Applied Microeconomics Assignment

Running head: APPLIED MICROECONOMICS ASSIGNMENT
Applied Microeconomics Assignment
Name of the Student
Name of the University
Author Note

1APPLIED MICROECONOMICS ASSIGNMENT
Executive Summary
The banking and financial sector of Australia has experienced considerable dynamics
over the years, owing to several endogenous as well as exogenous factors. In the recent
periods, the banks, especially the big ones, in the oligopolistic market, have been
experiencing lower returns on equity. While some argue that this is due to increase in
competition, others assert that the same has been due to increase in the regulatory measures
and restrictive rules imposed by the financial authorities of the country, much of which can
be attributed to the scepticism which exists in the system post financial crisis of 2008. The
report tries to explore these aspects in the light of the economic theories and conceptual
framework.

2APPLIED MICROECONOMICS ASSIGNMENT
Table of Contents
Introduction................................................................................................................................3
Research Methodology...............................................................................................................4
Findings......................................................................................................................................4
Article Summary....................................................................................................................4
Australian Financial Sector: An Economic Overview...........................................................5
Oligopoly Market...................................................................................................................7
Relevance with Australian Financial Sector..........................................................................8
Monopolistic Trends: Economic Interpretation.....................................................................9
Benefits of competitive market............................................................................................10
Discussion................................................................................................................................10
Falling ROE of the banks of Australia.................................................................................10
Market Concentration in Australian financial sector...........................................................12
Interpreting the fall in the ROE of the Australian Banks.....................................................12
Needs for stricter regulations: Eradication of Negative Externalities..................................13
Repercussion of stricter regulation.......................................................................................13
Socialist Calculation Debate................................................................................................14
Conclusion................................................................................................................................14
References................................................................................................................................16

3APPLIED MICROECONOMICS ASSIGNMENT
Introduction
The economic principles and theoretical frameworks in the global framework have
developed considerably and modified significantly in order to incorporate newer ideas and
explain the happenings and phenomena occurring in the different sectors of the economics
across the world (Bös 2014). The economic ideas of market, market structures and their
dynamics, concentration of power, production and consumption activities, costs and benefits
of the producers and consumers, externalities and many other concepts are found to be
considerably relevant when it comes to explanation of different phenomena occurring in the
increasingly integrated and inclusive global economy.
Keeping these economic concepts into consideration and taking into account the
debates present in the aspects of working of different socio-economic systems, the concerned
report tries to shed light on the current dynamics and issues arising in the financial sector of
one of the predominant economies in the global scenario, Australia (Joshi et al. 2013). The
issues which the concerned sector of the country has been experiencing indicates towards the
question of individual and overall economic welfare and trade-offs regarding the decision-
making processes of especially the supply side players as well as the roles played by the
government and regulatory institutions and the implications of their actions.
The Australian financial sector, especially the banking and the insurance sector have
been among the dominant and most dynamic sectors of the country, contributing significantly
in the development of the industrial, real estate and commercial aspects of the countries,
thereby contributing immensely to the economic growth of the country and also getting
facilitated by the economic growth itself, in terms of increased economic and financial
activities by the residents of the country (Cavusgil et al. 2014). However, several issues of