Economics for Business Assignment -

Learning outcomes - On successful completion of this subject, you should:

• be able to apply demand and supply analysis to make a range of market related decisions;
• be able to identify and critically evaluate opportunities for specialisation and exchange;
• be able to make decisions that incorporate the relevant benefits and cost analysis;
• be able to explain and defend why it is important to understand the structure of the market in which a firm operates;
• be able to critically examine and demonstrate why it might be necessary for government to intervene in the production of goods and services and in the distribution of income; and
• be able to examine critically the health of the economy as a whole through the analysis of major economic variables and advise on likely policy alternatives.

Assignment 1 -

Answer the following:

Question 1 - Define and explain the three key economic ideas: 1) people are rational; 2) people respond to economic incentives; 3) optimal decisions are made at the margin. Provide an example for each idea (Do not use the examples from the textbook).

Question 2 - Using the economics or other literature (but not the textbook) to identify estimates of the income elasticity of demand for at least three different products. Provide full citations for the employed literature. Comment on the magnitudes of these estimates in relation to the standard economic determinants of the income elasticity of demand.

Rationale - The question addresses the following learning outcomes:

• be able to apply demand and supply analysis to make a range of market related decisions.
• be able to make decisions that incorporate the relevant benefits and cost analysis.

Assignment 2 -

Answer the following:

Question 1 - Excise tax rates on tobacco and tobacco products increase in March and September based on average weekly ordinary time earnings. Perform a web-search to determine the amount of excise tax charged (as at 1 January 2018) on a standard 20 packet of cigarettes. If the standard packet is sold for a price of $30, how much is the before tax price?

Illustrate using the demand and supply model, the effects of a tax imposed on sellers of tobacco products. Explain in detail who pays the tax (buyers and/or sellers) and discuss the role the price elasticity of demand plays in determining the impact on prices and quantity of tobacco products sold. Be explicit about any assumptions made in developing predictions.

Question 2 - a) Assume a perfectly competitive firm's total cost (TC) for different levels of output Q is given by:

In a table format for the range of output (Q) provided determine: average total costs, average fixed costs, average variable costs and marginal costs. At a price of $35 how many units will be produced in the short run? At this price how many units will be produced in the long run?

b) Explain the differences between a monopolistically competitive market and an oligopolistic market? Give examples of industries with these market structures to explain your answer.

Question 3 - Some State Governments around Australia have pursued policies to merge Local Government Councils. Explain the economic rationale for these policies, use cost curves and related evidence to support your arguments.

Rationale - The questions address the following learning outcomes:

• be able to apply demand and supply analysis to make a range of market related decisions.
• be able to explain and defend why it is important to understand the structure of the market in which a firm operates.
• be able to make decisions that incorporate the relevant benefits and cost analysis.

Assignment 3 -

Answer the following:

Question 1 - Using data from the Australian Bureau of Statistics (ABS) website collect information on unemployment and inflation rates for Australia over the period 2001 to 2016, inclusive. Employ annual data. Be explicit and define and provide sources for the data obtained.

Plot on a single diagram the relationship between inflation and unemployment, measuring inflation on the vertical axis and unemployment on the horizontal axis. Comment on whether any relationship exists between these variables and any implications of your findings.

Question 2 - Employ the aggregate demand and supply model for the Australian economy, to analyse the consequences for real GDP and the general price level of the following scenarios. Confine your analysis to the use of short-run AD/AS curves. In your response clearly state your assumptions and illustrate your answers with diagrams.

(a) India has placed a 30% tariff on chickpea exports from Australia,

(b) The demand for Australian wine in China has substantially increased,

(c) The federal government plans to spend approximately $5 billion on Snowy Hydro 2.0 to generate more electricity power capacity,

(d) The price of oil, a product Australia primarily imports, fall substantially,

(e) An increase in the immigration intake substantially increases the Australian labour force.

Rationale - The question addresses the following learning outcome:

• be able to examine critically the health of the economy as a whole through the analysis of major economic variables and advise on likely policy alternatives.

Attachment:- Assignment File.rar