $399. This pricing will increase the demand of i Watches
because it is favorable as compared to other watches such as Roles.

MANAGERIAL ECONOMICS9
Mac: The recently introduced MacBook Air cost $1,199. This price strategy is quite favorable
compared to the features of the product. Therefore, the product is expected to experience high
demand (Gerald & Smith 2012)

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References
Alquist, Ron, and Lutz Kilian. 2008. “What Do We Learn from the Price of Crude Oil Futures?” Working
paper, University of Michigan.
Chari, V V and L Christiano .2017: “Financialization in commodity markets”, NBER Working
Paper, no 23766.
Davig, T, N C Melek, J Nie, A L Smith and D Tuzemen.2015: “Evaluating a year of oil price
volatility”, Economic Review, Federal Reserve Bank of Kansas City, Third Quarter
Filardo, A and M Lombardi.2014: “Has Asian emerging market monetary policy been too
procyclical when responding to swings in commodity prices?”, BIS Papers, no 77, pp
129−153.
Filardo, A, M Lombardi, C Montoro and M Ferrari.2018: "Monetary policy spillovers, global
commodity prices, and cooperation", BIS Working Papers, no 696.
Gerald E. Smith, 2012, Emergent Pricing Strategy, in Gerald E. Smith(ed.) Visionary Pricing:
Reflections and Advances in Honor of Dan Nimer (Advances in Business Marketing
and Purchasing, Volume 19) Emerald Group Publishing Limited, pp.103 – 126
Gong, Ting and Muluan Wu 2012, `A report on China's corruption from 2000 to 2009: an analysis
of over 2000 reported cases', Sociology Research 4, 204220.
Hamilton, James,2008. “Commodity Prices and the Fed,” Econbrowser
Kilian, Lutz,2009. “Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks
in the Crude Oil Market,” American Economic Review 99:3 1053–1069.

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Stock, James, and Mark Watson,2007. ìWhy Has Ináation Become Harder to Forecast?î Journal
of Money, Credit and Banking 39:Suppl. s1 3ñ33.
Tang, K. and Xiong, W.2012. Index investment and financialization of commodities. Financial
Analyst Journal, 68(6):54–74