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Discuss about the Economics Of Agrarian Change Under Population.

Market analysis is an important function for any organization before the introduction of new product in the market. This analysis allows the management of the organization to study different factors of economy and their impacts on the demand for the upcoming products. Among the economic factors, the income growth of the consumers of the market, inflation rate and the tariff on import plays an important role. The income growth is the direct influence of the demand for goods and services of the market as with the higher income the customers of the market would be more likely to buy goods. The inflation rate can help the management to understand the unemployment rate in the economy which has a negative relation to the demand for goods and services. Lastly, the tariff on the import in a particular industry shapes the competition among different types of sellers of the market. This paper aims at analyzing the case of Schmeckt Gut which is planning to introduce a new energy bar in the market. Taking into consideration the results of the market analysis, this paper discusses how different external factors influence the potential demand for the energy bar of the company.

This paper uses the data and information presented in other journal and article related to the topic of the paper. Apart from that, information has also been collected from online sources as well which discusses the process of marketing analysis of the organizations for the purpose of new product introduction in the market. The study uses the marketing analysis data for the process of multiple linear regressions in order to understand the relationship between the variables. Apart from that, the study also uses the content analysis technique to analyze descriptive data presented in the related journals and articles.

As per the findings from the study, there are a number of variables which influences the demand for the product of Schmeckt Gut. While the inflation has the indirect impact on the demand through the increased employment, the tariff also plays a part in generating the demand for the product. The regression analysis suggests that although the income is one of the important factors that determine the demand for the product, changes in the income changes the demand for the product slightly. Apart from that, the number of gyms also has its part to play in the changes in demand for the product of Schmeckt Gut.

Findings

Yes, the figures of the estimation can be linked with each other with the help of different economic theories and models. It is important to note that the macroeconomic variables are interrelated to each other and hence the changes in one variable influence the other variables of the economy. Galí (2015) stated that this interrelation provides a challenge to the business owners and the government to decide on the policies to be taken for the organization and for the country respectively. 

The income of the people of the economy and the inflation is related to each other in a strong way. This can be shown using the aggregate demand and supply for the products and the services of the economy. As the income of the customers of the market rises, they demand more of products and services which are being sold in the market. Mokyr (2018) highlighted that this is due to the immediate increase in the purchasing powers of the consumers of the market. Consequently, the demand for the products of the economy increases leading to a rightward shift in the aggregate demand, while the supply of the market remains constant. This results in an increased price for the goods and services of the market and the increased consumption. Thus, the income of the people of the economy also allows the economy to grow. However, as Tomczak, Reinecke & Kuss (2018) pointed out that this growth of the economy comes with a cost those higher prices of the products and services of the market corresponding to higher incomes of the consumer, increases the inflation as well.

Furthermore, the Phillips curve shows the relationship between the unemployment level of the economy and the inflation rate. As per the theory, the inflation is also dependent on the unemployment rate of the economy. At a low level of unemployment, the growth of wage is the most and hence this also influences the inflation of the economy. Bloom, Sadun & Van Reenen (2015) stated that these are all the basic characteristics of boom phase of a business cycle where the economic production increases. With the increase in the production the demand for the labor increases and with the bargaining power the labor unions enjoy even more wages. It is assumed that maximum part of the income of the people of the economy is from the wage they receive (Juster, 2015). Thus, in the boom phase, as the labor demand rises, the demand for the products and the services of the economy also raises leading to an increase in the price and eventually an increase in the inflation rate of the economy.

Matching of the figures and the explanation

Additionally, the intention of the government to generate high tax revenue can bring down the wages of the labors of the market. According to the Laffer curve, with the increase in the government tax rate, the revenue of the government increases till a certain point after which it starts to fall (Hicks, 2018). This is due to the fact that high taxes can discourage the people of the economy to work as most part of the wage would be taken away by the government. Thus, after a certain point, the tax revenue would start to fall. Kagel & Roth (2016) stated that the objective of the government is to determine a golden level of tax rate so that the tax revenue collected by the government is the maximum. This theory states why inflation does not grow in equal magnitude as the increase in the wages of the labor. As the labors of the economy start to earn more wages, they also become liable to pay taxes to the government and hence a part of the increase in wage that would potentially increase the inflation of the economy would be siphoned off as a form of tax by the government (Fuller, 2016).

In terms of tariff rate which provides opportunities to the domestic organization to enjoy the market share and becomes able to enjoy the control over the market. Kuratko, Hornsby & Hayton (2015) higher income tariff discourages the importers and demand for the domestic product rises. Consequently, the rise in the production and its associated benefits which have been discussed above is accrued mainly to the home economy benefiting the domestic consumers rather than the foreign economy and their consumers (Nandy et al.2015). In general, the higher the tariff rate the more would be the increase in the wage of the domestic labor following the increase in the demand for the goods and service produced by the domestic producers (Berry & Kato, 2018). Therefore, each economic variable is linked to each other and changes in one variable changes the other variables either directly or indirectly.

The market analysis of Schmeckt Gut has presented a set of estimation regarding values of inflation, income, tariff and the corresponding demand for the product in the market of Atollia.

Year

Quarter

T

Demand

Change of Demand

Income

Tariff

Number of Gyms

Inflation

Change of Income

2011

Q1

1

260.3297

15500

5

15

2.2

2011

Q2

2

267.9888

2.942074834

15841

5

15

1.88

2.2

2011

Q3

3

311.3787

16.19095808

16110.3

5

15

1.26

1.7

2011

Q4

4

307.1164

-1.368851325

16754.71

5

15

1.22

4

2012

Q1

5

306.1142

-0.326341748

17391.39

5

15

2.93

3.8

2012

Q2

6

359.8001

17.53789009

18156.61

5

16

3.04

4.4

2012

Q3

7

288.8254

-19.72616067

18501.58

5

16

3.17

1.9

2012

Q4

8

306.6604

6.175033171

18890.12

5

16

2.41

2.1

2013

Q1

9

295.9627

-3.488465784

19589.05

10

16

1.35

3.7

2013

Q2

10

335.9408

13.50781827

20431.38

10

16

2.17

4.3

2013

Q3

11

286.3944

-14.74853935

21126.05

10

17

2.93

3.4

2013

Q4

12

323.6386

13.00451303

21696.45

10

17

2.58

2.7

2014

Q1

13

329.1326

1.697572939

22000.2

10

20

1.45

1.4

2014

Q2

14

342.5879

4.08809

22352.21

10

20

2.59

1.6

2014

Q3

15

302.5452

-11.68828982

22799.25

10

20

3.65

2

2014

Q4

16

370.6793

22.52031165

23825.22

7.5

20

1.54

4.5

2015

Q1

17

371.3411

0.17854018

24635.27

7.5

20

3.63

3.4

2015

Q2

18

445.1766

19.88346994

25423.6

7.5

20

2.22

3.2

2015

Q3

19

441.171

-0.899786865

26338.85

7.5

23

2.82

3.6

2015

Q4

20

446.9891

1.318787198

27471.42

7.5

23

3.26

4.3

Table 1: the schedule for the dependant and the independent variables

(Source: Developed by the learner)

This table shows the demand for the product of Schmeckt Gut corresponding to the income, inflation, number of gyms and the import tariff in different quarters between the year 2011 and 2015. As per the data of the table 1, there has been a constant positive increase in the income of the consumers of the economy (Boserup, 2017). However, corresponding demand for the product of Schmeckt Gut has experienced a reduction in demand in some of the quarters. This implies that, income of the consumers is not a single variable that significantly influences the demand for the product of the company. Along with the income of the consumers the tariff rate on the import and the number of gyms has also increased over the years and quarters (Parker, 2018). Only variable that has fluctuated over the years is the inflation level of the economy which has significantly influenced the demand for the product of the company. In this case, the changes in the inflation rate of the economy changed the real income of the consumers and hence demand altered (Mittal & Lassar, 2015).

The impacts of different predictions on the demand for the product

Figure 1: the changes in the inflation rate

(Source: Developed by the learner)

The table marks the abrupt changes in the demand for products with red colors. These abrupt changes have been due to the collective force of the independent variables on the demand.  For example, the quarter 2 of 2012 experienced an increase in the demand by 17.53% which is significantly more than the previous changes (Tietenberg & Lewis, 2016). It is also important to note that in the since the quarter 4 of 2011 the increase in the income of the consumer has been more than that of the inflation (Demil et al. 2015). That implies a significant increase in the real income of the consumer. This trend continued until the 2nd quarter of the year 2012 and after that, the inflation of the economy outpaced the increase in the income of the consumer of the economy. The effects of this can clearly be seen in the changes in demand column which shows that the demand has decreased by 19.72%. This has been the collective movement of the income of the consumer and the inflation of the economy (Kempadoo, Sanghera & Pattanaik, 2015).


This also repeated in the 2nd and the 3rd quarter of the next year as well due to the same reason. However, it is notable, that the magnitude of the changes in demand has been lower than the magnitude of the last year. This is justified due to the increase in the import tariff which is raised to 10% since the year 2013.

SUMMARY OUTPUT

Regression Statistics

Multiple R

0.926973683

R Square

0.859280208

Adjusted R Square

0.82175493

Standard Error

23.62490359

Observations

20

ANOVA

df

SS

MS

F

Significance F

Regression

4

51122.36935

12780.59234

22.89870344

3.05144E-06

Residual

15

8372.041044

558.1360696

Total

19

59494.4104

Coefficients

Standard Error

t Stat

P-value

Lower 95%

Upper 95%

Lower 95.0%

Upper 95.0%

Intercept

96.59441264

37.72363519

2.560580712

0.021736985

16.18838794

177.0004373

16.18838794

177.0004373

Income

0.021303405

0.005115048

4.164849735

0.000829812

0.010400939

0.032205871

0.010400939

0.032205871

Tariff

-12.56696474

3.07298953

-4.089491556

0.000966638

-19.11688684

-6.017042629

-19.11688684

-6.017042629

Number of Gyms

-4.229805825

6.225343614

-0.679449375

0.50720338

-17.49881158

9.039199931

-17.49881158

9.039199931

Inflation

-14.78877013

7.768894901

-1.903587359

0.076331026

-31.34777756

1.770237299

-31.34777756

1.770237299

Table 2: the regression analysis

(Source: Developed by the learner)

The regression analysis has the R square value of 0.85 which is considered as a good fit model (Jeziorski & Segal, 2015). This implies that the variables chosen for the study mostly explain the changes in the demand for the product of Schmeckt Gut. However, the influences of all the variables are not the same and variations due to different variables have been shown in the table of ANOVA.

According to the analysis of the ANOVA table, the income has a coefficient of 0.02. It implies that the resulting changes in the demand due to the changes in the income of the consumer are not much significant (Keynes, 2017). This can be due to the inflation factor of the economy which has the potentiality to influence the real income of the consumers of the market. However, the p-value for this variable is less than 0.05 which allows rejecting the null hypothesis and accept the fact that income does impact the changes in the demand for the product of the company (Migliore, Schifani & Cembalo, 2015). It is important to note that, the most effective variable which has the highest power to influence the demand for the product is the inflation having the coefficient 14.78. That implies, for one unit increase in the inflation of the economy, the demand for the product of the company would increase by 14 units (?eref, Carrillo & Yenipazarli, 2016). Although, it can be confusing as to how the inflation level of the economy can influence the demand. For that, the Phillips curve which has been addressed in the earlier part of the study needs to be referred (Hitomi, 2017). The reduction in the unemployment increases the inflation of the economy which in turn, in this case, influences the demand for the product. 

Additionally, the analysis also shows that the tariff rate of the industry also has a positive impact on the change in the demand for the product. The table shows that the coefficient of the tariff is 12.56 which are the second largest (Chua, Chrisman & De Massis, 2015). That means with one unit increase in the tariff rate, the demand for the product increases. This is due to the fact that tariff allows the producer to compete steadily with the foreign organizations. Lastly, the variable number of gyms also has its impact on the demand for the number of gyms increases the demand for the energy bar increases (Liu & Lu, 2015). The coefficient of this variable is 4.22 which is significant to influence the demand for the product.

Based on the study of the paper and the result of the regression analysis, it is clear that there are some of the market variables that influences and triggers the demand for the new product of Schmeckt Gut. However, to ensure a smooth increase in the demand for the product there are many of the things that the board of the director of the organization keeps in mind.

Scenario 1: The income growth =1%, inflation= 3% the tariff rate= 5%

In this scenario, the management of Schmeckt Gut needs to understand that the inflation is more than the growth in the income of the consumers of the economy. Therefore, the real income of the consumers is decreasing in this phases. Apart from that, low rate of tariff also makes it easier for the consumers to import cheap substitute product from the foreign economy which can reduce the demand for the product of the company. Given that situation, it is recommended to reduce the price of the product in order to compete with the foreign players. 

Scenario 2: Income growth= 4%, inflation= 2% tariff rate= 5%

This is a scenario where the income of the consumers of the market is more than the inflation rate. Therefore the real income of the consumers is high. However, low inflation rate suggests that the economy is not in the full employment. Nevertheless, the demand for the product is still high and given the fact that the tariff rate is low it is recommended to the management of Schmeckt Gut to increase the price of the product in order to enjoy the higher revenue from the sales of the product.

Scenario 3: Income growth rate =2% inflation= 2% the tariff rate= 10%

This is a scenario where the income growth of the consumer matches with the inflation rate of the economy and the real income of the consumers remain the same. However, it needs to be noted that the Tariff rate set for the industry, in this case, is very high discouraging any kinds of import activities of any substitute products. Therefore it is recommended to the company to take advantage of this scenario and increase the price of the product in order to extract gains from the market.

Conclusion

Therefore the paper furnishes that the projected variables are all linked with each other and changes in one variable causes the other variable to change. The theories of economics suggested that in the boom phase of the economy the demand for the product and the services of the economy increases leading to an increase in the labor demand and hence the reduction in the unemployment rate. In turn, the unemployment rate is also related to the inflation through the Phillips curve. This shows as the unemployment reduces the economy the inflation rate of the economy rises up. Given this information, the data of the marketing department of the company is subsequently analysed. According to the results of the regression analysis, the inflation is the strongest variable that influences the demand for the product of Schmeckt Gut. In addition to that the tariff rate imposed by the industry is also significant when it comes to the case of impact on the change of demand for the product of the company. Lastly, based on the analysis, the paper furnishes recommendations to the board of directors regarding how each of the matching prediction can be dealt with by the company.

Reference

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