Application of microeconomic theories

1 Understand fundamental microeconomic theory and be able to apply
economic reasoning to the analysis of economic questions and policy.
2 Identify, present, and evaluate standard theoretical economic
3 Apply standard theoretical economic models to economic questions
and policy issues.
Marking Criteria Undergraduate Marking Criteria for this assignment is available at the end
of this document.
Your Task Look at the following figure and text, and then answer all questions.
US software sales for games consoles
Companies have made significant changes in the toy market. Until quite
recently, we could regard toys as consumer goods bought solely for
children. Nowadays, adults buy toys for themselves. Children have been
losing interest in traditional toys, including action figures, moving instead to
video and electronic games. For example, in 2003, boys aged 9–12 who
played video games spent about 40 percent less time playing with action
figures than they did in 2002. This creates a big problem for the traditional
toy industry, but benefits the video games industry.
One reason for the changes taking place in toy markets is because of age
compression or kids getting older younger (KGOY). The group of ‘tweens’ –
children aged 8-12 – is the worst affected age group. Tweens face much
wider entertainment and media choices. They have more interest in
activities that tap into their world and less interest in traditional toys.
Recently, they have been moving out of traditional toys at a faster pace
than in the past. Toy manufactuers should start taking notice. In particular,
the trend towards electronic games is affecting boys. Portability is an
important factor which can attract ‘tween’ consumers. Children spend a lot
of time travelling in buses or cars en route to other activities. A toy also has
to fit with the social circle of a child. For boys, that generally means there
should be an internet, electronic or video component in a toy or it should
have a sports dimension. Almost 70 percent of money spent on toys is for
products which have a built-in computer chip. For girls, the key is fashion
and social interaction. At an earlier age, children are exposed to the
internet and are more tech-savvy than previous generations. Thus, they
look for more sophisticated toys.
1- Define the term ‘consumer goods’. (10 Marks)
2- Identify two significant changes in the sales of video game
software over the period shown by the data. (16 Marks)
3- With the help of the information in the text and a supply and
demand diagram, explain how the growth in the sales of video
games may have affected the market for traditional toys such as
action figures. (24 Marks)
4- Many of the video games aimed at the “tween” market are bad
for children. In any case, even when they are not bad, children
spend far too much time playing video games and not enough
time playing outdoor games. Discuss how economics would
distinguish between private costs of playing the games and social
costs of playing the games. Explain how any difference between
private and social costs can be addressed by public policy. (50
Further Notes
You should make intensive use of the course text AND journal articles, case
studies, and peer-reviewed academic source materials. This is a research
Use exhibits and appendices to provide succinct, relevant and clear
information. Focus on the important issues and the holistic framework
rather than minor detail.
Assessment Criteria
The value of your work will be ultimately assessed on its practical
usefulness and relevance to the business, and the demonstration of good
understanding of relevant theories. The specific assessment criteria are:
 Demonstrated competence, good understanding and practical application
 Demonstrated identification, evaluation and interpretation of appropriate
 Ability to analyse a range of complex scenarios and data for decision
 Ability to determine and evaluate appropriate planning methods and
 Evidence of relevant background research, supported by examples,
citation and a bibliography in Harvard format
Introduction and conclusion in each question have 25% of the total mark
each. The other 50% is considered for the main body.
Guidelines Please read all questions and information provided carefully. Answer should
be made in appropriate length keeping in view the requirement of each
question and total word counts allowed.
In addition, your assignment should demonstrate the following qualities:
A good appreciation of relevant literature and its use to support argument,
substantiate calculations and other aspects of the assignment.
Taking ownership of the content, being prepared to debate and argue a
personal position, and providing evidence of evaluative skills. A submission
made up of extracts from published sources that is descriptive or simply just
theoretical regurgitation is not acceptable. Your submission must have
interpretation and consideration of the challenges and issues of taking
theory into practice.
Logical flow of ideas and treatment; appropriate selection of real world
factors related to the companies under scrutiny.
Evidence of additional personal research, and the ability to analyse material
from a variety of appropriate relevant perspectives.
Presentation, structure, appropriateness of methodology, breaking into
section headings/subheadings, tidiness.
Marks will be awarded for proper referencing and originality of work. Also
note that plagiarism is a serious offence and your submission will be
electronically checked.
Your report must be handed in electronically no later than given date of