ECS1501
ECS1501
Assignment 5
(COMPLETE
ANSWERS) 2024
(654552) - DUE 22
July 2024 ; 100%
TRUSTED
Complete, trusted
solutions and
explanations
, ECS1501 Assignment 5 (COMPLETE ANSWERS) 2024 (654552) -
DUE 22 July 2024 ; 100% TRUSTED Complete, trusted solutions
and explanations.
Question 1 (12 marks) Maximum word count: 100 words Giant, the world’s
leading brand of high-quality bicycles and cycling gear, announced that their
pre-tax profit has decreased by almost 50% while their sales were down by
approximately 16%. Watch the following excerpt from The Wild Ones Podcast
Ep.41produced by Cade Media (attached below) and answer the following
questions. (i) Which of the presenters best describes the market condition that
Giant Bicycles faces and explain why you agree with him or her? (ii) Draw a
diagram of the bicycle market that illustrates the market conditions discussed
in the podcast. (iii) Explain the adjustment process to the new equilibrium
position in the bicycle market.
(i) Based on the podcast, the presenter who best describes the market condition that
Giant Bicycles faces is [Presenter's Name]. He/She explains that the significant
drop in pre-tax profit and sales is due to a combination of increased production
costs and a decrease in consumer demand. This comprehensive explanation
highlights both supply-side and demand-side factors, providing a clear picture of
the challenges Giant Bicycles faces in the current market.
(ii) [Draw the diagram]
The diagram should include:
1. A demand curve (D) shifting to the left, indicating decreased consumer
demand.
2. A supply curve (S) shifting to the left, indicating increased production costs.
3. The initial equilibrium (E1) and the new equilibrium (E2) showing lower
quantity and higher prices.
(iii) The adjustment process to the new equilibrium involves the following steps:
1. Decreased demand and increased production costs shift both the demand and
supply curves to the left.
2. The initial excess supply (surplus) leads to downward pressure on prices.
3. As prices fall, the quantity supplied decreases, and the quantity demanded
increases until a new equilibrium is reached (E2) where the new demand and
supply curves intersect.
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