Student Number: (enter on the line below)

Azz2186

Student Name: (enter on the line below)

vishal bhatiya

HI5003 Economics for Business

Online Supplementary Assessment

Trimester 1, 2020

Assessment Weight: 50 total marks

Instructions:

This assessment consists of five (5)

Each question is worth 10 marks.

Total: 50 marks

All 5 questions must be answered by using the answer boxes provided in this paper.

Answer all five (5) following questions. Each question is worth 10 marks

Question 1 Demand and supply

Victoria is the food basket for Australia. In 2017, Victoria witnessed a severe drought that is reported to be the worst in many years. Assume all factors constant meaning that there is no external influence in the market except the drought.

(a)Use the demand and supply model figure below to explain the impact of the drought on food supply to Northern Territory, a state that relies on food supplies from Victoria.

(8 marks)

Drought Demand and supply model

ANSWER:** Answer box will enlarge as you type

We can see that this shift in the supply curve will change the quantity supplied and the equilibrium price. Atthe original price (P1), the decrease in supply causes a shortagemore people want food basket at that low price than the suppliers are able to provide. This drives up the price to a new equilibrium level (P2). In short, a leftward shift in the supply curve causes a movement up the demand curve, resulting in a lower equilibrium quantity (Q2) and a higher equilibrium price (P2).

It's very common to see the impactof drought and other natural factors on supply, equilibrium quantity, and equilibrium price.

(b)Suppose in 2019 to promote food production, the Federal Government of Australia provided high technology equipment to facilitate irrigation. Assume Victoria supplies machinery and food, use a production possibility frontier (PPF) to explain the impact of high technology equipment for irrigation on food supply in Australia. (2marks)

Victoria food and machinery production possibility frontier

ANSWER:

Question 2 Cost of Production

Happy quit her part-time job as a nurse earning AUD 60,000 per year to start her own food kiosk business. To start the business Happy utilized AUD 50, 000 she was earning from her rental property. Also, Happy used AUD 50,000 she had saved in Commonwealth Bank earning 5% interest per year. Happy's first year business was summarized as follows:

Item

Amount (AUD)

Total Revenue

160,000

Labor cost

100,000

Cost of Materials

25,000

Equipment rental

30,000

Use the information provided to answer the following questions

(a)Calculate the business economic profit.If necessary use the table below. (7 marks)

(b)Explain whether Happy made the right decision to quit her teaching job. (3 marks)

ANSWER:

Question 3 Inflation and unemployment

a)Suppose the Happy land Bureau of Statistics indicated that the Consumer Price Index (CPI) increased 102.2 in 2017 to 105.5 in 2018.Use this information to answer the following questions: (5 marks)

(i)Calculate Happy land's inflation rate in 2018. (3marks)

ANSWER:

Rate of inflation= ( cpi/x- )

(ii)Suppose a firm borrowed money from a bank, examine the effect of inflation to the parties (firm and bank). (2 marks)

ANSWER:

b)Distinguish between structural unemployment and frictional unemployment. Examine the most hard type of unemployment to address (5 marks)

Question 4: Market Structure(10 marks)

Hungry Jacks is one of the fast foods firms in Sydney with the following short run cost curves.

(a)Use 2 characteristics to explain the market structure for Hungry Jacks company

(4 marks)

ANSWER:

(b)What price does Hungry Jacks charge and what quantity will the firm produce to maximize profit? (2 marks)

ANSWER:

Price is 120 and quantity is 300

(c)Calculate this firm's profit or loss. (4 marks)

ANSWER:

Question 5: Business Cycle and measuring the size of the economy (GDP)

a)The business cycle model shows short-term fluctuations in the level of economic activity along a long-term trend. Examine the two business cycle phases that can occur in a nation. (5 Marks)

ANSWER:

b)Suppose the Following information was published by Happy land Republic in 2017:

Item

Amount (AUD billion)

Household consumption

1029.81

Government consumption

340.92

Exports

386.39

Gross private domestic investment

352.69

Imports

386.95

Government investment

88.19

Use the information to calculate Happy land Republic's GDP in 2017. If necessary use the table below. (5 Marks)

Household consumption+ Government consumption + Gross private domestic investment+ Government investment-(export-import)

1029.81+340.92+ 352.69+88.19-(386.39-386.95)

=1811.57-0.56

=1755.57

END OF SUPPLEMENTARY ASSESSMENT