BACC113 | Micro and Macro Economics Assignment Brief | Economics

Part A

Question 1

In economics, the concept of a market is important. Explain why this is so. What is the role of the price mechanism? (10 marks)

Question 2

For each of the following explain how the demand and/or supply curve(s) will change. State all necessary assumptions.  Draw diagrams to illustrate your answers.

a)         Supply of lamb as the price of beef increases

b)         Demand for restaurant meals as your personal income increases (10 marks)

Question 3

The following table shows the price and quantity demanded for a product. Calculate the elasticities of demand and the total revenue for this product. What conclusions can you draw about the relationship between elasticity and total revenue? (15 marks)

Question 4

Martha is an experienced pastry Chef working at a five star restaurant in the city. Twelve months ago, she decided to take a year’s leave without pay to try her hand at writing recipe books. She hoped to publish a best seller or two. At the end of the year, the following information is known:

• Her salary as a pastry Chef is $60,000 a year.
• She rented a small studio for $6000 during the year for her literary venture.
• She had savings in the bank earning interest at 10% p.a. She withdrew $4000 of her savings to purchase a computer, printer and digital camera.
• She spent $2000 on stationary, postage, utilities and traveling expenses associated with her literary work.
• She published two recipe books and several magazine articles, receiving royalties adding up to $80,000.

From an Accountant’s point of view, what is Martha’s profit from her literary venture? From an Economist’s point of view, what is Martha’s profit from her literary venture? (10 marks)

                                                                       

                                                                                                       

Part B

Question 1

A typical profit maximising firm in a competitive industry of 1000 firms has fixed costs of $80 per week and variable 

1. Complete Table 1.
2. In the short run, determine the quantity the firm will supply at market prices of
3. $104, $55, and $44. At these levels, is the firm making a profit or a loss? Explain.Using Table 2, record the firm’s and industry’s short run supply.
4. Determine what the representative firm’s profit maximising output is. Draw a graph to illustrate this profit maximising position.
5. Calculate the actual profit/loss earned and explain the long run implications of this short run equilibrium for the firm and industry. (3 + 8 + 4 + 5 + 5 = 25 marks)

Question 2

Explain how the government in Australia can stimulate the economy during a recessionary period.  Explain your answer with the use of relevant examples and diagrams. (15 marks)

Question 3

Explain the differences between discretionary fiscal policies and automatic stabilisers. In what way (s) are automatic stabilisers counteracting the effects of discretionary fiscal policies? (15 marks)