PART 1: THE PLANNING FUNCTION II
Question 1
If market research shows that the consumers of a new Apple Sauce product are people who live in the urban areas (80% of the population), are between the ages of 5 and 35 years old (45% of the population), come from a high-income household (20% of the population). Also, statistics shows that the total population in the United States is 250,000,000. You are expected to answer the following questions and show your workings clearly. (8 points)
a) As the agribusiness manager of the organization, you are expected to estimate the size of the market for this new product. What is the name of the approach you would use?
b) What is the size of the market?
c) If each of these consumers in the target market are buying an average of 2 pack of apple sauce per
month at $20 per pack, what is the total annual market potential?
d) If the organization feels they will obtain 15% of the market share in the first year of the product launch, what is the sales forecast in the first year?
PART 2: ECONOMICS FOR AGRIBUSINESS
Question 1:
Part 1: Table 1 shows the total, average, and marginal utility from the quantity of hamburgers consumed. Fill in the gap and show your workings clearly. Kindly note that the mark “XXX” in the first row indicates that the box should be excluded from your calculations. Average utility is calculated as total utility divided by quantity consumed. (11 points)
Table 1: Utility Table
Quantity Consumed Total Utility Average Utility Marginal Utility
1 50 XXX
3 90
5 120
8 150
14 180
20 200
Part 2: With the aid of diagrams, explain the relationship between the total and marginal utility of the hamburger above. Ensure the diagrams are properly labelled. (6 points)
Question 2:
Part 1: Table 2 shows the price and quantities demanded for 50lbs bags of rice. Each year, starting from 2021, the price has increased. You are expected to calculate the total revenue, elasticity coefficient, and determine if it is an elastic, inelastic, and unitary response. Fill in the gap and show your workings clearly. Kindly note that the mark “XXX” in the 2021 row indicates that the box should be excluded from your calculations. (16 points)
Table 2: Demand schedule for 50lbs bags of rice Year Price ($) Quantity Total Revenue Elasticity
Coefficient
Elastic,
Inelastic or
Unitary?
2021 40 1000 XXX XXX
2022 60 800
2023 80 600
2024 100 400
2025 120 200
2026 140 100
Part 2: Using the Table 2 above, construct a demand curve. Ensure this is properly labelled. Then, with respect to the price elasticity of demand, illustrate the ranges on the demand curve that indicate elastic, inelastic, and unitary elasticity. (6 points)
PART 3: FORCASTING AND BUDGETING
Question 1:
Table 3 shows the nominal price of oranges in Year 1 and 2 from January to December. The slope of the trend line is $0.504 per year. You are expected to fill in the blank spaces and answer the questions below. You do not need to show your workings for the answers in the blank spaces. But you are expected to show the workings on how you obtained the answers in
Question 2. (12points)
Table 3: Orange Price and Monthly Price Index
Month Nominal
Price (Year
1)
Average
Change in
Price (Year
1)
Nominal
Price (Year
2)
Average
Change in
Price (Year
2)
Monthly
Average
Monthly
Price Index
Jan 4.50 4.48
Feb 4.44 4.46
Mar 4.90 4.54
Apr 5.00 4.74
May 5.02 4.83
Jun 4.80 4.14
Jul 6.00 5.41
Aug 5.70 5.49
Sep 5.01 5.04
Oct 4.88 4.88
Nov 4.70 4.83
Dec 4.60 4.90
Notes: A slope of the trend line is $0.504 per year
Question 2: Answer the following questions and show your workings. (9 points)
a) What is the slope of the trend line per month?
b) What is the average change in price for Year 1 September?
c) What is the average change in price for Year 2 March?
d) What is the monthly average for June?
e) What is the overall average price?
f) Based on the monthly price index, which month has the lowest and highest price for the year? Kindly explain.
g) If the price of orange in October is $8, what will be the predicted price in December?
