The Essay Explores The Impact Of Mean Income, Tariff Rates, And Number Of Stores On Annual Demand For Energy Bars.

1. Interpret and successfully apply economic concepts of supply and demand for effective organisational problem solving.

2. Apply quantitative methods to forecast complex business variables including demand, supply, production and costs.

3. Critically analyse production processes and cost functions and classify the main forms of market structures as well as recommend appropriate pricing and strategies.
4. Critically evaluate the role and impact of various forms of government intervention in the economy including the implications of competition and deregulation policy for  managerial practices.

Regression analysis and correlation

While carrying out the regression analysis to detect the impact of offering the products of Schmeckt energy bars to other stores, four variables are used (Afonso & Kazemi, 2017). Three variables are independent while one of the variables is a dependent. Independent variables are: "Mean income for every person", "tariff or tax rates for importation of these energy bars”, as well as "number of stores where energy bars were offered" (Oestreicher, 2015). The dependent variable is “Average annual demand of drinks per individual". According to results, the relationship between independent variables and the dependent variable is very strong.  In other words as the level of income increases the annual demand of energy bars also increases. This is because of the high levels of disposable income available to the consumers. Also a reduction on the tariff rate on imports of energy bars also leads to increased demand of annual bars (Afonso & Kazemi, 2017). Lastly, increase in number of stores for these drinks leads to increase in annual demand of drinks per individual. This is because multiple R value is big, it has the value of 0.955932682.

Considering the “Mean income for every person” variable as W, the “tariff or tax rates for importation of these energy bars” variable as T, the “number of stores where energy bars were offered” variable as X and “Average annual demand of drinks per individual” variable as Y, the regression equation for the variable obtained through using excel is given as Y=0.004837918W - 6.456977068T + 4.072444073X -12.16021978.

Considering the equation, the mean income for every person is positively related to the average annual demand of drinks per individual though their correlation is very small. This shows that an increase in mean income for every person will slightly cause increase in the average annual demand of drinks per individual (Korinek & Jessica, 2012). The tariff or tax rates for importation of these energy bars are negatively correlated to the annual demand of energy bars per individual. Therefore, that means that an increase on tariff or tax rates for importation of these energy bars would cause a reduction on the average annual demand of energy bars per individual. The reduction on the tariff or tax rates for importation of these energy bars would simply lead to the increase on the average annual demand of energy bars per individual. The number of stores for these drinks offered has a positive correlation with the average annual demand of energy bars per individual in relation to the coefficient (Afonso & Kazemi, 2017). This means when there is increase on number of stores for the drinks, there is an increase on the average annual demand of the drinks per person, the reverse is true. Considering regression analysis carried out, mean income for every person, tariff or tax rates for importation of these energy bars, as well as number of stores where energy bars were offered greatly affect the annual demand of energy drinks per individual.

Impact of mean income, tariff rates, and number of stores on annual demand

Regression results are shown below;

The regression statistics table contains the multiple R value which identifies the relationship between independent and dependent variables.

Basing on the regression analysis and the graphs obtained which describes the relationship between the "Tariff or tax rates on imports of the drinks" and the "average annual demand of the drinks" (Eun& Resnic, 2011). Tariff or tax rates on importation of the drinks within the country greatly affect the demand of the commodity annually. The tax rates on the importation of energy drinks are negatively correlated to the demand of drinks by each individual or person. Therefore, this means increase on Tax rates on the importation of the drinks would cause a reduction on mean demand of the drinks per person. The reduction on the tax rates on the importation of the drinks would simply lead to an increase on the average demand of drinks per person per each year. It is important to note that tariffs reduces the overall  the overall demand of imports  in case they  are high meaning that limited consumers will be able to afford the product (Afonso & Kazemi, 2017).

The scatter diagram or graph illustrating the correlation between the "Tax rates on importation of energy drinks" and the "average annual demand of the drinks" is shown below;

Board meeting the minister for trade should address matters concerning the advantages and disadvantages of tariffs on these imports. Given that the imposed tariffs may be helpful to the government and the domestic or local industries in the following manner; they are helpful in raising revenue to the government. When tariffs are imposed in imported products, they become expensive meaning that high amounts of money will be required to spend on imports. Therefore this discourages importation of products.

However, the few products imported raises revenue to the Government.  They are useful in protecting the domestic industries from imported goods which are always more expensive and of good quality. Protecting the domestic industries would increase their revenue. Since the good or commodity taxed is an alcohol beverage, this would be useful in protecting the population and the environment (Evenett & Frédéric, 2012). It is important to note that Domestic industries may not have the capacity to effectively compete with large and highly efficient products and industries. So for government to encourage local production and demand, tariffs are very important to the economy. With the imposition of tariffs on imports, importation is discouraged and exportation encouraged. This is in line with the marchentalistic philosophy that emphasizes exportation and discourages importation if the wealth of the nation is to be enhanced (Afonso & Kazemi, 2017).

Advantages and disadvantages of tariffs on imports

However,    given these existing advantages, the board for the energy drinks should advise the minister of trade on the benefits of reducing or cutting off the tariffs. One of the importance is to promote trade liberalization which comes with a number of benefits. One of these benefits is promotion of globalization which increases market for the different goods which are being produced among the member states. The removal or reduction of Tariffs will also be essential in the lowering of the consumer prices. It also increases specialization and economies of scale benefits, tariff reduction also leads to the trade creation among different states (Silverman, 2018). 

Basing on the regression results, the tax rate on the importation of energy drinks is negatively correlated to the average annual demand of drinks per individual. Therefore, this means that increase on the Tax rate on the importation of drinks would cause a reduction on the mean demand of the drinks per person. The reduction on the tax rates on the imports of drinks would simply lead to the increase on the average annual demand of drinks per person (Blinder, 2008). Therefore there is need for the board of the company to make a requisition on the reduction on the tariffs or promote free trade. The benefits of free trade to both the government and the company are many though there are also some disadvantages. The importance of free trade is: Free trade basically means that there is free entry and exit of imports and exports between different countries without tariffs. This trade will basically led to creation trade between the country of origin of the energy bars and the case study country (Mathias and Harald, 2011).The removal of tariffs will promote the use of the surplus raw materials within the country and this would be useful in reducing on the prices of the energy bars thus increasing the demand of the commodity within the country. This will increase on the company revenue within Australia. Promotion of free trade will cause an increase in competition among the different companies. There will be incentives of increasing costs and cutting costs because of this competition. There is also a possibility of prevention of monopolies.

The diagram below shows the effects of tariffs on company

The regions which are pink identify net loss caused to the society because of tariff existence.

References

Afonso, A., & Kazemi, M. (2017). Assessing public spending efficiency in 20 OECD countries. In Inequality and Finance in Macrodynamics (pp. 7-42). Springer, Cham.

Blinder, A. S. (2008). "Free Trade". In David R. Henderson (ed.). Concise Encyclopedia of Economics (2nd ed.). Indianapolis: Library of Economics and Liberty. ISBN 978-0865976658. OCLC 237794267.

Eun, C. S.; Resnick, B. G. (2011). International Financial Management, 6th Edition. New York: McGraw-Hill/Irwin. ISBN 978-0-07-803465-7.

Evenett, S.J, and Frédéric, J. (2012). Trade, Competition, and the Pricing of Commodities. https://www.voxeu.org/index.php?q=node/7626.

Korinek, J., Jessica, B. (2012). ‘Multilateralising Regionalism: Disciplines on Export Restrictions in Regional Trade Agreements’.

Oestreicher, J. (2015). Plague of Equals: A science thriller of international disease, politics and drug discovery. California: Omega Cat Press. p. 408. ISBN 978-0963175540.

rabandt, Mathias; Uhlig, Harald. (2011). "The Laffer Curve Revisited". Journal of Monetary Economics. 58 (4): 305–27. doi:10.1016/j.jmoneco.2011.07.003

Silverman, B. W. (2018). Density estimation for statistics and data analysis. Routledge