Assignment ECO2001 Microeconomics - Fall 2023

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Jai Hind College *

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Economics

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Nov 24, 2024

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Page 1 of 9 SKYLINE UNIVERSITY COLLEGE B B A WEEKDAYS SKYLINE UNIVERSITY COLLEGE University City of Sharjah - UAE P.O. Box 1797 Sharjah - UAE, Tel: 06 - 544 1155, Fax: 06 - 544 1166 Course Learning Outcomes 𝑪𝑳𝑶 ? . Demonstrate an understanding of principles of economics and economic systems. 𝑪𝑳𝑶 ? . Explain the dynamics of market forces, elasticity and market equilibrium. 𝑪𝑳𝑶 ? . Apply concepts of costs, revenue on production under different condition of competition. 𝑪𝑳𝑶 ? . Analyse the market competitive environment and pricing mechanism under different market structures. Assessment Level Strands / Substrands Order of CLOs Order of Questions Marks Knowledge 𝐾 1 = Functional Knowledge 𝑪𝑳𝑶? 1 2 𝐾 7 = Theoretical Knowledge 𝑪𝑳𝑶? 1 3 𝐾 5 = Applied Knowledge 𝑪𝑳𝑶? 4 5 Skills ? 5 = Analytical Skills 𝑪𝑳𝑶? & ? 2 10 Competency 𝐶𝐴? 1 = Functional Competence 𝑪𝑳𝑶 ? 3 5 𝐶𝐴? 2 = Strategic Intelligence 𝑪𝑳𝑶 ? 4 5 Assignment Course Code ECO2001 Academic Year 2023 – 24 Course Title Microeconomics Semester/ Type Fall 2023 Submission Date 08-12-2023 Max. Marks/Weightage 30 Instructions 1. This assignment is group work/submission. 2. Plagiarisms in all forms are not acceptable. Students who submit plagiarized assignment will be given a fail grade. The maximum similarity index acceptable is 10% 3. This assignment will be due on 08/12/2022. Late submission will be penalized 4. This assignment is restricted to a maximum of 12 pages. 5. References should be in APA format. 6. Attach all relevant appendices to your paper. 7. Your assignment report should be typed, illustrated and presented on A4 paper using 12 font size(Times New Roman) and 1.5 spacing .

Page 2 of 9 SKYLINE UNIVERSITY COLLEGE B B A WEEKDAYS Question 1 (Theoretical and functional Knowledge – 5 marks) a) Explain the determinants of the demand for tea. (2marks) b) When demand and supply curves shift simultaneously what are the factors that would determine the direction of the change in equilibrium price and quantity. (3 marks)

Page 3 of 9 SKYLINE UNIVERSITY COLLEGE B B A WEEKDAYS Question 2 (Analytical Skills - 10 Marks) Mr. Ahmed’s coffee shop has the following cost schedules: Quantity Variable Cost Total Cost 0 0 30 1 10 40 2 25 55 3 45 75 4 70 100 5 100 130 6 135 165 a) Calculate average variable cost, average total cost, and marginal cost for each quantity. b) Graph all these three curves. (use excel to draw graph) c) Explain the relationship between the marginal cost curve and the average total cost curve? d) Analyse the marginal cost curve and the average variable-cost curve. e) Analyse the reasons for long-run cost curve is ‘U’ shaped. Question 3 ( 𝑪𝑨𝑹 ? = 𝐅??𝐜?𝐢??𝐚? 𝐂???𝐞?𝐞?𝐜𝐞 - 5 Marks) Case Study – Long-Run Adjustment in the U.S. Cotton Textile Industry. In a study of U.S. industries between the world wars, Lloyd Reynolds found that the U.S. cotton textile industry was the one that came closed to being perfectly competitive. Cotton textiles were practically homogeneous, there were many buyers and sellers of cotton cloth, each was too small to affect its price, and entry into and exit from the industry was very easy. Reynolds found that the rate of return on investment in the cotton textile industry was about 6 percent in the South and 1 in percent in the North (because of higher costs for raw cotton and labour in the North), as contrasted to an average rate of return of 8 percent for all other manufacturing industries in the U.S. over the same period of time. Because of the lower returns, the perfectly competitive model would predict that firms would leave the textile industry in the long fur and enter other industries. The model would also predict that because returns were lower in the North than in the South, a greater contraction of the textile industry would take place in in the North than in South. Reynolds found that both of these predictions were borne home out by the facts. Capacity in the U.S. textile industry declined by more than 33 percent between 1925 and 1938 with the decline being larger in the North than in the South. Thus, textile firms, cotton farms, and firms using cloth did respond to these economic forces in their managerial decisions. Most U.S. textile firms were able remain in business after World War II only as a result of U.S. restrictions on cheaper textile imports and, subsequently, as a result of the introduction of labour saving innovations that sharply cut their labour costs. But with the reduction in trade protection negotiated at the Uruguay Round (1986- 1993) U.S. and European textile firms have come under renewed pressure, especially from China, which is expected to produce half the world textiles before the end of the decade.

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Page 4 of 9 SKYLINE UNIVERSITY COLLEGE B B A WEEKDAYS Read the above case on Long-Run Adjustment in the U.S. Cotton Textile Industry to answer the following question: Why U.S. Cotton Textile Industry was considered to a perfectly competitive market? Analyse based on the above case. Question 4 ( Applied knowledge and strategic intelligence - 10 Marks) a) Explain what are the factors that are impacting the demand and supply of used cars in the UAE and Middle East car market. b) Analyse the strategies adopted by UAE and the Middle East to Promote used car market? Read the following study about used cars market in UAE to answer question 4. UAE Used Car Market Size & Share Analysis - Growth Trends & Forecasts (2023 - 2028) The Used Car Market in UAE is segmented by Vehicle Type (Hatchback, Sedan, and Sports Utility Vehicle (SUV) and Multi-Purpose Vehicles (MPVs)), Fuel Type (Gasoline, Diesel, and Others), Booking type (Online and Offline), and Vendor type (Organized and Unorganized). The report offers market size and forecast for Vietnam Used Car market in Value (USD billion) for all the above segments. UAE Used Car Market Size Study Period 2018 - 2028 Base Year For Estimation 2022 Forecast Data Period 2023 - 2028 Historical Data Period 2018 - 2021 CAGR 11.00 % Market Concentration Medium UAE Used Car Market Analysis The United Arab Emirates Used Car Market was valued at USD 20.03 billion in 2021 and is expected to reach USD 32.07 billion by 2027 registering a CAGR of around 11% during the forecast period (2022 - 2027). The COVID-19 pandemic had a moderate impact on the market as initial lockdowns in 2020 resulted in a slowdown in demand, however with ease in restrictions in 2021 consumers were encouraged to prefer used cars over new cars in the wake of the pandemic coupled with fewer vehicle production due to supply chain disruptions and shortage of some auto components. Over the medium term, factors such as the quality of used cars, the large number of expatriates, and demand for new and luxury cars are expected to stand as primary driving factors of the market. However, price discrepancies, lack of standardization, and others are expected to act as major restraints to the growth of the market.

Page 5 of 9 SKYLINE UNIVERSITY COLLEGE B B A WEEKDAYS Despite such challenges, growing passion for cars, especially in demand by youth in the country encouraged several global used car dealers and local certified car dealers to enter the market. In addition, the growing expat population in the country and the active online sales of used cars in the wake of the latest technologies enabled online tools to ease the entire process, such trends to further enhance the growth of market during the forecast period. For instance, As of July 2021, it is estimated that expat population in UAE constitutes 88.6% of the overall population. Mostly expats in UAE are living for a specific duration of time till their employment contract expires. Due to this nature, these expats prefer buying a pre-owned vehicle rather than spending huge sum of money in buying a brand-new car which has resulted in increased demand of used cars over the years. Dubai, Sharjah, Abu Dhabi, and others are expected to play key roles in the development of UAE’s used car market in coming years as these prov inces accommodate a large number of expats and high population who are mostly inclined to buy used cars due to the viability of easily available used car financing and loans. UAE Used Car Market Trends This section covers the major market trends shaping the UAE Used Car Market according to our research experts: SUVs and Sedans Expected to Hold Significant Share in the Market The SUV segment is the leading segment in terms of value concerning the market size owing to its added perks of being a family car with off-road capabilities and a spacious cabin. SUVs have become increasingly popular among UAE used car buyers in recent years. Consumers are always interested in looking at the current SUV models on the market, while dealers compete to offer new SUVs for this growing market. The SUV trend in the youth may be the driving force for the SUV segment among domestic buyers. In this situation, the existence of SUVs with luxurious and sporty looks generally cater to the higher class while providing a reasonable level of comfort. SUVs offer greater deals to customers who have these concerns. Even for a low budget, there is a low-cost SUV that nonetheless gives the image of a robust and latest vehicle. This SUV sector is a good value for money in the middle-class economy. The most popular models in the SUV section include the Toyota Land Cruiser and the high-end Mercedes Benz S-Class, famous for its superior comfort, style, innovation, and general luxurious appeal. Although there has been mounting interest in spacious, luxurious cars, price-conscious purchasers are equally interested in easy-to-maintain, affordable sedan models like the Toyota Camry, which is known for its resale value and fuel prices. In wake of such developments and instances it is expected that large number of operational and marketing changes to happen in the market as the companies are becoming more customers centric indicating optimistic growth of SUVs segment of the UAE used car market.

Page 6 of 9 SKYLINE UNIVERSITY COLLEGE B B A WEEKDAYS To understand key trends, Download Sample Report Growing Online Penetration and Digital Platforms to Play Key role in the Market The United Arab Emirates has a significantly high penetration of internet users in the GCC region and this is primarily attributed to the availability of high-speed internet at an affordable price. In 2021, there were 9.94 million internet users in the United Arab Emirates in January 2022 and the internet penetration rate stood at 99.0 percent of the total population at the start of 2022. This has motivated players to shift their business model from offline shops to online business models to provide an easy and hassle-free experience to their customers. Many multi-brand and independent dealerships are expected to develop their online presence in order to participate in the online used vehicle market. Some dealerships are investing in their own websites and Instagram pages in addition to advertising used car inventory on internet marketplaces. For example, Companies like AL-FUTTAIM UAE, ALBA CARS UAE, AUTO DEALS UAE, cars 24 UAE, and others are some of the active online used car dealers. Further, used vehicle platforms are likely to focus on establishing a transactional marketplace to enable 100 percent online end-to-end transactions without having to visit showrooms from the comfort of their homes. Also, COVID-19 has further aided the used car market owing to lockdowns and restricted movement which made most dealers rely on internet enquiries and bookings, to boost sales. Virtual tours and remote inspections are being made available through online portals, and home delivery services are being offered by enterprises, including OEM certified/authorized dealerships. Thus, in wake of such developments, several online platforms are expanding their presence in the region to increase their market share and revenues. For instance, • In February 2022, Cars24 a renowned online platform has recently launched AI-enabled software in the U.AE. allowing vehicle enthusiasts to purchase and sell cars within 30 minutes of downloading the program. Customers can also calculate their monthly EMI and track other characteristics like engine, steering, and tires. It is one of the most advanced platforms for consumers to obtain car financing, insurance, maintenance, and other important services.

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Page 7 of 9 SKYLINE UNIVERSITY COLLEGE B B A WEEKDAYS • In November 2021, Dubai-based SellAnyCar.com is set to invest USD 122 million in the region to expand its consumer sector, with the launch of Carnab.com. SellAnyCar.com, a also raised USD 35 million in fresh funds from Sanabil Investments which is a wholly- owned subsidia ry of Saudi’s Public Investment Fund, Kuwait -based Gulf Investment Corp. and Riyadh-based Olayan Financing Co, the startup. Apart from expansion, SellAnyCar.com will use the funds to expand its product line which would also include the launch of BuyAnyCar.com to allow consumers to sell to consumers in the UAE. Such developments expected to improve online segment of the market during the forecast period and poised to create positive outlook for the market. UAE Used Car Industry Overview The UAE Used Car market is considered to be moderately fragmented, accommodating several leading players like Al Tayer Group, Al-Naboodah, Al-Futtaim group, SellAnyCar.com, Car switch, Yalla Motors, and other prominent players. While several key offline used car dealers are focused on adopting expansion strategies like collaborative agreements, mergers, acquisitions, etc. other new entrants are also encouraged to explore the market and are actively focused on fleet expansion, varied offerings, etc. • In May 2021, CARS24 has begun operations in the United Arab Emirates . Cars on the CARS24 platform undergo a 150+ point quality check, are refurbished thoroughly, and go through the stringent RTA test before they go on sale. Every CARS24 car comes with a 7 days return policy and 2 years warranty. • In November 2021, Al-Futtaim announced that set to introduce battery electric vehicles from the start of 2022 as the company drives forward its pioneering approach to sustainable transport as part of its fleet expansion strategy. UAE Used Car Market Leaders

Page 8 of 9 SKYLINE UNIVERSITY COLLEGE B B A WEEKDAYS 1. Arabian Automobiles Co LLC 2. Yalla Motor.com 3. Alfuttaim Group 4. AlNabooda Automobiles 5. AlTayer Motors *Disclaimer: Major Players sorted in no particular order UAE Used Car Market • In February 2022, Cars24, an online platform for pre-owned vehicles, announced that the company's newly opened mega refurbishment lab (MRL) in UAE would roll out close to over 20,000 cars in a year. Through its next-generation, e-commerce platform for used cars and its new MRL, the company aims to continue its expansion plans in the region. Since the launch of its operations in the UAE in May 2021, CARS24 has sold close to 3,500 plus cars and 100 percent of these transactions were conducted online. • In February 2022, Al-Futtaim Trading Enterprises, the official distributor of Honda in the UAE, launched its certified approved pre-owned program, providing customers the opportunity to purchase a pre-owned Honda with the same brand guarantee and high- quality service pledge as a brand-new Honda. With these appealing service plans, flexible in-house finance solutions, and competitive trade-in offers the approved pre-owned program offers appealing deals for aspiring Honda customers. • In November 2021, Al-Futtaim Automotive opened the largest pre-owned car showroom in the UAE at Dubai Investment Park. The second branch in the emirate of Dubai, Al- Futtaim Automall DIP is a one-stop shop for those who are looking to buy and sell pre- owned cars from all brands and manufacturers. UAE Used Car Industry Segmentation A Used Car, a pre-owned vehicle, or a secondhand car , is a vehicle that has previously had one or more retail owners. Used cars are sold through various outlets, including franchise and independent car dealers, rental car companies, buy here pay here dealerships, leasing offices, auctions, and private party sales. The scope of the report covers details on the latest technologies, trends, and developments in the market. The United Arab Emirates Used Car Market is segmented by Vehicle type, Fuel type, Booking type, and Vendor type. By Booking type, the market is segmented into Hatchback, Sedan, and Sports Utility Vehicle (SUV) and Multi-Purpose Vehicles (MPVs)). By Fuel Type, the market is segmented into Gasoline, Diesel, and Others. By Booking type, the market is segmented into Online and Offline. By Vendor type, the market is segmented into Organized and Unorganized. For each segment, market sizing and forecast have been done on basis of a value (USD billion). By Vehicle Type Hatchbacks Sedans

Page 9 of 9 SKYLINE UNIVERSITY COLLEGE B B A WEEKDAYS Sports Utility Vehicles (SUV) and Multi-Purpose Vehicles (MPVs) By Vendor Type Organized Unorganized By Booking Type Online Offline By Fuel Type Petrol Diesel Others Source: https://www.mordorintelligence.com/industry-reports/united-arab-emirates-used-car- market UAE Automotive Aftermarket Service Industry Outlook to 2026 Shashwat Bharadwaj Shashwat Bharadwaj (SEO)Search Engine Optimization | B.com(hons) | Tally Prime| HIRISE | TCS ION Career edge certification | Accountant in HONDA | Digital Marketing | Published May 24, 2023 + Follow Driving Towards a booming Future: UAE Automotive Aftermarket Projected to Skyrocket at 7% CAGR by 2025 Amid Rising number of Cars on the road: Ken Research The number of automobiles in UAE has substantially grown with the introduction of electric vehicles. • The aspiration of reaching climate goals will further accelerate the market for oil- alternative transportation. • The Middle-East electric vehicle market was valued at USD 35 million in 2020. Apart from the traditional automotive aftermarket, the UAE is also witnessing the emergence of new technologies and services, such as electric vehicle (EV) charging stations, connected car services, and online marketplaces for automotive parts and accessories. These trends are expected to shape the future of the UAE automotive aftermarket, as the market moves towards a more connected, sustainable, and digital ecosystem.

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Assignment ECO2001 Microeconomics - Fall 2023

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