Backgroundinformation+TaskDescription

A mobile food van is known for its takeaway menu featuring local produce.The amount of produce harvestedvarieseachyear.There canbegoodyears,averageyearsandbadyears.Inaverageyears, themobilefoodvanoperatorisabletosourceareliableandstableamountofproduce.Ingoodyears, the operator obtains an above average amount of produce.This excess produce must be cleared as quickly as possible due to a lack of refrigeration space inside the van. In bad years, the van operator receives less produce than they normally do in average years.The van operator wants to maintain revenue to ensure ongoing employment of staff.To do so:

• Inbadyears,thevanoperator increasesthepriceofmeals.
• Ingoodyears,thevanoperatoriscontemplatingthe temporaryremovaloftheGSTcomponent from the price of meals to encourage clearance of excess produce.

Yourtaskistowriteareportwhichoutlinesthemobilefoodvan's revenue:

• Duringaverageyearswithnopricechanges
• Duringbadyearswitha$15 priceincreasepermeal;and
• Duringgoodyearswithtemporaryremovalof10%GST

Themobilefoodvan'ssupplyanddemandfunctionsarerepresentedbythefollowingequations:

• Demandequation:=24512
• Supplyequation: =0.000022²+ 5.5+44
• qisthenumberofcustomers(inhundredsperyear)
• pis thepriceof ameal indollars.
• aandbarecoefficientstobechosenasperStep1 below.

Stepsrequiredtocompletethe Analysis

Youmustdescribethestepsbelowinyourownwordsandthenpresentyourcalculations inthe same order as these steps:

1. Obtaintworandomnumbersforaandbbetween0.1and0.9inclusive(totwodecimalplaces). Use the Excel random function =Rand() or the RANDOM key on your calculator.
2. Findtheequilibriumpriceandquantityalgebraicallyforanaverageyear(withnopricechange).
3. Adjustthedemandequationfora$15priceincrease.
4. Usealgebratofindthenewequilibriumpriceandquantity.
5. AdjustthesupplyequationfortheremovalofGST.
6. Usealgebratofindthenewequilibriumpriceandquantity.

StepsrequiredtocompletetheResults

1. UseExceltoconstructtwographs,eachfeaturing3lines:
   • Graph1-OriginalSupplyEquation,OriginalDemandEquation+AdjustedDemandEquation for $15 Price Increase (from Steps 2, 3 and 4).
   • Graph2-OriginalSupplyEquation,AdjustedSupplyLineforGSTRemoval+OriginalDemand Equation (from Steps 5 and 6).

1. Useyourresultstocompletethefollowingsummarytables.Roundanswerstotwodecimalplaces.

COMPARINGAVERAGE+BELOWAVERAGE YEARS	AverageYears	BelowAverageYears($15price increase)
Equilibriumquantity
Equilibriumpricevanwouldchargewithoutany price change	LEAVEBLANK
Equilibriumpriceconsumerpays
Revenuevanreceiveswithoutanypricechange
Revenuevanreceiveswiththepricechange	LEAVEBLANK

COMPARINGAVERAGE+ABOVEAVERAGE YEARS	AverageYears(before GST removal)	AboveAverageYears (with GST removal)	Difference
Equilibriumquantity
Equilibriumprice
PercentageofGSTsavingpassedontocustomers
Revenuevanreceives
RevenuevanreceivesifALLofGSTsavingwere tobepassedon	LEAVEBLANK

Forthe Discussion

• Discuss the effect of each price change on equilibrium price, the price the consumer pays,quantity and revenue.
• Commentonhowmuchofeachpricechangeisactuallypassedontoconsumersandwhether the price changes are too small, too large or just right.