, CS1501 Assignment 5 (COMPLETE ANSWERS) 2024 (65455
2) - DUE 22 July 2024 ; 10 0%
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) Presenter Description of Market Conditions
Presenter: The presenter who best describes Giant Bicycles' market condition is
the one who identifies a recessionary period or downturn in the market.
Explanation: I agree with this presenter because the significant drop in pre-tax
profit by almost 50% and a 16% decrease in sales are indicative of a severe
contraction in demand. During a recession or downturn, consumer spending
decreases, leading to lower sales and reduced profitability. This suggests that Giant
Bicycles is experiencing a challenging economic environment affecting their
performance.
(ii) Diagram of the Bicycle Market
Diagram: The diagram should show a standard supply and demand graph with
the following features:
Demand Curve (D1): Shifted leftward from D1 to D2 to reflect decreased
demand.
Supply Curve (S): Remains unchanged in the short term.
Equilibrium Price (P1): Original equilibrium price.
Equilibrium Quantity (Q1): Original equilibrium quantity.
New Equilibrium Price (P2): Lower than P1 due to decreased demand.
New Equilibrium Quantity (Q2): Lower than Q1.
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