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HI5003 ECONOMICS FOR BUSINESS Online Final Assessment Question 1 The 2019/20 Australia Bushfires affected food production nearly in New South Wales, Queensland and Victoria that are regarded as the food basket for Australia
HI5003
ECONOMICS FOR BUSINESS
Online Final Assessment
Question 1
The 2019/20 Australia Bushfires affected food production nearly in New South Wales, Queensland and Victoria that are regarded as the food basket for Australia. Assume that before, the bushfire, in 2017/18 Australia produced 80,000 metric tons. Also, assuime that after the bushfire devastation in 2019/20 Australia produced 50,000 metric tons of rice. Finally, assume that during the same period 2017/18 and 2019/20 the price rice in Australia rose from AUD 1.75 per kg to AUD 3.00 per kg respectively. Use the Demand and Supply Model below to answer the questions that follow.
- Use the Demand and Supply Model above to explain the impact of the bushfires on the rice market in New South Wales. ANSWER: ** Answer box will enlarge as you type
- Use the mid-point approach to calculate the price elasticity of demand for rice in Australia. 3 Marks
ANSWER:
- What is the price elasticity of demand for rice? Based on your answer, is rice a necessity commodity? Explain your answer. 1 Mark
ANSWER:
Question 2 (7 Marks)
Henri quit his job as a teacher earning AUD 70,000 per year to start his own food kiosk business. To save on rent, Henri utilized his own property. He normally earned AUD 50,000 annual rent from this property. Also, to start the business, Henri used AUD 60,000 from his own savings which he earned 4% interest per year. Further in order to start the business, Henri borrowed $40,000.00 from the bank and was paying 6% interest per year.
Henri’s first year of business can be summarized as follows:
|
Item |
Amount $ |
|
Revenue- Food section |
250,000 |
|
Revenue- Liquor |
180,000 |
|
Revenue-Soft drinks |
40,000 |
|
2 Cashiers expense (wages per worker) |
(30,000) |
|
Food van |
(100,000) |
|
Manager wages |
(60,000) |
|
Food preservatives |
(30,000) |
|
Equipment expense |
(60,000) |
|
Motorcycle expense to ease movement in city |
(30,000) |
|
2 food freezers (cost per freezer) |
(5000) |
Based on your calculations of accounting profit and economic profit, would you advise Henri to return to his teaching job or continue with the food kiosk business?
Show your work! (7 Marks)
ANSWER:
Question 3 (11 Marks)
Assume the table below is extracted from Dodi company Ltd a perfectly competitive firm selling cabbages. Assume that when the firm’s selling price is AUD 15, the marginal revenue is also AUD15.
- Complete the table below and answer the questions that follow. 3 Marks
|
Quantity (Kg) |
AVC |
AFC |
ATC |
MC |
|
2.50 |
7.50 |
5.10 |
|
|
|
3.50 |
9.00 |
3.00 |
|
9.00 |
|
4.50 |
10.00 |
2.50 |
|
12.50 |
|
5.50 |
14.00 |
1.80 |
|
13.00 |
|
6.00 |
18.00 |
1.67 |
|
15.00 |
|
10.00 |
25.00 |
1.43 |
|
16.00 |
Qty = Quantity; AVC=Average variable cost; AFC = Average fixed cost; ATC=Average Total Cost; MC= Marginal Cost; Rev = Revenue; MR= Marginal Revenue; Kg = Kilogram
ANSWER:
- Based on your answers to the table above, identify the profit maximizing quantiy supplied by the firm. Calculate the amount of profit/loss at this optimal point. Show your work. 4 Marks
- State and examine the characteristics for a perfectly competitive firm such as Dodi Ltd selling cabbages. 4 Marks
ANSWER:
Question 4 (7 Marks)
The table below is extracted from Happyland Republic, Bureau of Statistics records for 2019-2020. Use the information in this table to answer the questions that follow.
|
Items |
Base year 2019 |
2020 |
|
|
|
|
Production |
Price |
Production |
Price |
|
Used cloth (units) |
4,000 |
50.00 |
5,000 |
60.00 |
|
Components used tractor factory production (units) |
8,000 |
500.00 |
11,000 |
1,200.00 |
|
Cloth (units) |
8,000 |
25.00 |
12,000 |
30.00 |
|
Beef gifts during cultural festival (Kg) |
1,500 |
2.00 |
1,700 |
3.00 |
|
Milk (litres) |
5,000 |
1.30 |
7,000 |
2.50 |
|
Computers (Units) |
2,000 |
500.00 |
2,500 |
600.00 |
|
Printers (Units) |
500 |
300.00 |
400 |
355.00 |
|
Raw materials for car assembling plant (Units) |
4,500 |
250.00 |
4,450 |
300.00 |
- Calculate Happyland Republic’s nominal GDP, real GDP in 2020. Also, calculate the GDP deflator if 2019 is used as the base year. 5 Mark
ANSWER:
- Double counting must be avoided when measuring GDP. State and examine four (4) transactions that are excluded from GDP to avoid overstating the size of the economy of a nation. 2 Marks
ANSWER:
Question 5 (11 Marks)
- According to Australia Bureau of Statistics, in 2020 the population of Australia is about 25.6 million. The adult population over the age above 15 years was reported to be about 21.3 million and the labour force is 16.5 million. The population employed was about 13.4 million. Following this information;
- What is the population of the people that is not included in the labour force? Show your work. 2 Marks
ANSWER:
- Calculate the percentage of the people employed and the unemployment rate in Australia. Show your work. 4 Marks
ANSWER:
- Currently unemployment has increased in Australia. What are the 2 main causes of increasing unemployment in Australia. Your answer should be based on the case study used during this trimester and current events events.
2 Marks
ANSWER:
- Examine the causes of at least two (2) main types of inflation 3 Marks
ANSWER:
Question 6 (7 Marks)
The Australia Federal Government established a AUD 2 billion grant to help sectors affected by the bushfires to get the support they needed to recover. Use the Aggregate Demand and Aggregate Supply Model below to answer the questions that follow.
- Using the Aggregate Demand and Aggregate Supply Model did the 2019/20 cause economic expansion or economic contraction in Australia. Name at least three sectors that were affected by the bushfires and examine the impact of the bush fires to the economy of Australia. 5 marks
ANSWER:
- Employ the Aggregate Demand and Aggregate Supply Model to explain the benefits of the Australia government AUD2 billion grant to the economy. 2 marks
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