ECO100 Economics for Business Assessment 3: Case Study and Research Essay

ECO100 Economics for Business
Assessment 3: Case Study and Research Essay
25% Week 11
Note changed from 10 1500 words
a) Select a product, a good or a service.

Select Petrol or Cigarettes or Alcohol or Cars or Sugar (in the UK there is a sugar tax). An example of a service is a Noise tax on airline flights. Another is the Luxury Car tax in Australia.
RESEARCH THE BEST PRODUCT TO USE
b) Analyse the factors affecting the supply of and demand for the selected product.

EG petrol
Demand;
• Define demand
• Illustrate how a change in Price causes a shift along the curve
• How other factors cause a shift to a new curve.
• Demand for petrol is affected by Substitution effects (Petrol vs electric cars and diesel as well as public transport) Complement effects (Cars and petrol and service station supermarkets) and it is a normal good so as incomer increases demand increases
Use Diagrams

Supply;
• Define supply
• Illustrate how a change in Price causes a shift along the curve
• How other factors cause a shift to a new curve.
• Supply of petrol is affected by, OPEC (define and explain how and why it affects supply of petrol) Oil is a finite resource look up “peak oil”, which are the countries that supply oil. Which are the oil companies that operate service stations in Australia. Does Australia produce any oil? Where does Australia’s oil petrol come from?

c) Describe the elasticity of demand for the product.

• Define price elasticity of demand.
• Distinguish between inelastic and elastic demand. What happens to price elasticity along a demand curve, at lower price compared with higher price?
• Explain the elasticity of demand for petrol. What about cross elasticity and income elasticity? What other factors affect elasticity eg. before holidays (what happens to the price at the start of holidays?).

d) Assume the government places an excise tax on this product.

• Research the rate of tax on petrol and the change in this rate overtime.
• Which levels of government implement this tax on petrol?

e) Daw a supply and demand diagram to analyse the effect that this tax will have on its price and quantity sold.

f) What is other consequences of the tax?
• This last part is to discriminate good from less good answers.
• The obvious things to explain is its effect on Government revenue and who (the consumer or producer) pays the largest share of the tax called the INCIDENCE of the TAX.
• Does the tax decrease demand for [petrol that much, is this a good or not so good thing?
• It requires you to analyse and to go give both costs and benefits.
• Also it expects you to look from different points of view. So costs benefits for consumer’s, producer’s, government, the environment, the economy, society overall etc.

NEXT WEEK I WILL GO OVER QUESTION 2 from the ASSIGNMENT

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