Question 1:

Recently the local government in Shanghai has introduced a price ceiling for the sale of apartments to deal with the huge increase in prices over the last few years.Apartments that could sell in the market for 130,000 yuan (US$19,400) per square metre, now have to be sold at a price about 30 per cent lower, that is, at a price of 100,000 yuan per square metre to meet the government requirement.Source: Zhen, Summer (2017) - see link: https://www.scmp.com/business/article/2105987/shanghais-price-controls-new-homes-toughest-china-says-jinmao-chief.

What effect is this likely to have on the market for apartments in Shanghai?What will happen to the quantity of apartments demanded?What will happen to the quantity supplied?Who gains?Who loses? Draw a diagram to support your answer. (5 marks)

Question 2:

In the 1980s Australia introduced restrictions on the amount of foreign clothing products that could be imported and sold in Australia. Source: Emmery, Michael (1999). See link: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp9900/2000RP07

Using supply and demand analysis, graph and explain what the effect of these restrictions would have been on the market for foreign clothing in Australia and on the market for locally made clothing in Australia. (Please note: You do notneed to discuss tariffs or quotas when answering this question). (5 marks)

Question 3:

In 2018 steel workers in America received the biggest wage increase in six years after long negotiations with the steel companies. Source: Singh, Rajesh Kumar (2018). See link:

https://www.reuters.com/article/us-u-s-steel-union-contract-exclusive/exclusive-u-s-steel-workers-set-to-get-biggest-pay-raise-in-years-sources-idUSKCN1MQ2Q3

At the same time the price of aluminium, which is a substitute for steel, has seen a price drop in 2018 selling at below US$2000 a tonne. This is mainly due to increased supply of aluminium from China. Source: Djukanovic, Goran (2018). See link:

https://aluminiuminsider.com/aluminium-year-in-review-and-what-to-expect-in-2019/

What are the effects on the equilibrium price and quantity of steel if the wages of steelworkers rise and, simultaneously, the price of aluminium falls? Draw a diagram to support your answer. (5 marks)

Question 4:

In 2019 drought has reduced the amount of production of farm products in Australia by many billions of dollars. Source: Sullivan, Kath (2019). See link: https://www.abc.net.au/news/rural/2019-03-05/value-of-australian-farm-production-drops-abares-figures/10867294.

At the same time the demand for farm products is generally considered to be price inelastic. Economics Online (2019). See link: https://www.economicsonline.co.uk/Competitive_markets/Primary_markets.html

If the demand for farm products is price-inelastic, a reduction in farm production will increase farm incomes. Explain why this is so. Use a diagram to support your answer. (5 marks)

Question 5:

In 2019 the UK government increased the tax paid on flights out of the UK (specifically Heathrow airport) to approximately $300 per ticket. This tax is collected from airline companies who use Heathrow Airport for their operations. Source:Graham, Matt (2018). See link: https://www.australianfrequentflyer.com.au/australian-departure-tax/

Consider the market for airline travel. The initial market equilibrium is at 10 million tickets sold per year at an average price of $500 each. Then, the UK government imposes a tax on the market, collected from sellers (the airline companies). The tax is $300 per ticket.

Show the effect of this on the market for airline travel. Show the effect on consumers of airline travel, on the airlines and on the government. Does the UK economy gain or lose as a result of the tax? Explain why. Use a diagram to support your answer. (5 marks)

Reference list:

Djukanovic, Goran (2018), "Aluminium: Year in Review and What to Expect in 2019", Aluminium Insider, Published on 17 December 2018, https://aluminiuminsider.com/aluminium-year-in-review-and-what-to-expect-in-2019/, Accessed on 20 November 2020

Economics Online (2019), "Commodity and primary markets", Economics Online, https://www.economicsonline.co.uk/Competitive_markets/Primary_markets.html, Accessed on 20 November 2020

Emmery, Michael (1999), "Australian Manufacturing: A Brief History of Industry Policy and Trade Liberalisation", Parliament of Australia, Economics, Commerce and Industrial Relations Group, Research Paper 7 1999-2000, Published19 October 1999, https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp9900/2000RP07, Accessed on 20 November 2020

ExtD Tech (2015), "Economics class - How to Make Graphs in Microsoft Word", YouTube, https://www.youtube.com/watch?v=W5OmRo8mKzM, Accessed on 20 November 2020

Graham, Matt (2018), "The Australian Departure Tax", The Australian Frequent Flyer, Published on 14 June 2018, https://www.australianfrequentflyer.com.au/australian-departure-tax/, Accessed on 20 November 2020

Singh, Rajesh Kumar (2018), "Exclusive: U.S. Steel workers set to get biggest pay raise in years - sources", Reuters, Published on 17 October 2018, https://www.reuters.com/article/us-u-s-steel-union-contract-exclusive/exclusive-u-s-steel-workers-set-to-get-biggest-pay-raise-in-years-sources-idUSKCN1MQ2Q3, Accessed on 20 November 2020

Sullivan, Kath (2019), "Drought wipes billions from Australian farm production", ABC (Australian Broadcasting Corporation), Published 5 March 2019, https://www.abc.net.au/news/rural/2019-03-05/value-of-australian-farm-production-drops-abares-figures/10867294, Accessed on 20 November 2020

Zhen, Summer (2017), "Shanghai's price controls on new homes the toughest in China, says Jinmao chief", South China Morning Post, Published 8 August 2017, https://www.scmp.com/business/article/2105987/shanghais-price-controls-new-homes-toughest-china-says-jinmao-chief, Accessed on 20 November 2020