Do 11 questions.
Note: Required questions are # 5, 6, 9 & 18.
Each answer should be 2-3 pages including graphics, definitions, analysis, etc.
For all questions, include context, graphical
illustrations and calculations to support your answers.
When answering, think as a CFO / Manager.
1) Explain the determinants of Price elasticity of Demand
(“PED”), Price elasticity of Supply (“PES”) & (“IED”) Income Elasticity of
Demand. In your analysis, define elastic, unitary elastic and inelastic behaviors
relative to price changes including impacts on total revenue. What are some
real life elasticities & EXPLAIN (such as health care, restaurants, energy,
technology, medicines, higher education, food, etc.)?
> What are inferior versus normal goods and how
are they impacted by changes in disposable
income ? Provide examples ?
2) The New York Times reported…“ That subway ridership
declined 5.5 million fewer riders in THE MONTH of December, 1997, the first
full month after the price of the token increased $.65 to $1.85, than in the
previous December. This price change immediately resulted in a 8.3% ridership decline.” Note: Token increase from $ 1.20 to $1.85 = +
> With this information, estimate the Price elasticity
of Demand (“PED”) for subway rides; Interpret ? According to your analysis,
what happens to the Transit Authority’s total revenue (P * Q) when the fare
rises? Explain and interpret the economic calculation of “PED”…..
If Supply does change by + 10% given the token increase,
what is the “PES” value ? Interpret your results. ***Please see elasticity notes attached.***
> Why might your initial elasticity calculation be unreliable
> If your total
cost is $100 M (Breakdown: 50 % fixed, 45% variable & 5 % opportunity
costs) based on the documented token increase, are you now generating enough
revenue to cover your costs? Explain. Hint: Formulas to use are TR – TC =
Profit; Determine & interpret BOTH your Accounting & Economic Profit / Loss
positions. Does cash – flow analysis come into play? Explain?
disposable income of your market increases by + 25 %, what happens to your
demand elasticity function ? Does it become more or less elastic & why ? ***See attached Elasticity Problem Workup***
are the determinants regarding the Law of demand (“LoD”) & Law of Supply
(“LoS”)? Explain the Law of Supply as a proxy for the firm’s marginal cost
structure? In your analysis, please also explain the concepts of changes in price
as it impacts on changes in quantity demanded & quantity supplied.
4) As a CFO / Manager, explain the following in your
response….”Advertising seeks to change consumer tastes and thus the willingness
to buy. If tastes and income do change, the demand and supply curves will
shift”. What are the principal factors that causes shifts in market demand and
supply for a good or service? Can demographic and cultural trends effect demand
& supply? Examples? Explain.
5) ***REQUIRED***: From a CFO / Manager’s
perspective, what are the unique characteristics of a perfectly competitive
market structure compared to the other market structures (monopolistic
competition, oligopoly, duopoly and monopoly) discussed on-line class?
> How do firms make supply / output and profit
decisions and how are production levels, prices, profits determined in the
various market structures ? In your summary, are certain market participants
(consumers & producers) “included” and / or “excluded” in the market
From a CFO / Manager’s perspective, what are some pricing strategies employed
by firm’s based on an industry make-up, elasticity and market power ? Why do
firms adopt “price discrimination” ? What are the unique criteria for a firm to
exercise “Price Discrimination” ? What are the various degrees of “price
discrimination” ? Which type of “price
discrimination” is the most common in practice ? Refer Tables 10.4, 10.5, 10.6 &
10.7 ***See attached***
7) What is the relationship between accounting costs, opportunity
costs and the degree of contribution (i.e. productivity) of an input How does
productivity influence an economy’s standard of living and corresponding economic
growth? Do firm’s consistently evaluate resource decisions as it relates to the
flexibility of input (labor & capital) substitution in their busines model Explain.
& explain some measures (econ principles) which are important in
determining growth in production for an economy ? Think about the principles
& interconnectivity of the circular flow model Refer to ***Question 7 attached***
8) What is the relationship between costs &
productivity, hence the firm’s production function? What is meant by short run
versus long run production & cost analysis? Explain: “Advances in technology and the
efficacy / quality of our inputs have been a major source of productivity
growth. The advances (human and non-human capital) have shifted production functions
up and pushed cost curves down”? Think “AI” (Artificial Intelligence);
Blockchain; “5G”; “AR”, (Augmented
Realty); Algorithms, etc…….
you include some of the concepts highlighted in the Walmart posting attached in
your response? Remember, the complement of
productivity is cost; As productivity yields in your factor inputs (labor /
capital) goes up, costs are mitigated. In addition, factor inputs are always in
competition by the Manager regarding their usage.
9) ***REQUIRED***: What is meant by Market / Equilibrium
versus Dis-equilibrium Pricing? Provide examples of government induced (mandated) dis-equilibrium
pricing and impact on production levels, consumption, price, quantity and
quality ? Think …..“Price controls: Price
ceilings / Price floors, Taxes” are examples of dis-equilibrium pricing? What
are subsidies? Give examples? Can subsidies influence demand, supply market activities
? Can government legislated subsidies generate unintended consequences ? Explain.
>What are the observed INTENDED
VERSUS UN-INTENDED CONSEQUENES of government requiring companies to give up
their intellectual property rights to “help” others; or…imposing rent control
and minimum wage legislation “debate” as it relates to employment, demand and productivity
and ultimate impacts (i.e. shortages / surpluses). Include graphical analysis. Graphically
illustrate your analysis and provide context.
10) What are some of the challenges facing the world
economy as it relates to the accumulation of debt liabilities including
unfunded mandates especially in efforts to combat the global pandemic, COVID
’19 ? ? Refer to US Debt Clock, real
Why is this important in understanding and addressing
this societal challenge relative to current and future economic growth? Think
impacts of your industry, company and on aggregate demand: Y = C + I + G + (X
–M) ! Also consider…..the parity relationship between demand (spending) and
income. In your analysis, review the following on your explorer
below…. “U.S. Debt Clock”, real time. What is it highlighting and what is the
importance in achieving economic growth ?
11). As a CFO / Manager, why is it important in
understanding trends in GDP ? Is it a good measure of economic well being ?
What are the primary sub-components of consumption and why is it important is
analyzing when deciphering economic behaviors and overall trends?
Explain the following, GDP measures two things at once – ”The
total income of everyone in the economy and the total expenditure (demand) of
the economy’s output of goods and service. For an economy as a whole, income
must equal expenditure”.
12) Describe consumer behavior ? Why is it important in
understanding from a Manager’s perspective ? Explain the difference between
substitute and complementary goods? Provide examples of both and describe
their impacts on each other when price changes. Hint: What is Cross Price
Elasticity of Demand (“CPED”). Does time and a good’s price ($) relative to
one’s overall income budget influence elasticity of a product? Why? Also, refer to Appendix 3 A, “Economic Model of Consumer Choice”. ***See attached***
13) As a CFO / Manager, why is it important in
understanding the role of government in WHAT, HOW, or FOR WHOM goods / services
are produced in our mixed economy? Review “Welcome Document”. Discuss concepts such as equality of
opportunity, distribution of income, consumer, labor protection, civil rights
concurrent w/ safeguarding individual property rights and opportunities of all.
Question: Does equality of opportunity in a meritocracy based social / economic
structure imply equality of outcome ? Explain. ***Welcome document attached***
14) Define economic surplus (consumer + producer
surplus), AND TOTAL SURPLUS ? What is meant by economic efficiency ? Why do
economists define efficiency in this way? What are the many economic and
governments effects (public policies) discussed in class which could either
positively or negatively impact both consumer & producer surplus ? Does a
trade-off exist between economic efficiency and equity ? Explain.
15) Highlight the interconnectivity (“interdependencies”) of various economic
& financial impacts of your company (Cigna Health Care), industry (Health Insurance), with the US economy and other
countries ? What differentiates the US
versus the other economies ? Current analysis / real-time readings. What is
meant by understanding business cycles within the macro & micro economy ?
16) As a CFO / Manager, why is
it important in understanding the following concepts: Tax incidence; Tax burden
and Tax shifting between consumers and producers and it’s relationship to
demand & supply elasticities?
Explain the following: “The incidence of a tax depends on the price
elasticities of supply and demand. Most of the burden falls on the side of the
market that is less elastic because that side of the market cannot respond as
easily to the tax rate by changing the quantity bought or sold”. ***See attached elasticity analysis problem workup***
17). Explain the following two
economic statements regarding interdependence and gains from trade:
“Trade makes everyone better of
because it allows people to specialize in those activities in which they have a
comparative advantage”….What is meant by comparative advantage ?
“The principle of comparative
advantage and specialization applies to countries as well as to people.
Economists use the principle of comparative advantage to advocate free trade
among countries…..as well as commerce (mutual / voluntary exchange) among
As a CFO / Manager, what are the various cost, cash-flow, revenue and
production metrics? What is meant by a firm’s production function? Why is it
important to differentiate the production and cost in the short run versus long
run? What are the various models for a” Long Run Cost Function” as it relates
to scale effects? What are some factors which contribute to Economies versus
Diseconomies of scale? Why do firms pursue scale benefits in their cost and
pricing strategies ?
Can the performance of these metrics influence a company’s access &
cost of capital in the financial markets?
19). Again from a CFO / Manager’s perspective, explain the following… (‘A’,’B’,’C’
your readings, globally exists in excess (>) of $ 175 trillion (T) in accumulated debt. From a managerial
perspective, how could that impact future economic growth ? Given the magnitude
of debt, what is the significance of economic growth to adequately fund this
debt level ?
your career experiences, provide examples on how new health care technologies
can accelerate opportunities for all, reduce short term costs and be a catalyst
for economic growth ? Define the impact of new technologies as it relates to
increasing the “yield” i.e. productivity of the factors of production &
corresponding factors of income ? Can technology changes be a catalyst for
increased consumer & producer surplus and a higher standard of living ? Explain.
What are some of the benefits associated with economic growth ? What are some
of the various consequences associated regarding a lack of economic growth ? What
contingencies are needed to address these impacts ? Can economic growth provide
various stakeholders (students, consumers, firms) opportunities such as the
collection of needed tax revenue to fund basic government social programs
? Explain ?
As a CFO
/ Manager, why should you be familiar with economic trends and principles (macro,
micro, tax elasticity, health care, demographics & behavioral) relative to your
business, industry and importantly, in pursuing your career ?
Do 11 questions.