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Transcription of this question: 4.EnigmaEnigma is a large company, which generates and distributes electricity to over 90% Of householdsin a cold country in Northern Europe. From September to March, daily temperatures are below zero.The average annual wage is the lowest in Europe.Using price discrimination to generate substantial profits, Enigma charges the business communityhigher rates than it charges rural poorer communities. Enigma has calculated that the price elasticityOf demand for electricity is such that demand is very unresponsive to price changes. However,by early 2009, some pressure groups felt that Enigmas revenue and profits had become too high.Enigma’s chief executive officer (CEO), Bjorn Andersson, defended the high revenue and profits.He argued that they were necessary for Enigma to guarantee electricity supply throughout thecold months.However, by the end Of 2010 Enigma made a substantial loss due to the economic downturn(recession). As a result, the country’s government organized a “rescue package”* to guaranteeelectricity supply. At the annual general meeting held in 2011, Enigmas financial accountsrevealed that senior managers had been awarded substantial performance related payments,despite the significant losses. Most shareholders believed that the rescue package was used toreward inefflcient senior managers. They argued that it was unethical for Enigma to use publicmoney in this way, especially during the economic downturn (recession).Bjorn did not agree. He argued that despite the economic downturn (recession), Enigma had toreward its senior managers as Other electricity companies do; he said that “superstar talentrequires superstar reward packages”. TO ensure that there will be a future generation Ofhighly-skilled senior managers, Bjorn claimed that he had only one option: to Offer milliondollar reward packages. This practice would also help to recruit and motivate the best universitygraduates to work for Enigma, who could then be trained through job enrichment schemes tobecome the next generation Of senior managers.(a)(b)(c)(d)Define the following terms:(i) price elasticity(ii) shareholder.Explain two advantages to Enigma Of using price discrimination.Using Herzberg’s motivational theory, analyse the motivation Of EnigmaSsemor managers.Evaluate solutions to two possible stakeholder conflicts present at Enigma.[2 marks/[2 marks/[6 marks][6 marks][9 marks]

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