Reference no: EM133137219 , Length: word count:2000

ECON6049 Economic Analysis - Macquarie University

Compulsory Assignment

Question 1: Suppose that the market for vape pens in Australia is competitive and illustrated by the following supply and demand equations:
Demand: Q^D = 1000 - 20P
Supply: Q^S = 30P

a) Calculate the equilibrium price ($) and quantity, and show this equilibrium on a diagram. Use your diagram to calculate the consumer surplus, producer surplus, and total surplus.

b) Due to the health reason, the government wants to discourage people from smoking cigarettes including vaping. Suppose the government wants to reduce the consumption of vape to 400. What would be the specific (per unit) tax imposed by the government (on vape pens producers) to achieve this outcome? What is the per unit incidence of the tax experienced by consumers, and by producers?

c) Explain why the tax burden is not equally distributed between consumers and producers.

d) The imposition of this tax might help improve people's health, and increase the government's tax revenue. However, it could lead to a reduction in the national well-being. Explain how.

Question 2

a) Based on the three functions of money discussed in the lecture, reason if cryptocurrencies such as Bitcoin and Ether are money or not. (Your answer should be around than 300 words.)

b) Consider a bank's balance sheet as shown below. Would this bank face any liquidity risk and default risk? What would follow such risks? (Your answer should be around 300 words)

Assets		Liabilities
Base money	$100	Payable on demand	$1,200
Loans	$1,100
Total	$1,200		$1,200

Question 3

The figure below shows the demand and supply shocks in a number of sectors at the onset of the Covid19 pandemic.

a) Assume the retail trade, and education and health services markets are competitive and were at the market equilibrium before the pandemic. With the help of diagrams, explain the impact of Covid-19 on the market equilibrium in these two sectors.
b) Discuss some possible reasons leading to the supply and demand shocks in these two sectors (hint: you may want to focus on the situation in your country). (Your answer should be around 300 words.)

Question 4
The below table shows Marginal Propensity to Consume (MPC) by distribution of wealth and income, and by employment status, in a number of countries in Europe.
a) What story can you make of from this table regarding MPC within each individual country and across countries?
b) Explain why top wealth holders and income earners have a lower MPC than the bottom wealth holders and income earners. And why does the MPC vary by employment status?
(Your answer should be around 500 words for the whole question)

 

Question 5
As you are probably aware, rising inflation has become one of the top concerns of authorities and policy makers in many countries including advanced nations. As a result, central banks around the world have begun to increase interest rates to tame inflation. Take your country, or Australia, or the United States as a case study, discuss the recent inflation story in that country and policy responses (which have been introduced or should be in place) to put inflation under control. (Your answer should be around 400- 500 words)

Attachment:- Economic Analysis.rar