Answer the following questions in reference to the coffee and coffee shop industry Questions: 1. Define the industry that you are applying these concepts to. Your industry ought to be pretty precisely defined and this is not necessarily an easy thing to do. Note that it can be just as important to say what is NOT included, as what is. It is OK to use the IBISWORLD definition, or any sensible attempt at defining the industry. IBISWORLD definitions are below 2. What does this industry do? ie use plain English to describe, in a little bit of detail, what this industry does. 3. What are the key products in your industry? List or briefly describe a few of the most important ones. 4. Economics categorises all the inputs of the production process into four different categories-: Land, Labour, Capital, Entrepreneurship (reviewing the key selling industries may give you some hints as to the types of inputs needed for this industry's production) (i) Provide several examples of key "land" resources used in your industry. (ii) Provide several examples of key "capital" resources used in your industry. (iii) Discuss the labour resources required – how important is skilled labour? What are the types of skills required? Does the industry use much unskilled labour? Do they mainly use full time, part- time or casual labour? (iv) Discuss the nature of the entrepreneurship resource-: a. Are there many entrepreneurs who have created businesses that are currently operating in your industry? OR b. did the real entrepreneurship occur a long time ago, and the business is really run by managers for investors now? c. Are the entrepreneurs close to the business – for example, they run and/or work in the business or monitor it closely? Pages in the Industry Reports that will help with these answers-: Page 1 (showing industry & contents of report) 2nd page (shows definition and primary activities) The Products and Markets pages-these include the headings of Supply chain, Products and services, Demand determinants, Major markets and International trade. For the different industries, these are pages-: Cafes and coffee shops: 11-14 inclusive 1. Describe the producers in your industry. For example, how many firms are in your industry? Are there some major players, and/or a range of smaller players? Who are the few biggest firms? What does a 'normal' firm look like in this industry? Example answer to this question-: Motor Vehicle Manufacturing industry in Aust-: (This industry manufactures motor vehicles including passenger cars, SUVs, light commercial vehicles, buses and vans, along with medium, heavy and special-purpose highway trucks. Automotive engine manufacturing is also included in this industry.) There are 452 firms in this industry, but there are 3 major players in Australia. They are Toyota with 37.2% of the market, GM Holden with 16.1% and Ford with 8.9%. Each of these firms have large factories based in different locations in Australia – Toyota in Altona, Victoria; Ford in Geelong and Broadmeadows, Victoria and GM Holden in Elizabeth, Sth Aust. The rest of the industry is made up of the 449 smaller firms distributed through all states of Australia, except for Tasmania, NT and ACT. Each major manufacturer sells their cars via their own Australia-wide network of dealers, and there is a small export market. 2. Who are the major buyers (demanders) of the products of your industry? Do buyers buy locally for local use, or is the product traded nationally, and / or internationally? 3. How do buyers and sellers come together to trade in your industry ie how and where are the goods and services exchanged? 4. Give examples of each of the 5 non-price factors of demand that would influence the demand for the key products in your industry. Which do you think are the 2 most important factors for your industry? 5. Explain the difference between a movement along the demand curve, and a shift of the demand curve, in your industry. 6. Give examples of each of the 5 non-price factors of supply that would influence the supply for the key products in your industry. Which do you think are the 2 most important factors for your industry? 7. Explain what would happen in the market for one of the key products in your industry if there was an increase in the cost of inputs to production. Ensure you draw a diagram and provide a full explanation of what would occur. PTO Industry report additional pages that will be useful for this week (you may also need to use previous weeks' too in order to answer these questions)-: Cafes & coffee shops – Pgs 3-5, 12-14, 17-19 and 22-23 inclusive Question 1 Discuss each of the factors that determine the price elasticity of a product with respect to the product or product category listed for your industry. Do you think this product or product category is likely to have a price elasticity of demand that is elastic or inelastic at their current market price levels, looking over a period of 6 months? 5 + 2 marks Question 2 The CEO of the Industry Association that works to advise firms in your industry wants to increase total revenue in your industry, and is considering advising all the firms in the industry to increase their recommended retail price for the appropriate product or product category as above in question 1. Write a short paragraph that explains to CEO of the Industry Association whether this is a suitable course of action for them to recommend, and why. 4 marks Question 3 Irrespective of your answers to questions 1 and 2 above, assume your product or product category has a price elasticity of demand of 1.2 How would demand for the product change if the price of the product decreased by 10%? Would total revenue for the product or product category increase or decrease? 3 marks Question 4 Give the formula for income elasticity of demand. What do you think is the likely income elasticity of demand for products in your industry (ie is it positive or negative? A large number or a small number?). Justify your answer with reasons. 1+2 marks Question 5 Give the formula for cross price elasticity of demand. What do you think is the likely cross price elasticity of demand for products in your industry compared to the product category shown against it below (ie is it positive or negative? Close to zero or a long way from zero?)? Justify your answer with reasons. 1+2 marks • Cafes and Coffee shops industry products and restaurant meals 1. Is it likely that, in your industry, there is some consumer surplus? Is there likely to be any producer surplus? Why, or why not? 3 marks 2. Has the government ever set the price in your industry? Why would they do that, or why not 3 marks 3. Australia has a GST (goods and services tax) of 10% that works very similarly to a VAT (value-added tax) in other countries (ie they simply use a different name for it, and the amount may be different). However, unlike most other countries, Australia allows some products and services to be GST free. Does the Government tax the products of your industry? 2 marks (See https://www.ato.gov.au/Business/GST/When-to-charge-GST-%28and-when-not-to%29/GST-free-sales/ and https://www.ato.gov.au/Business/International-tax-for-business/Australians-doing-business-overseas/Exports-and-GST/ 4. Go to this site, and have a look at the first paragraph that begins "GST basics" and ends just before "The nitty-gritty". http://www.taxpayer.com.au/KnowledgeBase/10236/Small-Business-Tax-Super/GST_basics . There is an error in one of the dot points they have listed there. What is it? Explain what the reality of the situation is, and draw a diagram to help your explanation. 4 marks Hint: ensure you review the last part of the lectures for this week. There is no need to discuss what we did not cover; but you ought to be able to discuss what we did cover. 1. For each of the following concepts, define the concept. Then give an example of it using a product or product category in your industry -: (i) Total utility 2 marks (ii) Marginal utility 2 marks (iii) The Law of diminishing marginal utility. 2 marks (Your industry may not sell their products directly to the end consumer. In that case, select any end product that is consumed directly by the end consumer that your product or product category significantly contributes to: it is ultimately consumer demand - your customer's customers - that is going to dictate demand for your industry's products. )