# Economics

October 22, 2018

Assignment

Length:no more than 2500 words(including graphs, tables etc).
Font size: 12; Margins: 2.5 cm on all sides

PART
A
Activity
1
You are
given the following information in relation to the market demand and supply of Ford
cars:
Ford
Cars: Market Demand and Supply

Price (\$)

Quantity demanded/sold

Quantity supplied

Price elasticity of demand

Total Revenue

20,000

40,000

10,000

25,000

35,000

15,000

30,000

30,000

20,000

35,000

25,000

25,000

40,000

20,000

30,000

45,000

15,000

35,000

50,000

10,000

40,000

(i)
Draw
the market Demand and Supply curves (on the same graph) for Ford. [5
marks]
(ii)
What
is the market equilibrium price and quantity?
[5
marks]
(iii)
Explain what you will observe in the market if
the Ford car price is set at a higher than equilibrium price. [5 mark]
(iv). suppose
you are managing director of Ford Australia, and you are wondering whether or
not to cut the price of Ford cars to increase your total revenue from
sales. Explain how your knowledge of elasticity
of demand can help you make this decision. Complete the last two columns of the
above table and also draw a graph to explain your answer. [8 marks]
(v).
suppose car industry is very competitive and Ford has been losing its competitiveness
in
the car market. Suppose that the government is providing
substantial financial support to
Ford manufacturers with the
view that it will improve Ford’s competitiveness. Evaluate the
merits and demerits of this
government policy measure. [7 marks]

Activity
2:
(i). Explain
the difference between accounting profit and economic profit. Include
discussion of the distinction between explicit and implicit costs and how they
relate to economic cost and opportunity cost. [5
marks]
(ii).
about opening a hardware store. She estimates that it would
cost \$ 500,000 per year to rent
the store and buy the stock. In addition, she would have to
quit her \$ 510,000 per year job
as an accountant.
What is your aunt’s opportunity cost of running a
hardware store for a year? If your aunt
thought she could sell \$ 510,000 worth of merchandise in a year, should she
open the store? Explain.
[5 marks]
(iii). Compare and contrast the two
market structures: Perfect Competition and Monopoly, in
line with main characteristics of them.
Comment of the Price and profit maximising output
level in the two structures. [5
marks]
(iv). which market structure is considered to
[3
marks]
(v). List down two closest real world
examples for each of these market structures.

[2
marks]
(vi). Do you believe that the
government should intervene to control the monopoly power in the market. You need to argue for/justify your answer. [5 marks]
(vii). in a free market system, why
does the government have to provide certain goods and services using tax payers
money? Is there any justification?
Explain providing examples.
[5 marks]
PART
B
Activity
3:
Section I:

(i). (a). What
is gross domestic product (GDP) and what is the use of it? [5 marks]
(b). Comment on how well this measure
serves its intended purposes. [4
marks]
(ii). (a). What is unemployment [2 marks]
(b). Can a country achieve a 0%
unemployment rate, explain [5
marks]
(iii). (a). What is inflation and how it is
calculated [4
marks]

Section II: Essay Question: [20
marks]

Explain why inflation is a main concern
for an economy, and examine how well inflation in Australia has been managed by
the monetary authority over the last 10-15 years.
To
do the above activity, you need to read relevant chapters in your text book to
get theoretical/conceptual understanding of the subject matter and read outside
the textbook/Study Guide to examine the Australian case. These readings may include
published research papers/articles, reports, reviews in the media and any other
materials published with authority.
In
borrowing/extracting the ideas from other sources, you must properly
acknowledge it. This means that you need to prepare a list of references at the
end of Essay question.

NOTE: please make sure that Graphs
and tables are must included where required and also avoid plagiarism.

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