Reference no: EM132984168
HI5003 ECONOMICS FOR BUSINESS
Demand and Supply, and Elasticity
Question 1 After the devastating typhoon Haiyan in the Philippines, the government and donor agencies embarked on rehabilitating rice production to avoid hunger and starvation. As a result, Philippines experienced a rice bumper harvest which led to the equilibrium price to decrease to AUD 1.50 per kilogram. To reduce poverty, the government decided to increase the price of rice to AUD 2.00 per kg. Suppose the figure below represents rice production by Jane a farmer in rural Philippines, answer the questions below.
i. Examine the effect of government price legislation on Jane a farmer in rural Philippines
ii. Calculate the price elasticity of demand using the midpoint formula for rice.
iii. What is the price elasticity of demand for rice? Based on your answer, is rice a necessity? Explain your answer.
Production costs
Question 2 John was a high school teacher earning a net salary of $54,000 per year. After working for one year, he quit his job to start his own milk bar business. In order to start the business, John borrowed $40,000.00 from the bank and was paying 5 percent interest per year. Also, John withdrew $ 50,000 from his savings account. He had been earning 5 percent interest per year for this account.
John's first year of business can be summarised as follows:
|
Item
|
Amount $
|
|
Revenue- Fresh milk section
|
250,000
|
|
Revenue- Yogurt Section
|
180,000
|
|
2 Cashiers expense (wages per worker)
|
(40,000)
|
|
Truck expense
|
(80,000)
|
|
Manager expense
|
(60,000)
|
|
Milk sales assistant expense
|
(30,000)
|
|
Equipment expense
|
(50,000)
|
|
Motorcycle expense to ease movement in city
|
(30,000)
|
|
2 milk freezers (cost per freezer)
|
(5000)
|
Based on your calculations of accounting profit and economic profit, would you advise John to return to his teaching job or continue with the milk bar business? Show your work!
Market structure
Question 3
Adidas is one of the high-class sports shoe dealers in Melbourne with the following short run cost curves. Answer the question that follow
i. Use 2 characteristics to explain the market structure for Adidas Sports Shoe Company.
ii. Calculate this firm's profit or loss for Adidas shoe company.
Measuring the size of the economy
Question 4
The table below is extracted from Khada Republic, Bureau of Statistics records for 2019-2020. Use the information in this table to answer the questions that follow.
|
Item
|
Base year 2019
|
2020
|
|
Production
|
Price
|
Production
|
Price
|
|
Used cloth (units)
|
4,000
|
50.00
|
5000
|
60.00
|
|
Components used tractor factory production
|
8,000
|
500.00
|
11000
|
1,200.00
|
|
Cloth
|
8,000
|
25.00
|
12,000
|
30.00
|
|
Beef gifts during cultural festival
|
1,500
|
2.00
|
1,700
|
3.00
|
|
Milk litres
|
5,000
|
1.30
|
7,000
|
2.50
|
|
Computers
|
2000
|
500.00
|
2,500
|
600.00
|
|
Printers
|
500
|
300.00
|
400
|
355.00
|
|
Raw materials for car assembling plant
|
4500
|
250.00
|
4450
|
|
i. Calculate Khada Republic's nominal GDP, real GDP in 2020 and GDP deflator
ii. Examine the importance of a GDP deflator for Khada Republic
Inflation and unemployment, and Macro economics
Question 5
In order to improve the living standards of the people in Philippines after the devastating typhoon Haiyan, the government decided to increase the labour wage per hour from AUD 17.50 to AUD 25.00. Also, Philippines experienced structural unemployment and frictional unemployment.
i. What is the hardest type of unemployment that Philippines experienced as a result of typhoon Haiyan? Explain your answer.
ii. Use the figure below to examine the effects of the government minimum wage of AUD 25.00 in Philippines.
a. Examine the effect of government minimum wage of AUD 25.00. Assume the increase labour is equivalent to the total labour force and calculate the unemployment rate
b. The figure below indicates that the aggregate demand curve slopes left to right downwards. Explain the factors that account for the shape of the Aggregate demand curve.
Fiscal policy and Monetary policy
Question 6
The government of Australia has embarked on various policies in order to reduce the severity of COVID 19 on the economy.
i. Has COVID 19 caused economic expansion or a recession? Explain your answer using at least two economic effects on the economy of Australia.
ii. Examine the effects of the fiscal policy instruments that the government of Australia has adopted on the economy.