Economic Policies and Practices The policies of the federal government influence the outcomes of the various activities in that economy.  When government policies change or unplanned events occur, the resulting economic events or activity will usually change.  Listed below are several policies or events that affect the performance of the economy: 1. The federal government employs a budget plan over several fiscal years that results in significant increases in the national debt, with no relief or plans to deal with the problem. 2. The federal government enacts new tariffs and quotas on all imports. 3. The general public loses confidence in their leadership, in terms of their ability to manage the economy, especially in the area of job creation. 4. The federal government, in an effort to stimulate the economy, decreases taxes on all individuals except those earning over $250,000 per year. 5. The level of investment decreases because of a lack of confidence in the economy. 6. Interest rates are kept artificially low by the Federal Reserve for several years. Required: For each of the items above, describe what would be the likely outcomes in the economy.  Use the appropriate tools of analysis, such as aggregate demand and aggregate supply where appropriate, to justify and explain your answer. Deliverables: 1. Submit an 3-6 page paper in Microsoft Word format 2. Create a Microsoft PowerPoint presentation of 5-10 slides that summarizes your findings in your report. Business Proposal Feedback Checklist ECO/561 Version 8 2 University of Phoenix Material Business Proposal Feedback Checklist Important information Included? Comments Identification of market structure FORMCHECKBOX FORMCHECKBOX Yes No Market structure stated as Oligopoly. It is characterized as having a few firms in the market. Assumptions regarding market structure and elasticity FORMCHECKBOX FORMCHECKBOX Yes No To what degree do you agree or disagree with the items below? SD=Strongly Disagree D=Disagree N=Neutral A=Agree SA=Strongly Agree Justification included? Comments Chosen method to increase revenue FORMCHECKBOX FORMCHECKBOX FORMCHECKBOX FORMCHECKBOX FORMCHECKBOX SD D N A SA FORMCHECKBOX FORMCHECKBOX Yes No Mr. Kern suggested that he would lower his margin rate to match those of his competitor. This is a suggested maximize on profit as depicted in the video on market structures. Chosen methods to determine profit-maximizing quantity FORMCHECKBOX FORMCHECKBOX FORMCHECKBOX FORMCHECKBOX FORMCHECKBOX SD D N A SA FORMCHECKBOX FORMCHECKBOX Yes No To determine profit, Mr. Kern has decided to take advantage of the premium pricing for the first 2 years of introducing the new products. Use of concepts of marginal cost and marginal revenue to maximize profit FORMCHECKBOX FORMCHECKBOX FORMCHECKBOX FORMCHECKBOX FORMC ...

1. Economic Policies and Practices
The policies of the federal government influence the outcomes
of the various activities in that economy. When government
policies change or unplanned events occur, the resulting
economic events or activity will usually change. Listed below
are several policies or events that affect the performance of the
economy:
1. The federal government employs a budget plan over several
fiscal years that results in significant increases in the national
debt, with no relief or plans to deal with the problem.
2. The federal government enacts new tariffs and quotas on all
imports.
3. The general public loses confidence in their leadership, in
terms of their ability to manage the economy, especially in the
area of job creation.
4. The federal government, in an effort to stimulate the
economy, decreases taxes on all individuals except those
earning over $250,000 per year.
5. The level of investment decreases because of a lack of
confidence in the economy.
6. Interest rates are kept artificially low by the Federal Reserve
for several years.
Required:
For each of the items above, describe what would be the likely
outcomes in the economy. Use the appropriate tools of
analysis, such as aggregate demand and aggregate supply where
appropriate, to justify and explain your answer.
Deliverables:
1. Submit an 3-6 page paper in Microsoft Word format
2. Create a Microsoft PowerPoint presentation of 5-10 slides
that summarizes your findings in your report.

2. Business Proposal Feedback Checklist
ECO/561 Version 8
2
University of Phoenix Material
Business Proposal Feedback Checklist
Important information
Included?
Comments
Identification of market structure
FORMCHECKBOX
FORMCHECKBOX
Yes No
Market structure stated as Oligopoly. It is characterized as
having a few firms in the market.
Assumptions regarding market structure and elasticity
FORMCHECKBOX
FORMCHECKBOX
Yes No
To what degree do you agree or disagree with the items below?
SD=Strongly Disagree
D=Disagree
N=Neutral
A=Agree
SA=Strongly Agree
Justification included?

3. Comments
Chosen method to increase revenue
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
SD D N A SA
FORMCHECKBOX
FORMCHECKBOX
Yes No
Mr. Kern suggested that he would lower his margin rate to
match those of his competitor. This is a suggested maximize on
profit as depicted in the video on market structures.
Chosen methods to determine profit-maximizing quantity
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
SD D N A SA
FORMCHECKBOX
FORMCHECKBOX
Yes No
To determine profit, Mr. Kern has decided to take advantage of
the premium pricing for the first 2 years of introducing the new
products.
Use of concepts of marginal cost and marginal revenue to
maximize profit
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX

4. FORMCHECKBOX
FORMCHECKBOX
SD D N A SA
FORMCHECKBOX
FORMCHECKBOX
Yes No
Mr. Kern provided in great deal the justification in marginal
cost and revenue.
Suggested mix of pricing and nonpricing strategies
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
SD D N A SA
FORMCHECKBOX
FORMCHECKBOX
Yes No
I have my opinion on the non-pricing strategy. I was under the
impression that non-pricing strategies were geared towards how
this particular product would be advertised. I know understand
that part of a non-pricing strategy is producing a product that is
tough for rivals to emulate. This product has will have a
foldable battery that will have a patent.
Selected barrier to entry
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
SD D N A SA

5. FORMCHECKBOX
FORMCHECKBOX
Yes No
Although Mr. Kern did not state this as a specific barrier to
entry, he did mention that he would patent his foldable battery.
A patent is a way to protect the inventor from rivals.
Chosen methods to increase product differentiation
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
SD D N A SA
FORMCHECKBOX
FORMCHECKBOX
Yes No
Mr. Kern’s way of product differentiation is through the use of
his products foldable battery. The paper could’ve expound
more on its features and benefits.
Chosen methods to minimize costs for the product
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
FORMCHECKBOX
SD D N A SA
FORMCHECKBOX
FORMCHECKBOX
Yes No
I did not notice a plan to minimize the cost of producing the
foldable batter in the smart phone.

6. Business Proposal Feedback Checklist
ECO/561 Version 8
2
University of Phoenix Material
Business Proposal Feedback Checklist
Important information
Included?
Comments
Identification of market structure
X |_|
Yes No
The author describes the market structure as oligopoly, where
there are many competitors among the market which compete
against each other.
Assumptions regarding market structure and elasticity
X |_|
Yes No
Both elasticity of demand and price are described within the
author's article. The author also provides data on how each
would be affected by pricing.
To what degree do you agree or disagree with the items below?
SD=Strongly Disagree
D=Disagree
N=Neutral
A=Agree
SA=Strongly Agree
Justification included?
Comments
Chosen method to increase revenue
|_| |_| X |_| |_|
SD D N A SA
X |_|

7. Yes No
The author describes the product as having a high price within
the inception years which will maximize profits with later
having competitors entering the market.
Chosen methods to determine profit-maximizing quantity
|_| |_| X |_| |_|
SD D N A SA
X |_|
Yes No
The author intends to put into play the premium pricing
strategy, allowing the product to be slightly higher than
competitor pricing but relying on customer loyalty to the
product.
Use of concepts of marginal cost and marginal revenue to
maximize profit
|_| |_| X |_| |_|
SD D N A SA
X |_|
Yes No
To maximize profit the author will try to match the pricing of
competitors by lowering the price and using "psychological
pricing", making the customer believe they are getting a better
deal.
Suggested mix of pricing and nonpricing strategies
|_| |_| X |_| |_|
SD D N A SA
X |_|
Yes No
Non-pricing strategies suggested, such as owning a scarce
resource in this case the author is designing a foldable battery
with the foldable smart phone, research and development,
allowing the author to find and work out all the kinks before his
competitors. The author also mentions customer loyalty to the
product.
Selected barrier to entry
|_| |_| X |_| |_|

8. SD D N A SA
X |_|
Yes No
The author states that he will patent his foldable battery making
it hard for competition to enter the market.
Chosen methods to increase product differentiation
|_| |_| X |_| |_|
SD D N A SA
X |_|
Yes No
The author describes a foldable smart phone, a foldable battery
which will have a patent, and customer loyalty.
Chosen methods to minimize costs for the product
|_| |_| X |_| |_|
SD D N A SA
X |_|
Yes No
The author describes research and development of the product,
along with automation, bulk purchasing, quantity discounts and
the utilization of resources.
Instructor Feedback on Proposal
You have not yet made a convincing case for excluding the US
market from the initial launch of the FOLDABLE SMART
PHONE based on the quote below. You need to explain clearly
how the data below leads to the conclusion that a new launch
should not include the US. I understand that many companies
are launching products outside of the US first, but that may
have to do with saturation of the market or regulations and
taxation. Revisit this area, where there are so many promised
product launches in 2015 "My choice of China and European
market is because of the comparatively higher purchasing power
of the individuals in these markets. Their consumer price index
is relatively attractive with United States having 76.97, Hong

9. Kong having 75.86 and China having 52.67. Categorically, these
markets have a hunger for new technology and advancements so
the foldable smartphone device will enable ease of handling and
create a substitute for tablets in the market, which are relatively
large in size." This is a REAL product idea since many product
prototypes are already on display and ready for launch next
year. You need to account for the competition explicitly
focusing on technical specifications, operating system (either
Open Handset Alliance Android, a variant of your own like
Amazon did with Kindle and Samsung is threatening to do with
Tizen, or Linux where Canonical has been planning to bring a
phone to market with Ubuntu or even Mozilla Corporation that
has a phone on the way. Make the entire proposal practical and
you will have a more realistic proposal without making it too
long You are very close to an investor-ready proposal Follow
the rubric above carefully when editing
Running Head: SMARTPHONE BUSINESS PROPOSAL
1
SMARTPHONE BUSINESS PROPOSAL
10
Smart Phone Business Proposal
ECO 561
Lawrence Kern
August 4th, 2014
Wawa Ngenge
Business Proposal of a new Foldable Smart Phone for the
Technology Industry
Market structure
The technology industry can be seen to be an olipolistic nature

10. whereby we have a handful of players in the market which
compete against each other. The companies in question include
Samsung, Apple and Black berry in the United States. With
Black berry having a market share of 33.7% and Samsung
following closely with 33.6%, as per 2013. Stiff competition
has been experienced in the recent past due to emergence of
superior technology, extensive research and developments,
creativity and innovations in the designs of the products, with
LG following closely at 8.6% of the market share.
Interesting statistic on the market size can be illustrated by data
obtained on the shipment of smartphones and mobile phones as
of 30th April 2014, whereby the shipment of mobile phones in
the world market was up by 3.9% totaling to 448.6 million units
whereas the smartphones were up by 28.6% making up a total of
281.5%.
Thus the growth of demand in the smartphone industry is
exponential and this creates a gap where my new product, a
foldable smartphone, is going to fit. The huge market share and
ever growing demand of the technological devices is what
makes the participation of the industry lucrative. This fact is
brought about by the growing economies in the third world
countries where the purchasing power and economic ability of
individuals has increased thus, creating a huge market which is
not fully tapped.
Comparing the two leading Smartphone developers (Samsung
and Apple) we can establish the continental market share as
follows; China 27%,Europe 17%, Emerging Asia 14%, Latin
America 14%, North America 13%, Rich Asia 9%, Middle East
3% and Africa 2%.
Target Market
The target market of my new foldable smartphone is China and

11. Europe; this is because the demand in these region are high. It
should be noted that the demand on smartphones is basically
based on the brand and brand functionality. The customers
based brand and functionality account for roughly 36% so
concentrating my target market will be directed there.
My choice of China and European market is because of the
comparatively higher purchasing power of the individuals in
these markets. Their consumer price index is relatively
attractive with United States having 76.97, Hong Kong having
75.86 and China having 52.67. Categorically, these markets
have a hunger for new technology and advancements so the
foldable smartphone device will enable ease of handling and
create a substitute for tablets in the market, which are relatively
large in size.
Elasticity of the Foldable Smartphone
Elasticity of Demand
Considering the following hypothetical data on the demand of
the foldable Smartphone and the price
% change in Quantity of Smartphone demanded
% change in price changes
8.5%
8%
14%
10%
8.0%
7%
18%
14%
Average 12.125%
Average 9.75%
The elasticity of demand is:

12. % change in quantity demanded
% change in price
= 12.125/9.75
=1.2435
This means that there would be a small change in the demanded
quantity that results from a price change. This is because the
demand on smartphones is brought about by brand functionality
rather than price wars. However; upon the entrance of other
competitors , a probable scenario in future would have various
companies offering foldable smartphones at their disposal.
These will result to price wars and the elasticity of demand
would proportionately increase to illustrate the same.
Elasticity of Supply
Similarly we will have the elasticity of supply as a function of
the quantity supplied versus the price change.
= % change in quantity supplied
% change in price
=15%/10%
1.5
The price elasticity of supply would be 1.5, this is considerably
higher since a positive increase in the price would result to an
increase in profit margin and therefore; the firm would
maximize the supplies. However due to the fact that the brand
switching in the smart phone industry is high, a little caution

13. will be exercised in order to prevent a scenario whereby we
overstock our products and therefore; we will need to review
our prices downwards.
Product pricing
The pricing of the Foldable Smartphone is going to be based on
the costs incurred and margin. The average cost price of the
foldable smartphone would be $ 270. I would recommend the
use of price skimming as my pricing strategy within the first
two years of business. The reason is that the price elasticity of
demand of the product is slightly above 1 and hence we can
comfortably dictate the pricing; this will mark the first phase of
business.
This strategy will ensure the prices of the Foldable smartphone
to be high as there would be no other competitor. The
introductory price would be high and enable the maximization
of profits out of it. Here we can put a profit margin of 50%
where every sale shall ensure a profit realization.
I approximate a yearly production of 900,000 units, at a cost
price of $270 per unit,
with an average production cost per unit of $270. The Foldable
smartphone shall be priced at $ 405 using a profit margin of
50%. At this point we shall not have any comparative measure
of elasticity since we will not have substitutes as the product
would be new to the market.
On the second phase, which will last 12 months, I will make use
of premium pricing strategy. This is because we would now
have competitors joining the market, various big players would
be struggling to win consumers and a price reduction to 35% of
margin will do. This price will be slightly higher than the
competitors’ price that will come up with penetration pricing
strategy. During this phase the unit price of the Foldable

14. smartphone would be $ 364.50. At this particular point we
expect to stabilize with the current customers as there would be
some form of brand loyalty established.
Substituting in the equation of elasticity of demand to obtain
the new quantity demanded;
1.2435 * 10% = 12.435%
1.12435 * 900,000
=1,011,915
The changes in the demand will result to a change in the
marginal cost.
The Marginal cost = 270 – 250
1011,915 – 900,000
=$ 0.0001787
The Marginal revenue that will result would be
MR = change in revenue/change in quantity sold
= (1011915*364.5 – 900,000* 405)/(1011915-900,000)
= $ 38.81
On the third phase which would be after the 12 months spell, I
shall employ a lower margin rate trying to match the lower
prices offered by the competitors at about 30% margin. A little
creativity employed would make use of psychological pricing
whereby instead of pricing it at $ 351 I would price it at $
350.99. With the price elasticity at about 1.2, we expect the
entry of more customers basically about 7.4%. This would help
us break even and maximize on profits.

15. Substituting in the equation to obtain the demanded quantity as
caused by the change in price, we have:
1.2435 * 13.33% = 16.58%
1.1658 * 900,000
= 1,049,220
The Marginal cost associated with the increased production will
be;
= 270 – 245
1049220-900,000
= $ 0.00016753
The Marginal Revenue associated with the same would be
Change in total revenue/change in units sold
(1049220 * 351 – 900,000 * 405)/(1049220-900,000)
=$ 25.306
Non pricing strategies
In order to increase my dominance in the Foldable smartphone
market, I will employ several non-pricing strategies such as:
· Owning a scarce resource - The development of a foldable
smartphone is basically hindered with the complex design of
having a foldable battery. Once I design my foldable battery to
be used in the product, I will patent it and open a new line of
production thus dictating the market price and hindering the
entry of new players because of associated high prices.

16. · High Research and Development costs - Extensive research
and development on the product will be key to the success of
the product. Subjecting the product to various tests will help to
oversee future problems and start addressing them prior to the
entry of our competitors.
· A strong brand - This would ensure customer loyalty, whereby
the customers would be associated with the product. It would be
easier for me to liaise with Samsung which has a high number
of consumers to produce the same in its line in order to easily
capture the customers relating to Samsung.
Ordering Cycle
Figure 1: Ordering Cycle Diagram
When we increase the quantity demanded by lowering the
selling price then our variable cost per unit will decrease. This
will be brought about by the economy of automation, bulk
purchasing, quantity discounts, and optimal utilization of
resources and economies of scale.
The fixed costs would be reduced significantly by the optimum
utilization of the resources as can be seen with the comparative
reduction of the fixed cost per unit product. Research and
development would enable the identification of cost effective
production techniques thus resulting in the reduction of variable
costs.
References
Kato, Y., Boer, G., and Chow, C., (1995). Target Costing: An
Integrative Management Process, Journal of Cost
Management, Spring, 39-51
McConnell, C. R., Brue, S. L., & Flynn, S. M. (2009).
Economics: Principles, problems, and policies (18th ed.).
Boston, MA: McGraw-Hill Irwin..
The Case of Ashford (Kent).” Industry Structure, Competition

17. and Investment. Universidad Carlos III de Madrid.
Ahlfeldt, G. M. and A. Feddersen. September 2014. “From
Periphery to Core: Economic Adjustments” (working paper).
The London School of Economics and Political Science and
University of Hamburg.