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Sample Economics Australian Assignment Help !

Below are five questions. WRITE A BRIEF EXPLANATION IN ANSWER TO EACH. The marks awarded will depend on the quality of the reasoning exhibited and the ability to express the argument in a concise manner. Where appropriate draw diagrams to illustrate your answer. As a guide' approximately one page of tightly reasoned argument should be sufficient to answer any one question. The total mark for the assignment is out of 100' with each question worth 20 marks.

  • 1. As a measure to decrease consumption of alcohol by young adults' the Australian Government has imposed a tax on 'alcopops, (sweet alcoholic soda drinks' that tend to be consumed by younger people). Assume that the tax on 'alcopops, is $20 per unit (a unit is a carton of drinks) and that other alcoholic beverages are not taxed. If the demand and supply functions for cartons of 'alcopops, per week are: P= 200-0.5Q and P=0.5Q

  • a) Calculate the amount of tax revenue collected by the government
    b) Calculate the distribution of tax payments between buyers and sellers
    c) Based on the equilibrium price and quantity consumed before and after
         the tax, calculate the elasticity of demand for ‘alcopops’.
    d) How do you expect that the tax on ‘alcopops’ will impact on the demand for other alcoholic beverages?
  • Answer 1:
    
    (a)	The demand equation is:
    	P= 200-0.5Q...(1)
    	The supply equation is:
    	P=0.5Q...(2)
    
    At Equilibrium:
    	200 – 0.5Q = 0.5Q
    	Solving we get
    	Q=200
    	P= 50
    So if a $20 tax per unit quantity is imposed
    then the total tax revenue collected by 
    government is: 20*100 = $2000
    (b)	 In the post tax situation:
    	Pt= 200-0.5Q – 20...(3)
    	So new equilibrium quantity is:
    	200-0.5Q – 20Q = 0.5Q
    	Q= 180
    	P = 90
    If we compare with the previous situation,
    we see consumers are paying more and 
    buying less but sellers are selling
    less but getting a higher price, 
    so the burden will fall on consumers.
    (c)	Elasticity of demand = pdq/(qdp)
    	= 50*(180-200)/200*(90-50)
    	= -0.125
    (d)	We have elasticity of demand 
    negative and less than 1,
    so if price rises in post tax 
    situation then quantity demanded will
    fall and less than proportion to change in price.
    
    	References:
    	1)	Microeconomics by Maddala and Miller
    	2)	Microeconomics by Pindyck and Rubinfield
    
    
  • 2. Consider the following demand and supply functions: P=100-3Q and P=20+Q



    a) Determine the equilibrium price and quantity b) Calculate the consumer and producer surplus at the equilibrium price c) Calculate the amount of shortage that would prevail if a ceiling price of $25 was imposed. d) What happens to the consumer and producer surplus after the ceiling price is imposed?
    Answer 2:
    (a) The demand function is :
    	P=100-3Q
    	(100 – P)/3 = Qd..... (1)
    	The supply function is : 
    	P=20+Q
    	Qs = P - 20 ....(2)
     
    At equilibrium 
    			Qd = Qs
    			P - 20=(100-P)/3
    			P = 40
    			Also Q = P – 20 = 20
    			
    (b)	The consumer surplus is ∫020PQdQ – PQ 
    			= ∫020 (100-3Q)QdQ – PQ 
    			= [100Q2/2 – Q3]020 – 20*40
    			= 11200
    			
    	The Producer Surplus is ∫020PQdQ – PQ
    			= ∫020 (20+Q) – 20*40
    			= 10Q2 + Q3/3 – 800
    			= 5866.67
    
     
    (c)	If a price ceiling of $25 is imposed then 
    quantity supplied is : Qs= 25 – 20 = 5
    But quantity demanded at equilibrium is 20,
    hence amount of shortage is = 20 – 5 = 15
    
    (d)	The new consumer surplus is:
    = ∫05 (100-3Q)QdQ – PQ 
    = 50Q2 – Q3]020 – 125 = 1250 – 125 - 125 = 1000
    
    The new producer surplus is 
    ∫05 (20+Q) – 20*40
    = 10Q2 + Q3/3 – 125
    = 166.67
    	
    
    After the ceiling is imposed, both producer
    surplus and consumer surplus fall  References:
    1) Microeconomics by Maddala and Miller
    2) Microeconomics by Pindyck and Rubinfield
    
    
    3. Suppose that Australia and New Zealand 
    can both produce wheat and lamb. The production 
    possibilities for each country are summarised below: 
    	Country Output per person 
    	per unit of time 
    	Population 
    	Australia Wheat = 2 bushels 
    	Lamb = 1 kg 
    	20 million 
    	New Zealand Wheat = 2 bushels 
    	Lamb = 4 kg 
    	5 million
     
    a) Which country has the comparative advantage 
    in producing wheat and which country has the 
    comparative advantage in producing lamb?
     
    b) Can these countries gain from trade and 
    if so which country should produce which good?
     
    c) Would the terms of trade of 1 bushel 
    of wheat = 1 kg of lamb be 
    acceptable to both counties? Why?
    
    d) Illustrate the consumption possibilities
     for each country after trade, 
    assuming the terms of trade 
    are 1 bushel of wheat = 1 kg of lamb.
     
    
    Answer 3:
    (a)In Australia the amount of labour 
    required to produce one bushel of 
    wheat (alw)=10 million/bushel 
    In Australia the amount of labour required
     to produce one kilo of lamb (all)=20 million/kilo
    
    In New Zealand amount of labour required 
    to produce one bushel of 
    wheat (anw*)=2.5 million/bushel 
    In New Zealand the amount of 
    labour required to produce one kilo of lamb 
    (anl*)= 1.25 million/kilo
    
    For Australia: alw/ all = 10/20 = 0.5
    For New Zealand: anw*/ anl* = 2.5/1.25 = 2
    Here we see the ratio is lower for Australia 
    which means Australia has a
    comparative advantage in wheat and New 
    Zealand has it in lamb
    
     
    (b) Yes both these countries should 
    gain from trade. 
    
    From the Theory of Comparative Advantage:
     Trade between two countries 
    can be beneficial if each country 
    exports the good in which it has a 
    comparative advantage.  So, Australia should 
    export wheat and import lamb and New Zealand 
    should export lamb and import wheat.
    
    (c) The terms of trade would be acceptable 
    to both these countries. The terms of trade 
    say, PW/PL = 1, would lie as follows:
    alw/ all(=0.5) < PW/PL (= 1)< anw*/ anl*( =2)
    This means, Pw > alw. So the price 
    for a bushel of wheat would be higher 
    after trade than the autarkic price, 
    so producers would willingly produce 
    at that price. And similarly, for New Zealand it 
    would be more profitable to produce 
    lamb at the post trade price.
    
    (d) Let us consider the following two graphs:
    In Figure a, we see that Australia’s 
    Consumption possibilities has increased 
    from e to f after trade. In figure b, we see 
    that New Zealand’s consumption possibilities 
    have increased from g to h.
    

    References:
    1)International Economics by Krugman and Obstfeld
    2) World Trade and Balance of Payments by Caves and Jones
    4. A study by the computer manufacturers Association of 
    America found a significant increase in the usage of 
    computers by firms in the United States over the past 2 
    decades. In terms of productions theory, the computer 
    to labour ratio has risen. Using isocost and isoquant 
    analysis, provide an explanation for this trend.
    
    Answer 4:
    An isocost line represents a combination of inputs
    which all cost the same amount. Although similar to
    the budget constraint in consumer theory, the use
    of the isocost pertains to cost-minimization in 
    production, as opposed to utility-maximization. 
    The typical isocost line represents the ratio 
    of costs of labour and capital, so the formula 
    is often written as:
    		rK + ωK
    
    Where w represents the wage of labour, 
    and r represents the rental 
    rate of capital. The slope is: 
    		-ω/r
    
    An isoquant is a contour line drawn 
    through the set of points at which the 
    same quantity of output is produced 
    while changing the quantities of 
    two or more inputs.
    
    Now, it has been found that the 
    computer to labour ratio has 
    increased. Let computer represent 
    capital here.  We have L/K = -w/r. 
    
    That means labour –to-capital ratio 
    varies directly with wage-rental ratio. 
    
    Equilibrium occurs at a point where an 
    isoquant is tangent to the isocost line.
    If the wage-rental ratio changes then 
    consequently the K-L ratio would also 
    change and the isocost line would be 
    tangent at a different point on the 
    isoquant. So a new K-L ratio would 
    emerge at the equilibrium. 
    
    In case of the computer manufacturers, 
    a rise in the labour wage or a 
    fall in price of computers or both 
    must have caused the w/r ratio to 
    fall and hence, K-L ratio to rise. 
    i.e. leading to increased usage of computers.
    
    References:
    1) Intermediate Microeconomics by Hal Varian
    
    
    
    5.Farmers often complain about the costs of 
    machinery, labour and fertiliser, suggesting 
    that these factors drive down their profits. 
    
    a) Does it follow that if the price of 
    fertiliser fell, then farming (a highly 
    competitive industry with easy entry conditions) 
    would be more profitable in the long run? Explain.
    
    b) How would this differ if the industry in 
    question was a monopoly?
    
    Answer 5:
    (a) If the price of fertilizers increased, 
    there would be still no profits in the
    long run, though there may be so in the short 
    run. Here it is said that the farming industry 
    is a highly competitive industry where there is 
    free entry and exit. If cost of fertilizers 
    decrease, it would help the farmer reap
    profits in short run as the revenue-cost
    gap would increase. (Profit = Revenue – Cost). 
    But due to free entry, new farmers would 
    start farming as there are profits now. 
    This would reduce the profit share of 
    each farmer till the profit level is brought 
    down to zero. Hence, in the long run there would 
    be no profits.
    

    (b) In case the industry was monopoly, then 
    there would be profits even in the long run. 
    As the cost of fertilizers go down, the 
    difference between cost and revenue 
    would rise and there would be profits. 
    In case of monopoly as there are no 
    entry and exits, ao the farmer would 
    be able to retain profit even in 
    the long run.