BLAW1002 S1 2024 – EPA Brief
A. Context and Overview
‘Assessment 2’ is called the Economics Principles Analysis (EPA) and is worth 30% of the final mark. This EPA assesses the Economics Topics E1 (Module 6) and E2 (Module 7).
It is a ‘take-home’ activity, consisting of a set of tasks to do in short-written answers. You will have up to seventeen (17) days to complete the EPA on your own.
Timeline of EPA-specific events (local time in year 2024AD):
1. EPA Brief available on Blackboard (Bb): 16th April, 9pm.
2. Submit to Turnitin by the official due date: 3rd May, 11:59pm.
3. ETA of marks/feedback in Grade Centre: 22nd May, 9pm
Key assessment information:
The EPA consists of two (2) compulsory questions: Part 1 worth 10 marks + Part 2 worth 20 marks.
For supporting information on EPA, refer to the following PDFs, available in Assessmentstab on Bb:
1) EPA Brief S1 2024 [this document]
2) Marking Guidance and FAQs for EPA S1 2024
Realistically, you should set asidea solid 3-6 days to work on the EPA. Part 2b will likely be the more challenging task.
Your answers need to be typed, but diagrams must be hand-drawn (digital inking using a stylus is fine) and included in the Word document or in PDF.
Note, the word count is a suggested maximum. The main thing is that you specifically answer the questions and have sufficient explanations and refer to key sentences and ideas from various articles* where relevant to support your analysis. *= key articles are available for free online, or from Curtin’s Library databases and/or ‘Reading List’ on Bb.
The EPA will take up some of your thinking time, but this is a doable assessment!
A general guide on what the marker is looking for in this assessment is recalling the tutor-student discussions in the M6, M7 and M8 workshop sessions. Your tutor as an exemplar would have gone through the process of how best to explain price elasticity of demand and the key isoprofit diagram, and so on. The lectures on E1 and E2 (especially the Module 7 topic) may come in handy as well.
Complete the tasks set out in this assessment brief by your human self -- no need for you to share/upload it on the web for extra help. The lectures, tutorial question sets, and assigned readings within this brief and from the CORE text should be sufficient resources for you to draw upon to do the tasks well enough.
Many thanks in advance for your cooperation, Brennan AI Tech Incorporated (BAT Inc.)
When ready to submit, ONLY include answers and prepare your document as following:
Full Name, Student ID and Tutor’s name as a title in the Word document (or PDF) to Turnitin by the due date above.
B. Assessment Tasks
Part 1 – 10 Marks
Demand for Pepsi
Consider the price-setting power of firms in a unique time in history, post-pandemic amidst an outbreak of high inflation (2022 to mid-2023), followed by a steady period of relatively moderate inflation in recent months. We shall focus on the beverage giant, PepsiCo. To give you some relevant knowledge and guidance for this task, read the following freely available articles:
https://www.fastcompany.com/90902098/how-long-can-companies-raise-prices-inflation-pepsi https://www.crikey.com.au/2024/02/12/mcdonalds-pepsi-price-gouging-inflation-cost-of-living/
Consider two scenarios.
Scenario 1: Assume the firm increased price of their Pepsi fizzy drink by 25% over 2022-2023.
Scenario 2: Assume the firm increased price of their Pepsi fizzy drink by 5% in first quarter of 2024.
For each scenario, do the following:
Draw a single straight-line demand curve and explain the relevant details on the price elasticity of demand (PED).
Show the workings of your calculation of PED.
Describe and quantify what would happen to revenue in this case.
In your answer, use hypothetical incremental values (rough guesses from your imagination) for the prices on they-axis and quantities on the x-axis.
400 ± 100 or so words should be sufficient
Part 2 – 20 Marks
Profitability of Firms in the Weight-Loss Industry
a.
Obesity is a major social problem in some modern economies, and it can be a struggle for many to maintain a healthy diet and balanced lifestyle. An important question is what role the firm plays in the diet culture of weight-loss. Do some research and discuss the fallin profitability (market share) in recent times of either Weight Watchers or Jenny Craig—two historical giants in the weight-loss diet sector — from this unit using the concept of creative destruction.
500 ± 100 or so words should be sufficient
b.
Consider the firm Novo Nordisk and the production of Ozempic, a class of diabetes drugs which can additionally be used to treat weight-loss by mimicking GLP-1 to suppress appetite. At present, the firm has mostly a monopoly on this kind of injectable drug where semaglutide is the key active ingredient. For some context, read the following freely available articles:
1. https://theconversation.com/ozempic-the-miracle-drug-and-the-harmful-idea-of-a-future-without-fat-211661
2. https://fortune.com/europe/2024/03/28/ozempic-maker-novo-nordisk-facing-pressure-as-study-finds-1000-appetite-suppressant-can-be-made-for-just-5/ [or, access via Login to Curtin Library: https://search.ebscohost.com/login.aspx?direct=true&AuthType=sso&db=bsu&AN=176267009&site=ehost-live&custid=s8423239]
3. https://www.usatoday.com/story/news/health/2024/03/29/ozempic-wegovy-weight-loss-diabetes-drug-cost/73125135007/
4. https://www.doctorswithoutborders.org/latest/msf-study-reveals-global-double-standard-diabetes-care
The price it charges for the drug varies greatly across different countries, as presented in the study by Barber et al. (2024),https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2816824[skim read]. The study shows that the firm can still make a profit even if the price of this drug was set at a low price of say $10 per month, given that the costs of production for a pre-filled insulin pen are around $5 (max.).
Your task is to show what the profit of this firm might look like using a key economics diagram. To make graphing easier, we will consider the price of the Ozempic drug for the middle-income country Bangladesh, which is $38 (assumed the profit-maximising price).
For this task, you will be required to illustrate and explain to atypical first-year undergrad student who has no economics background the profit the firm makes at $38 per month, and what has happened to profit (producer surplus), markup, consumer surplus and the output if the price was reduced from $38 to $10 per month.
To help you construct the relevant diagram, here are some instructions and assumptions:
You will hand draw one (1) diagram with an isoprofit curve, which is an adaptation of Figure 7.9d from the CORE ESPP text. An adaptation means that you modify the main diagram from the text to suit the case study at hand, for the drug used for diabetes and/or fight weight gain. Assume unit costs of production of this drug area constant $5 per month.
You are only required to draw one isoprofit curve at this profit-maximising price of $38 per month. Be accurate when you draw your isoprofit curve, but there is no need to calculate with precision every single point on the isoprofit curve. To show that your profit is the same (‘iso’), calculate and show workings of what the (same) iso-profit would be for $50 and for $20.
For the incremental quantities of drug production on the x-axis, use hypothetical values (rough guesses from your imagination). Also use your intuition for making up other prices/costs of the drug on they-axis and makeup a demand (straight-line) ‘curve’ .
Finally, calculate and show workings for the change in producer surplus and markup, but you only need to shade in the change in consumer surplus if the price of the drug was set at $10 per month.
500 ± 100 or so words should be sufficient