Swinburne College
Economic Principles (ECO10001)
Final Assignment
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Economic Principles (ECO10001)
Final Assignment
Instructions to students
Due date: Please submit your completed work by Sunday, 11:59pm at the end of Week 12.
Form of submission: Please submit on Canvas via “Assignments”.
Document type for submission: Microsoft Word.
Assignment format: The Final Assignment involves answering 4 case studies, beginning
from the next page.
The final assignment is to be completed in a group of 4.
The final assignment is worth 30 marks.
Please ensure that each member provides their details (i.e., name & student ID) and sign on
the assignment cover sheet.
Please take note of the following:
− There is NO need to provide references in your answers.
− Feel free to consult various sources (e.g., the textbook, newspapers, the internet, etc)
to help with composing your answers.
− You must NOT copy and paste ve
atim from those sources. You must paraphrase,
using your own language.
− Straight copying and pasting will be caught for plagiarism. Students who are detected
of plagiarism will be subject to serious academic consequences.
− You are welcome to discuss the questions with each other. Again, you must make sure
to compose answers in your own language.
− Students submitting the same work will also be held liable for plagiarism.
− For questions that involve drawing graphs, please feel free to draw your graphs with
pen and paper, take a photo, then insert the photo into your answer document.
− Please do not copy the questions in your answers as it will trigger plagiarism
detection.
Swinburne College
Economic Principles (ECO10001)
Final Assignment
P a g e 2 | 7
Case Study No. 1: Microeconomics (10 marks)
Ben F is a young and prominent businessman, hailing from Prickly Bottom, Tasmania.
(Yes, it’s a real place, folks. Welcome to Tassie, the gateway of stupidities, I mean,
opportunities!)
He owns Ben Barn Ltd, a farming business, specialising in growing lettuce in his home state.
While there are more than 2,000 lettuce farms all across Australia, the majority of supply
comes from Queensland (QLD) and New South Wales (NSW).
In the first half of 2022, lettuce farmers in QLD and NSW lost all of their crops due to one of
the worst recorded flood disasters in history. The disaster spanned over two months, from
Fe
uary to April 2022, with heavy rainfalls pouring again in late June and early July.
Based in Tasmania, Ben Barn Ltd was not affected by this extreme weather and was able to
keep its lettuce crop intact.
Required:
1. What market structure would best describe the lettuce farming industry in Australia?
Clearly explain why.
Hint: There are FOUR possible market structures: perfect competition, monopolistic
competition, oligopoly and monopoly.
(2 marks)
2. Draw an appropriate demand – supply graph to illustrate the impact of the shock
above (i.e., disastrous floods destroying crops in QLD and NSW) on the market for
lettuce in Australia.
Point out the relevant determinant behind the shift in the demand and/or supply
curves.
(2 marks)
3. Clearly explain how the flood events in QLD and NSW would impact the business of
Ben Barn Ltd, in terms of its demand, price, quantity and economic profit.
Note: For each factor above, you must spell out how it is changing (i.e., increase,
decrease or unchanged) AND you have to explain the reason(s) behind the change.
(2 marks)
Swinburne College
Economic Principles (ECO10001)
Final Assignment
P a g e 3 | 7
4. Draw an appropriate firm diagram to illustrate the impact of the shock above (i.e.,
disastrous floods destroying crops in QLD and NSW) on the business of Ben Barn
Ltd.
(2 marks)
5. Speaking to ABC Australia, Ben F, the owner of Ben Barn Ltd, said the following:
“In a normal season, I would average $20 per one box of lettuce. This year, I was able
to fetch $40 for the same box. However, things are not all rosy. My business had to
attle surging costs caused by the war in Ukraine and COVID, which ate away much
of the extra revenue”.
Do some research and explain how the war in Ukraine and COVID caused soaring
costs for an average lettuce farm in Australia
XXXXXXXXXX = 10 marks)
Swinburne College
Economic Principles (ECO10001)
Final Assignment
P a g e 4 | 7
Case Study No. 2: Microeconomics (5 marks)
Woolworths and IGA are the only two supermarket chains in Australia to have won the
exclusive right to sell the latest Tim Tam.
The new product, called “Tim Tam: Vegemite Blast”, is expected to be a smash hit among
iscuit lovers.
The market for “Tim Tam: Vegemite Blast” can, therefore, be framed as one of duopoly (i.e.,
two sellers dominating the entire market).
Woolworths and IGA are contemplating whether to charge a low price ($4 per pack) or high
price ($7 per pack).
All possible outcomes of this game are shown below.
− If Woolworths charges a high price and IGA charges a high price, Woolworths will
earn $69,000 in sales revenue per day, from selling this new Tim Tam alone. IGA will
earn $42,000.
− If Woolworths charges a high price and IGA charges a low price, Woolworths will
earn $36,000 and IGA will earn $37,000.
− If Woolworths charges a low price and IGA charges a low price, Woolworths will
earn $78,000. IGA will earn $31,000.
− If Woolworths charges a low price and IGA charges a high price. Woolworths will
earn $86,000. IGA will earn $12,000.
Required:
1. Construct a payoff matrix for this game based on the information provided above.
(1 mark)
2. Does IGA have a dominant strategy in this game? If yes, what is the dominant
strategy for IGA?
Clearly explain why it is the dominant strategy.
(1 mark)
3. What is the Nash equili
ium for this game? Clearly explain.
(1 mark)
4. If Woolworths and IGA are to adjust their prices every two weeks (i.e., the two firms
keep playing this game repeatedly), what would likely be the final outcome? Clearly
explain.
(1 mark)
Swinburne College
Economic Principles (ECO10001)
Final Assignment
P a g e 5 | 7
5. Based on the sales figures for Woolworths and IGA as shown above, what can you
say about the price elasticity of demand for the “Tim Tam: Vegemite Blast” biscuit?
What is the main factor that drives consumers’ purchase of the product?
(1 mark)
XXXXXXXXXX = 5 marks)
Case Study No. 3: Macroeconomics (10 marks)
On 27 July 2022, the ABS (Australian Bureau of Statistics) released data on the CPI
(Consumer Price Index) for the 2nd quarter of 2022.
Headline inflation rate was shown to hit 6.1% while core inflation rate topped 4.9%. Both are
annual figures, obtained by comparing the average price level in June 2022 against the year
efore (June 2021).
Inflation has never been this high since June 2001 when the GST (Goods & Services Tax)
was first introduced in Australia.
Required:
1. What are the reasons behind the inflation rate running rampant at the present?
While there are a raft of factors at work, you only need to identify TWO (2).
Explain clearly in words how the TWO (2) factors of your choice cause the cu
ent
inflation rate to hit historic high.
(2 marks)
2. Amid the present economic environment, what type of monetary policy do you think
is needed?
Clearly explain why.
(2 marks)
3. Describe in detail the steps the RBA (Reserve Bank of Australia) must undertake to
implement the monetary policy suggested in part (2) above.
(2 marks)
4. Clearly explain how the monetary policy suggested in part (2) above would affect the
Australian economy.
Hint: Explain the impacts on Aggregate Demand (AD), Short-run Aggregate Supply
(SRAS), and Long-run Aggregate Supply (LRAS).
(2 marks)
Swinburne College
Economic Principles (ECO10001)
Final Assignment
P a g e 6 | 7
5. Many economic commentators warn that aggressive action by the RBA would inflict
unnecessary damages on the economy.
They contend that hiking interest rates may not help drive down inflation. At the same
time, it may push a large number of homeowners to the
ink.
Do some research to explain why, amid cu
ent economic conditions, higher interest
ates “may not help tame inflation”, and would potentially “push homeowners to the
ink”
(2 marks)
XXXXXXXXXX = 10 marks)
Case Study No. 4: Macroeconomics (5 marks)
In this case study, let’s wind the clock back to the year 2019.
In early September 2019, the Australian economy woke up to underwhelming news regarding
growth data for the 2nd quarter of 2019 (from 1st April to 30th June 2019).
According to the data published by the ABS (Australian Bureau of Statistics), the economy
grew at a quarterly rate of 0.5 percent. In other words, Real GDP in June 2019 was 0.5
percent higher than that in March 2019.
This was the weakest growth rate on record ever since the first quarter of 2001 (from 1st
January to 31st March 2001).
Even more disappointingly, the data revealed that the quarter ending June 2019 witnessed a
lower level of Real GDP per capita compared to the year before (the quarter ending June
2018).
Required:
1. As discussed above