Based on international sources, the Research Department is comfortable in working with the following scenarios on the future development of average income in Atollia, the inflation rate development and tariff rates on imports from Industria:

- Income growth: 1% increase or 3% increase or 5% increase or 7% increase

- Inflation rate development: 2% increase or 3% increase or 4% increase or 5% increase

- Tariffs on imports from Industria: 7.5% or 10% or 5% or free trade

Note: These developments are not necessarily matched to each other in the sequence shown above; meaning that we do not know if the 1% increase in income is associated with a 2% increase in inflation rate and a 7.5% tariff rate.

Your task: Your task is to write a report addressed to the Board of Directors of Schmeckt Gut in which you address the following:

- Do you think you can match the different projections? That is, do you think that a 5% increase in income is associated with a 10% tariff rate and a 2% inflation rate? Explain by linking your discussion to the following concepts:

• supply and demand
• aggregated demand and
• aggregated supply o the Philipps Curve, and o
• the Laffer curve.