Scenario You are a Freelance Economics Consultant who has been commissioned by the Commonwealth Government to analyse the state of affairs in the market for Liquor Retailing in Australia and report your findings to the Government.

REPORT 1.0 Market Structure Identify the market structure of Liquor Retailing in Australia. Explain how you reached your decision using economic theory and facts.

2.0 Market Analysis 2.1 Briefly discuss the own price elasticity of demand for alcohol. Give one relevant example to demonstrate your understanding.

2.2 Briefly discuss the cross-price elasticity of demand between Dan Murphy's brand and First Choice Liquor brand. Give one relevant example to demonstrate your understanding.

2.3 Briefly discuss the cross-price elasticity of demand between alcohol and cigarettes. Give one relevant example to demonstrate your understanding.

2.4 How did demand for and supply of Liquor Retailing in Australia change in the past 5 years? In your answer, you should briefly discuss two relevant conditions (determinants) of demand and two relevant conditions (determinants) of supply in this market.

2.5 Illustrate the changes in 2.4 above in a demand and supply diagram showing clearly the impact on the equilibrium price and quantity. 2.6 How is demand for and supply of Liquor Retailing in Australia likely to change in the next 5 years? In your answer, you should briefly discuss one relevant condition (determinant) of demand and one relevant condition (determinant) of supply in this market. 2.7 Illustrate the changes in 2.6 above in a demand and supply diagram showing clearly the impact on the equilibrium price and quantity.

3.0 Welfare Analysis

3.1 Discuss the economic welfare of consumers and producers in the market for liquor retailing in Australia. In

your analysis refer to consumer and producer sovereignty, how market structure and firm conduct impacts on

consumer and producer surplus. Also, in your analysis, consider the material and non-material economic

welfare of consumers in this market.

(How is the market concentration impacting on consumer and producer surplus? Is the product offered homogenous (identical) or differentiated?

Who is more powerful - consumers or producers?

Who sets the price - the market (where prices are determined by the combination of demand and supply) or the producer (who sets high prices above the competitive market)?

What impact do the above characteristics have on consumer and producer sovereignty?)

3.2 How does government intervention (regulation and education campaigns) impact on consumer and

producer surplus? Briefly discuss.

(Provide two examples (from IBIS) of government intervention and how these may impact on consumer and producer surplus. Are consumers/producers better or worse off after the intervention?)

4.0 Further market analysis

4.1 Identify one externality that is evident in the market of Liquor Retailing in Australia. Discuss, the most

significant economic concepts relating to this market failure, including type of externality, allocation of

resources, how market failure arises, etc.

4.2 Draw a diagram for the market of domestic Liquor Retailing which demonstrates and illustrates the market

failure discussed in 4.1 above.

4.3 Name and briefly discuss one policy option the government has in order to resolve the market failure

discussed in 4.1 in the market for Liquor Retailing.

4.4 Draw a diagram for the market of Liquor Retailing which illustrates the situation in 4.3 above.

https://my-ibisworld-com.ezproxy.lib.rmit.edu.au/download/au/en/business-environment-profiles/25048/1/0/pdf

https://my-ibisworld-com.ezproxy.lib.rmit.edu.au/download/au/en/industry/398/1/0/pdf

Include bibliography