economic assignment sample

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Improving economics teaching and learning for over 20 years

Student essays from the Economic Naturalist writing assignment

Provided by Wayne Geerling , LaTrobe University with grateful thanks to all the students who contributed.

Why would a consumer spend up to $4,000 on a fixie bike when a standard one is much cheaper?

How should one overcome the perils of online dating, why does steroid usage lead to an inefficient outcome for society, eggspensive taste: why do eggs that cost 95c a dozen to produce sell for up to $9.00.

• The Market is Amoral: Should you buy the last can of Coke on the shelf?

"Why are motorbikes exempt from paying fees on toll roads in Victoria?"

Why are designer denim shorts so expensive, does mcdonald’s three minute drive-thru service lead to better outcomes for society, how has the contraceptive pill contributed to the split in the relationship market in western societies, why are soft drink cans sold on aeroplanes half the size yet double the price of those sold in supermarkets, why are mobile phone calls more expensive than landline calls, why do some people choose to exceed speed limits whilst others do not, was my decision to live in reservoir rational, will the new red p-plate driver restrictions decrease or increase road safety.

Given the option of purchasing a road bike from Target for $99 that comes equipped with 18 speeds, brakes and front suspension support or a basic “fixie” bike for an average $1,000, which comes with none of the aforementioned items, which would you prefer? Interestingly enough, many of Melbourne’s younger generation are choosing the latter option.

A fixie bike is a  bicycle that has no  freewheel , meaning it cannot coast; the pedals are always in motion when the bicycle is moving. Fixie’s are associated with a young, hipster crowd; each individual rider identifies with other fixie riders because they ride the same bikes and a fixie culture is established. This fixie culture has created a lucrative market where suppliers are able to mark up the price of certain bikes and purchasers willingly continue to purchase.

The vast amounts of money spent on purchasing, but mostly modifying, a fixie bike is well in excess of what most young “Melbournites” would spend on the average consumer good. Having ownership of a luxury item such as a fixie allows the rider to attain a certain social status within friend groups, work atmosphere and the society that he or she rides.  A luxury item, economically speaking, is defined as a good or service where demand increases more than proportionally as income rises.

The social status attached to riding a fixie bike does not, alone, explain why consumers are willing to pay such hefty amounts of money for them. The niche market theory provides further clarification: specific demand requirements such as price, quality, demographics, etc, dictate the need for a specialised market to materialise. A successful niche market will have higher prices and a smaller market share than its competitors but be more profitable in the same product category. As outlined, niche markets depend less on the price of a good and more on the specific needs of the consumer. These needs can extend to brand recognition and other assets that the consumer wants to be associated with (e.g. prestige, environmentally conscious consumers, etc). The needs of fixie riders include brand recognition, the ability to modify the bike and make it a reflection of themselves, and social association.

Various literature, including websites and newspaper articles note that many consumers see appeal in the hardened image of riding without brakes (it is also worth noting that it is illegal to ride a bike without brakes in Australia).  In economic terms, this intended projection of image is called signaling: when one party conveys a certain image of itself to another party. In the case of fixie riders, they are signaling to other riders, and the general public, that they are young, fashionably conscious, hardened riders.

The decision to purchase a fixie can also be justified with a cost/benefit analysis: purchase if MB > MC. The benefits of riding a fixie bike include the increased social status and belonging to the fixie culture. A fixie can also provide the same benefits as a standard bike: exercise & cheap transportation. The costs of purchasing a fixie bike include the purchase of a bike (ranging from $600-$2000) and the modifications (a further $60-$2,000). The consumer’s marginal willingness to pay plays a major role here. According to the laws of economics, a consumer cannot be duped into spending too much money on their bike of choice, as they will only spend up to a point where MB = MC. If a buyer values a bike at $2,000, then he/she will pay not a cent more.

Purchasing a fixie bike may seem like an irrational choice for those who do not delve beneath the exterior motives of the rider. In reality, the underlying benefits gained through buying a luxury item, such as a fixie, provides recognition and many other intrinsic benefits to the rider. Although the price may seem excessive compared to a standard road bike, after careful research and the application of economic reasoning, it is apparent that a fixie is not just any bike. It is a “lifestyle changing” purchase.

Diana had been on OasisActive for over a month now and had yet to find a mate. Initially, Diana had a choice between two dating websites: OasisActive and eHarmony. She choice OasisActive because the opportunity cost was lower, as it is a free dating site (OasisActive’s comparative advantage). What she didn’t consider was that incentive of satisfying materialistic needs such as sex would not motivate men to register for eHarmony, as consumer price discrimination favours Oasis and features younger women – a trait valued by men. There was also greater information asymmetry in choosing OasisActive over eHarmony. Diana had attempted to attract a like-minded mate by listing “No Casual Sex” on her profile. This turned out to be a perverse incentive as it encouraged men to be deceptive about their intentions in order to increase their supply of sexual intimacy.

It was clear that whilst her opportunity cost for using OasisActive over eHarmony was lower, it had also reaped less net benefit. Her initial cost-benefit calculation had been incorrect. So Diana began to think, I’m still single, and the variable costs are mounting. She had made a large emotional investment into online dating. Diana knew she was dealing with sunk costs but was irrationally driven to wait for her marginal benefit to exceed her marginal cost to regain a feeling of value and worth.

As an economics student, she had also begun to realise she was in a very competitive market. She had been realistic about her purchasing power; she was attractive, though not supremely beautiful and she knew she needed to contend with women who were willing to lease instead of buy and who had maximised their total utility – at least in terms of superficial looks. Because OasisActive offered few metrics to measure compatibility, search and rejection costs accumulate, increasing marginal cost. Diana began to wonder; “at what point does my marginal benefit exceed my marginal cost and make this worthwhile?”

Diana was right to re-consider the costs and benefits of dating. She had dealt with much immorality in what should be an amoral market. After all, OasisActive is known as a dating site for youth and considering the time constraints, social commitments and friendship networks of such youth, how many want to commit to a serious relationship? Nevertheless, it seems the expectations of men and women entering the market seem to differ. Expectations are high, the quality of the product is low but the supply is high and equilibrium is therefore difficult to strike.

Men on OasisActive have lower standards for gratification and were less inclined to fall into emotional intimacy as their rational intellect prevailed over their emotional mind. In this way, men possess market power as they are price-setters. Women, searching for traits that are rarer amongst the male population on the website, are price-takers as they must reassess their willingness to pay in order to find a mate. What Diana realised is that this perfectly illustrated scarcity and shortage; men who fulfil the higher expectations of women naturally attract more attention. As a rational agent, Diana knew that her hopes of finding this man were unlikely; after all, efficient market hypothesis states that all the good ones are either taken or gay.

After a while Diana realised that her profile views were growing less frequent. Diana considered that by allowing searches by profile picture, the website was incentivising a superficial interaction between buyers and sellers and creating barriers to entry for women who did not post an attractive picture. Suddenly, her chat window opened – somebody was talking to her. After a few minutes of talking, however, she quickly cottoned on that this man was using game theory, and moreover, he had a dominant strategy! It didn’t matter what she said, the man was duly sympathetic and excitable at the times when he should be. He seemed so nice. When she questioned him about this, he became defensive. “Argh, she thought. This site is a perfect example of market failure!”

Diana had rejected guys who asked for sex before, and they quickly began to berate her and call her unsavoury names. Although she knew this was a technique to reduce her self-worth and therefore her purchasing power, she couldn’t help but feel terrible afterward, a negative externality.

Active, social young adults are especially prone to the influence of social norms, expectations and values systems as projected by their peers, parental figures and the media. It is no coincidence that Australia’s mainstream media is more concerned with idealistic images of beauty than with realistic representations of the human body. Media agencies are rent-seeking, trying to bolster private economic growth through political manipulation. They are reliant on advertising revenue for profit. The products sold in the advertising are driven by consumer need, therefore magazine publications have an incentive to ensure consumers believe they have a problem that needs fixing. This creates an obvious negative externality in perpetuating a social problem of low esteem.

Perhaps more than any other Generation, Generation Y (aged 18 – 29) is impatient and wants quick results. The quickest and easiest way to bulk up quickly is with anabolic steroids. Arguably, the greatest issue with confronting the popularity of the drug is the moral hazard involved. Steroids deliver instantaneous results with minimal short-term risk and thus, present great benefit at low cost to people looking to build fast muscle. What results, however, is an inefficient allocation of resources whereby growth is maximised early but habits for maintenance of those gains are not established. In this way, performance enhancers such as steroids do maximise utility but also incentivise lazy workout habits. So whilst short-term gains are good, the long-term risks of using steroids inevitably contribute to a dependence on government-funded health care.

It is also inefficient on a fiscal level whereby cash is fed into the black market – giving dealers market power, who can then price gouge – and not into the private sector, to nutrition companies who can then further invest in research and development to yield better quality produce. If this were to be a government regulated market through decriminalisation, information asymmetry would be reduced by rule of law and competition will drive the price down. If governments were to control the supply of performance enhancing drugs, taxation could be used to supplement government revenue.

As steroid abuse is potentially addictive, it is possible that a percentage of heavy users of steroids would have perfectly inelastic demand for the good. The government has made steroid use available through prescription, which some addicts are using to obtain quality-controlled goods. Although the government is signalling that steroid use is not condoned, they still offer market access for steroids legally for legitimate medical reasons. Through screening for loopholes and access to corrupt doctors, the system is adversely selected by addicts who are able to circumvent the system. This, however, is the only mechanism preventing drug dealers from possessing scarcity power, even if it does, in some way, act as a perverse incentive. On a personal level, it could be that wealthier steroid abusers stockpile the drug from prescriptions and experience free-riding from addicted, less financially stable friends.

Whatever the case, it can be assumed that the market for steroids is populated by people serious about fitness or muscular development. If young people where to consider the benefits of health and nutrition education, they would be able to up-skill, gain employment within the sector, raise capital to build muscle and receive discounts on health products. Furthermore, it is ironic how irrational behaviour leads people to choose low-hanging fruit instead of healthier, more sustainable substitutes to muscle growth.

Despite the trade-offs and opportunity costs – including reduced health at older ages for dependant users -, steroids still apparently deliver strong return on investment. Revealed preferences theory proves that social welfare is not considered, and that marginal benefit clearly outweighs marginal cost. This goes some way to explaining how the market for steroids is still active. The greatest consideration, however, is the impact steroid abuse has on society.

There are many negative externalities associated with steroid abuse, such as improper disposal of needles polluting the public sphere. The broader problem, however, is that it is counter-intuitive to efficient level of crime. Steroids are of more value to patients in rehabilitation than to recreational users, so the commodities, or resources, are inefficiently allocated in the market (where marginal social cost outweighs marginal social benefit). The side-effects of the drug such as steroid-induced rage may lead to statistical discrimination against the body-building community and could have permanent effects on the hedonic treadmill due to its hormone adjustment. Another consideration is that income inequality contributes to steroids being used in higher-income areas, where physical health is an affordable hobby. This could potentially lead to segregation between recreational performance-enhancing drug addicts and psychotics or depressants in different socio-economic regions. Whatever the perspective, economically, steroid use is an inefficient outcome for society.

How is it that supermarket’s are able to sell eggs at such a mark-up price? A dozen eggs can sell for anywhere from $2.39 to $9.00 in a supermarket in Melbourne (All prices quoted in this essay are based on figures obtained from Coles supermarket in Greensborough on 10 October 2010). What causes such a price differential and why do people pay for the more expensive eggs? The answer lies in the economics of everyday life.

It costs a Victorian farmer approximately 95c to produce a dozen eggs. Current wholesale prices being paid to farmers are up to $1.60 per dozen. On shelves in local supermarkets, eggs cost anywhere between $2.39 for the no frills home brand eggs to $9.00 for homestead laid, free range eggs. Supermarkets are able to artificially inflate prices using many techniques, such as product placement, packaging, branding, asymmetrical information and signalling.

The first thing that is obvious when you walk up to the egg section is the abundance of varieties available. The supermarket singles out those who place a high opportunity cost on their time by the way the eggs are placed on the shelf. Customers who are relatively insensitive to prices won’t take time to compare and are likely to grab the box that is easily accessible with packaging that quickly appeals to them. It should come as no surprise then that those with the highest prices and mark-ups are located at eye level in easily accessible spaces.

The way in which different eggs are packaged signals different things to groups of customers. The cheapest options are found in egg cartons with the basic information printed in black with little or no colour, whilst the more expensive eggs are more vibrant and eye catching. These design techniques have no impact on the quality of the eggs in the box; however it signals to the consumer that the eggs are of differing quality. This is targeting customers with varying levels of willingness to pay.

Packaging style is not the only way in which prices are gouged by the supermarkets. Labels on how the egg was produced and under what conditions are used to increase the buyer’s willingness to pay. Supermarkets price target different segments, which are more sensitive to certain situations. Eggs labelled as being “locally produced” attract a mark up of 66%. The eggs that donate 20 cents a box to charity cost the customer an extra $2.60 to buy. Eggs produced to RSPCA standards attract an 88% mark up. Each product is aimed at a different consumer, and is designed to identify and exploit that customer’s marginal willingness to pay.

Asymmetrical information plays a large role in the ability to impose such large and seemingly arbitrary mark-ups. A dozen caged eggs cost approximately 95c per dozen to produce. Barn laid eggs cost 25% extra to produce, and free range eggs 50% more. Supermarkets charge mark-ups of up to 109% for barn laid eggs and 276% for free range! The average customer will be unaware of the production costs and therefore be more willing to accept that they must be so much more expensive.

 Customers will purchase eggs that have been laid free range for two dominate reasons: they object to chickens being caged or they believe that free range eggs are of higher nutritional value or quality. Whether it has been laid by a chicken in a cage barely big enough to fit the chicken or on a farm with kilometres of open space, the end product is simply an egg. Research done by the US Department of Agriculture found that there were no nutritional benefits to free range eggs. As you are able to inspect eggs before purchasing, the quality is assured, regardless of whether they are free range or caged. Therefore, supermarkets are effectively putting a price solely on your conscience.

With all of these techniques the supermarkets strive for perfect price discrimination, where the buyer will be charged the highest price they are willing to pay for a product. Leakage occurs when customers who are willing and able to pay a higher price for eggs choose the relatively inexpensive home brand eggs. But what is the loss to the supermarket? They still make a profit margin off these eggs, even if it is less than the mark up on their ‘premium’ eggs.

So how can a supermarket openly display such price disparity, yet customers willingly choose the more expensive products? Although they cannot practice perfect price discrimination, what they do is employ economic techniques such as signalling, information asymmetry and price targeting in order to identify those customers with the highest marginal willingness to pay, and increase profits as a result. If you feel ripped off in the knowledge that you paid $9.00 for eggs that are for all intents and purposes the same as eggs less than a third the price, next time choose differently.

What the hell is ‘amoral’?

Amoral is a neutral term which infers that something is neither good nor bad. Economic markets are amoral; they are a ‘forum’, for lack of a better term, where goods and services can be traded. Markets vary - they can be good, bad and sometimes ugly, for example the market for renewable energy or volunteering in Africa may seem saintly compared to the crack cocaine markets of inner city Ghettoes, or the gun market in Mogadishu. Although both of these sit at opposite ends of the moral spectrum they both operate in exactly the same way: they are simply offering different goods or services. If we accept Mr. Paul Zak’s inference that almost all people do have some altruistic moral fibre then why are gun merchants selling arms to child soldiers?

Why do they feed Paris?

One of the most important ten lessons in economics is that people respond to incentives, so if a person sees an incentive in selling an AK-47 to a pre-pubescent child, they generally will. The market answers the question of “who feeds Paris?” and incentives answer the question of ‘why’. People seek to maximise their utility; they do so by selling their labour or commodities to the market. In the more eloquent words of Charles Wheelan “these guys don’t care about upscale diners in Paris. They care about the wholesale price of fish” [1] . Markets organise themselves through people’s patterns of behaviour and this behaviour is governed by an incentive: for a person to be better off than they were before.

I guess at this point you are probably asking “what does this have to do with the last can of Coke on the shelf?” People face trade-offs every day; the money a person spends on a can of Coke could have easily been spent on a chocolate bar or a cigarette lighter. Therefore, if someone buys a can of Coke it is safe to assume that this product was the most important thing to them at the time. Now imagine this was the exact same case for a separate person, only with one problem: two people want a can of Coke more than anything else that is the same price and in the near vicinity; however, in this case there is only one left. By Smithian logic the best possible thing for the market is for both actors to behave in a self-interested manner, but will this lead to the best possible result for the market?

Let us assume for a moment that the market is founded on a different basis to Smith’s self-interested perspective, maybe one of “morality”. Morality is an elusive term so we will substitute it with ‘altruism’ to make it easier. Would the market be better off if this were the case? The simple answer is ‘no’. If both parties vying for the can of Coke acted altruistically, which is to say they both sacrifice their own want for that delicious beverage, making it available to the other. In this scenario there is an asymmetry of information - neither party knows the value of the Coke to the other person. The best approach for both people now would be to send a ‘signal’. They reveal information to the other person and as a result the ‘receiver’ adjusts his consumption behaviour. If, for a number of reasons, any information is ‘not received’ (misinterpreted, poorly sent) then we have what is called a ‘separating equilibrium’.

Let’s play the Moral Bayesian game!

Sending signals sounds much simpler than it actually is. The problem is that much of the information sent, even in a rather simple scenario of trying to quench your thirst for caffeine cola, is incomplete. Put simply (or at least attempting to) both players (the two Coke consumers) are trying to understand the ‘nature’ of the other; however, there are too many factors which can be ‘misinterpreted’. Essentially, the only information that both people have is that the other is going to act altruistically and as a result questions begin to arise like how thirsty are you? Have you had a hard day at work and would a Coke make it better? These are potentially all categories of information which need to be revealed for both people to establish who wants that can of Coke more.

Acting morally could lead to negative externalities.

Let us now imagine that both players do not arrive at a conclusion. Instead they both decide not to purchase the Coke because of the quaint idea that one will benefit at the other person’s loss. In effect they are in collusion, but it is a cooperative pact that is actually not ideal for all parties involved. Before you think this is turning into a Dostoyevsky novel with 70 characters, I will assure you there is only one more person involved in this transaction. That person is the one selling the Coke of course. As a result of the two people deciding not to purchase the Coke due to altruistic tendencies, the shop owner loses. Actually, everyone loses. The two individuals who want to buy the Coke incur the opportunity cost of the time it takes to learn the ‘value’ of the other and the shop owner does not sell his can of Coke.

If this was how an altruistic market operated (in very simple terms) then it would most likely fail due to the large part that asymmetry of information would play. Fewer transactions would occur because of consumer altruism and a change of incentives, which basically means people are no longer trying to make themselves better off than others. This may have a positive effect on markets mentioned before, like drugs, however how would this affect everyday markets? For one, you would definitely be paying double for almost everything. In other words next time you are at the shop and staring at the last can of Coke on the shelf, just buy it. Unless of course you derive more benefit from allowing a nice young lady, or large under-caffeinated fridge with a head, to purchase it.

[1] Charles Wheelan, Naked Economics: Undressing the Dismal Science , W.W. Norton and Co. (New York), 2002, p 12

While it may seem like a pointless loss of revenue for CityLink [2] to not charge bikers for their use of toll roads, it makes economic sense to leave them exempt from the fees, which, for a 24 hour pass, ranges from $4.70 (car) to $21.25 (heavy commercial vehicle). Motorbikes cause less congestion than cars and emit much less pollution from their considerably smaller capacity engines. Cars are charged by way of e-tags kept inside the cabin. An e-tag for motorbikes would have to be weatherproof and the costs involved in developing such a device may be too great.

Some might argue that motorbikes, regardless of their size, still contribute to the traffic congestion dilemma. Any “crowding out” effect that people may contend is basically negligible. Even if there has been an increase in the numbers of riders using toll roads, traffic congestion has not become considerably worse. In fact, it may have taken motorbike traffic off public roads and spread it out over both public and toll roads, creating improved traffic flows across all metropolitan areas.

The typical motorbike has a much smaller engine than even a small car. Hence, the pollutants emitted by motorbikes are far less than those emitted by cars on average. In order to reduce pollution, providing free travel on toll roads for motorbikes is a strong incentive for commuters to make the change. Improving air quality became pivotal for CityLink when the smoggy air in both its tunnels appeared to be worsening. A rational way of reducing the poor air quality was to allow free travel for vehicles that contribute very little to the pollution. This, along with some improvements to the ventilation, eradicated the thick smog.

Cars are chargeable via a simple e-tag that gets scanned at each toll gantry along the CityLink. It needs direct line of sight with the sensors and has variable beeps to indicate different things to the driver. An e-tag for motorbikes would need to be able to resist the elements and still somehow communicate with the gantry sensors and the rider. To develop a different e-tag capable of doing all these things would increase overall costs of production for CityLink. Given the relatively small impact bikers have on CityLink's efficiency in reducing traffic congestion, it appears that e-tags for motorbikes would lead to marginal costs being greater than marginal benefit (MC > MB).

Furthermore, to maintain marginal profits after developing motorbike e-tags, CityLink would have to raise prices, deterring car drivers and most bikers. Bikers' demand for CityLink is quite elastic since there wouldn't be much difference riding on CityLink or public roads during busy periods. These price increases would then impose a negative externality on the car drivers who now face higher prices for the same good. The opportunity cost for bikers returning to public roads after fees are implemented reduces very quickly. In this sense, not only is the positive externality of not charging riders being the reduced congestion and pollution but also the lower prices charged to car drivers!

To some it may seem unfair that bikers get a “free lunch” and they will argue that a free-rider problem may ensue as a result. While the bikers may essentially be getting an actual free ride on toll roads, this case is not leading to any significant negative effects. As mentioned earlier, there is no overuse of the good and it can’t lead to any underproduction from lack of funding because the capital has already been funded and constructed. By eliminating this free-rider situation, the entire system will suffer as a result. For once, a free-rider situation is beneficial.

To conclude, while there are certain arguments promoting fees imposed on motorbike riders, it would simply be a poorly judged trade-off to charge them. Motorbike fees would raise CityLink’s prices across the board and it would see very little usage by riders given their highly elastic demand for toll roads. The costs involved in producing vastly different e-tags to those already in cars would be a huge cost - one that’s best off being avoided as the return on this cost is very low. Given the agility and small size of motorbikes, they don’t increase traffic congestion and have little reason to be charged as they don't sit behind traffic but simply ride through it. While it may be seen as a free-riding issue, these riders using the toll roads are not over-using them and only very minimally “crowding them out”. All in all, the current system of free travel for bikers is Pareto inefficient in that by making one party better off, other parties are not seriously worse off.

[2] CityLink is a 22-kilometre automated tollway in Melbourne, which is divided into two sections: the Southern and Western Links. It connects the Tullamarine Freeway, the West Gate Freeway and the Monash Freeway. CityLink roads are clearly marked with blue and yellow tollway signs.

As the weather has been changing for the better recently, I have been on a regular hunt for shorts. Picky as I am, I have been browsing through many shops in order to find the ideal pair to be included in my summer apparel wardrobe. During my search, I stumbled upon something my inner economist found peculiar: the price of so-called “designer denim” shorts costs anywhere from $150-$250! [3] Since denim shorts use roughly half the amount of fabric as a pair of jeans, one could rationally assume the price would reflect this. Seeing as this is clearly not the case, why exactly is it that designer denim shorts are so expensive?

Many apparently 'obvious' reasons why designer clothing is more expensive than the alternative generic brands initially come to mind. Often, I have heard: “designer clothes are equal to prestige and exclusivity”, “they provide a better fit”, “the quality of the materials is higher”, “remember that much time is spent on the innovation and designing process”, etc. And while there is definitely some truth to all of those statements, I would like to argue that other factors also contribute to the higher price. After all, denim is denim and there is only so much that you can do with the design of shorts.

We are dealing with a standard market. The designer firms wish to make profits (and attempt to maximise these) by delivering goods we want to buy and we, individuals, simply want to maximise our utility. By applying market theory, the answer to my posed question is simply: the reason these shorts are set at the price they are is because the consumers’ marginal willingness to pay for them equals or exceeds their value (marginal benefit > price). Thus, the interesting question now becomes: what utility is it that consumers derive from denim designer shorts? And why is their willingness to pay so high?

Appearance and being fashionable explains some of it. For example, men who wish to date attractive women would be very interested in increasing their ‘purchasing power’. By wearing more expensive, designer clothing it could be argued that men improve their physical appearance and thus signal a higher 'value'. As designer clothes do signal values like prestige and exclusivity, they do send a clear message to potential dates: I am wealthy and fashionable. Since women generally regard men with higher incomes and higher social status as more desirable marriage partners, men can take advantage of this signaling and consequently their marginal willingness to pay for designer shorts rises.

Another reason relates to the pursuit of happiness. The research of Robert Frank has proven that being rich does not necessarily equal being happy due to the fact that our expectations and aspirations adjust over time. Nevertheless, having certain positional goods, for some, is important for a general sense of self-value and level of contentment. Some people simply feel happier if their relative position to others is better. Unfortunately, a relative position implies that you can only get ahead if somebody else falls behind. As consumption is important in relation to relative position, people wishing to have this ‘higher’ status must continue to buy designer clothing. This again affects one’s willingness to pay.

Lastly, I think it can be argued that designer companies try to create scarcity in the minds of the consumers through advertising. The different labels are in need of some degree of market power to actually sell their products at above normal economic profits. They achieve this by differentiating themselves through price, design, advertising, etc. This differentiation is so important because, if excluded, denim shorts could be categorised as a fairly homogenous product, i.e. shorts are shorts. If consumers think the same way, then firms’ profits would be under threat. Many labels supply denim shorts. If, for example, Generic Shop B undercut its competitors, Design Shop A would quickly lose all of its customers, and a bidding war would start between the shops selling denim shorts, eventually driving the price down to where price equals marginal costs i.e. no economic profits.

Therefore, labels try to create a perception of premium value and, to an extent, a sense of scarcity through proactive marketing efforts essentially saying: “There is only one company that delivers, for example, “Diesel Shorts” and these are worth much more than the next best alternative”. These branding efforts create the perception of premium associated with the product in the mind of consumers. Consequently, the designer products become price inelastic for consumers and the designer companies are able to capitalise on this by reaping above normal economic profits.

[3] Denim is the rugged cotton twill textile that jeans are made of.

McDonald’s restaurants have been at the frontier of the fast-food industry in adapting their service to better suit their customers’ preferences. The competitive nature of the industry forces them to be dynamic. Hence, they recently introduced a three minute timer on Drive-Thru meal orders. If a customer’s Drive-Thru order takes longer than three minutes to fulfil, that customer will receive a free burger on their next visit. This seems fair enough: waste a customer’s time, then make it up with a freebie. However, the overall effects on society are ambiguous.

A McDonald’s employee would ideally like to uphold their three minute promise to signal to their superiors that they are an efficient and more valuable worker. The manager can use the number of free burgers each employee is giving away (among other metrics) as a form of screening to decide which employee is more valuable to the restaurant. The better employees may be rewarded to provide the incentive for increased labour productivity while other employees may be reprimanded or fired for poor performance. These improvements in labour should, in theory, increase McDonald’s overall profit.

On face value, this policy should make McDonald’s restaurants better off financially and improve their consumer image. Customers whose Drive-Thru order is too slow would receive a free burger, but not immediately: the burger is claimable on their next visit. When they return to the restaurant to claim their burger, they might come with a friend who in all likelihood will make a purchase. The customer who claims their free burger might make an additional purchase, say chips and coke. These extra items are complementary goods to the burger because they are normally consumed together. McDonald’s would generate a tidy surplus on these goods, as they otherwise would not have been sold. In this case, the extra trade and profit generated more than covers the cost of supplying that one free burger. Assuming customers return to claim their free burger, McDonald’s increases its market power over rivals (provided they do not imitate).

The Drive-Thru Promise is not a perfect, flawless policy. It has many drawbacks which can be traced back to the law of perverse incentives where unintended or undesirable outcomes result from a policy’s implementation. For instance, say an employee must fulfil a customer’s order, but is running out of time. That employee would prefer not to give a free burger as it will reflect poorly on their performance. Hence, there is an incentive to deliver an order on time, even if it is not ready. By using marginal cost-benefit analysis, the employee will determine if it is worth the risk of being caught undercooking a customer’s meal or leaving items out of the order just to get the meal in the customer’s hands before the time is up. McDonald’s would not condone its employees behaving in such a way, yet their policy has the potential to lead employees to act in their own best interests, which will be at the customer’s expense.

The customer is not always worse off as a result of perverse incentives. McDonald’s assumes that consumers will continue to buy from their store, with only the odd free burger when a meal is late because of understaffing or a busy front counter. Yet the Drive-Thru promise night cause consumer habits to change. Drive-Thru customers may try to rort the system in order to increase their chance of receiving a free burger. A customer could drive slower, fiddle with their money and make complex and confusing orders in the hope that the order will take longer than three minutes to fulfil. This customer sees a free burger as maximising their utility, or their enjoyment, and will act in a way that allows them to achieve this. However, if every customer decided to employ this strategy, McDonald’s will be giving away too many free burgers (possibly causing a decrease in profit) and will have to either increase the price of their products or scrap the policy altogether. This is known as tragedy of the commons where multiple agents, while acting individually in their own best interests, cause a long-term outcome which is bad for society (and not initially intended).

McDonald’s is the first franchise in the fast-food industry to implement a three minute Drive-Thru policy, giving them a first-mover advantage over other restaurants. The actual effectiveness of this policy really depends on where customers and employees draw the line in terms of how much utility a free burger brings them. If consumption and supply habits do not change, the policy’s only effect should be positive: an increase in sales volume.

Some modern luxuries we have taken for granted, such as cars, mobile phones, even the contraceptive pill. The contraceptive pill has long been voiced as a liberator of women, allowing frequent sexual experiences without the unintended (negative) externality of becoming pregnant, therefore lowering the cost of premarital sex. Over time it has come to light that some perverse incentives from the regular use of the contraceptive pill have split the unitary relationship market from one in which you find a long term partner into two: a sexual market and a relationship market. Other factors may also be responsible for this split but here I will mainly concentrate on what extent the contraceptive pill has split the relationship market.

The relationship market has extensively been considered as a place of courtship for people considering finding ‘the right person’ and settling down. This does not exclude sexual activity but places the emphasis on establishing a deeper connection and possible long term future relationship. Over time though, there has been a greater emphasis on sexual activity without the ‘strings’ of any type of relationship attached, basically one night stands/sexual partners. This split puts some strain on the aforementioned relationship market as there are now more options for both men and women to indulge in either market, though the levels of scarcity and bargaining power for either sex are different across the two markets. In the sex market, women are found to have a higher bargaining power as men are the majority of consumers in this market. The relative scarcity of women in this market means that men have to engage in higher sunk costs like buying new clothes, spending money on drinks for girls and taxi cabs for the ultimate product: sex. Whereas in the relationships market men have the higher bargaining power because of their scarcity as they are filtering out to stay in the sex market longer. With this understanding, we can look at how the contraceptive pill has attributed to the split in the relationship market.

The contraceptive pill has lowered the cost of having premarital sex by all but eliminating the possibility of falling pregnant, encouraging a split within the relationship market. The commodity most in demand in the sex market is sex and when men have a higher willingness to pay, women hold the bargaining power and can be a little more picky, creating personal, pardon the pun, barriers to entry. A woman in the sex market will determine what age bracket, occupation, physical attractiveness and other qualities she will be willing to exchange her goods for. At any given point in time, women of similar appeal to a man, may find themselves in an oligopoly situation where to remain competitive they have to lower their standards but only slightly to accommodate for outside competition. In the relationship market, it is men with the bargaining power and women who make compromises to fulfil their desires of starting a family and being in a committed relationship. Even though the contraceptive pill may have encouraged the split in the relationship market, other factors in human development should also be taken into consideration.

Over the last 50 years, women have gained unprecedented ground when it comes to rights and independence from men and the development of the pill contributed to this freedom by taking away the possibility of falling pregnant. Other factors that may have also contributed to this split are the sexual revolutions of the 1970’s and women being able to hold more prominent jobs in society, both of which have led women to consider having children at a later age.

As much as the pill may have encouraged a split in the relationship market, it was a contributing factor to a wider set of events. This miracle of modern science was supposed to liberate women from what was once an undesirable set of circumstances and be enjoy the freedom of promiscuity as practised by men but instead has encouraged a perverse incentive by enabling the split of the relationship market.

In today’s globalised world, aeroplane flying has become a part of everyday life for most Australians. With flights going cheap and the increased ease of booking a ticket, more people are flying in the air than ever before. Recently, while onboard a flight from Melbourne to the Sunshine Coast, something caught the attention of my ‘economic brain’. The woman beside me ordered a soft drink as well as a ham and cheese sandwich. Although the sandwich looked nice enough, it was the small soft drink can that caught my attention and made me ponder the question, “Why are soft drink cans sold on aeroplanes half the size, yet double the price of those sold in supermarkets?” Although some answers to this question may be obvious, my ‘economic brain’ went to work and came to the conclusion that several economic concepts were at play and they give some insight into why passengers pay so much for so little.

Onboard three out of four domestic flight carriers within Australia, food comes at an additional cost to the price of the ticket. This is one of the consequences of buying a cheaper ticket: you are paying for the seat and nothing else. Once onboard the flight, food and beverages are available to passengers at a price. Looking at the in-flight menus of both Jetstar and Virgin Blue, a 200ml soft drink can will cost a passenger $3.00 [4] . A standard soft drink can sold in a supermarket is 355ml and can vary in price from $0.70 cents to $1.50. There is a vast price difference between these two scenarios (buying in a supermarket v on a plane), which can be explained by the scarcity of the soft drink, pricing policies, willingness to pay, the existence of a captive audience, price gouging and relative market power.

There is only a small amount of space onboard an aeroplane that can be allocated for food and beverages. This exacerbates the level of scarcity. Flight carriers stock small cans in order to increase the quantity of cans without having to increasing the holding space of the scarce resource. Unlike supermarkets, the cans cannot be sourced from other locations such as storerooms and external warehouses, meaning there is only a finite supply for any given flight. Given this constraint, soft drink cans have a relative long shelf life, meaning the airline does not have to sell the cans within a certain flight and they can be rolled over to other flights. Airlines exploit this relative shortage by engaging in price gouging, setting prices that are higher than that of a competitive market. The airline becomes a de-facto monopoly once the plane is in the air. As there is no alternative supplier and the audience is a captive one, in theory, airlines are able to charge a price equivalent to a customer’s highest marginal willingness to pay, extracting all consumer surplus.

A consumer’s demand on a flight is less sensitive to price, hence, willingness to pay is much higher than when buying from a supermarket. In this situation, the passenger is not being “ripped off” by the airline because if their willingness to pay is lower than the price they are being charged, they will not buy the good. If they do buy the good, it confirms that the value the passenger places on the soft drink is at least equal to the price charged – in this case, much higher than for a comparative can from a supermarket.

Onboard the flight from Melbourne to the Sunshine Coast, the woman who sat next to me bought a can of soft drink, even though she was hesitant to pay the price at first. Many people would argue the price charged was extreme, but my ‘economic brain’ came to the conclusion that the price is in fact reasonable given the laws of supply and demand at work.

[4] Jetstar In-flight Menu: http://www.jetstar.com/~/media/files/pdf/refreshments/jetshopcafe.pdf

Virgin Blue In-flight Men: http://vlicious.realviewtechnologies.com/

For many Australians, mobile phones have become an indispensible everyday tool. Many rational consumers might wonder why a mobile phone call is relatively more expensive than a fixed landline call. There are dozens of factors that determine retail telecommunication pricing structures. Many consumers dismiss high call costs as a form of being ‘ripped off’ without considering various factors. The following essay explains some of the reasons behind relatively high mobile phone call costs with the aid of various economic concepts.

An attractive component of many mobile phone contracts is the provision of a ‘free’ (or heavily discounted) handset – effectively acting as an incentive. Some consumers fail to realise that these handsets are hardly ‘free’ – there is no such thing as a free lunch. The provider recovers the cost of subsidising the handset through call rates that are greater than what they otherwise would be.

Mobile telecommunication providers encounter significant and immediate fixed costs in the provision of their services. Unlike landline copper network infrastructure that was built many decades ago (by Telstra’s government owned predecessor– Telecom Australia), mobile phone companies have been forced to build mobile phone reception towers and related infrastructure in a relatively short period of time (since the 1990’s) and must continue to build them as demand continues to increase. The cost of building this infrastructure runs into hundreds of millions of dollars and must be recovered from the consumer. Some of the high mobile phone call cost is reflected by the fixed costs incurred by the company.

Some consumers may believe that mobile phone calls should be billed per connection (as is the case for local landline calls) as opposed to a timed tariff. These consumers may not understand that wireless capacity is a scarce resource; there are a limited number of calls that can be supported in a particular geographic area. It is inevitable that some consumers would exploit untimed calls and unnecessarily prolong their conversations whilst tying up scarce wireless access to the detriment of those that really do need to make a call. To ensure that consumers are able to have access to the network when required, the pricing structure needs to reflect the fact that such access is a scarce resource.

There are relatively few mobile phone networks in Australia. This concentrates the mobile phone market into only a few companies, thereby creating an oligopolistic market. There could be an argument that these networks exploit their market power and keep their mobile phone call rates artificially high due to lack of greater competition. This means that such companies effectively engage in price gouging. The steady rise of mobile phone users and the increased integration of these devices in our everyday lives demonstrate to the mobile phone companies that the demand for their services is probably inelastic. Inelastic demand for services provides a perfect opportunity for the extraction of consumer surplus. Mobile phone companies know that consumers will continue to value the benefits of mobile telephony and continue to pay relatively higher prices, even if the prices appear to be unreasonably high.

Greater competition is difficult to achieve in this industry due to barriers of entry, three of which particularly stand out:

• There are significant up-front fixed costs involved in establishing a viable mobile phone network. Many individuals / companies do not have access to such capital.
• Due to the technical nature of wireless telephony, there is limited wireless spectrum that the government can auction off to these companies. The scarcity of wireless spectrum significantly raises the cost of the relevant bids / licenses.
• Australia may not have enough consumers to provide the large customer base necessary to make a mobile phone telecommunications venture viable.

Finally, there may be a case of asymmetric information. A standard SMS message sent over the two largest mobile phone networks in Australia costs a consumer 25 cents. How is an ordinary consumer to know if this reflects the true cost of sending a SMS message? It is possible that the mobile phone companies know that the consumers cannot know what the true operating costs are and therefore exploiting this ignorance.

There is no question that mobile phone services are becoming increasingly important in our everyday lives and similarly that mobile phone calls are comparatively more expensive than fixed landline calls. The above has demonstrated that this cost difference can be at least partially explained through subsidies, fixed infrastructure costs, inelastic demand, asymmetric information, concentrated market power, barriers to entry, price gouging and scarcity.

Despite a saturation of government campaigns and tough penalties, some motorists consciously choose to exceed speed limits. Many people label such drivers as irresponsible ‘hoons’ that seek an adrenaline rush from travelling at high velocities. Whilst this may be true for some drivers, this widely held view is a simplistic interpretation of the complex decision making process that many drivers, possibly unknowingly, undertake prior to exceeding the speed limit. Economic theory is a useful tool in explaining why some motorists choose to do this – as will be demonstrated below. A seemingly simple issue has a surprisingly complex economic explanation.

In many cases, exceeding the speed limit allows people to arrive at their destination sooner. This can represent a time saving that ranges from minutes to hours. Driving at the speed limit represents an opportunity cost – the extra time required to obey the law is time that is lost that could be used for the pursuit of other activities. If this were the only consideration, most motorists would consistently ignore the speed limit. Motorists caught speeding are usually fined – this is a (literal) cost that many take into consideration. Given the opportunity cost of time and the potential cost of a fine, motorists (often on a subconscious level) assign a value to any potential time saving gained through speeding. If the benefits of saving a certain amount of time outweigh the costs of potentially getting caught and paying a fine, the driver is likely to exceed the speed limit.

Some motorists choose to exceed the speed limit because they seek the thrill of travelling at high velocities. Whilst such drivers are not necessarily a mutually exclusive group from the category of drivers that are intent on saving time, for the purpose of this essay it is assumed that they are. High speed driving for thrill seeking purposes can be considered a high risk activity that significantly increases the chance of injury or death should the driver lose control of the vehicle. Armed with this knowledge, the driver performs (an often subconscious) calculation where the benefits of a high speed thrill are weighed against the costs of injury or death. If the driver values the thrill greater than their life, he/she may decide to exceed the speed limit.

Some drivers may employ marginal analysis when considering whether they should exceed the speed limit. Freeways often designate speed limits of 100km/h or more. Many drivers appreciate that if they were to be involved in a crash at that (legal) speed, the chance of survival is relatively low. Therefore, some drivers may reason that by exceeding the speed limit by (for example) 10 km/h to bring their speed up to 110km/h (for one of the reasons outlined above) may not significantly impact on their chance of survival in the event of a crash. Given that governments tend to install fixed speed cameras along freeways, one can assume that this form of marginal analysis is quite common amongst some motorists.

Exceeding the speed limit carries many negative externalities on other members of society. Aside from noise and air pollution, speeding motorists may endanger the lives of other road users. Many decades ago, the government tried to combat these externalities with mandatory fines. Some motorists that are on relatively high incomes and choose to exceed speed limits may have an inelastic response to generally high fines that are indexed for inflation each year; other motorists will continue to speed no matter what the monetary cost is. In response to this, the Victorian government introduced a demerit point system where traffic offenses, including exceeding the speed limit, are penalised with the accrual of demerit points as well as being fined. Once a threshold is reached, the driver may have their driving license suspended for a prescribed period. The demerit point system affects all motorists equally (i.e. irrespective of income). Assuming that most motorists regard their drivers license (right to drive) as precious, there is a significant disincentive for the vast majority of drivers (that wish to legally drive) to exceed the speed limit.

It is inevitable that some drivers will elect to exceed the speed limit. Assuming that they are rational economic agents, a complex economic assessment will occur prior to any decision to break the law. Drivers may consider the opportunity cost (time) of travelling at the speed limit, or perhaps they value the thrill of excessive speed more than their life, or maybe the driver decides that when driving at a legal high speed, the marginal cost of increased death or injury is negligible compared to the benefits. It should be noted that the vast majority of drivers do not exceed the speed limit as they are deterred by fines and demerit points. Regardless of a motorist’s decision in relation to excessive speed, it is certain that economic considerations are involved – often without them even realising.

Being a student is not the most profitable profession. Therefore, the cost of rent was a major factor when I was deciding where to reside during my period of study exchange at La Trobe University in in Melbourne.

Having done my research from Denmark, I had it narrowed down to two options:

Stay in Fitzroy/Carlton (F/C): close to the city but 15-20 kilometres from La Trobe University

Stay in Reservoir/Bundoora (R/B): close to La Trobe University but far from the city.

There were, as there are with everything in life, trade-offs involved in each choice. Rent in Bundoora was roughly $40/week cheaper than the places that I had found in F/C, and I was quick to opt for a house close to La Trobe under the impression that I was saving money this way. Having had my inner economist awakened, however, I now want to take a closer look at this decision.

It is now apparent to me that I did not include all of the relevant costs when deciding between the alternative housing situations. Internet, food and utilities are all going to be roughly the same, both in normative price, as well as in usage level. On top of that, seeing as I have a job in the central business district [CBD] and go to university, in either scenario I would have bought a monthly zone 1 concession ticket (transport costs will be the same). What I really failed to take into account, and what would turn out to tip the 'rational scale' against me, was money spent on going out.

Being a young university student, I enjoy the odd night out in the city now and again. These nights tend to occur roughly once a week (4 times a month on average) and usually amount to approximately $100 per night for alcohol and a souvlaki. The problem though is: by the time I get to my 4 am souvlaki, the only means I have of getting home is taxi. Through empirical evidence from my own past, I can conclude that a Saturday night taxi ride from the city to home costs roughly $40 (or $160 per month). This shows that, based purely on the cost of nights out on the town and and taxis home, it is unclear whether my original rationale on choosing accommodation was correct.

Another aspect relevant to my decision is my propensity to consume 'going out', as a function of my housing situation. There are two factors to consider here. Lets assume that I only go out in 'downtown' Melbourne, which is in close proximity to F/C. This means that the marginal cost of going out is lowered, as I need only travel a short distance both to and from the city. Therefore, I now  have an incentive to consume more of 'going out'. However, my consumption of 'going out' is also, consciously or unconsciously, a function of my disposable income, that is, the amount of money I have left every month after rent and other fixed expenses are paid. Having more fixed expenses every month might make me more cautious about going out every single weekend of the month and I might cut down from 4 to 3 nights instead. Yet my housing decision’s effect on my propensity to consume “going out” is ambiguous.

Since the financial implications are equivocal, we can quickly look to the “other” costs associated with the trade-offs. For one thing, either housing situation may impact on my study and thus, my grades. Living in F/C would require a 40 minute tram ride to university each morning versus a 10 minute bus ride from R/B. This means that my marginal cost of going to university would increase, and I would have less incentive to go than would be the case if I lived in R/B. If we assume that my grades are a function of my attendance rate of lectures, this could be the tie-breaker I have been looking for in this analysis. But wait! Another argument comes to mind, which tips the scale back to the vague centre. Because I am an exchange student, the grades that I get whilst at La Trobe will never show up on my transcript from the Copenhagen Business School [my home institution]. They will simply be transferred and shown as Pass/Fail. This practically removes my incentive to want good grades and with it, the negative weight of the fall in lecture attendance if I were to choose F/C.

I am almost a little disappointed to say it, but after the analysis of direct financial and non-financial costs and benefits of either housing situation, it would appear that what it comes down to is in fact a question of practicality. If I were to ensure that I never take a taxi home from the city alone after a night out (which is not unlikely as I share a house with two housemates who are also fans of the Melbourne nightlife), I would significantly lower the financial costs associated with living in R/B. That small practical point actually tips the scales in favour of R/B and confirms that my decision to live in Reservoir is, in fact, rational indeed.

In 2007, 12% (39) of drivers killed in Victoria were aged between 18 and 20, even though this age group represents only 8% of Victorian licence holders. As a reaction to these statistics the government introduced new road user restrictions in the form of a red and green P plate system. The idea essentially was that while driving on a red P plate, drivers were restricted to having only one passenger aged between 16 and 21. Will this actually decrease or increase road safety?

The legal implications of these new restrictions give young drivers the incentive to get their licence sooner as they can no longer rely on friends for lifts and multiple car pooling. The increased incentives of having your license sooner along with owning your own car will also result in more young inexperienced drivers on the road. These drivers are considered inexperienced as they have only had to complete a minimum of 120 hours of supervised driving and in a lot of cases the hours are forged by parents so that their children can sit for their license test. This increase in adolescents getting their license and choosing to drive will result in higher negative externalities of smog, road congestion and pollution. More importantly though is that with a higher proportion of young inexperienced drivers on the road simultaneously, we can logically expect an increase in accidents and an overall decrease in road safety. This is due to not only the level of experience of these P plate drivers, but also the peer pressure to drive dangerously that results when multiple friends are driving simultaneously (as they can longer car pool due to the new restrictions) to the same destination. One needs only to drive on the roads during holiday season to witness this first hand.

Using Insurance premiums and TAC statistics as a basis, it can be justified that young drivers are more likely to be involved in accidents. The reasons inexperienced P plate drivers take more risks can be explained using Rational Choice Theory (RCT). RCT looks at how individuals weigh up the perceived marginal costs and benefits of their actions and choose a type of behaviour where MB > MC. The benefits of driving dangerously are overstated in the minds of these drivers as the bragging rights and perceived acceptance among peers (just spend a few hours in the car park of a McDonalds or a suburban shopping centre late at night) is considered greater than the marginal cost of serious injury, fines, repairs and death. A general consensus among young drivers is that they are immune to these costs. This belief lowers the MC of their actions, resulting in a rational choice in their mind to drive dangerously.

When the rational choice for P-plate drivers is to drive dangerously, combined with the incentive to be on the road sooner, a decrease in road safety is likely. The government’s decision to restrict the amount of passengers a red P-plate driver can have will have no effect on reducing accidents. Instead the perverse incentive to drive sooner will lead to an increase in driving related accidents.

The biggest problem is that there are limited incentives for young drivers to drive safely. The government’s current restriction doesn’t offer any incentives for young drivers to drive safer; all it does is increase the marginal benefit of driving sooner and does nothing to increase the costs of driving dangerously. The list below poses some potential solutions to increase road safety by increasing the incentive to display safe driving behaviour and/or increasing the costs of dangerous driving.

Increase costs of dangerous driving

• Increased police presence at shopping centres, fast food outlets and other areas that attract a high density of young drivers
• Increased fines for dangerous driving, and increasing police powers to fine on the spot and/or seize vehicles
• Increased costs of purchasing high powered vehicles creates a greater incentive to purchase vehicles more economically friendly
• Increased education on the costs and perceived benefits of dangerous driving lowers the MB of dangerous driving, as education creates an understanding of the danger they pose to the community and lowers the social acceptance from peers.

Increase benefits of safe driving

• Lower insurance premiums for young drivers who have taken more hours of practice
• Reduced registration costs for drivers who demonstrate good road etiquette and safety
• Safe driver rewards program
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51+ Economics Project Topics [Updated]

Economics may sound like a daunting subject, but it’s all around us, influencing every aspect of our lives. Economic projects delve into various aspects of how societies produce, distribute, and consume products or goods and services. Whether you’re a student looking for compelling economics project topics or someone curious about the world of economics, this guide will walk you through some fascinating areas to explore.

How Do You Write An Economic Project?

Table of Contents

Writing an economic project involves several steps to effectively research, analyze, and present your findings. Here’s a general guide on how to write an economic project:

• Choose a Topic: Choose an economic subject that captures your interest and is in line with the requirements of your assignment or the objectives of your research. It could be a macroeconomic trend, a microeconomic analysis, or a specific area like environmental economics or development economics.
• Conduct Research: Collect pertinent data and information from credible sources like scholarly journals, government reports, economic repositories, and literature. Make sure to critically evaluate the credibility and reliability of your sources.
• Outline Your Project: Create an outline that organizes your ideas and arguments logically. Include sections such as introduction, literature review, methodology, findings, discussion, and conclusion.
• Write the Introduction: Begin with an introduction that provides background information on your topic, states the purpose of your project, and outlines the structure of your paper.
• Review the Literature: Perform a thorough examination of existing literature and theories pertinent to your subject matter through a literature review. Identify any deficiencies or areas lacking sufficient research that your project intends to fill.
• Develop a Methodology: Describe the methods you used to collect and analyze data. This may include quantitative techniques such as econometric modeling or qualitative approaches like case studies or interviews.
• Present Your Findings: Present the results of your analysis in a clear and organized manner. Use tables, charts, and graphs to illustrate key findings and trends.
• Discuss Your Results: Interpret the implications of your findings and discuss their significance in relation to existing literature and theoretical frameworks. Address any limitations or constraints of your study.
• Draw Conclusions: Provide a condensed overview of your project’s key discoveries and derive conclusions from your analysis. Consider the broader implications of your research and suggest areas for further study.
• Write the Conclusion: Conclude your project by restating the main points and highlighting the contribution of your research to the field of economics. Discuss any practical implications or policy recommendations arising from your findings.
• Cite Your Sources: Make sure to cite all sources properly used in your project according to the appropriate citation style (e.g., APA, MLA, Chicago).
• Proofread and Edit: Finally, carefully proofread your project to check for errors in grammar, spelling, and formatting. Ensure that your writing is clear, concise, and coherent.

By following these steps, you can effectively write an economic project that demonstrates your understanding of economic concepts, analytical skills, and ability to communicate research findings effectively.

51+ Economics Project Topics: Category Wise

Macroeconomic topics.

• The Impact of Fiscal Policy on Economic Growth
• Analyzing the Effects of Monetary Policy on Inflation
• Evaluating the Relationship Between Exchange Rates and Export Performance
• Assessing the Role of Government Spending in Stimulating Aggregate Demand
• Examining the Causes and Consequences of Economic Recessions

Microeconomic Topics

• Market Structure Analysis: A Case Study of the Smartphone Industry
• Consumer Behavior and Preferences in the Fast Food Industry
• The Impact of Price Elasticity on Revenue in the Airline Industry
• Producer Surplus and Profit Maximization in Competitive Markets
• Analyzing Market Failures and the Need for Government Intervention

International Economics Topics

• The Effects of Trade Liberalization on Developing Countries
• Exchange Rate Volatility and Its Impact on International Trade
• Globalization and Its Effects on Income Inequality
• Trade Policies and Their Influence on Foreign Direct Investment
• Comparative Advantage and Specialization in International Trade

Environmental Economics Topics

• The Economics of Renewable Energy Adoption
• Carbon Pricing and Its Implications for Climate Change Mitigation
• Economic Valuation of Ecosystem Services
• Environmental Regulations and Firm Behavior: A Case Study Approach
• The Role of Economics in Biodiversity Conservation Efforts

Development Economics Topics

• Microfinance and Poverty Alleviation: Lessons from Case Studies
• The Impact of Education on Economic Development
• Evaluating the Effectiveness of Conditional Cash Transfer Programs
• Gender Inequality and Economic Development: An Empirical Analysis
• The Role of Foreign Aid in Promoting Sustainable Development

Behavioral Economics Topics

• Behavioral Biases in Consumer Decision-Making: A Experimental Study
• Nudge Theory and Its Applications in Public Policy
• Prospect Theory and Risk Preferences in Investment Decisions
• The Influence of Social Norms on Economic Behavior
• Behavioral Economics Approaches to Addressing Climate Change

Econometrics and Quantitative Analysis Topics

• Time-Series Analysis of Stock Market Volatility
• Regression Analysis of Factors Affecting Housing Prices
• Forecasting Macroeconomic Indicators Using Machine Learning Techniques
• Panel Data Analysis of Regional Economic Disparities
• Causal Inference Methods in Economic Research

Policy Analysis and Evaluation Topics

• Cost-Benefit Analysis of Infrastructure Projects
• Evaluating the Impact of Minimum Wage Policies on Employment
• Welfare Effects of Tax Reform: A Microsimulation Approach
• Policy Responses to Economic Shocks: Lessons from the COVID-19 Pandemic
• Assessing the Effectiveness of Anti-Poverty Programs in Developing Countries

Monetary Economics Topics

• The Transmission Mechanism of Monetary Policy
• Central Bank Independence and Inflation Targeting
• Quantitative Easing and Its Effects on Financial Markets
• The Role of Interest Rates in Determining Investment Decisions
• Digital Currencies and the Future of Monetary Policy

Labor Economics Topics

• The Economics of Immigration: Impacts on Labor Markets
• Gender Wage Gap: Causes and Policy Implications
• The Effects of Automation on Employment Patterns
• Labor Market Dynamics and Unemployment Duration
• Evaluating the Impact of Minimum Wage Laws on Poverty

Health Economics Topics

• The Economics of Healthcare Financing Systems
• Cost-Effectiveness Analysis of Healthcare Interventions
• The Impact of Health Insurance Coverage on Healthcare Utilization
• Behavioral Economics Approaches to Promoting Healthier Lifestyles
• Healthcare Market Competition and Patient Outcomes: Evidence from Empirical Studies

What To Avoid For Economics Projects?

When working on economics projects, it’s essential to be aware of common pitfalls to avoid. Here’s a list of things to steer clear of:

• Lack of Clarity in Research Question: Ensure your research question is clear, specific, and well-defined. Avoid ambiguity or broad topics that make it difficult to focus your research.
• Poor Data Quality: Avoid using unreliable or outdated data sources. Ensure your data is accurate, relevant, and obtained from reputable sources.
• Ignoring Assumptions: Be transparent about the assumptions underlying your analysis. Ignoring or glossing over assumptions can weaken the validity of your findings.
• Overly Complex Models: While sophisticated models can be impressive, avoid unnecessarily complex models that obscure key relationships or make interpretation difficult.
• Ignoring Alternative Explanations: Consider alternative explanations for your findings and address potential counterarguments. Ignoring alternative explanations can weaken the credibility of your analysis.
• Misinterpreting Correlation as Causation: Be cautious when interpreting correlations as causation. Correlation does not imply causation, so ensure you have robust evidence to support causal claims.
• Ignoring Feedback Effects: Consider feedback effects and dynamic interactions between variables in your analysis. Ignoring feedback effects can lead to biased or misleading conclusions.
• Ignoring Heterogeneity: Recognize heterogeneity within the population or sample under study. Ignoring heterogeneity can lead to overgeneralization of results.
• Overlooking Endogeneity: Be mindful of endogeneity issues, where the relationship between variables is bidirectional or influenced by unobserved factors. Addressing endogeneity requires careful modeling and appropriate techniques.
• Inadequate Literature Review: Conduct a thorough literature review to situate your research within the existing literature. Avoid overlooking relevant studies or failing to acknowledge prior research.
• Inadequate Discussion of Limitations: Acknowledge the limitations of your study and discuss their implications for the validity and generalizability of your findings.
• Poor Presentation and Organization: Ensure your project is well-organized and clearly presented. Avoid cluttered or confusing visuals, inconsistent formatting, or unclear writing.

By avoiding these common pitfalls, you can enhance the quality and credibility of your economics projects and contribute meaningfully to the field of study.

Economics is a dynamic and multifaceted field, offering endless opportunities for exploration and discovery. Whether you’re interested in understanding the forces shaping the global economy or seeking solutions to pressing social issues, there’s a wealth of topics to explore.

By delving into these areas, you’ll gain valuable insights into how economies work and how they can be improved for the benefit of all. So, don’t hesitate to dive into economics project topics and start exploring the fascinating world of economics.

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Economics is a study of consumption, production, and distribution of goods and services within the country as well as globally. It is also concerned with monetary transactions that prevail in an economy or with other economies. Economists such as Adam Smith, Karl Marx, Alfred Marshall, and many more have given various theories. Studying all these theories before writing your assignment is an impeccable task.

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Assignments on equilibrium concept, production curve, theories by economists, demand and supply, market research, cost of production, government policies, economic policies, etc. are often created by students. When you have to choose topics for your market research, or case study, or just to make an assignment; then you have to be very concise about the selection.

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There are students from different regions of the world studying economics in Australia. Because of this, not everyone is well versed in the language of English. It might be a hindrance in writing assignments but not if custom assignment writing help is provided by experts who hold a PhD in economics.

You might have gathered all the facts and relevant data concerning your topic. Putting together all the content to form an excellent assignment or essay also requires skills and proper technique. If you fail to acknowledge the fact that marking index should be considered before writing your assignment that you are highly mistaken.

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You might think what could go wrong in mentioning the names of authors, whose content you have used in your assignment. Well, journals published by these authors are published globally and it is mandatory to use appropriate referencing style. You can use Harvard referencing style, APA, AGLC, MLA, etc. or as mentioned in the academic guidelines provided by your university. You attain knowledge on proper biography and referencing methods so through economics assignment samples before starting to write your assignments.

More than 500 experts will not only provide you with a free economics assignment sample but will also ensure that learning objectives are clear to you. You can get assignment assistance on any subject from professionals. In case you are unable to write your assignment or you are not able to find appropriate resources for your assignments. You can get an Economics assignment example written by experts.

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Sample Agricultural Economics Assignment

Note: This assignment was designed for a 400-level class.

Good analytical writing is a rigorous and difficult task. It involves a process of editing and rewriting, and it is common to do a half dozen or more drafts. Because of the difficulty of analytical writing and the need for drafting, we will be completing the assignment in four stages. A draft of each of the sections described below is due when we finish the class unit related to that topic (see due dates on syllabus). I will read the drafts of each section and provide comments; these drafts will not be graded but failure to pass in a complete version of a section will result in a deduction in your final paper grade. Because of the time both you and I are investing in the project, it will constitute one-half of your semester grade.

Content, Concepts and Substance

• Population—Developing countries have undergone large changes in population. Explain the dynamic nature of this continuing change in your country or region and the forces underlying the changes. Better papers will go beyond description and analyze the situation at hand. That is, go behind the numbers to explain what is happening in your country with respect to the underlying population dynamics: structure of growth, population momentum, rural/urban migration, age structure of population, unanticipated populations shocks, etc. DUE: WEEK 4.
• Papers will focus on the peoples and policies related to population, food, and the environment of your chosen country. As well as exploring each of these subsets, papers need to highlight the interrelations among them. These interrelations should form part of your revision focus for the final draft. Important concepts relevant to the papers will be covered in class; therefore, your research should be focused on the collection of information on your chosen country or region to substantiate your themes. Specifically, the paper needs to address the following questions.
• Food—What is the nature of food consumption in your country or region? Is the average daily consumption below recommended levels? Is food consumption increasing with economic growth? What is the income elasticity of demand? Use Engel's law to discuss this behavior. Is production able to stay abreast with demand given these trends? What is the nature of agricultural production: traditional agriculture or green revolution technology? Is the trend in food production towards self-sufficiency? If not, can comparative advantage explain this? Does the country import or export food? Is the politico-economic regime supportive of a progressive agricultural sector? DUE: WEEK 8.
• Environment—This is the third issue to be covered in class. It is crucial to show in your paper the environmental impact of agricultural production techniques as well as any direct impacts from population changes. This is especially true in countries that have evolved from traditional agriculture to green revolution techniques in the wake of population pressures. While there are private benefits to increased production, the use of petroleum-based inputs leads to environmental and human health related social costs which are exacerbated by poorly defined property rights. Use the concepts of technological externalities, assimilative capacity, property rights, etc. to explain the nature of this situation in your country or region. What other environmental problems are evident? Discuss the problems and methods for economically measuring environmental degradation. DUE: WEEK 12.
• Final Draft—The final draft of the project should consider the economic situation of agriculture in your specified country or region from the three perspectives outlined above. Key to such an analysis are the interrelationships of the three perspectives. How does each factor contribute to an overall analysis of the successes and problems in agricultural policy and production of your chosen country or region? The paper may conclude with recommendations, but, at the very least, it should provide a clear summary statement about the challenges facing your country or region. DUE: WEEK15.

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Economics assignment help expert shares the scope of business economics, want to have a look at the recent solved business economics assignment sample, common difficulties faced by students while working on business economics assignment, why must students know the importance of economics assignment help.

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Business Economics is an extensive topic. It includes diverse elements, such as geographical, financial, and natural elements. When it is Business Economics, the subject's scope may be divided into two leading roles: problem identification and problem-solving. These steps play an important role in the organisation's functioning. Some vital decisions depend absolutely on the systems and theories of Business Economics. The analysis additionally examines the agency's courting with its team of human resources, goods and services it provides.

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Sample Assignment economics

Economics assignment sample stuck with your economics assignments get free assistance from our ph.d. experts, econ1025 prices and markets assignment sample, assignment brief.

The assessment is worth 50 marks and will be delivered as a question sheet on Canvas exactly two weeks before the submission deadline. Your submission will receive an automatic Turnitin similarity score that should not exceed 25%. You should check this score using the tool on Canvas before submitting. Exceeding this limit raises the risk of your submission being subject to an academic integrity process. As per University regulations late assignments receive a 10% penalty per day until the mark reaches zero. Marks will be given according to the rubrics on Canvas. You must attach a completed coversheet with your submission (template appended below). For the formatting requirements follow the advice given for assessment task 2 above.

Your submission should be a word-processed document not exceeding 2000 words. Any diagrams that you wish to use can be inserted into this document in any way you like, i.e. created in the word-processing software itself, or inserted as a photograph of a pencil drawing or from another software.

There is no discretionary margin above this limit. There is no minimum but you are advised to use all the words for assignment help allowed to allow for a more developed and detailed analysis.

Answer any FOUR of the following questions. Each question is worth a total of 12.5 marks. If more than four questions are answered, marks will be awarded for the first four answers only.

High-performance cars (HPCs) are automobiles with engines that generate great power relative to their weight. They boast high acceleration, speed, cornering and breaking performance. But they obviously come with a very high price tag. Some people even buy them to publicly display their wealth. The Singapore economy has grown rapidly between the 1960s and 2018 with rising incomes across the island. Examine the likely consequences of rising incomes on the Singapore HPC market and one or two related markets.

The speed limit on Singapore roads, even expressways, never exceeds 90 kmh, much less than the top speed of HPCs. But there is a road racing culture where individuals perform stunts and races on public roads, far exceeding speed limits. What, if anything should government do about the HPC market? Should such cars be banned outright? What would be the problems with such interventions?

The car industry is characterized by heavy research and development activity. This activity has a high fixed cost and can only be undertaken by large firms with significant monopoly power. Sometimes the innovations of the car industry spill over into other industries. There is also a great deal of product differentiation, with certain brands enjoying reputation and loyalty. What are the likely effects of these aspects of the industry on the market structure for HPCs? Examine this industry using the theory and models of industry structure. Should government be worried about any aspect of how an industry with this market structure will perform?

BMW is one of the world’s best known HPC manufacturers. Developing new cars is a costly, uncertain and complex process. This company would need to consider which parts of the vertical chain to outsource and which to conduct in-house. Using the theory of the optimal boundary of the firm, discuss BMW’s make-or-buy decision for developing and producing a HPC. What stages of the vertical chain should BMW consider conducting in-house, and which should be outsourced? Provide reasons for your findings.

Consider the following hypothetical case. Only BMW and a competitor, Mazda, are considering launching a new, niche HPC in the Asian market. The issue is what price to charge. Both new cars are very similar in performance and production cost. Analyze the interaction between the two firms using game theory. Present a payoff matrix to model the situation and analyze it for Nash equilibrium. What can either of these firms do to make their best, most-preferred outcome more likely?

Question 1: likely consequences of rising incomes on the Singapore HPC market

High performance cars are considered a sign of wealth as rich people often showcase their status and flaunt their economic well-being. High prices of high performance cars imply that only a limited number of people are capable of buying those products in the market. High performance cars are considered to be a luxury commodity in the market as only a few people can afford to buy these products. However, rising economy of Singapore encourages its economic stakeholders to accumulate substantial wealth over the past few decades. Rapid growth from 1960 to 2018 has helped many people to change their fortune as they became wealthy during these periods. This has generated demand for high performance cars in the Singapore market as the capabilities of people buying similar kinds of cars has over this period. As per the studies done by Kern, Dossow & von Roon (2020), people tend to buy more expensive products with a rise in their income. Similar aspects could be observed in the Singapore market as demand for high performance cars would like to increase.

High performance cars apart from being a symbol of wealth possess high acceleration, speed, cornering along with breaking performance. The income elasticity of the high performance cars is positive as rising income enhances the affordability of those for the consumers. Rising market demand would cause the dealers to supply a higher volume in the Singapore market that would raise the overall supply of high performance cars. The market for high performance cars will see a boom as consistent growth of the Singapore market has established itself with a strong economy. The rapid growth of the Singapore economy has enabled the market players to infuse a huge amount of money that encouraged them to buy high performance cars in the market. According to the study of Ji et al. (2021), rising demand for any commodity would increase the price of that product in making it more experience. However, market equilibrium for high performance cars in Singapore would shift towards the right with further increases in the price in the market.

The price increase could be explained through comparative static models that compare different economic outcomes that can be observed after changes in exogenous parameters. In this scenario, demand for high performance cars is changed in the market through changes in income. Furthermore, the demand factor influences the price metric to change which raises the price of high performance cars in this case. The overall price of HPC will rise in the Singapore market although the growth of the economy would stimulate the demand in the market. This would raise the overall import items in the Singapore economy as car manufacturing companies would raise the supply in the market. As per the view of Sadiq et al. (2021), a rise in demand in a specific market often increases the demand in the related markets. Related markets such as customised parts or car paint would observe a growth in the market as the products are complementary.

Question 2: Government intervention in the HPC market and issues developed through intervention

High performance cars possess a high speed which is much higher than the restricted speed in the Singapore economy. Speed limit curbing the speed of vehicles does not allow the riders to enjoy the top speed of high speed cars as there remains racing culture among people. Individuals performing stunts or having a race on the public road could lead to fatal damages that may cause government intervention in the HPC market. As per the studies done by Basu & Ferreira (2020), government intervention allows a market to run properly as well helps in people getting benefits from the market. Restriction on sales of high performance cars could lower the chances of accidents on the road that would sufficiently help the people of that economy. Imposition on sale of high performance cars would discourage the wealthy population of the nation. The Government of Singapore further raised the speed limit in a specific time period along with special race tracks that would allow the cars to remain within a certain area.

High performance cars could be banned by the government of Singapore that would depress the HPC market. On the other hand, the banning of high performance cars would lead to the emergence of the black market in the country. According to the study of Adler, Peer & Sinozic (2019), market imposition of government often restricts the natural market composition that influences the shady market to grow. Furthermore, people of Singapore could buy high performance cars in different national markets and that could be imported into Singapore due to imposed market restrictions. These could lead to loss of taxes and other financial losses for the Singapore government arising due to government intervention in the market. However, banning cars would never solve the problems rather it would create further complications.

The emergence of a shady market is not helpful for the growth of the economy as the government does not get any financial benefits for transactions. The government will have no clue about the number of products sold in the market. As per the view of Bucsky (2018), market governance is necessary to have estimated about any specific market and transaction happening in that market. Furthermore, the government will be unaware of the shady deals that would occur in the parallel market. The parallel market assists in the growth and development of corruption that would cause a bigger issue for the government.

Market equilibrium in the high performance cars market would disrupt through the imposition of the Singapore government. It may lead to market failure as tough restrictions by the government could dry off the entire market. According to the study of Basu & Ferreira (2020), welfare loss happens due to the imposition of market restrictions as both producers and consumers waste their resources. High tax imposition could lower the sales of high performance cars that could help the government in lowering the number of cars in the market. The Singapore government could impose a higher import duty that would provide a similar effect as well.

Question 3: Market structure for HPC industry and governments worry on market performance

The global automobile industry is not that highly competitive as it is filled with various market producers. However, the market structure in the high performance car industry is oligopolistic markets as only a handful of market players dominate the industry. Target market of the high performance car industry always remained different as compared to the automobile industry. As per the studies done by Yin & Hamilton (2018), research and development is the crucial component behind the growth of high performance cars that can be managed through few market suppliers. Producers in the market are unable to carry the heavy research and developmental activities in the market in a regular manner. These aspects have implicated a few producers in the market who are the dominant force in the market.

The market producers have different brand valuations as they have some degrees of product differentiation. A certain amount of product differentiation causes a huge advantage in the market that allows some manufacturers to have a significant market advantage. According to the study of Minh (2020), brand valuation is another component that influences the market position of different car manufacturers. Furthermore, the brand valuation of a company comes through sufficient brand reputation that is acquired through proper servicing to consumers and efficient customer satisfaction. The car manufacturing companies with greater brand reputation allow a greater competitive advantage in the market that helps them in being a dominant force in the market.

Loyalty of the customers plays a crucial role in these aspects as car manufacturers with a higher brand reputation have a greater loyal customer base. As per the view of Horn et al. (2019), the customer retention rate of manufacturing companies depends on the loyal customer base that provides sufficient confidence to the companies in case launching new products in the market. Product differentiation allows car producers to develop different types of products in the market. High performance car industry possesses few manufacturers who have focused on the heavy research and development of their production system in a heavy manner. The car manufacturing companies possess a high fixed cost that provides a certain level of market entry barrier as very few producers are capable of sustaining the cost. This market entry barrier encourages the existing producers in the market to carry on the production activities as profitability remains higher.

The government must not worry about the existing market structure in the high performance car industry as few dominant producers are very competitive among themselves. However, the Singapore government must ensure that any single firm does not contain significant monopoly power in the market. According to the study of Horn et al. (2019), monopoly power could further disrupt the market as only one firm is capable of supplying products in the market which would result in loss of welfare in the market. Consumers could be exploited through the emergence of monopoly in the high performance car industry as a sole producer would satisfy the supply of the entire market. The government must ensure the car manufacturers do not form a cartel that would represent a monopoly manufacturing company itself.

Question 5: Market interaction between BMW and Mazda using Game theory

BMW and Mazda are two companies operating in the high performance car industry in the Asian market. Cars of both of the companies having similar features and providing the same performance lead to a case of no product differentiation in this scenario. Production cost of both the cars being the same implies the cost for these two vehicles will be identical. In this scenario, the application of game theory would be most useful helping to identify the market equilibrium. As per the studies done by Sun & Sun (2018), the payoff matrix model provides a visual representation of the best possible outcomes of strategic decisions for two different players.

The playoff model matrix for BMW and Mazda has been provided below,

Table 1: payoff Matrix Model for BMW and Mazda (Source: MS Word)

From the above matrix model it can be observed that the pricing of BMW and Mazda cars could be of two different levels which are 100000$, and 200000$. Furthermore, within the matrix, the market share for each of the cars has been provided based on the level of price for each of the high performance car manufacturing companies. It can be observed from the above table that the prices of both of the cars would lead to equal market share in the luxury car industry. Furthermore, one of the cars having different prices would lead to complete market acquisition for one car manufacturing company. Both of the cars having same production cost and identical products would lead to identical product pricing in the market. Cars having different prices in the market would lead to greater market accumulation by the other company. The company with a higher pricing policy would lose a heavy market share as consumers will shift to that other brand with lower cost (Ajay et al. 2019). In this scenario, BMW will consider market pricing of 100000 USD as the company is beneficial irrespective of policy adoption of Mazda. BMW will accumulate 50 percent and 100 percent of the market while adopting the price of 100000$ which is higher as compared to the other pricing strategy of the company. Similarly, from the playoff matrix, it can be observed that Mazda having products pricing 100000 USD could lead to higher market acquisition as compared to other pricing strategies. According to the study of Koryagin (2018), Nash equilibrium from a payoff matrix model leads to conjugal outcomes that satisfy both of the players. Mazda can acquire a higher market share in the high performance industry irrespective of the pricing strategy of BMW with a market price of 100000 USD. Hence, both the car manufacturer company BMW and Mazda will adopt a price of 100000$ and the Nash equilibrium is (50, 50) in this case.

Adler, M. W., Peer, S., & Sinozic, T. (2019). Autonomous, connected, electric shared vehicles (ACES) and public finance: An explorative analysis. Transportation Research Interdisciplinary Perspectives, 2, 100038. https://www.sciencedirect.com/science/article/pii/S2590198219300387

Ajay, M., Kannan, S., Narayan, P. P., & Kumar, R. D. S. (2019). A Glance Through History of Automobile Industry and Current Market Study of Some of the Legendry Models in India. In Advances in Manufacturing Technology (pp. 433-441). Springer, Singapore.https://www.researchgate.net/profile/Tamilselvam-Nallusamy/publication/332488514_Mechanical_Characterization_of_Glass_Fiber-Strengthened_Balsa-Depron_Composite/links/5f97e8c292851c14bceac820/Mechanical-Characterization-of-Glass-Fiber-Strengthened-Balsa-Depron-Composite.pdf#page=426

Basu, R., & Ferreira, J. (2020). Understanding household vehicle ownership in Singapore through a comparison of econometric and machine learning models. Transportation Research Procedia, 48, 1674-1693. https://www.sciencedirect.com/science/article/pii/S2352146520306244/pdf?md5=ce396baaa396abdbf25538b2104f72e0&pid=1-s2.0-S2352146520306244-main.pdf

Bucsky, P. (2018). Autonomous vehicles and freight traffic: towards better efficiency of road, rail or urban logistics? Urban Development Issues, 58(1), 41-52. https://sciendo.com/pdf/10.2478/udi-2018-0022

Horn, M., MacLeod, J., Liu, M., Webb, J., & Motta, N. (2019). Supercapacitors: A new source of power for electric cars?. Economic Analysis and Policy, 61, 93-103.https://eprints.qut.edu.au/121172/1/__qut.edu.au_Documents_StudentHome_Group77%24_n8844577_Documents_PhD_Misc_EVdocs_Supercapacitors%20A%20new%20power%20source%20for%20electric%20cars.pdf

Ji, X., Zhang, Y., Mirza, N., Umar, M., & Rizvi, S. K. A. (2021). The impact of carbon neutrality on the investment performance: evidence from the equity mutual funds in BRICS. Journal of Environmental Management, 297, 113228. https://www.researchgate.net/profile/Muhammad-Umar-150/publication/353257462_The_impact_of_carbon_neutrality_on_the_investment_performance_Evidence_from_the_equity_mutual_funds_in_BRICS/links/60f542869541032c6d4e25b7/The-impact-of-carbon-neutrality-on-the-investment-performance-Evidence-from-the-equity-mutual-funds-in-BRICS.pdf

Kern, T., Dossow, P., & von Roon, S. (2020). Integrating Bidirectional Chargeable Electric Vehicles into the Electricity Markets. Energies, 13(21), 5812. https://www.mdpi.com/1996-1073/13/21/5812/htm

Koryagin, M. (2018). Urban planning: A game theory application for the travel demand management. periodica polytechnic transportation engineering, 46(4), 171-178.https://152.66.114.10/tr/article/download/9410/7826

Minh, N. K. (2020, April). Features and prospects of the electric vehicle in the Vietnamese automobile market. In IOP Conference Series: Materials Science and Engineering (Vol. 819, No. 1, p. 012007). IOP Publishing.https://iopscience.iop.org/article/10.1088/1757-899X/819/1/012007/pdf

Sadiq, M., Hsu, C. C., Zhang, Y., & Chien, F. (2021). COVID-19 fear and volatility index movements: empirical insights from ASEAN stock markets. Environmental Science and Pollution Research, 1-18. https://link.springer.com/content/pdf/10.1007/s11356-021-15064-1.pdf

Sun, S., & Sun, N. (2018). Management Game Theory (pp. XI-129). Singapore: Springer.http://ndl.ethernet.edu.et/bitstream/123456789/67572/1/447.pdf

Yin, J. Z., & Hamilton, M. H. (2018). The conundrum of US-china trade relations through game theory modelling. Journal of Applied Business and Economics, 20(8), 133-150.https://www.researchgate.net/profile/Michael-Hamilton-25/publication/331994158_The_Conundrum_of_US-

China_Trade_Relations_Through_Game_Theory_Modelling/links/5c9a44b7a6fdccd4603cc3d2/The-Conundrum-of-US-China-Trade-Relations-Through-Game-Theory-Modelling.pdf

BUECO5903 Assignment Sample

Instructions:.

This assignment contains four questions. You are required to answer all four questions for assignment help .

This is an individual piece of assessment. Make sure your submission is an original

Submission - this means it must be the creation of the person submitting it.

You are required to explain your reasoning and use diagrams where appropriate.

Assessment weight: This assessment task constitutes 15 percent of the total assessment for this course.

Due date: Your instructor will advise you of the submission date of this assessment task.

Assignment to be submitted electronically in the drop box in your Moodle shell.

a) Give the definition of GDP and explain what items are not included in its calculation? b) How is GDP calculated using the expenditure approach? c) How is GDP calculated using the income approach? d) Explain the problem of "double-counting" and how it can be avoided in calculating GDP

Assume that an economy is initially operating at the natural rate of output (full employment output). Use the AD-AS model to illustrate graphically the effects on price and output of an increase in government spending and a decrease in the cash rate. Explain your assumptions with respect to the range of aggregate supply of your analysis.

Explain in detail the process of Monetary Policy transmission of an increase in the cash interest rate. Use relevant graphs to describe how a Central Bank’s action on the interest cash rate ripple through the economy and lead to the target policy goal. (Three connected diagrams should be used: (1) money supply and demand (2) investment demand schedule (3) AS/AD diagram. Interest rates is the variable that connects the first and second diagram).

Using the World Bank’s World Development Indicators database, https://databank.worldbank.org/home.aspx, a) Complete the following table.

*or latest available year

b) Produce a plot for each variable (GDP, gdp growth, inflation) comparing the four countries.

c) What can be inferred with respect to economic growth and price control in each of these economies?

A - In macroeconomics, GDP or Gross Domestic Product represents total value of entire economic activities that take place in a country in a specific period of time, for example, one year (Dynan and Sheiner 2018). In measuring GDP, total market prices of all final goods and services, which are produced in a specific geographic location in a particular year, are considered.

In measuring GDP, some items are not considered. These are:

i. Goods and services, manufactured in other countries and imported ii. Goods and services produced in previous year iii. Goods and services, which are resold iv. Goods and services that are sold in illegal process v. Transfer payments vi. Intermediate goods that are used as input in producing another good

B - GDP can be measured with the help of expenditure method. This method considers expenditures of all groups, which conduct economic activities in a year. In other words, this method considers all the expenditures that are made on final goods and services (Magdalena and Suhatman 2020). In this measure, four components are considered and these are private consumption (C), government spending (G), investment (I) and net exports (NX) (total exports- total imports). Hence, the formula of GDP using expenditure method is written as:

GDP = C+I + G +NX

C. In measuring GDP of a country, the income approach can be applied. This approach considers income of all production factors, which are, labour, capital, land and entrepreneur. Those factors contribute in the production of final goods and services of the country in a year. Consequently, labour, capital, land and entrepreneur receive their income in the form of wage, interest, rent and profit, respectively (Aitken 2019). Income approach depends on the accounting reality where all expenditure made on economic activities within the country equates with total income of all factors that produce final goods and services.

D. One can face the problem of double-counting at the time of measuring GDP of a country in a particular year. Double-counting implies the process of adding a product value for two times in the GDP measurement (Fforde 2021). To avoiding this problem of multiple counting, the value of final goods and services are not considered. Instead, the value-added method is considered in which value added in each stage of production is taken.

In the vertical range of the Aggregate supply curve, an economy can produces output at its full employment level. At this stage, the movement of aggregate demand can change the price level only while output level remains unchanged. As the government spending increases, it leads the aggregate demand curve to move upward (Lisi 2021). Moreover, a decrease in the cash rate leads the borrowers to borrow money for investment and consumer expenditure purpose. As a result, the aggregate demand curve can shift upward. The situation is shown below:

The Monetary Policy Transmission is a process of changing cash rate. The process influences both the economic activity and inflation in the economy. As cash rate rises, expenditure in the private sector declines and it further influences total productivity of the firms to decline. This in turn cause economic activity and total employment to decrease (Chatziantoniou, Gabauer and Stenfors 2021). The following diagram shows the activity of the Central bank on the interest cash rate ripple. Here, the interest rate is taken as variable in the first two diagrams. The first diagram represents money supply and money demand curves, the second diagram represents investment demand schedule and the third diagram represents aggregate demand and supply curves.

In figure 3, GDP per capita of Australia, China, India and US are compared for the years 2006, 2009, 2014 and 2020. In 2006, the GDP per capita of US was the highest followed by Australia. However, GDP per capita of China and India remained very low comparatively. The situation remained same in 2009. From figure, it is seen that GDP per capita of Australia and China increased in this year compared to that in 2006. In 2014, Australia’s GDP per capita increased considerably and it surpassed US. Moreover, China’s GDP per capita also increased in this year. In 2020, GDP per capita of the US, China and India increased while that of Australia declined.

As per figure 4, GDP growth rate of China remained the highest in 2006 followed by Indian, US and Australia. In 2009, GDP growth rate of each country declined while that of US became negative. In 2014, US’s GDP growth rate was improved and became positive. In 2020, the GDP growth rate of Australia was nil while that of India and US were negative.

Inflation rate of India remained the highest in 2006, 2009, 2014 and 2020 compared to other countries. On the other side, Inflation rate of US and China became negative in 2009 which means these countries faced deflation.

From the comparisons, it is understood that India needs to control its price for controlling inflation. China has gained significant economic growth over the years while Australia has also successfully maintained its economic growth.  

References:

Aitken, A., 2019. Measuring welfare beyond GDP. National Institute economic review, 249, pp.R3-R16.

Chatziantoniou, I., Gabauer, D. and Stenfors, A., 2021. Interest rate swaps and the transmission mechanism of monetary policy: A quantile connectedness approach. Economics Letters, 204, p.109891.

Dynan, K. and Sheiner, L., 2018. GDP as a measure of economic well-being. Work. pap, 43.

Fforde, A., 2021. Measuring economic transformation–what to make of constant price sectoral GDP–evidence from Vietnam. real-world economics review, p.113.

Lisi, G., 2021. Can the AD-AS Model Explain the Presence and Persistence of the Underground Economy? Evidence from Italy. Economies, 9(4), p.170.

Magdalena, S. and Suhatman, R., 2020. The Effect of Government Expenditures, Domestic Invesment, Foreign Invesment to the Economic Growth of Primary Sector in Central Kalimantan. Budapest International Research and Critics Institute-Journal (BIRCI-Journal), 3(3), pp.1692-1703.

Worldbank 2022. World Development Indicators | DataBank. Available at: https://databank.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/1ff4a498/Popular-Indicators (Accessed: 22 January 2022).

ECO500 Economics for Business Assignment Sample

The problem/scenario.

Suppose that a new strain of Covid 19, known as Kappa, has been detected in Australia. Kappa is known to be twice as infectious than the existing variants of Covid 19. Kappa has been found also to be immune to the existing Covid 19 vaccines such as Pfizer and Astrazeneca.

KC Pharma, a local startup company, has produced a unique nasal spray vaccine called KC1 that has been found to be 98 per cent effective against Kappa in clinical trials. Based on this information the Therapeutic Goods Administration (TGA) of Australia, Australia’s regulatory body, has approved the use of KC1 in Australia in the short run to combat Kappa. Based on the above scenario, provide a project report on market structures, market model(s), economic strategy(ies) and profitability scenarios. In your assignment writing, you shall include the following issues clearly and sufficiently with diagrams and illustrations where necessary for assignment help :

1. Identify the basic market structure and explain the type of market in which KC Pharma will be operating

2. Based on your answer to question 1 above, show a theoretical market model explaining the equilibrium position (profit/loss situation) of KC Pharma in the short run.

3. Suppose you are the economic adviser to KC Pharma. Suggest a selling strategy to KC Pharma whereby it can further maximise its profit. Make sure you clearly illustrate the selling strategy to KC Pharma.

4. Critics of TGA argue that KC Pharma is charging a very high price for KC1 and is also unable to keep up with demand. They argue that more firms should contest the market to create efficiency in the market. TGA is convinced by the Critics’ arguments and allows a “large” number of firms to supply vaccines to combat Kappa. Assess and evaluate in which market structure(s) and the type of market(s) KC Pharma will be operating. In your demonstration, you must explain KC Pharma’s equilibrium position after the entry of large number of rivals in the market.

5. Analyse and evaluate economic profitability of KC Pharma in the long run.

KC Pharma will operate in an oligopoly market, which is a form of imperfect market condition. In this market structure, few firms compete with each other and produce differentiated products. As per the given scenario, KC Pharma has produced a unique nasal spray vaccine, KC1. However, the company have close competitors like Pfizer and AstraZeneca which produce COVID-19 vaccines that are also safe for people. These companies have captured a large share of the market. This is because new firms cannot enter into the market easily due to legal restrictions the Therapeutic Goods Administration (TGA) of Australia, large amount of capital investment and low economies of scale.

The oligopoly market is characterised by entry barriers and existence of limited firms. The main feature of the market is interaction as well as interdependency among existing firms. In other words, the action of one firm can influence the action of other firms in the market. Therefore, the oligopoly market often experiences strong competition between firms as each firm has the capability of making decisions on quantities, prices, and advertisement in order to maximise profits (Azar and Vives 2021). As the market is concentrated extremely with few companies, some firms can dominate the industry while other small firms can also perform their business. Likewise, Pfizer and AstraZeneca dominate the vaccine market while a start-up company like KC Pharma can also produce and sell its products. The start-up company can maximise its profit when its marginal revenue (MR) and marginal cost (MC) equate with each other. This situation creates an equilibrium condition where the firm produces equilibrium amount of vaccine at an equilibrium price. The start-up company, here, will experience a kinked-demand curve due to the competition of other oligopolistic firms. In Kinked demand curve model, two theories are seen, which are:

A. If a firm declines its price below the prevailing level then other rival firms will follow him

B. If the firm rises the price above the prevailing level then other rival firms will not follow him

The profit-making equilibrium condition of KC Pharma is presented in the figure below:

Figure 1: Short-run Profit maximisation condition of KC Pharma

The short-run profit maximisation condition of KC Pharma is shown with the help of kinked demand curve theory (Salehi and Makiyan 2021). As per the theory, each firm in the oligopoly market sells differentiated products and each of them experiences two market demand curves for its product. Thus, KC Pharma also faces two different demand curves where at high prices, the firm has comparatively elastic demand curve and at low price the firm has relatively inelastic demand curve. Corresponding to two demand curves, the firm has two marginal revenue curves accordingly. These two demand curves intersect at point k. Here, the MR and MC curves intersect at point E. Therefore, equilibrium quantity of KC Pharma is Q* and equilibrium price is P*. As per the assumption, if KC Pharma increases its price above P* then other vaccine producing firms will not follow the increase in price and hence the company will experience the more elastic market demand curve. If the company will decrease price below P* then it is assumed that other competing firms will follow the price. The main reason of these assumptions is that when KC Pharma will increase its price, it will face a substantial decrease in sales as consumers can purchase similar products from other companies. On the other side, if KC Pharma will reduce its price, other firms will follow it due to the fear of customer loss.

To increase profit further, KC Pharma can make collusion with other companies. In collusive oligopoly, firms make agreement between each other to make an undifferentiated oligopolistic industry. Here, all vaccine producing firms come together and agree to set prices as well as outputs for maximising total industry profits which is known as cartel (Schlechtinger et al. 2021). Thus, the company along with its competitors can set price in a collective way by the leadership of one firm instead of taking prices from the market. In this situation, profit margin becomes higher compared to that in a competitive market. Sometimes, governments do not support collusion and price-fixing. However, in case of vaccination, the industry can get the permission of fixing price by making a cartel.

The kinked-demand theory has several limitations for which the industry can move to make a cartel for making higher profits. Firstly, the kinked model does not state the condition by following which a firm can find its kinked point in the market demand curve. Secondly, the theory does not consider the chances of collusion and setting a fixed price and output. Lastly, the kinked-demand model shows that price increase by one firm will not be followed by other firms. Hence, considering these obstacles, it can be said that a cartel is better for KC Pharma to make higher profits.

Now it is essential to discuss the selling strategy that KC Pharma will follow for maximising its profit. The company needs to make a formal agreement with other vaccine producing companies in order to control supply and to manipulate price. Therefore, collusion will form a group of independent business that will perform as a single seller at the fixed price for the vaccines they produce without any competition. In this context, it is essential to mention that a cartel gets less facility compared to that of a monopoly where only a single seller only owns certain products in the market. The cartel of vaccine producing companies will help to set a fixed price for vaccines in a legal way. After forming cartel, each company will select their combined output where their marginal revenue becomes equal with marginal cost. The fixed price of cartel, therefore, will be determined by market demand curve where the cartel selects its output level. By forming a cartel, the vaccine producing firms can charge higher prices together for certain quantity of vaccines like a monopolist. The figure below reflects the situation:

The above figure represents a cartel where each firm together set price P2 and produces Q2 quantity of output. At this output level, MR and MC become equal with other. Hence, each firm can earn supernormal profit by the area P1BA2. Therefore, by making a cartel, KC Pharma can successfully earn profit. However, the company needs to follow some points that can breakdown a cartel. Sometimes, it is seen that other firms have cheating tendency on their quotas for getting higher benefits from higher output and price. Hence, the firm needs to make cartel with small number of firms so that it can easily observe behaviour of others. Moreover, penalties will be charged for each firm who will break quotas.

As per the given situation, KC Pharma will operate in a monopolistically competitive market. This market structure lies between a monopoly market and a perfectly competitive market. In this type of market, large number of firms produces and sells almost similar type of products in the market to a large number of customers. In this market, each firm will produce products that are close substitutes and hence they can differentiate their products by applying different market strategies. Thus, firms can act as a monopolist as each of them has different brand name, price level and product quality. Like a monopoly market, firms can charge higher prices for selling lower quantity of output than a perfectly competitive market. Therefore, each firm acts like a price maker in this imperfect competition where change in price will not cause any price war that can be seen in the oligopoly market. A monopolistic competitive firm achieves higher profit only in the short-run when its marginal revenue and marginal cost become equal. Moreover, the firm can also incur loss in or gain normal profit during this time. The figure below represents a condition, where the firm gains supernormal profit in the short-run:

TGA allows a large number of firms to supply vaccines for combating Kappa, which is produced by KP Pharma. Therefore, the number of vaccine sellers will increase in the market. However, one type of vaccine cannot substitute another type of vaccine completely as they can be differentiated by their company name, branding, price level and quality. Therefore, each vaccine producing firm will act like a monopolist and can set vaccine price individually in the market for maximising profit (Bertoletti and Etro 2022). Though firms can act like a price maker, they cannot charge higher prices due to strong competition in the market. By charging higher price, a firm can loss its customers and this in turn can reduce profit-making condition of the firm. The diagram above showcases equilibrium position of KC Phrama here the demand curve is slightly elastic. This indicates that if the firm increases price of its vaccine then its demand for product can be declined.

In figure 4, it is seen that the short-run equilibrium can be obtained at point E where marginal cost (MC) curve and marginal cost (MC) curve intersects. Hence, the corresponding equilibrium output and price level become Q* and P*. In short-run, the average cost (AC) curve is lower than average revenue (AR) curve. Average revenue curve which is also the demand curve of KC Pharma is elastic but not perfectly elastic as it has negative slope. Hence, the firm gains economic profit by the area CBAP*. In short-run, the monopolistic competitive firm can also face loss if its average cost becomes higher than average revenue. However, it is essential to mention that a monopolistically competitive firm does not become allocatively efficient as the price does not equal to marginal cost. Moreover, production efficiency also cannot be seen in the market as firms can set higher price than their marginal costs, which means, P > MC. Therefore, the market cannot achieve efficiency level instead of facing competition.

In long-run, the monopolistically competitive market has free entry and exit and this implies that the existing firm can make only normal profit in the long-run. In other words, when the market gains supernormal profit in the short-run, other firms will enter into the market. This will increase the number of firms and hence their profit making opportunity will decline until it will earn normal profit only. The following figure showcases equilibrium position of KC Pharma when it will operate in the monopolistically competitive market.

Figure 4: Monopolistically Competitive Market in the long run

As per figure 4, it is seen that the long-run equilibrium can be obtained at point E where long-run marginal cost (LMC) curve and marginal cost curve intersects. Hence, the corresponding equilibrium output and price level become Q* and P*. In long-run, the firm will operate somewhere to the left of the average cost (LAC) curve’s minimum point. Average revenue curve which is also the demand curve of KC Pharma is elastic but not perfectly elastic as it has negative slope. The left side of LAC curve becomes tangent with the AR curve and hence the firm only gets normal profit.

ECO600 Economics and Finance for Business Assignment Sample

Instructions.

1. Answer ALL four (4) sections. They contain short-answer questions. There are NO multiple-choice questions.

2. Keep your answers WITHIN 500 words per section.

Weighting 40%

Word Count Maximum 2,000 words

Section 1: Ethical enterprises in the modern economic system: the circular economy (10 marks; length: max. 500 words) Background

You are hired as the sustainability manager of Manly Golf Club. It is in Sydney, not too far away from ICMS’s main campus. Learn about the golf club, its facilities, and the services it provides here, in this website.

To distinguish itself from rival golf clubs in the area, this club is under pressure to demonstrate its circular economy credentials. It has hired you to propose strategies that apply the circular economy principles to all aspects of its operations.

1. Propose four (4) circular economy strategies, two for each of this golf club’s two services: (i) Golfing (ii) Weddings and functions

Where possible, demonstrate how each strategy could be good/profitable for the business.

Section 2: International trade and development (10 marks; length: max. 500 words)

Papua New Guinea is a large island country north of Australia. It has a largely underdeveloped economy: it mostly exports raw materials such as timber and copper.

It does not have a large manufacturing base, relying instead on importing manufactured goods from abroad.

To learn about the country, go here. To learn about its economy, go here.

To see its low and high complexity exports, use Harvard University’s Atlas of Economic Complexity (click here):

- Enter the country’s name and click ‘start exploring’ - Find the section called ‘Export basket’ (the products it exports). - Lastly, click on ‘Export complexity’ near the bottom.

1. Select one (1) export item from this country whose complexity is low. Then, follow these three steps:

First: propose how this item’s complexity could be improved using creativity, innovation or value-adding. Provide interesting detail. Argue why your proposals might be beneficial for this country’s economy.

Second: which country or region would be good target markets for this export, and why?

Third: suggest any trade-related policy that could help this country in this project.

Section 3: Macroeconomic fundamentals (10 marks; length: max. 500 words)

Maldives is an archipelagic country made up 1,200 islands of which only around 200 are inhabited. It has a population of 540,000 people. It is located to the south of India, in the Arabian Sea.

The economy is heavily reliant on tourism, which is its largest ‘export’ industry by far, followed by seafood exports (fish, prawns etc.)

Macroeconomic situation

Since 2012, Australia’s inflation rate was around 2% and falling, before rising sharply in 2022 to almost 4% as COVID-19 restrictions were largely removed (go here, click on ‘10Y’ button to see the last 10 years’ trend).

In contrast, Maldives inflation in 2012 was almost 20%, fell to 5% in 2018, and was mostly negative (between 0% and -5%) since then. Analyse Maldives inflation rate since 2018, by going here and clicking on the ‘10Y’ button. See how it looks like, in contrast to Australia’s.

Analyse Maldives unemployment rate, here (click on the ‘50Y’ button for a long historical perspective. Analyse its balance of trade, here (click on the ‘25Y’ button).

Contrast that to Australia’s unemployment and balances of trade (see here and here, click the ‘25Y’ button). You may investigate these and other macroeconomic measures more on the Internet.

1. By contrasting Maldives and Australia’s macroeconomic measures up to today in 2022, assess which phase of the business cycle Maldives is likely to be in (see here to learn about the business cycle). Justify your answer.

2. You are the general manager of the Four Seasons hotel chain in the Maldives. Given your analysis of the business cycle above:

(i) assess whether it might be a good idea for Four Seasons to invest in expanding its hotel operations in the Maldives

(ii) assess issues involved in hiring new hospitality managers and other workers for its hotels.

Section 4: Fiscal, monetary and supply-side policy (10 marks; max. 500 words)

Country X is a developing country with a large government bureaucracy that is quite inefficient. The processing of applications to start new businesses are slow.

This country also has generous unemployment benefits: its unemployed citizens receive a generous payment that allows them to pay for rent and food such that there is little motivation for some of the unemployed to look for jobs.

The key macroeconomic measures of Country X over time– from two years ago to the present– are shown below. Examine them carefully. They are expressed in quarters (quarters means in chunks of three months):

(a) GDP growth: -2%, -1%, -2%, 14%, 5%, 3%, 2%, -1%

(b) Unemployment rate: 8%, 9%, 10%, 6%, 6%, 5%, 5%, 8%

(c) Inflation rate: 2%, 2%, 1%, 3%, 3%, 1%, 0.5%, 0.5%

(d) The purchasing managers’ index, PMI, in the manufacturing sector: 47, 48, 49, 49, 45, 48, 46, 45

The current official interest rate is 4%.

Monetary policy

Given the macroeconomic information above about this country’s economy:

1. Would this country’s central bank be likely to increase or decrease its official interest rate or maintain it at the same level? Why do you say that?

Next, based on your answer above, assess how that action might affect or transmit to each of these, with sufficient detail and discussion:

(a) consumer spending (C) and business investment (I)

(b) the unemployment rate

(c) the inflation rate

(d) the currency’s exchange rate, assuming all other things being equal (will the currency’s value tend to appreciate or depreciate, and why?)

(e) the exchange rate’s effect on the country’s exports, assuming all other things being equal (could the trade balance move towards a surplus or a deficit?)

(i) Golfing

- With respect to Cao, L., 2020, the implementation of coordinating the circular value chains with the help of data which is a circular economic strategy supports the preparation of products for recycling for reusing the data. If the Manly golf club uses the data of different players and collects detailed information related to the style of playing the golf, creates an effective plan for the different golf games. The purpose of implementing this strategy helps the golf club to understand the gameplay of the players and create potential golf courses for adding challenges and providing a high level of satisfaction to the players or the customer of the golf club. Through this process, the Manly golf club increased the profitability of the business and also met the satisfaction requirements of the customers or the players.

Rethink: The principle of rethink is applicable in this strategy for creating an effective golf course for the player and also understanding the playing style of the player. It adds up value to the product and makes it a potential product for best assignment help .

Figure 1: Coordinating the circular value chains (Source: https://www.boardofinnovation.com/circular-economy-business-models)

- Overview of the Kim, 2019, this strategy of circular product design of circular economic strategy helps for the preparation of different products to recycle for reusing the killed information of the players and game field. At any rate, the Manly golf club effectively uses the potential data of the different players and also it collects detailed information related to the different levels of players then it will create a potential golf course for the players. The purpose of implementing this strategy helps the golf club to understand the gameplay of the players and create potential golf courses for adding challenges and providing a high level of satisfaction to the players or the customer of the golf club.

Reduce: The above strategy helps to increase the efficiency level of the golf club and also provides various resources to the players. Providing a higher value of a product to the players creates a high level of satisfaction rate for the customers.

Figure 2: Circular product design (Source: https://www.boardofinnovation.com/circular-economy-business-models)

(ii) Weddings and functions

- Based on the analysis of the Kimanzi, M.K. and Gamede, 2020, the strategy of collection and reserve logistics of the circular economic strategy creates a potential environment and complementary services for the customers. With the help of this strategy, the different occasions and wedding functions can be effectively operated in the hotel of the Manly golf club. It is based on the life cycle of the product and the method of reselling. This process implements appropriately in the function section of the golf club which helps to increase the value of reputation and profitability of the golf club. Repurpose The strategy is based on the method of re-selling which is the main purpose of the concept. The repurposing of the different products can be helpful for the golf club.

- With respect to Klopotan, I., Zoroja, J. and Meško, 2018, the application of the sorting and the pre-processing with the help of data which is a circular economic strategy supports the preparation of products to recycle for reusing the data. This process helps to optically use any alternative products and services during the wedding function and occasions for the creation of different products. Recover: With the help of the above strategy, the golf club can effectively reuse the data for better purposes in the upcoming course of time. It will help the business of the golf club to increase in the upcoming course time.

According to the website, the selected export item is timber from the country Papua New Guinea which is standing in the low category of the complexities. It is one of the large Islands on the Norton side of Australia. The economic level of the country is underdeveloped

- In respect to Lamperti, F., Monasterolo, I. and Roventini, 2019, improvement can be done by creating valuable exporting relationships with other countries by exporting the timber and also the products which are made out of the timber. At the time of harvesting the timber, the scrap material and waste timber materials can be used to create potential artefacts which increase the profitability of the country. The scrap or the waste timber which is going to be thrown away now creates valuable artefacts which have a higher rate than the value of timber in respect to the art. On the other hand, the country needs to create relationships with developed countries for exporting the timbers and artefacts. For instance, if the buyer country of the timbers and artefacts of the country is the USA then the underdeveloped country Papua New Guinea can sell the timbers and artefacts at a high price. This process will be highly beneficial to the country and help to increase the rate of GDP and profitability at the same time.

- Based on the analysis of the Mian, A. and Sufi, 2018, to increase the profitability and improve the business quality of the underdeveloped country Papua New Guinea, the selected country origin for effective targeting market will be the developed countries such as the US and UK. The purpose behind selling the product to the US or the UK is due to the higher rate of currency and also the quality market segment. If the buyer country of the timbers and artefacts of the country is the USA or the UK then the underdeveloped country Papua New Guinea can sell the timbers and artefacts at a high price. This process will be highly beneficial to the country and help to increase the rate of GDP and profitability at the same time. Therefore, the country will get a high level of benefits and also the potential market segment which increases the profitability of the country decently.

- Based on the overview of the Pillay, S., Rajaram, R. and Ramnanun, 2020, the multilateral trade policy will be helpful for the country Papua New Guinea to maintain an agreement of commerce between the two countries by signing the treaties for the import and export of timber and artefacts made out of the timber materials. It will help the country to maintain a decent level of trade with developed countries which increases the profitability and helps the country to grow and develop in the coming course of time.

- According to the abstraction of the Rusydiana, A., Sanrego, Y. and Rahayu, 2021, after the investigation process, it is found that the business cycle of the Maldives is going towards a recession period. The forecasting range of the unemployment rate in the Maldives is going to be increased in the upcoming course of time which refers to the business cycle of recession. On the other hand, the macroeconomics level of the country is also going to decrease in the coming course of time due to safety and health reasons. The factor of safety and health reasons impact the entire business cycle of the country because the main occupation of the country is based on tourism which is going to be restricted in the upcoming course of time. The output level of revenue and GDP of the country is going to decrease due to the increasing unemployment rate in the country. It is also observed that the inflation rate of the country has been increasing for consecutive years which also impacts the profitability and the ability to generate revenue by tourism. Therefore, it is clear that the country is going forward into a recession period in the upcoming course of time.

- According to the analysis of the Rusydiana, A.S., Sanrego, Y.D. and Pratomo, 2021, after evaluating the financial business cycle of the country, it is not the appropriate time to invest in the expansion of the operations of the hotel in the country because of the decision period in which the inflation did become higher than the normal level and also the rate of unemployment increased. If the value of unemployment rate increases it will create a flood of working employees in the hotel and after the decision period most of the working employees are going to leave the hotel which creates an operational gap in the business. It also negatively impacts the growth and development prospect of the hotel. Therefore, the four-season hotel in the Maldives does not need to increase the expansion of the operation factor of the business.

- With respect to the overview of the Vogel, H.A., 2019, if the four-season hotel appoints a new manager for operating the hospitality operation then it will be beneficial for the entire hotel. The hotel needs to understand the purpose and perspective behind hiring anywhere manager for the hospitality section. The hiding of a new hospitality section of the hotel is beneficial but on the other hand, the hiring of various workers will negatively impact the overall productivity and profitability of the hotel. Therefore, the hotel can hire a new manager for the hospital section but the hiding of new workers will create conflict in the financial activities and transactions of the hotel.

Based on the analysis of Lamperti, 2019, the central bank of the country needs to increase the current official interest rate because of the negative rate of the GDP and the inflation rate. The country to maintain years’ financial value concerning the GDP rate. Therefore, the country needs to increase the interest rate for combating the financial environment. The central bank of the country needs money in their account rather than into the account of the customer.

(a) If the central bank of the country increases the interest rate then the consumer spending will become less because the citizens of the country will deposit their money into the bank and through this, the central bank will be able to fluctuate the level of inflation in the country. On the other hand, the business investment will remain the same or slightly decrease due to the increase in the interest rate which is comparatively safer than an investment in any other business organisation. Therefore, it helps to maintain the level of inflation in the country.

(b) The rate of unemployment in the country will decrease due to the higher interest value which provides courage to the people for finding a job and depositing their salary into the bank account through which the rate of interest is higher compared to the current situation of the time.

(c) If the central bank of the country increases the interest rate then it motivates the citizens of the country to deposit their money into the bank and through this, the central bank will be able to fluctuate the level of inflation in the country. Similarly, if the rate of inflation in the country is managed then the purchasing and consumption power of the citizens of the country increases. As the purchasing and consumption power of the customer increases in the country, it will provide a sustainable and lower inflation rate for the country.

(d) As it is discussed in the above section if the rate of interest of the country increases then the value of the currency of the country will also increase. This factor is the impact of the rate of interest if the citizens of the country deposit their money into the bank accounts which helps the country to manage the value of the currency. The exchange rate of the currency will also increase due to the sound base of the company.

(e) If the value of the currency of the country increases then it also impacts the process of import and export of the country. As the value of the currency of the country increases then it will provide a positive impact on the exporting of the products and goods to the different countries. The increased rate of interest provides a circular during the time of export of the goods and services to the different countries. This process will positively impact the process of export in the country in the appropriate method.

BUECO5903 Business Economics Assignment Part A Sample

This assignment contains five questions. You are required to answer all five questions. This is an individual piece of assessment. Make sure your submission is an original submission; this means it must be the creation of the person submitting it. You are required to explain your reasoning and use diagrams where appropriate.

Due date: Your instructor will advise you of the submission date of this assessment task. Assignment to be submitted electronically in the drop box in your Moodle shell.

Using a production possibilities frontier (PPF) diagram, determine how does the PPF change in response to the events describe below. Make sure to explicitly indicate what sectors you are representing, and what sort of assumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latter follows from your assumptions on the factor intensity of the sector you are representing.

a) A relaxation of policies allowing more foreign direct investment into the country.

b) Increasing the minimum wage level.

c) A decrease in expenditure on research and development.

d) An increase in the retirement age.

e) Government policies supporting the provision of services, without affecting manufacturing.

For each of the events describe below, you are required to explain:

1. The market you are evaluating (e.g., labour market, automotive market, etc).

2. Does the event act on the demand side, supply side, or both sides of the market?

3. Does the event lead to a quantity or price change? Or does the event lead to a shift in demand, supply, or both?

Make sure to explain what sort of assumptions you are making on the elasticities of demand and supply (when plotting your demand and supply, describe whether you are assuming an elastic or inelastic demand/supply).

a) A concerted reduction in the total production level in oil markets.

b) The implementation of a minimum wage.

c) The implementation of subsidies to agricultural production in Australia

d) The implementation of a Carbon tax in the resources exploitation sector. A Carbon tax is charged according to the level of emissions of greenhouse gases in an economy.

e) The implementation of a new loan program to university students in the education sector

Compare the impact of a recession that reduces consumer income by 10 percent on the consumption of durable goods and house rentals. Suppose that the income elasticity of demand for durable goods is 1.5 and the income elasticity of demand for house rentals is 0.3. Based on your response, make a policy argument to support through government funding either businesses or house rentals.

Using a supply and demand analysis show first the labour market in equilibrium, and then show

a) the effect of a reduction in the demand for labour as a consequence of a pandemic.

b) The effect of a government subsidy to producers to restore the employment of labour.

Provide a diagram with clear axis details. Make sure to explain what sort of assumptions you are making on the elasticities of demand and supply.

Here, agricultural and service sectors are represented. Assume the economy produces good X which is capital-intensive in service sector and good Y which is labor-intensive in agricultural sector. Hence, more foreign direct investment will create sector-biased effect as the production of good X will increase keeping the production of good Y unchanged. This situation is drawn in the figure below:

Figure 1: Production Possibility Frontier: Sector-Biased Effect

Again consider good X in the agricultural and good Y in the manufacturing industry. Good X is capital intensive and Good Y is labour intensive. For Assignment Help , Increasing the minimum wage level will help the industry to get more labourers for producing good Y while the production of good X will also increase but by a smaller rate (Arnold, Arnold and Arnold 2022). Hence, the situation implies sector-biased effect.

Figure 2: Production Possibility Frontier: Sector-Biased Effect

Consider two industries, service and manufacturing industries are operating in the economy. As expenditure on research and development (R&D) declines, the service sector can increase its total production by conducting more research work. Furthermore, manufacturing sector can also increase its total production due to increasing R&D. Hence, the economy will experience a neutral effect on the PPF.

Figure 3: Production Possibility Frontier: Neutral Effect

Suppose the economy has manufacturing sector and service sector. An increase in the retirement age will help both sectors to get a large number of skilled and experienced labour force. Hence, production in both sectors will increase and a neutral effect can be seen on the PPF.

Figure 4: Production Possibility Frontier: Neutral Effect

The economy has both service sector and manufacturing sector. Government policies are implemented to support the provision of services though these do not influence manufacturing process. Hence, production in the service sector will increase keeping total production in manufacturing sector unchanged. Thus, a sector-biased effect can be seen on the PPF.

Figure 5: Production Possibility Frontier: Sector-Biased Effect

Figure 6: Change in supply in the oil market

The condition is based on the oil market. The concerted reduction in total production of oil will affect the supply side. Oil market has inelastic demand and supply. This is because, supply of oil cannot be increased suddenly and demand for oil does not change significantly with its price change. Figure 6 depicts the situation from where it is observed that equilibrium price will increase to P1 and equilibrium quantity will decrease to Q1.

Figure 7: Change in supply in the labour market

The condition is based on the labour market. The implementation of a minimum wage will affect the supply side of labour if the wage rate will impose above the market wage rate. Labour market has elastic demand and supply. This is because, demand and supply of labour can be changed significantly by a small change in its wage. The condition of implementing minimum wage is shown in Figure 7. Here Wm is the minimum wage which is higher than market wage W0. Hence, an increase in labour supply by N1N2 are can be seen in the economy.

Figure 8: Change in supply in the agricultural market

The condition is based on the agricultural market. The implementation of subsidies on Australian agricultural product will affect supply side. Agricultural market has elastic demand and supply. The implementation of subsidy will encourage farmers to produce more amount of agricultural products. Figure 8 depicts the situation where supply curve increases from S0 to S1. Thus, equilibrium price declines to P1 and equilibrium quantity increases to Q1.

Figure 9: Change in supply in the Energy market

The condition is based on the energy producing market. The implementation of a carbon tax as per the level of greenhouse gas emission will affect the supply side of energy production. Energy market has inelastic supply due to the limited resource. The condition of decreasing supply of energy resource is shown in Figure 9. Here market price of energy increase to P1 from P0 and energy supply will decline to Q1 from Q0 due to imposition of carbon tax.

Figure 10: Change in supply in the Energy market

The condition is based on the energy education market. The implementation of a new loan program will increase demand for education among university students. Education has inelastic demand as it is necessary for everyone. The condition of increasing demand for education is shown in Figure 10. Here market price of education increases to P1 from P0 and equilibrium quantity declines to Q1 from Q0.

When income elasticity of demand becomes greater than 1 then it implies that the good is luxury item. On the other hand, income elasticity of demand less than 1 implies that the good is necessary item. For durable goods, the income elasticity of demand is 1.5 and income elasticity of house rental is 0.3. Hence, as per the given condition, durable goods are luxury items and house rentals are necessary items (El Shagi, Sawyer and Tochkov 2022). Thus, government needs to implement funding policy on house rents so that people can afford it easily.

Labour demand curve has a negative slope showing an inverse relationship between real wage of workers and amount of labour. Labour supply curve is upward rising as it shows a positive relationship between real wage and amount of labour. The supply curve expresses a tradeoff between labour and leisure and hence it bends slightly at the upper portion.

Figure 11: Labour Market Equilibrium

The impact of decreasing labour demand due to pandemic is shown in figure below:

Figure 12: Decrease in Demand for labour

Due to decrease in demand for labour, the real wage will also fall to W1 from We while amount of labour in the market will also fall to N1 from Ne.

Impact of a government subsidy to producers for restoring the labour employment:

Figure 13: Increase in labour supply

Due to increase in labour, the real wage will also fall to W1 from We while amount of labour in the market will increase to N1 from Ne.

Figure 13: MC, AVC and ATC Curves  

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These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can configure your browser to block or alert you about these cookies, but certain areas of the site will not function properly. These cookies do not store any personal data.

Performance Cookies and Web Beacons

These cookies and web beacons allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information that these cookies and web beacons collect is aggregated and, therefore, anonymous. If you do not allow these cookies and web beacons our aggregated statistics will not have a record of your visit. The website uses Google Analytics, a web analytics service provided by Google, Inc. ("Google"). Google Analytics uses cookies to help analyse how you use this website. The information generated by the cookie about your use of this website (including your IP address) will be transmitted to and stored by Google on servers in the United States. Google will use this information for the purposes of evaluating your use of the website, compiling reports on website activity for website operators and providing other services relating to website activity and internet usage. Google may also transfer this information to third parties where required to do so by law, or where such third parties process the information on Google's behalf. Google will not associate your IP address with any other data held by Google.

These cookies enable the website to provide enhanced functionality and personalization. They may be set by us or by third party providers whose services we have added to our pages. If you do not allow these cookies, some or all of these services may not function properly.

These cookies and web beacons may be set throughout our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant advertisements on other sites. They do not store personal information that could identify you directly, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies and web beacons, you will experience less targeted advertising. The website does not track users when they cross to third party websites, does not provide targeted advertising to them and therefore does not respond to Do Not Track ("DNT") signals.

Managing Your Cookie Preferences

You have many choices with regards to the management of cookies on your computer. All major browsers allow you to block or delete cookies from your system. However, if you do decide to disable cookies you may not be able to access some areas of our website or the website may function incorrectly. To learn more about your ability to manage cookies and web beacons and how to disable them, please consult the privacy features in your browser or visit www.allaboutcookies.org. This website may link through to third party websites which may also use cookies and web beacons over which we have no control. We recommend that you check the relevant third parties privacy policy for information about any cookies and web beacons that may be used.

IBKR LLC (U.S.)

We are redirecting you to the Interactive Brokers LLC (U.S.) Website. Should you decide to open an account, you will be redirected to the account application for your region. You can also find the website of the IBKR entity for your region at the bottom of this page.

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