Practice Cases Econ 605 PDF

Inflation – Impact on the Nation – Case of Venezuela – The crisis of Hyper Inflation Professor Sen was as usual sitting in his armchair, reading intensely the Newspaper and verifying through some texts. Also, time to time he was checking through his computer. Kumar and his classmates who entered th...

Inflation – Impact on the Nation – Case of Venezuela – The crisis of Hyper Inflation Professor Sen was as usual sitting in his armchair, reading intensely the Newspaper and verifying through some texts. Also, time to time he was checking through his computer. Kumar and his classmates who entered the room then was waiting for him to turn to him and did not disturb him. This is not unusual, that, the Professor whenever he go through the any reading, he gets immersed and, in another world, not even bothered look into the surroundings. Professor Sen turned his head and noticed Kumar, Ah, when did you come. Just now sir said Kumar with a smile. Don’t lie to me, I know I must not have noticed you. Let me tell you what I was reading - On December, 2016, Venezuela, once Latin America’s richest country, entered the record book of historical events in the economic history of the world to have experienced hyper-inflation. Its central bank reported the highest-on-record inflation of 180 per cent and 240 per cent in 2015 and 2016 respectively. The country was facing the world’s worst ever economic disaster. The citizens were suffering from food shortages, hunger, death due to lack of medicines, and escalating homicide rates, which were turning the nation into the second most violent country in the world outside of open war. There was no sign of improvement in the year 2017 either; in fact, it was worse than 2016. The The Government responded by issuing currency controls. It set a fixed exchange rate, to stop the official value of the Bolívar dropping against the US Dollar and made it difficult to get permission to exchange Bolívar’s into US Dollars. The idea was to stabilize the currency by effectively shutting down all currency transactions. However, US dollars were still available on the black market. As the crisis deepened, more and more Venezuelans looked to switch their Bolívar’s into US Dollars. This increasing demand meant the black market price for the currency rose, creating a difference between the official exchange rate (set by the Government) and the unofficial going rate. This pushed the price of US Dollars up, and that of Bolívar’s down, even more. As the crisis deepened, increasing numbers of ordinary Venezuelans began to engage in the unofficial currency market. This also took the form of taking subsidized Venezuelan goods like food across the border to sell. This earned the sellers’ foreign currency, but it also exacerbated shortages of goods within the country, driving prices up even further. Venezuela’s hyperinflation rate increased enormously since 2018. The economic situation remained dire. According to economists, the measures to solve the crisis included managing subsidies, higher taxes, ending price controls and Government subsidies, lower Government spending to reduce budget deficits, devaluing the currency, and boosting foreign exchange Going by the case-let, I. What are the lessons that we can learn from the Venezuela Crisis? II. Do you think the impact of Inflation is generally as serious as in the case of Venezuela? Sam Maneckshaw’s Tryst with Price Discrimination On September 5th, 2022, Sam Maneckshaw (Sam) an employee at one of the leading Indian IT companies visited Madonna Diagnostic Center (MDC) in Mangalore to undertake various medical tests that his Consultant Physician had recommended the previous week. After filling up the required details in the form given to him, he paid ₹2000 for all the tests. He noticed people from various strata of the society walk into the diagnostic center for taking various diagnostic tests. Sam observed that the same services were charged differently for people from different income levels. Also, the charges were lower if the tests were recommended by a doctor from an affiliated hospital. He was perplexed why was there price discrimination for the same service/services from the same service provider. Sam and Tina’s Differential Pricing Experience Sam had relocated to Mangalore from Gurugram in April 2015. He had joined at a senior position in an IT services firm. Sam had a very hectic lifestyle as he worked until late night almost daily and travelled frequently. While Sam enjoyed his work, his wife Tina Maneckshaw (Tina) was quite worried about his health. She had been pestering him to go for a regular health checkup since the time he had turned 40 in June 2020, but Sam could not spare time to visit the doctor. However, upon Tina’s Healthcare Prices for the Poor Tina: I am happy you finally visited the doctor and registered for complete healthcare checkup tests. Moreover, we are able to get all the tests done at just ₹ 2000. Infact I was thinking about the poor people for whom even ₹ 2000 would be a very big amount. And here we, the upper middle class are spending just ₹ 2000 for preventive healthcare checkup. The poor will most certainly not take these tests. They will be visiting the doctor only when they encounter some health problems. Sam : This is a live demonstration of Price-discrimination, Dear. Don’t you remember our Professor at the Managerial Economics class talking about it? Questions I. What do you understand by price discrimination? II. What are the advantages and disadvantages of price discrimination? III. Who would all benefit under price discrimination? Anita’s First Three Months at BEEPL: Elasticity Experiences? Anita Chauhan (Anita) was an ambitious girl from a remote village, 15 kilometers from Gorakhpur, in Uttar Pradesh. Anita’s village was sparsely populated and was underdeveloped. For instance, it was not connected by a pucca road, lacked electricity and had just one primary school. Anita completed her schooling from Gorakhpur and graduation (engineering) from Lucknow. Thereafter, she pursued her MBA from the New Delhi Management College (NDMC). In the fourth semester of her MBA, Anita was placed as a management trainee in the corporate office of Blue Earth Engineering Products Ltd. (BEEPL), located in Udyog Vihar, Sector-18, Gurgaon. BEEPL being one of the leading engineering and manufacturing companies of India, it was a dream company for Anita. She was one of the five students who were offered final placement by the engineering giant. The job profile too was exciting with equally encouraging pay package. The first three months of her work life reminded her of what her Economics Professor had taught in the elasticity session of Managerial Economics course. Residence Selection The fourth semester exams were over in May 2014 and the students still had around 3 months’ time on hand before they could start working. BEEPL had conveyed to the students that the joining date would be in the end of August 2014 or beginning of September 2014, and they would be informed about the exact joining date over e-mail, sometime in August 2014. Of the five students who were offered campus placement by BEEPL, Aakash and Surendra were New Job, New Clothes and Online Fashion Apparel Retailer Although Anita had settled for an expensive PG accommodation for ₹18,000, she was happy in her newfound residence. At the end of 1st week at work, Anita was looking forward to spending the weekend with friends at her room. On Saturday (September 6th, 2014) morning, as she picked up the day’s newspaper, she saw a full page advertisement by one of the leading online lifestyle stores announcing flat 50% off on most of the apparel and footwear labels from 9:00 am to 3:00 pm on Sunday. First Salary and First Signs of Brand Preferences The first month at work was very exciting for Anita, Meera and Sonal. Not only were they learning the ways of professional life, they also got a chance to participate in several events. On one such occasion, tickets were offered to BEEPL employees for a rock concert being held in Gurgaon. Each ticket was available at a subsidized rate of ₹1,500. However, Anita, Meera and Sonal decided not to go for the concert as they found the tickets to be expensive and they had not even received their first salary. Travel Travails and the Honda Activa To travel to office each day, the girls walked up to the main road, where they could hire shared auto rickshaws which plied till the office campus. Similarly, to go back home in the evening, the girls followed the same routine. They paid ₹25 for each trip (per head). Questions I. Explain Anita’s residence selection and shopping for fashion apparel online with the help of concept and types of price elasticity of demand. II. Anita’s first salary undoubtedly changed her brand preferences. How do you categorize the