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Using supply and demand graphs, illustrate and explain the following scenarios: a) An increase in the amount of employees retiring. b) The prices of materials used in car manufacturing deceases . c)...

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Using supply and demand graphs, illustrate and explain the following scenarios:
 

a) An increase in the amount of employees retiring.
b) The prices of materials used in car manufacturing deceases.
c) The government introduces a tax on mixed alcohol drinks.
d) The effect of a decrease in income on the consumption of designer clothes
e) The effect of an increase in income on the occurrence of holidays.
f)  Genetic engineering has produced a coffee bean resistant to disease

 

Over recent months the Australian government has issued strong travel warnings advising Australian citizens not to travel to any country registered on the smart traveller list. Given that information what do you think is likely to happen in the:

1. Australian international air travel market?
2. Australian domestic holiday market?
 

Required:
Explain how this information will affect demand and/or supply in each of these markets.

Answered Same DayDec 11, 2019

Solution

David answered on Dec 24 2019
61 Votes
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Assessment question
 Question 1             [2.5 mark for each sub section; Total 15 marks]

Using supply and demand graphs, illustrate and explain the following scenarios:
 
a) An increase in the amount of employees retiring.
Answer – There will be shortage of workers in the labor market as supply of the total employees will fall down. At given wage rate, fewer workers will be available for work because majority of the labor force will start retiring. As a result, there will be rise market wage rate and fall in the employment of workers. Cu
ent workers would demand higher wage rate and also the employment level will get reduced.
(
D1
) (
SS
2
) (
PRICE
)
(
P2
) (
SS
1
)
(
P1
)
(
QUANTITY
)
(
Q1
) (
Q2
)
) The prices of materials used in car manufacturing deceases.
(
SS1
) (
PRICE
)Answer – Fall in the input prices of the good will result into rise in supply of car in the market because of which the supply curve will shift rightwards leading to rise in equili
ium quantity of car and fall in prices of car in the market. Input prices play a crucial role in determining the output prices in the market because costs of inputs is the prime factor which makes up the final price of the good in the market.
(
SS2
)
(
P1
)
(
P2
)
(
Q2
) (
Q1
) (
QUANTITY
)
c) The government introduces a tax on mixed alcohol drinks.
Answer – Introducing tax on mixed alcohol drinks will reduce the demand of mixed alcohol drinks in the market leading to downward shift of the demand curve from D1 to D2. As a result, the equili
ium quantity will fall from E1 to E2 and equili
ium price will fall from P1 to P2.
(
PRICE
)
(
SS1
) (
DD2
)
(
P1
)
(
P2
) (
DD1
)
(
Q1
) (
Q2
) (
QUANTITY
)
d) The effect of a decrease in income on the consumption of designer clothes
Answer – There is positive co
elation between income level and consumption level. As income falls, the demand of designer clothes also falls down from D1 to D2 leading to reduction in price of designer clothes and equili
ium quantity consumed of such designer clothes.
(
PRICE
)
(
SS1
) (
DD2
)
(
P1
)
(
P2
) (
DD1
)
(
Q1
) (
Q2
) (
QUANTITY
)
e) The effect of an increase in income on the occu
ence of holidays.
(
SS1
) (
DD2
) (
PRICE
)Answer – An increase in income will increase the expenditure of people over holidays as people would like to have more of leisure activities at higher income level. As a result, the demand curve for occu
ence of holidays will shift rightwards from D1 to D2 leading to rise in prices of holiday packages and equili
ium quantity.
(
P2
)
(
Q2
) (
Q1
) (
P1
) (
QUANTITY
)
f)  Genetic engineering has produced a coffee bean resistant to disease
Answer – Production of coffee bean which are resistant to disease will increase the demand of such beans in the market leading to rightward shift of the demand curve from D1 to D2. As a result, there will be rise in equili
ium market price and quantity (Allan, 2015).
Question 2:               [2.5 marks for each sub section; Total 5 marks]
Over recent months the Australian government has issued strong travel warnings advising Australian citizens not to travel to any country registered on the smart traveller list. Given that information what do you think is likely to happen in the:
1....
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