1.1). a. Under the expenditure approach, breaking down the GDP needs the calculation of four elements, C (Consumer spending on goods and services) + I(Investor spending on business capital goods) + G(Government’s expending on goods and services by the government) + net exports(exports minus imports of goods and services).
So on describing the GDP of the Czech Republic in 2018 using the expenditure approach, the GDP growth rate in 2018 has fallen compared to the former years with several reasons: A. An unbalance of net exports (the percentage of import is much higher than export’s) B. A higher inflation rate started from 2017 compared with former years.
b. It is influenced by the increasing inflation rate, it shows that households in the Czech Republic have to pay more money than last year on a certain product with the increasing inflation rate.
2) a. The General Unemployment Rate is the number of unemployed people as a percentage of the labour force, where the latter consists of the unemployed plus those in paid or self-employment, it always indicates the development of a certain economy, the better development, the lower General Unemployment Rate and vice versa.
But the share of Unemployed Persons means the total of unemployed population and the people unwilling to work constitute a socially inactive population that minuses the labour force. The two concepts contain different people
b. A. GDP continues to grow steadily B. Household expenditure continues to grow steadily. These two indicators are the proof that the economy of Czech Republic goes well.
3) a. It is a creeping inflation when prices rise 3 percent a year or less. It benefits economic growth. This kind of inflation makes consumers expect that prices will keep going up. That boosts demand. Consumers buy now to beat higher future prices. That’s how mild inflation drives economic expansion.
b. The average nominal wage growth rate is much greater than the inflation rate, indicating that the real wages of workers are rising.
4) Exchange Rate Commitment: CZK/EUR=27/1
5) The Government deficit rate from 2014-2018 had never beyond 3% and the Government debt rate from 2014-2018 had never beyond 60%.
6) a. Monopolistic competition refers to the market phenomenon in which many manufacturers produce and sell similar but different commodities. Its characteristics are: (1) the number of enterprises is large but the scale is relatively small (2) the products are similar and different from each other, so the demand curve is inclined downwards. (3) The enterprise is not restricted in terms of access, resources can be transferred between industries (4) many small Buyer.
An oligopoly is a market state dominated by a small number of sellers (oligarchs). An oligopoly is a market structure that includes both monopolistic and competitive factors and is closer to a complete monopoly. Its distinguishing feature is that a few manufacturers monopolize the market of a certain industry, which accounts for a high proportion of the total output of the industry, thus controlling the supply of products in the industry.
In the process of short-term equilibrium realization, the monopolistic competition market, like the monopoly market, will also have three situations: excess profit, income and expenditure, and loss. The difference from the monopoly market is that the slope of the market demand curve faced by monopolistic competitors is small. After considering the production cost factor, the monopolistic competitor will choose the production under the condition that the marginal cost is equal to the marginal benefit, that is, the E point in the figure below. The output determined by point E is OQ* and the price is OP. Since the short-term average cost at this time is OG, the monopolistic competitor is profitable and its profit is GFHP.
7) a. It indicates that the degree of consumer response to changes in the amount of consumer income over a certain period of time is measured by the coefficient of elasticity.
Income elasticity is based on the assumption that the consumer’s preference, the price of the commodity itself and the price of the relevant commodity remain unchanged, analyze the degree of response of the demand for the commodity to the change in income.
Three types of income elasticity of demand
(1)＞ 1 (luxury, rich income elasticity)
(2) (0,1) (essential, lack of income elasticity)
(3)＜0 (low grade)
b. An indicator of the extent to which demand reflects the price change.
The formula is the price elasticity of demand = the percentage change in demand / the percentage change in price
When Ed = 0: perfect inelasticity
When 0 < Ed < 1: lacks elasticity, is not elastic, or is inelastic
When Ed = 1: unit elasticity, single elasticity, or unit elasticity
When 1<Ed<+∞ : Elastic
When Ed→+∞: fully elastic or perfect elasticity
c. A measure of the extent to which a product’s demand responds to changes in the price of its substitute or complement, subject to other conditions.
The cross-elasticity of demand can be positive or negative. The cross-elasticity of the substitute is positive, while the cross-elasticity of the complement is negative.
2.1 A. Balance sheet
2.3 Coca-Cola reports its net revenue in two segments: concentrate operations and finished product operations. Coca-Cola manufactures and sells syrup to authorized bottlers to make finished Coca-Cola products and manufacture fountain syrups. This revenue is reported under the company’s concentrate operations. The company also manufactures its own fountain syrups, manages several bottling operations, and collects revenue on finished products.
2.5 Pepsi and Red Bull
Pepsi – Coca-Cola’s largest and closest competitor; its main competitor, the brand covers multiple categories, including herbal drinks, health and energy drinks, and bottled water and juice. In fact, Pepsi is the toughest competitor of Coca-Cola, and their competition has been called the Coke War.
Red Bull – Red Bull has a limited product portfolio but is a major competitor to Coca-Cola’s energy drink products. Red Bull is Coca-Cola’s most powerful energy drink competitor.
2.6 The Profitability Score is a relevant measure for the assessment of a stock attractiveness. The Coca-Cola Company shows a Profitability Score of 9.00.
The Profitability Score for The Coca-Cola Company is significantly higher than its peer group’s. This means that The Coca-Cola Company has a significantly higher profitability than its peer group.
I would not recommend Coca-Cola’s stock. The Coca-Cola Company has had little success in achieving multi-business in the past few years compared to its competitors. Its business growth is not only slow but also heavily dependent on the single pillar of beverages.