MLF1002 Economics Assignment
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MLF1002
Economics Assignment – 30%
Part 1 - 20%
Case Study: Crocs
Speaking about Crocs’ collaboration with KFC, Crocs’ global chief marketing officer Terence Reillysaid this: “we launched a campaign that was focused on making the classic silhouette an iconic symbol. Because we know it’s always been a polarizing brand. But remember, when you're polarizing, there's one side of the polarization that loves you.” Instead of catering to everyone, Crocs knows it has a dedicated audience willing to come back for more. "Our goal is not to make the haters love the brand,"saysAndrew Rees, Crocs’ CEO. "It's to exploit that extrinsic tension because it creates opportunity, it creates PR, it creates media, it creates interest. It creates a whole lot that would cost you a fortune to buy in other ways."
https://www.indigo9digital.com/blog/crocsmarketingstrategy
For an insight into Crocs’ history, strategies, and success, you may wish to read the following articles:
1. https://www.indigo9digital.com/blog/crocsmarketingstrategy
2. https://www.fastcompany.com/90669642/yes-were-ugly-but-were-one-of-a-kind-how-crocs-went-from- laughingstock-to-red-carpet
3. https://www.washingtonpost.com/business/2021/06/03/crocs-pandemic-surge/
4. https://www.theguardian.com/fashion/2021/sep/15/crocs-to-change-clogs-ingredients-to-be-bio-based-by- 2022
5. https://qz.com/2036832/crocs-are-now-mainstream-footwear-like-it-or-not/
a. Do some further research, in addition to the above articles, and elaborate on the following:
The Crocs’ strategies in its key footwear market segments as well as external factors that
were responsible for Crocs’ sustained growth while charging relatively high prices.
Demand curve and Price Elasticity of Demand (PED) of Crocs since 2020.
Evidence of some degree of ‘Creative Destruction’ (or Disruptive Innovation) by Crocs since its founding in 2002. [ Hint: Has Crocs influenced or shaped the footwear industry?]
[8 marks for quality of explanation. About 700-800 words]
b. Illustrate using an appropriate diagram [see sample below] where the Crocs online store in Australia [https://www.crocsaustralia.com.au/]sets the average price of a pair of Classic Clog
to maximise profit. And within that diagram, explain ‘Gains from trade’ and ‘Deadweight Loss’.
In addition to your Lecture Slides, you may wish to refer to CORE ESPP online textbook:
https://www.core-econ.org/espp/book/text/07.html - 76-gains-from-trade
In your diagram, assume at the profit-maximising point, the average price of the Classic Clog is $60, and the unit cost is $35.
Determine whether the PED is more elastic or inelastic
Use hypothetical values (rough guesses) relying on intuition for quantities sold (Q) per month
Once your diagram is complete (and properly labelled), explain ‘Gains from trade’ and ‘Deadweight Loss’ associated with your diagram.
[6 marks for diagram + 6 marks for quality of explanation = 12 marks]
Part 2 – 10%
Demand & Supply of Petrol in Australia
The global market price of crude oil (Brent grade) is highly volatile – from a 2021 low of
USD65/barrel to USD85/barrel in October:https://markets.businessinsider.com/commodities/oil- price
The average price of petrol in Australia has increased sharply since June 2021 - from $1.40/litre to
a high of $1.75 in Nov 2021:https://www.9news.com.au/national/petrol-prices-australia-why-is- it-so-expensive-right-now-explainer/b7f466db-731c-4dad-926e-744957335c3d
Conduct further research to answer the following questions:
a. Using a Price-Quantity diagram for petrol, draw a Demand Curve D1 and a Supply Curve S1 with the correct shape/angle at a given point in time this year. Briefly explain.
b. What likely happened to the Demand Curve D1 during the height of Covid- 19 pandemic in 2020? Briefly explain.
c. In the foreseeable future, what likely factors can cause the Demand Curve and Supply Curve for petrol to shift? Draw a diagram to reflect the change. Briefly explain.
[About 400 words for Part 2] [4 marks for diagrams + 6 marks for quality of explanation = 10 marks]
Referencing Requirements for both Part 1 and 2
Chicago 17th B Author- Date Referencing Guide to acknowledge your sources of information (both in-text
and as a reference list at the end).
Marking Criteria & Feedback (RUBRIC)
2021-12-31