BU EC05903 Business Economics Assignment Part A- Microeconomics lnstructions: This assignment contains five questions. You are required to answer all five questions. This is an individual piece of assessment. Make sure your submission is an original submission, this means it must be the creation of the person submitting it. You are required to explain your reasoning and use diagrams where appropriate. Due date: Your instructor will advise you of the submission date of this assessment task. Assignment to be submitted electronically in the drop box in your Moodle shell. Question 1 Using a production possibilities frontier (PPF) diagram, determine how does the PPF change in response to the events describe below. Make sure to explicitly indicate what sectors you are representing, and what sort of assumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latter follows from your assumptions on the factor intensig of the sector you are representing. a) A relaxation of policies allowing more foreign direct investment into the country. b) Increasing the minimum wage level. c) A decrease in expenditure on research and development. (1) An increase in the retirement age. e) Government policies supporting the provision of services, without affecting manufacturing. Question 2 For each of the events describe below, you are required to explain: 1. The market you are evaluating (e. g., labour market, automotive market, etc). 2. Does the event act on the demand side, supply side, or both sides of the market? 3. Does the event lead to a quantity or price change? Or does the event lead to a shift in demand, supply, or both? Make sure to explain what sort of assumptions you are making on the elasticities of demand and supply (when plotting your demand and supply, describe whether you are assuming an elastic or inelastic demand/supply). a) A concerted reduction in the total production level in oil markets. b) The implementation of a minimum wage. c) The implementation of subsidies to agricultural production in Australia d) The implementation of a Carbon tax in the resources exploitation sector. A Carbon tax is charged according to the level of emissions of greenhouse gases in an economy. e) The implementation of a new loan program to university students in the education sector Question 3 Compare the impact of a recession that reduces consumer income by 10 percent on the consumption of durable goods and house rentals. Suppose that the income elasticity of demand for durable goods is 1.5 and the income elasticity of demand for house rentals is 0.3. Based on your response, make a policy argument to support through government funding either businesses or house rentals. Question 4 Using a supply and demand analysis show first the labour market in equilibrium, and then show a) the effect of a reduction in the demand for labour as a consequence of a pandemic. b) The effect of a government subsidy to producers to restore the employment of labour. Provide a diagram with clear axis details. Make sure to explain what sort of assumptions you are making on the elasticities of demand and supply. Question 5 Using the following table a) construct the cost schedule for a firm operating in the short run b) Graph the average variable cost, average total cost and marginal cost curves