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OPEN UNIVERSITY of MAURITIUS MBA – SEMESTER 1 Module Name: Economic Environment of Business Lecturer’s Name: Mr Somanun Seegolam INSTRUCTIONS TO STUDENTS- READ PROPERLY THE MODE OF SUBMISSION Your assignment will be marked on a total of 30 marks. Answer all 3 questions. Submission date: 14th Oct 2020 Please note that any assignment submitted after the deadline, marks will be deducted as per assignment submission procedure document. Word limit: 4500 – 6000 words Format: Please follow the guidelines in the document “Guide to writing assignments” available on Moodle. You are required to conform to Harvard referencing style. Plagiarism will be heavily penalised and may result to non-award of marks. Please include a bibliography at the end of your document. Mode of submission: Please submit 1 soft copy directly to your respective tutor’s email address (
[email protected]) and always send a soft copy on:
[email protected]. Please ensure that you fill in the assignment cover sheet and attach it to your assignment. In case the assignment is received after the due date, marks will be deducted as per OU policy. The onus is on learner to ensure that the assignment reaches before/on the due date. The current penalty is 2% per day (weekends and public holidays included) for any assignment received after the due date which the tutor will deduct from the final mark. POINTS TO REMEMBER WHEN SUBMITTING YOUR ASSIGNMENT: All assignments submitted should include the assignment cover sheet (available at Moodle) The Open University of Mauritius will not hold itself responsible or liable for the non-award of marks if you fail to submit the assignment as per the required mode of submission. Assignments questions: ANSWER ALL QUESTIONS Q1. OPEC AND THE PRICE OF OIL On the basis of extracts A to E, answer the following questions: (a) To what extent, if at all, do the data suggest that the reliance on fossil fuels to produce energy is falling? You must use the data in Extract C to support your assessment.[6] (b) Explain how a sustained low world market price for oil would be likely to affect the economic development of a less economically developed oil-producing country such as Nigeria or Venezuela.[9] (c) After considering the above extracts, would you recommend to the members of OPEC that they continue to restrict the supply of oil to try to raise the world market price of oil? Justify your recommendations.[10] (d) Analyse the factors which are likely to determine the success of cartels like OPEC in controlling price and output of a commodity.[6] (e) Using Figure 3 and Figure 4 from the above extracts, analyse the relationship between the price of coal and the price of oil, and how you would account for this relationship.[5] (f) Using Figure 2, analyse the likely reasons why the cost of producing oil differ between countries.[4] TOTAL: 40 MARKS Q2. (a) Suppose you are a stock market analyst specialising in the stocks of theme parks, and you are examining Disneyland’s stocks. The Wall Street Journal reports that tourism has slowed down in the United States. At Six Flags Magic Mountain in Valencia, California, a new Viper roller coaster is now operating and another new ride, Psyclone, will be opening this year. Using demand and supply analysis, predict the impact of these events on ticket prices and attendance at Disneyland. As reported in The Wall Street Journal, Disneyland slashed ticket prices and admitted that attendance was somewhat lower. Is this consistent with your prediction using demand and supply analysis? In light of the fact that both price and output were falling at Disneyland, is the law of demand being violated in the world of fantasy?[15] (b) John Smith previously earned £ 10,000 a year in employment and had £ 100,000 invested in government securities, yielding 10% per annum. He sold his securities for £ 100,000 and started his own business. Initially, he rented a factory for £ 5000 per annum, but subsequently purchased it for £ 20,000, leaving £ 80,000 as the financial capital within the firm. John Smith’s accountants estimate that total revenue of the firm in the past year was £ 100,000 and total costs were £ 80,000, including a salary of £ 5000 paid to John Smith. Estimate the profit of this firm from the viewpoint of (i) The accountant (ii) The economist, explaining clearly the reason for any difference.[15] Q3 (a) What are the likely differences between a monopoly market and a monopolistic competition market, and how do firms reach equilibrium in such market situations in the long run?[15] (b) Differentiate between monetary policy, fiscal policy and supply side policies. In the light of the COVID-19 pandemic, analyse the effectiveness of the major monetary, fiscal and supply-side measures that are being adopted by the authorities to minimise the economic impact of the pandemic.[15] Note: The assignment is on a total of 100 marks which will be pro-rated to 30 for final assessment. 5