Assignment 1 – Demand Estimation for UAE
Managerial Economics
Historically UAE has trade links with most of the countries along the silk route. It has natural advantage of being positioned as a hub for international trade between Asia and Europe on an east-west axis and the CIS and Africa on north– south axis due to its strategic geographical location. Around the 6th century, when Islam was emerging as major religion and establishing Arab culture in the world, Arab merchants sailed long distances all around the sea routes in traditional wooden dhows trading spices along the Silk Route. At that time the major trading route emerged from China and ran through to the Mediterranean Sea.As early as 3000 BC, the UAE was rich in natural resources and traded copper with countries such as Persia and Mesopotamia.
The discovery of oil in 1962 became a landmark in its economic history and the country has emerged as an important player in the world economy byexporting oilto the world economies.The country was importing food, technology, medicines and other vital products required for their growth and development. The table below provides the data on various factors which affect demand in the country for the products mentioned. You are required to forecast the demand for each of the products mentioned in the table taking the variable that impact the demand. Predict the demand for the cocoa, coffee and meat products for the years 2019, 21 and 22 given the population, Gross per capita income, Gross domestic product, inflation rate and the time period in years. After forecasting suggest which of the variable are significant for each of the products coco, coffee and meat products.
Table 1:UAE economy and trade 2007 to 2017
Years
Population in millions
GDP
Billion $
GPI
Inflation rate
Coco products value in $
Coffee products
Value in $
Meat products
Value in $
2007
6.05
257.92
40,400
11.1
183,429
475,224
736020
2008
6.89
315.47
41,040
12.3
228,458
659,549
1084212
2009
7.67
253.55
36,140
1.6
245,328
702,665
1162341
2010
8.27
289.79
36,160
0.9
285,557
785,321
1269872
2011
8.67
350.67
40,310
0.9
312,265
843,285
1358791
2012
8.9
374.59
43,920
0.7
386,669
966,425
1498701
2013
9.03
390.11
45,070
1.1
441,248
1069004
1604824
2014
9.3
403.14
43,360
2.3
545,746
1158764
1614089
2015
9.58
358.14
40,000
4.6
499,369
969987
1663314
2016
9.86
357.04
39,320
1.6
516,862
855049
1626971
2017
10.14
374.41
38,750
2.0
559,939
734497
1705968
2018
10.43
395.0
39,250
0.66
2019
10.75
409.75
41,000
1.1
2020
11.08
438.21
41,700
2.35
2021
11.42
459.32
42,325
4.07
2022
11.77
468.22
43,000
1.62
One of the major sectors in UAE is construction industry. It is a thriving industry and provides adequate boost to the economy. The need for housing, warehouses and commercial buildings is eve growing due to its growth in GDP, increasing population especially the expatriate population. The table below provides information on the demand and supply of houses in number of units per month and its relevant rental prices.
Table 2: Demand and Supply of Housing Units in UAE
Monthly rentals per month in AED
Quantity of number of housing units demanded per month
Quantity houses supplied number of units per month
1200
125,325
55,326
1400
120,121
63,247
1600
110,150
72,254
1800
90,000
75,253
2000
86,253
82,354
2200
73,369
90,211
2400
63,000
97,251
2600
54,235
102,311
3000
47,333
110,321
Identify the equilibrium point of the demand and supply of housing units in UAE. Calculate the demand and supply equation and find out the demand and supply situation at rental values at 2300 and 2700 respectively. At these two rental values what will be the market condition surplus or shortage and what decision will the builders take with regard to prices. Comment on what would be the scenario with respect to new builders entering or exiting the construction market.Using the information in the table find out the price elasticity on demand and supply. Comment on the variations in the total revenue if the rentals increase from 3000 to 4000.
The construction company aiming to promote the sales of housing units is considering advertising in different promotional activities during the meeting the Director marketing has suggested the team of marketing team to conduct a quick survey of the media their costs and asked them to submit a report on their findings and suggest the most appropriate and effective media. While closing the meeting he said that they have one million AED as their budget for achieving their targeted sales. From the details the report given below you suggest which mix of media is the most suitable. The prices of each of event, the road show event cost is 25000 AED, the price of sponsorship of events is 15000 AED, Hoardings- 20000 AED.
Number of media mix
Road show spot registrations – sales of housing units
Sponsorship of events – generate sales of housing units
Hoardings – generate sales of housing units
5
10,000
5,000
7,000
10
12,000
7,000
9,300
15
16,400
10,000
10,000
20
18,000
12,000
12,000
25
20,000
15,000
15,000
30
25,000
20,000
16,000
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