ECONOMICS CASE STUDIES (15 MARKS)
*Case Study 1: The Global Semiconductor Supply Chain Disruption*
In early 2023, a confluence of factors, including geopolitical tensions between major global
powers, unexpected surges in demand for electronic devices due to shifts in remote work
and digitalization, and localized disruptions in key semiconductor manufacturing regions
(e.g., due to natural disasters or trade restrictions), led to a significant bottleneck in the
global semiconductor supply chain. This shortage impacted numerous industries worldwide,
from automotive manufacturing plants in Germany and Japan facing production halts to
consumer electronics companies in the United States struggling to meet demand for their
latest products. The crisis highlighted the intricate and geographically dispersed nature of
modern production processes and the vulnerability of relying on a few key players in specific
locations for critical components.
*Required* :
a) Identify two international factors that contributed to the disruption of the global
semiconductor supply chain as described in the case. [2 marks]
b) Explain one potential long-term impact of this supply chain disruption on the location of
production for firms that rely heavily on semiconductors. [3 marks]
*Case Study 2: "Sweet Treats"*
Sweet Treats is a small bakery in a busy shopping district. They sell a variety of cakes,
pastries, and sandwiches. Their fixed costs, such as rent and loan repayments, amount to
PKR 50,000 per month. The variable costs for producing each cake, including ingredients
and direct labor, average PKR 100. They currently sell each cake for PKR 300. Due to
increasing competition from a new bakery nearby, Sweet Treats is considering lowering its
prices to increase sales volume.
*Required* :
a) Calculate the profit Sweet Treats makes from selling one cake. Show your working. [2
marks]
b) Discuss one potential advantage and one potential disadvantage for Sweet Treats if they
decide to lower their prices. [3 marks]
*Case Study 3: The Mobile Telecommunications Market in Pakistan*
The mobile telecommunications market in Pakistan is dominated by a few large companies
that offer a wide range of services, including voice calls, SMS, and mobile internet data.
While there are some smaller players and new entrants occasionally emerge, the market
share is heavily concentrated among the top three or four firms. These major companies
engage in significant advertising and promotional activities to attract and retain subscribers.
There are regulations in place by the Pakistan Telecommunication Authority (PTA) regarding
pricing and service quality, and consumers generally have a few options when choosing a
mobile network provider.
*Required* :
a) Identify the market structure that best describes the mobile telecommunications market in
Pakistan. Justify your answer with one characteristic from the case study. [3 marks]
b) Explain one way in which the presence of a few dominant firms in the mobile
telecommunications market might affect the prices and choices available to consumers
compared to a perfectly competitive market. [2 marks]