GSFM7223 Economics for Managers May 2025 Final Assessment

There are four question in this section. Answer all questions

QUESTION 1

For each scenario below, draw the demand and supply curves, clearly label the curves, and indicate the changes in equilibrium.

a) Recent medical studies published in international journals reveal that regular coffee consumption can significantly reduce stress and improve mental alertness. This finding goes viral on social media, leading to a nationwide surge in consumer interest in coffee. Coffee shops report an increase in customer numbers, and coffee bean suppliers see rising orders.
(3 Marks)

b) A civil war breaks out in one of the world’s top oil-producing countries, resulting in a sudden drop in its oil exports. This causes the global oil supply to contract. Local fuel distributors and transportation companies begin to feel the impact through rising import prices.
(3 Marks)

c) In response to food security concerns, the Malaysian government introduced a subsidy program that reduces the cost of fertilizer and machinery for rice farmers. This policy allows more farmers to increase production at lower costs, improving their output during harvest season.
(3 Marks)

d) Tech media reports confirm that a major smartphone manufacturer will launch a new generation of phones with significantly better features at a lower price in the next three months. As a result, consumers begin delaying their purchases in anticipation of the new release.
(3 Marks)

e) During an unusually prolonged heatwave, households rush to purchase air conditioners, increasing demand sharply. At the same time, a global shortage of semiconductor chips, a key component in air conditioners, limits the production capacity of manufacturers.
(3 Marks)

(Total: 15 Marks)

QUESTION 2

In November 2024, Donald Trump was re-elected as President of the United States. His administration swiftly reintroduced the “America First” doctrine, emphasizing trade protectionism, new tariff threats, and the potential withdrawal from multilateral agreements such as the World Trade Organization (WTO) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Global markets reacted with volatility as investors feared renewed trade wars and geopolitical instability.

Malaysia, as an export-oriented economy with more than 120% of its Gross Domestic Product (GDP) linked to global trade, faces considerable risks from these developments. Key Malaysian industries such as electronics, palm oil, and machinery manufacturing are heavily exposed to international markets and U.S. demand. Early warnings suggest U.S. tariff barriers could dampen Malaysian exports, reduce foreign direct investment (FDI), and create currency fluctuations due to capital flight and a stronger U.S. dollar.

In light of this uncertainty, Malaysian policymakers must act swiftly to cushion the domestic economy. With private sector confidence softening and household incomes under threat, there is a pressing need for a strategic combination of fiscal and monetary policy responses.

Sources:

• OECD (2024). Global Economic Outlook: Post-U.S. Election Scenarios.
• Bank Negara Malaysia. (2024). Quarterly Monetary Policy Report: Q2 2024.
• Abdullah, A. H., & Lee, C. M. (2025). Global political shocks and policy responses in small open economies. Asian Economic Review, 21(1), 33–51.

Based on the statement above:

Discuss how the Malaysian government and Bank Negara Malaysia (BNM) can deploy both fiscal and monetary policies to stimulate the economy in response to the external trade and investment uncertainties caused by Donald Trump’s re-election in 2024.
(15 Marks)

Explain how these policy actions can support Malaysian households, businesses, and the country’s overall economic resilience.
(15 Marks)

(Total: 30 Marks)

QUESTION 3

You are the operations manager of a mid-sized manufacturing firm. The accounting department has provided the following data on total costs (TC) and total revenues (TR) at different output levels. Your task is to advise the firm on the optimal level of production.

Based on the information given:

a) Calculate the following for each level of output:
    i. Profit (TR – TC)     (2 Marks)
    ii. Marginal Cost (MC)     (2 Marks)
    iii. Marginal Revenue (MR)     (2 Marks)

b) Plot the MC and MR curves on a graph. Clearly label the equilibrium point where MC = MR.
(6 Marks)

c) Identify the profit-maximizing output level and justify your answer based on your calculations and graph.
(4 Marks)

d) Suppose fixed cost increases by RM50 due to higher rent.
    i. Recalculate total cost and profit for each output level. (3 Marks)
    ii. Does the profit-maximizing output level change? Explain your reasoning. (3 Marks)

e) Based on your findings, explain how understanding cost behavior and marginal analysis helps managers in real-world decision-making such as pricing, output planning, and investment.
(8 Marks)

(Total: 30 Marks)

QUESTION 4

Compare the Gross Domestic Product (GDP) of any TWO (2) countries with different currencies using purchasing power parity (PPP) exchange rate by clicking this link UNdata.
(Hint: Can opt for any year of GDP)

You are required to calculate:

a) The GDP of both countries. (6 Marks)

b) The GNP of both countries. (4 Marks)

c) The GDP per capita income of both countries. (6 Marks)

d) On the basis of the countries’ GDP value, elaborate on their standards of living. Which country has a higher standard of living? Discuss your answer. (9 Marks)

(Total: 25 Marks)

*** END OF QUESTION PAPER ***

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