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BUS102 Group Assignment T217

BUS102 Microeconomics T217, Group Assignment due 09 September 2017 Page 1

BUS102 Introduction to Microeconomics

Questions, Notes & Guideline for Group Assignment

Due 3.00pm, Saturday 09 September 2017

Three Problem-Solving Questions that require written answers 1. General information

1.1 This group assignment is worth 20 per cent of total assessment and is to be submitted by 3.00pm, Saturday 09 September 2017.

 There are 3 questions and answer all 3 questions, worth a total of 60 marks all together. Then the marks will be converted to a total of 20 marks scale to be uploaded in Moodle for 20 per cent of your total course assessment.

 A hard copy of the assignment must be submitted to KOI Librarian in Kent street campus by 3.00pm, Saturday 09 September 2017. You must keep the receipt after the submission for your own record. You are also required to upload an electronic copy of the assignment in Moodle Turnitin by 3:00pm Saturday 09 September 2017.

 Late submission will attract loss of 4 marks out of 20 marks (20 per cent), and the assignment submitted to the library after 5:00pm Monday 11 Sept 2017 will not be accepted.

1.2 This assignment is a group assignment and each group must contain only two (2) people.

1.3 Names and ID numbers of students in the group must be clearly printed on the Assignment Cover Sheet. A member, who has not contributed to the discussion and assignment, must be marked as “Not contributed” in a bracket following the student’s name and ID.

1.4 You must follow the appropriate format explained below. Not following the appropriate format will cause a loss of some marks.

 All written answers must be clearly typed and printed. Hand-written answers will NOT be accepted.

 All assignment questions and sub-questions must be typed in order at the heading.

 Answer each question on a different page. For example, if Question 1 (a) (b) (c) and (d) are answered on pages 1-2, then start Question 2 on page 3, etc.

 You must analyse, explain and show how and why you reached your answers. Providing just answers without explanation will not receive full marks.

 You must also draw and include appropriate and relevant graphs and tables together in your explanation. Draw them using Microsoft Power Point/Word/Excel, NOT hand-drawn.

BUS102 Group Assignment T217

BUS102 Microeconomics T217, Group Assignment due 09 September 2017 Page 2

1.5 Copying the assignment contents from other group assignment is a serious violation of copy right. It will be penalized and will attract a VERY heavy loss of marks – “Fail”.

 Please remember that it is not difficult to identify the contents that are copied from other group(s). Write the answers in your own English words.

 Please DO NOT SHOW work students in other groups. If you did, both the person who showed the assignment and the one who copied the assignment will be awarded zero out of 20 marks.

1.6 Each group must have a coordinator, who will submit a hard copy of the assignment to the KOI librarian and also upload an electronic copy of the assignment in Moodle Turnitin. Only ONE COPY of the assignment from each group is required to be submitted (& uploaded) by the coordinator of the group.

1.7 Make sure you discuss and work together for ALL THREE questions. You MUST read and check the assignment before submission, once completed.

BUS102 Group Assignment T217

BUS102 Microeconomics T217, Group Assignment due 09 September 2017 Page 3

Question 1: Answer the following questions – 15 marks

Table 1 – Production Capacity of Newland.

Cars Bicycles

30,000 0

28,000 1,000

24,000 2,000

18,000 3,000

10,000 4,000

0 5,000

Use information in Table 1.1 above to answer the following questions:

a. Using the above figures, map out the Production Possibilities Frontier (PPF) for the production of the Cars and bicycles (Hint! Use Microsoft Excel, for accuracy) (3 marks)

b. In your own words, while making use of the graph that you have created in part a, explain

what the PPF is. Cleary state all assumptions and properties of the PPF. (6 marks)

c. Newland usually has a demand of 3,000 bicycles and 18,000 cars. Suddenly Newland receives notice that the demand has increased to 4,000 bicycles and 20,000 cars. Discuss and explain at least three possibilities of how Newland could meet that demand. (Hint: State any appropriate assumptions made). (6 marks)

Question 2: Answer the following questions – 25 marks

Table 2: Demand schedule for computer chips

Price (dollars per chip) Quantity demanded (millions of chips per year)

200 50

250 45

300 40

350 35

400 30

Part I: Use the demand schedule for computer chips in Table 1 to answer parts (a) and (b) below.

a. What happens to total revenue if the price falls from $400 to $350 a chip and from $350 to $300 a chip? (4 marks)

b. At an average price of $300, is the demand for chips elastic, inelastic, or unit elastic? Explain your answer using the total revenue test. (4 marks)

BUS102 Group Assignment T217

BUS102 Microeconomics T217, Group Assignment due 09 September 2017 Page 4

Part II. Use the demand and supply functions expressed by equations (1) and (2) below to answer parts (c) – (f). Consider the demand and supply functions for widgets to be:

Q D = 100 – 5P (1)

Q

S = 5P. (2)

c. What is the market equilibrium? (3 marks)

d. Calculate the consumer and producer surplus at the market equilibrium. What is the total

surplus? (4 marks)

e. Now assume that the government sets a rule that the maximum quantity that can be sold is 25 units. If the price in the market is $15, what is the consumer surplus, producer surplus and the deadweight loss? If the price is $5 what is the CS, PS and DWL? (5 marks)

f. Using equations (1) and (2), sketch the demand and supply diagram and indicate your results from parts (d) – (e). Correctly label the diagram. (5 marks)

Question 3: Answer the following questions – 20 marks

In 2010, the Australian government imposed a tax on Alcops to reduce teenage binge drinking and alcohol-related harms and hospitalization, and also to raise tax revenue. However, by the end of the financial year no reductions in teenage binge drinking and alcohol-related harm were recorded and, moreover, the revenue raised from the tax was 6% less than predicted.

a. As an economist, are you surprised about the outcome of the government’s tax policy? Critically discuss. Use the demand and supply model and other appropriate microeconomic tools you have learned in this unit to illustrate your argument. (10 marks)

b. Who bore a greater burden of the tax, the buyers or sellers of Alcops? Was the outcome of the tax efficient? Explain. (5 marks)

c. What other policy could the government implement to reduce teenage binge drinking and

alcohol-related harm and hospitalization? Briefly explain. (5 marks)

END OF THE ASSIGNMENT