9 ECONOMICS ASSIGNMENT IB HL ECONOMICS Contents Beer case study Question 1 The price for a pint of beer in Britain

9 ECONOMICS ASSIGNMENT IB HL ECONOMICS Contents Beer case study 3 Question 1 3 Question 2 3 Question 4 4 NZ house price case 5 Question 1 5 Question 2 6 Question 3 6 Question 4 7 Question 5 7 Question 6 8 Question 7 8 8 Reference 9 Beer case study Question 1 The price for a pint of beer has increased in many parts of Britain mainly due to the increased cost of running the public houses. Figure 1: The leftward shift in the supply curve (Source

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ECONOMICS ASSIGNMENT
IB HL ECONOMICS

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Contents
Beer case study...........................................................................................................................3
Question 1..................................................................................................................................3
Question 2..................................................................................................................................3
Question 3..................................................................................................................................4
Question 4..................................................................................................................................4
NZ house price case...................................................................................................................5
Question 1..................................................................................................................................5
Question 2..................................................................................................................................6
Question 3..................................................................................................................................6
Question 4..................................................................................................................................7
Question 5..................................................................................................................................7
Question 6..................................................................................................................................8
Question 7..................................................................................................................................8
Question 8..................................................................................................................................8
Reference....................................................................................................................................9

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Beer case study
Question 1
The price for a pint of beer has increased in many parts of Britain mainly due to the increased
cost of running the public houses. Consequently, the sellers supply lower quantities of beer at
any given price leading to a leftward shift in the supply curve (Iossa and Martimort, 2015).
The new supply curve S2 and the demand curve D intersect at a point where the price is
higher and the quantity sold is lower. Therefore the leftward shift in the supply curve has
caused an increase in the price of beer.
Figure 1: The leftward shift in the supply curve
(Source: Kreps, 2019)
Question 2
The fall in the prices of a pint of beer in Surrey and Suffolk can be due to the reduction in the
operational cost of the pubs. Rent can differ from one place to another contributing
differently to the cost of operation. In the case of these two places, the rent might have been

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lower reducing the cost of operation since the last year. Consequently, the sellers can supply
an extra pint of beer at each given price level (Fine, 2016). The supply curve shifted to the
right leading to a reduction in price and an increase in quantity demanded.
Figure 2: The rightward shift in the supply curve
(Source: Kreps, 2019)
Question 3
The home-brewed beers are made in-home facilities owned by the makers themselves. The
rent and the wage cost are among the different cost for the production cost of a beer at home.
Therefore, the increasing rent does not affect the production of the home-brewed beers and
hence the pub will sell the home-brewed beers in relatively low prices (Postlewaite, 2016). In
this case, the pubs will be able to buy the home-brewed beer at a relatively lower cost that
eventually reflects in the price charged for the beers which are lower than the mass-market
beers.
Question 4
Internationally, the differences in the price of a pint of beer are dependent on the non-price
factors that shift the demand and the supply curve. These include the tastes and preferences of

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the local people, cultures, availability of close substitute etc. For example, the price of a pint
of beer in Dubai is $9, the highest since Dubai is a place with a cosmopolitan lifestyle and
high income. Therefore the demand for beer is high leading to a higher price for a pint of
beer. On the other hand in the case of Taipei, Taiwan the price of a pint of beer is only $1.77,
since, this country consumes a very low quantity of beer. The demand is low leading to a low
price for a pint of beer in Taiwan. It also needs to be noted that the price of a pint of beer is
moderate in Germany (Martimort et al. 2015). The reason behind this is the fact that
Germany is the largest consumers of beer along with that it has cost-effective beer production
technology due to its culture of beer consumption.
NZ house price case
Question 1
In the first case of low-interest rate, population growth and lack of supply of houses increase
the demand. The low-interest rates attract more potential buyers to take housing loans, and
higher population requires more space for accommodation. Given the increase in the demand
and unchanged supply for housing the price increases along with the number of houses sold
in the market.
Figure 3: the influence on the housing prices due to the first force

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(Source: Kreps, 2019)
In the second force where tightening credit conditions and range of government initiatives are
being implemented, the demand for housing will reduce (Taylor, 2019). The demand curve
will shift to the left side leading to a decrease in the price of housing in the market.
Figure 4: The influence in price due to credit restrictions
(Source: Kreps, 2019)
Question 2
In the case of the first force, the price is rising and in the case of the second force, the price is
reducing. If overall prices are falling then the second force outlined in question is prevailing.
Question 3
If the government bans foreigners to buy a home in New Zealand, some of the foreign
customers will be eliminated from the market. According to the theory of supply and demand,
the reduction in the number of customers shifts the demand curve to the left side (Horner,
2018). In this case, as well, the demand for housing in New Zealand will reduce leading to a
lower price and quantity of houses sold in the market. Therefore the policy will be able to
reduce the price level in the housing market of New Zealand.

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Figure 5: the changes in the price due to government policy
(Source: Kreps, 2019)
Question 4
Most of the cities of New Zealand have experienced a rise in housing prices in the last couple
of years. Along with this, the ownership of the home by foreigners has also increased over the
years. This is one of the major reasons for the upward pressure on the prices in the housing
market of New Zealand. The increasing immigration is causing the demand to increase from
the side of the foreigners making the local people worse off. Therefore I support the
government for banning foreigners from the housing market (Olitsky and Cosgrove, 2016). I
also want to add that Australians and Singaporeans also need to be kept out of the market
otherwise this will have ill effects on the prices again. If the Australians and the Singaporeans
are excluded from the ban from the housing market they will increase the demand in the
market of new apartment increasing the price further and the policies will not have any
effects to cool the housing market in New Zealand.
Question 5
Furniture and white goods are a complementary product to houses. Therefore in the case of a
rising in housing prices, the demand for furniture and white goodwill also reduce. The market

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for white good and furniture may also experience a reduction in the quantity sold if the
supply is unchanged.
Question 6
The rise in divorce rate will increase the individual customers of houses in the market.
Therefore the demand for housing will increase leading to an increase in the price for housing
property in the economy.
Question 7
If the government restricts the seller regarding where the new buildings can be made, the
sellers will not be able to increase the supply fully to meet the growing needs of the
customers of the market. For example, due to congested location if a seller plans to develop a
new building in the outskirts with better environment and government restricts the plan, then
the overall housing supply will be a constant level (Olitsky and Cosgrove, 2016). Lack of
flexibility from the supply side will push the prices higher given the high demand for housing
in the economy.
Question 8
If people move between the markets like this, the demand for house renting will reduce and
as a result, the rent will reduce in the market. Given the fixed supply of housing and higher
demand for the house, buying will increase the price in that sector. Further few customers
will go back to the house renting market until two markets are in a combined equilibrium
with a stable price and the number of houses being sold and rented in two different sectors of
the market of accommodation.

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Reference
Fine, B., 2016. Microeconomics. University of Chicago Press Economics Book,pp.45-49.
Horner, J., 2018, May. Report of the Editor: American Economic Journal: Microeconomics.
In AEA Papers and Proceedings (Vol. 108, pp. 686-93).
Iossa, E. and Martimort, D., 2015. The simple microeconomics of public‐private
partnerships. Journal of Public Economic Theory, 17(1), pp.4-48.
Kreps, D.M., 2019. Microeconomics for managers. Princeton University Press, pp.12-47.
Martimort, D., Menezes, F., Wooders, M., Iossa, E. and MARTIMORT, D., 2015. The
Simple Microeconomics of Public-Private Partnerships. Journal of Public Economic
Theory, 17(1), pp.4-48.
Olitsky, N.H. and Cosgrove, S.B., 2016. The better blend? Flipping the principles of
microeconomics classroom. International Review of Economics Education, 21, pp.1-11.
Postlewaite, A., 2016. Report of the Editor: American Economic Journal:
Microeconomics. American Economic Review, 106(5), pp.736-39.
Taylor, J.E., 2019. Deconstructing the Monolith: The Microeconomics of the National
Industrial Recovery Act. University of Chicago Press.