Intrepreting Economics

Assignment 4: Interpreting Macroeconomic Conditions

Your name

Instructor’s name

Managerial Economics and Globalization—ECO 550


Background motivation

      You are an advisor to your company’s investment management committee.   Your company, XYZ Industries, Inc., manufactures automobile decorative and finishing accessories such as floor mats, seat covers, mirrors, and decorative decals.   Some of your product line is high end upgrades for new cars, but most of your market is retail outlets and the ultimate customers are purchasers of used car or they are ‘home ‘mechanics.   Your sales growth generally correlates with retail sales not with new auto sales.

      Your company is currently located in the northeast U.S.   In 2008 you acquired a location in the Midwest in order to be more centrally located for distribution to major markets in the southeast and the west.   Because of rising fuel cost there is strong interest in moving forward as soon as possible.   However, when the recession began the company decided not to proceed with the project until growth in consumer demand was expected to again be strong.

It will take one year to complete the new facility.   If the project begins today, will there be enough economic growth in the economy to support the new facility one year from now.

      Being a producer of automobile accessories, our sales are not related with the rising sales of new cars. Instead, people who buy used cars upgrade their cars with such accessories that we produce. Our sales are mostly directly related with the sale of used cars.

      Currently we are present in North East and Midwest States. And the increasing sales and customer demands have made us to increase our presence in the market. Coupled with the rising costs of the fuel, having our presence further South would increase our market and sales.

      But the recent recession has made us to think about expanding our market. As this would require one year for...