economics for decision making
Assignment 1 – Information for students
Read the questions carefully and make sure you answer each question fully.
Follow any word length suggestions
Assume the marker knows nothing about the topic
Use as many graphs as you can
Label your graphs carefully and explain them fully
Show your calculations
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Assignment 1 – Information for students
Turitin
keep your receipt from Turnitin – if you do not get one you have NOT submitted your assignment
make sure your score is acceptable
you will be able to check your Turnitin score (1st time you will receive a score quickly however takes longer for others)
References
cite other people’s work in the body and provide a reference list
hard to be prescriptive about the number of references
no need to reference the unit study guide
Harvard – be consistent
font size 12 with 1.5 line spacing is recommended
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Do NOT contact me for technical questions about submission – contact University IT Help
If you submit assignment then you cannot submit another copy unless you request me to remove the previous submission
Technical Issues
For students who are struggling with graphs - look at these websites:
http://cls.syr.edu/mathtuneup/grapha/TOCbook.html
www.desmos.com
https://www.youtube.com/watch?v=pSsFUUMojxc
For students want to draw supply curves in word
https://www.bing.com/videos/search?q=%27how+to+create+supply+and+demand+curves+in+word%27&qpvt=%27how+to+create+supply+and+demand+curves+in+word%27&view=detail&mid=C149A21EC6D5F790C659C149A21EC6D5F790C659&&FORM=VRDGAR
Graphs
| Choices | ||
| Production possibilities | Grade (%) | Work (hours per week) |
| A B C D E | 0 20 40 60 80 | 60 55 45 30 0 |
Question 1a
Joan, who has been a university student for a year, has just started a new job. She realises that if she works more hours there will be an impact on her grades. The following is Joan’s production possibility table for work and her average grades:
From the figures in the table above:
i. Plot the production possibility curve for Joan. (1 mark)
ii. Explain the concept of increasing opportunity cost using the production possibility table and curve plotted in Q1ai above. (2 mark)
iii. If the opportunity cost of Joan increasing her grade was constant regardless of how many hours she worked, what would be the shape of her production possibility curve? Draw this graph. Which of the two shapes would be more likely, and why? (2 marks)
iv. What would be happening if Joan’s combination of her grades and hours of work per week were below the curve as plotted above in Q1ai? (1 mark)
v. How could Joan push her combination of her grades and hours of work per week past the current curve? (2 mark)
Question 1a (cont)
Does not matter which axes is used for the two alternatives but make sure you label everything
Q1ii is about ‘increasing opportunity cost’.
Explain the concept of increasing opportunity cost (hence the shape of the curve)
Q1iii Explain your answer – you do not have to use actual figures
Question 1a (cont)
After a period of good growing weather Australia produced a plentiful wheat crop - does this mean that it will not have a scarcity problem in regards to wheat? Provide reasons for your answer (300 words maximum).
(2 marks)
Question 1b
Make sure you explain the concept of scarcity very clearly in your answer
Question 1b
In February 2018, it was reported that Australia’s solar power capacity could almost double in a year.
a. Use demand and supply curves to show the doubling of capacity. (3 marks)
b. Use demand and supply curves to show what is likely to happen to demand over time in response to the capacity increases (see Q2a above). (3 marks)
c. Use demand and supply curves of the solar powered industry and coal-fired power electricity industry to show what is likely to happen to demand and supply of solar power if the government introduces a tax on coal-fired power electricity. (4 marks)
Question 2
Remember that markets are in constant change as consumers and producers respond to changes in price. Part a asks you to identify what would change first NOT the on-going responses of either consumers and/or producers.
Assume that the doubling of capacity in Q2a is due to something like new and/or improved technology – will this effect D and/or S? You only need to identify the FIRST change.
In Q2c you need to determine how a tax will impact on CPE. You should also explain the relationship between CPE and Solar power.
Question 2 (cont)
Question 3 (10 marks)
a. Explain in your own words, using demand and supply curves, the concepts of consumer and producer surplus. (3 marks)
b. Using demand and supply curves describe and illustrate what would happen to consumer and producer surplus if solar power capacity is increased. (4 marks)
c. The treasurer, Scott Morrison, has stated that business tax cuts will be good for business and workers. Is this a positive or a normative statement? Provide reasons for your answer (300 words maximum). (3 marks)
Question 3
For Q3b use your diagram from 2a to discuss the changes to CS and/or PS
Question 3
| Price ($) | Quantity demanded | Total revenue ($) | Percent change in price | Percentage change in quantity demanded | Elasticity value | Assessment of Elasticity |
| 0.50 | 16 | |||||
| 1 | 13 | |||||
| 1.50 | 10 | |||||
| 2.00 | 7 | |||||
| 2.50 | 4 | |||||
| 3.00 | 1 |
Question 4a
Complete the table below outlining the demand for hot doughnuts in winter. In your calculations use the midpoint method to calculate the price elasticities. (5 marks)
Remember that elasticity is between P & Q
You ONLY need to calculate FIVE elasticities
Elasticity values are absolute – they do not need a positive or negative sign
Show your calculations
Question 4a
b. Do you think the price elasticity of demand for hot doughnuts in summer would be the same as in winter or would it become more elastic or more inelastic? Explain your answer. (3 marks)
c. What would you expect the price elasticity of demand for cigarettes to be? Explain your answer. (2 marks)
Question 4b and c
| Output | Total Fixed Cost (TFC) $ | Total Variable Cost (TVC) $ | Total Cost (TC) $ | Average total cost (ATC) $ | Marginal Cost (MC) $ | Total Revenue (TR) $ | Average Revenue (AR) $ | Marginal Revenue (MR) $ | Profit $ |
| 0 | 100.00 | 100.00 | |||||||
| 1 | 220.00 | ||||||||
| 2 | 300.00 | ||||||||
| 3 | 390.00 | ||||||||
| 4 | 530.00 | ||||||||
| 5 | 690.00 |
Question 5a
i. Complete the cost schedule below for a company operating in a free-market (remember that MC and MR values are placed midway between the output figures):
4 marks)
Remember that MC & MR is between outputs
See Q5b for information about revenue
ii. If the firm is operating in a perfect market where the market price for the good the company produces is $150, how many items should this company produce in order to maximise profit? Explain your answer. (2 marks)
iii. Graph the average total cost, marginal cost, average revenue and marginal revenue curves. (2 marks)
Question 5a (cont)
In your own words explain the concept of diminishing returns and describe what will happen to marginal product, total output and marginal cost when diminishing returns start to occur. (2 marks)
Question 5b