INTRODUCTION TO MICROECONOMICS (ECO1001)

INTRODUCTION TO MICROECONOMICS (ECO1001)

PRESENTATION – CASE ASSIGNMENTS – Juici Beef

Instructions:

• You will be expected to deliver a polished and concise overview of the topic in the allotted 20 minute time frame. You will have 5 minutes for questions and answers following the presentation. You will be expected to fill the complete 25 minute timer period, but no more.
• Make sure the presentation is well balanced (each speaker will should have equal time to present and should only speak once)
• The language of your presentation should be formal and create a good professional image.
• Do not read from your full report, do not do lengthy calculations on the board, rehearse with the group.
• The Tutor will use a rubric to evaluate each group’s presentation. Students can look at this rubric online so they may understand what is expected.

Question 1 – (25 marks)

Read the following passage carefully and answer questions

Read the following passage carefully and write your response in the space provided.

Juici Patties is one of the companies leading companies in the patty business. With over 60 restaurants across the island, Juici Patties is the largest fast- food chain in Jamaica, almost doubling the number of outlets of rival Tastee. The company expand from producing beef patties into a wide range of products such as chicken, lobster, vegetable, cheese and mega cheese patties. Their menu also includes callaloo and vegetable loaves, pastries.  They also serve many traditional Jamaican breakfast and lunch dishes.

Despite its success, Juici Patties had to end its franchise agreement with several of its Corporate Area restaurants due to inadequate service standards.  According to the marketing manager of Juici Beef, they decided to end the franchise agreement with these restaurants after they have received several complaints about the poor service at these locations and efforts to resolve this problem failed.

One Juici franchisee in the Duhaney Park area complained that his inability to offer good customer service was as a result of loss of revenues when Juici Beef increases the price of its products.  He claimed that when beef patty increased from $100 to $130 the quantity demanded decreased from 15,000 units to11,000 units per week.

1. When the price of beef patty increased from $100 to $130 and the quantity demanded decreased from 15,000 units to11,000 units per week

1. Calculate the price elasticity of demand (using the mid-point method) and interpret the results

(4 marks)

1. Identify three factors that determine whether the demand for patty is likely to be elastic or inelastic.

 (3 marks)

2. Based on the price elasticity of demand (calculated in part A) what would have been the best decision to increase the revenue of the Duhaney Park franchise. Give reason for your answer.

(3 marks)

3. With reference to the market for beef patty, explain the economic effect if the franchisor (Juici Beef) imposes a price ceiling of $130 on beef patties and this price is below its franchisees’ current equilibrium price.

(4 marks)

4. Both Juici and Tastee believe that their patties are the best. The incomplete table below shows a customer utility for these patties when Tastee Patty cost $100 and Juici patties cost $120 each.

1. Complete the table

(4 marks)

1. If the customer Sandra has $760 to spend on these two products, how many Juici patties and how many Tastee patties she can buy to maximize her satisfaction.

(2 marks)

1. Draw Sandra’s budget constraint and indifference curve. This graph must illustrate how Sandra maximizes her satisfaction from consuming Juici and Tastee patties.

(All budget line intercepts as well as the quantities of patties that will maximize Sandra’s satisfaction must be shown on the graph)

 (4 marks)

Question 32 – (2 marks)

Read the following passage carefully and write your response in the space provided.

In 2001 Juici Beef constructed a totally automated abattoir designed to slaughter both cattle and chicken. Juici Beef chairman Jukie Chin said that this facility will enable the company to become self-sufficient in the desired cuts of quality meat that is required in the patty making business. Previously, Juici Beef spends over $90 million per annum to purchase slaughtered and dressed carcass from farmers, mainly in St. Ann, Clarendon, and Manchester.

According Mr. Chin, the company recognises the need to raise the standard and quality of the meat used in its patties hence an abattoir of this rating will serve to enhance the quality and standardise the Juici Beef products. However some local farmers are upset as they will no longer be able to supply an average of 500 slaughtered heads of cattle per month to Juici Beef and calls for the intervention of the Minister of Agriculture to protect their livelihood.

1. Describe the integration strategy use by Juici Beef when decided to become more self-sufficient and constructed the abattoir.

(2 marks)

1. With the new abattoir Juici Beef will be able to slaughter eight cows and forty chickens per hour for its own personal use. In the same time the local farmers could slaughter four cows and thirty chickens.

1. Which producer has absolute advantage in the slaughtering of cows and chickens?

(1 mark)

1. Which producer has comparative advantage in the slaughtering of chickens?

(1 mark)

• Based on the theory of comparative advantage should the local farmers continue to supply Juici Beef with slaughtered cattle? Give reason for your answer.

(2 marks)

1. With the aid of a demand and supply diagram explain how the how local farmers will be affected by Juici Beef’s decision to be self-sufficient in slaughtered cattle.

(4 marks)

1. Joe is an elderly Clarendon farmer that produces and supply slaughtered beef to Juici Beef. The table below shows the quantity of beef, total cost and total revenue for the farmer.

1. Complete the table above to show the marginal cost, marginal revenue and average cost for each output level.

(6 marks)

1. Identify the market structure under which this firm operates. (justify your answer)

(2 marks)

• Compare three characteristics of this industry, identified in your answer to part D(ii), to that of the fast food industry in which Juici Beef operates in.

(3 marks)

1. What is the profit maximizing price and quantity for the firm identified in your answer to part D(ii) ?

(2 marks)

1. Calculate the firm’s economic profit/loss.

(2 marks)

The End