Describe criticisms leveled at kinked demand analysis

Reference no: EM131356198 , Length: word count:2000

Principles of Economics: Assessment - Short Answer Questions

Question 1: Imperfect Competition

(a) Explain why the soft-drink market in Australia may be regarded as an example of an oligopoly. How does this industry differ from a perfectly competitive industry? Compare graphically (use 2 graphs) the prices and outputs that would result under tacit collusion and non-collusive oligopoly.

(b) Describe at least two criticisms leveled at the kinked demand analysis.

Question 2: Market Failure and Government Policy

(a) If perfect markets allocate resources efficiently, why do we need government? In answering this question, make specific references to at least three (3) sources of market failure and explain the role of government in correcting each. Use diagrams to show how efficiency can be restored through government intervention.

(b) One form of negative externality is global warming and climate change caused by greenhouse gas emissions. Discuss at least three plausible policy alternatives to address this market failure.

Question 3: Introduction to Macroeconomics

(a) What are the latest figures for the unemployment rate, the growth of GDP and the inflation rate? [To find out, visit the Australian Bureau of Statistics (ABS) website at: www.abs.gov.au/].

(b) Based on your analysis of the above data, where would you place Australia in the business cycle? Explain your reasoning.

	Amount ($m)
Gross Private Domestic Investment	755
Government Consumption Expenditure	220
Government Investment Expenditure	95
Household Consumption Expenditure	3920
Taxes	300
Imports	475
Exports	380
Savings	-100

Using the data in above Table, calculate GDP and the country's Gross National Expenditure (GNE) using the expenditure approach.

Question 4: The Determination of GDP

The table below shows part of a country's aggregate expenditure schedule (in $ billions)

GDP	250	270	290	310	330	350	370
Aggregate Expenditure	280	290	300	310	320	330	340

(a) Refer to the above and calculate the expenditure multiplier for the economy. Assume that full employment is achieved at a level of GDP of $350 billion.

(b) Is there an inflationary gap or deflationary gap? Illustrate and explain.

(d) What effect does the minimum wage legislation have on poverty?

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Reference no: EM131356198

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len1356198

1/16/2017 11:57:04 PM

Diagrams must be drawn properly, correctly labelled and the relations they depict explained on the diagram and in the accompanying text of your answer. Answers must be complete, addressing the specific tasks nominated in the questions. Sources must be acknowledged in-text and a list of references provided using the APA Referencing Style. Where a question has more than one part, so too should the answer. Ensure complete coverage in the analysis section of your answer. As a minimum, students should reference more than two credible sources to answer theory-based questions.

1/16/2017 11:56:58 PM

Australian student, 1500-2000 words, diagrams and calculations if required. Use the DADA acronym when structuring your answers to all questions in economics. (Definitions: define the key terms; Assumptions: list or make assumptions as required; Diagrams: draw relevant graphs/tables and explain; and original Analysis: apply the theory to real life economic examples and explain). Please, you must read the chapters each week and work on the assignment questions progressively each week—which will prevent you from asking for extensions and also submit all assessment task on time to pass the course. So please follow a weekly study schedule. Concepts and key terms must be defined accurately and completely. The assumptions upon which the analysis is based must be stated at the outset.

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