Largo Global Inc. is a fictious firm that is will be used to allow you to understand the market forces of supply and demand as they impact a company as well as the industry in which the company operates. The company produces several different product lines two of which are a simple Standard box and a more elaborate Deluxe box. These boxes are also produced by many other companies.
In Project 2, you will learn about how to apply the tenets of microeconomics to improve the company’s profitability. In tab 1 after reading the instructions, you will chart the supply and demand curves for the two different boxes. In tab 2 you will focus on the price elasticity of demand for these two products. In tab 3 you will approximate the prices that maximize the profit for both boxes.
Follow these steps to complete Project 2:
1. In step 2, you will complete this Excel file by placing your answers to the questions in the boxes provided. You may submit this file as the Milestone submission so you can receive feedback on the accuracy of your calculations.
2. In step 3, you will answer the questions provided in the Word file for this project that will guide/give direction to your analysis. These questions will constitute the core of your report where you will be asked to make key recommendations. Your report should be no more than 15 pages, a maximum of one page per question. Start each question with your answer on a new page.
Project 2 is the team assignment in MBA 620. Each team member will have three deliverables for the project. First, each team member will complete the Excel spreadsheet. Second, each team member will serve as the team’s primary respondent for one of the five topics and will answer all questions for that topic. Third, each team member will serve as the secondary respondent to one of the five topics and submit their answers to the primary for that topic. The primary respondent will coordinate the answers for that topic and submit them to the editor for the team’s Word file. Once the faculty member’s feedback is provided, the primary will coordinate any changes to the team’s answers to the topic questions.
All team members must submit their three deliverables in order to receive a grade for the project. Your faculty member will let you know how you will submit your deliverables as well as the team’s consolidated Word file which will be graded.
Course and section number
Supply and Demand
- Explain why an understanding of the law of demand and the law of supply is important to being an effective manager.
- Identify the supply factors that are most important in determining the market equilibrium for the Deluxe box.
- Identify the demand factors that are most important in determining the market equilibrium for the Standard box.
- Explain why an understanding the market structure in a which company operates is important to being an effective manager.
- Explain the market structure that is most likely operating in the market for the Deluxe boxes.
- Explain the market structure that is most likely operating in the market for the Standard boxes.
- Discuss what actions the company should take in setting the price of the Standard box given its price elasticity of demand.
- Discuss what actions the company should take in setting the price of the Deluxe box given its price elasticity of demand.
- Assuming the price elasticity of supply for the Standard box is inelastic, explain the key factors that the company must consider in expanding production.
- Explain under what conditions profit maximization would be appropriate for the Standard box.
- Explain why the concepts of marginal revenue, marginal cost and economies of scale are important to the financial objective of maximizing profit.
- Assuming the company only manufactures these two product lines and they have customers who purchase both products from them, discuss what the overall company financial objective should be.
Economics and Decision Making
- Explain how an understanding of economics is important to being an effective manager.
- Explain why understanding the economic concept of opportunity cost is essential to managers making better decisions.
- Explain why understanding the economic concepts of marginal revenue and marginal cost are essential to managers making better decisions.
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