MAE101-Analyse and Apply Key Microeconomics Concepts – Economics Assignment Help

Assignment Task


Assignment 1 is a written assignment and you have to submit this assignment individually by its due date of submission (as we have mentioned above). Note that this is an individual assignment and it is not a group assignment. There is also a word limit, which is maintained strictly.
This assignment is designed whether you have understood the relevant economic concepts discussed on week 1 to week 6, in particular, you need to make sure that you have understood the concepts of (i) Demand , Supply and Market Equilibrium (ii) Elasticity and its application (iii) Government Policies : Tax and (iv) Markets and Welfare. There are three questions. Some questions also have small parts and some questions require to read the attached articles carefully. You need to answer all the questions. 

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Learning Outcomes
ULO 1: Describe, analyse and apply key microeconomic concepts.
ULO 2: Explain, present and interpret economic tools in a digital format.
ULO 3: Obtain and present information and data related to a real world issue, and critique approaches to the issue.

Assignment questions

Question 1: The economics of sales tax and online shopping 
Imagine a company, A, that sells goods through its physical stores as well as an online trading platform. Initially there is no sales tax on goods irrespective of whether they are sold through online or physical stores. Then assume the government imposes a sales tax of $2 per unit of the good (assuming a fixed amount of tax) only on goods which are sold at the physical store. The company collects the following data on its sales, which is provided in the following Table 1:

a. Calculate the own price elasticity of demand for the quantity sold at the physical store? 
b. Based on your results to part (a), do you think consumers who purchased at the physical store are responsive to the sales tax? Explain.
c. Calculate the total revenue of company A before and after the sales tax. Does the sales tax affect company A’s total revenue? Explain.  

d. Calculate the cross-price elasticity of the. quantity sold online with respect to the price per unit of goods sold at the physical store. Use your answer to explain what cross price elasticity measure indicates.  

e. Now suppose Table 1 provides us equilibrium price and quantity, then draw a demand and supply diagrams for the market of company A’s physical store as well as its online store. Name and fully label your diagram including both axes and indicate and explain points of interest using P for price (P1, P2 etc) and Q for quantity (Q1, Q2 etc). Hints: For simplicity assume that supply curve is upwardly sloped, and the diagrams are consistent with Table 1. 

f. Now work further on your diagram in part (e) to show the impact of a sales tax on quantity sold at the physical store. Illustrate and explain how the sales tax affects the consumers of the physical store. Also indicate the area on the diagram that represents tax revenue. How much burden of tax is born by an individual consumer as well as an individual seller?  

g. Classical economists argue that, everything else remains the same (i.e. in the absence of externalities or market failure), any sort of government intervention on a competitive market leads to inefficiency. If so then answer the following questions:

i) Do you think that the classical economists are right, in particular, for our case of where a sales tax is imposed on the sales of a physical store? Calculate deadweight loss (if it
exists!) for physical store (after sales tax) in supporting your argument and also show the deadweight loss with an appropriate diagram.

ii) Read the article (attached) titled “Consumer behaviour in online shopping is affected by sales tax” carefully. Explain how online consumers respond to sales tax imposed by the US government.

Question 2: Online shopping tax in Australia and Amazon
An article published by Chung, F. (2018), “Turnbull’s online shopping tax punishes Aussie consumers: How to avoid the Amazon rip-off”. The article is attached to this assignment question. The article is interesting as it analyses the implications of an on-line shopping tax in the Australian domestic market, in particular, how some big multinational companies, (for example Amazon) respond to such tax policy taken by our government. Read the article carefully in answering the following question (using appropriate diagrams with reference to relevant evidence):
Critically analyse the arguments put forth, both for and against an online shopping tax on Amazon using the above article. You may use other resources to support your argument.

Question 3: Price of related goods and good’s quality
In economics, we have learnt that related good’s price does matter. Given the budget constraint and everything else remains the same, an individual consumer switches to relatively cheaper goods (also known as substitution effect).
Often when you visit a chemist shop with your doctor’s prescription, your pharmacist may ask whether you are interested in buying a relatively cheaper drug (which is biologically equivalent to your prescribed drug) if it is available. Read the article carefully titled “Economists throw doubt on generic drug price advantage over branded version”.1 Explain what seems to be a problem that may arise when one switches to a cheaper drug (using appropriate diagrams with reference to relevant evidence).

5 points will be allocated to the quality of presentation, including digital presentation of diagrams; all labels and headings on diagrams; proper referencing; assignment submitted as a PDF document; and quality of writing, taking the total to 100 points.
Your score out of 100 points will be converted to a grade out of 30 marks, or 30% of your final result for the unit.

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