Business Economics

This document provides study material and solved assignments on various topics in Business Economics. It covers the factors affecting demand for foreign education, elasticity of demand, price floors, and monopoly market structure. The content includes explanations, examples, and diagrams to enhance understanding. The document is suitable for students studying Business Economics.

Running head: BUSINESS ECONOMICS
Business economics
Name of the student
Name of the university
Author note

1BUSINESS ECONOMICS
Table of contents
Answer 1....................................................................................................................................2
Answer 2....................................................................................................................................3
Answer 3....................................................................................................................................5
Answer 4....................................................................................................................................7
Reference list............................................................................................................................10

2BUSINESS ECONOMICS
Answer 1
The international education has started to become a growing export industry in case of
developed countries such as UK, USA and Australia. The programs that are generally offered
to the international students comprises of both onshore and offshore programs. One of the
factors which affects the demand for the foreign education is the low tuition fees. One thing
which will attract the international students for studying in the universities of Australia is the
low tuition fees. The number of international students will increase when the tut6ion fees for
the universities will decline (Kritz, 2015). Another factor of the universities which will be
attracting the students is the quality of education providing by the universities. The
international students will get attracted to Australian universities only when they provide
quality education. The sources of funding also act as an important determinant. The world
rankings of the university acts as a determinant of the demand of the education, quality of the
teaching and the availability of the services for supporting the international students acts as
some of the main determinants of demand of foreign education. Therefore, the quality of the
education can also be stated as one of the key determinants of the demand of the international
education. The exchange rates, the gross domestic product of Australia, total population,
energy price index and the price of the metals index is known to be some of the main
determinants of the demand for the international education. Personal experiences and the
beliefs about the benefits of the college helps in creating a foundation from which the
students approach the college decision making process. Self-efficacy can be also stated as the
driving force of the human behaviour. The young students are also known to be influenced by
their close friends. Therefore, the universities suggested by them will be attended by the
international students. The education has a strong correlation with the economic growth, it
will affect the pattern of the supply in the labour market. The demand in general comprises of
the investment, aspects of the consumption and the expected benefits which will be

3BUSINESS ECONOMICS
influencing the people who find it economically desirable. The demand for university
education has both natural as well as artificial components (Beine, Noël & Ragot, 2014). The
university education demand also the function of the population of the youth, per capita
income, federal aids and the tax systems. Another important factors that could be taken in to
account is how much effective is the educational system in bringing students to the university
doors.
Answer 2
The elasticity of demand states how sensitive the demand for good is to change in the
other economic variables. The economic variables consist of the both consumers and the
prices. Demand elasticity is usually calculated as the percentage change in the amount of
quantity demanded is divided by the percent change in case of another economic variable.
One of the `example of the three products is the gasoline
The gasoline has an inelastic demand in the present market. As the price of the
gasoline goes up, the quantity of gasoline will not decrease that much. The quantity of the4
good demanded is insensitive in nature to the change in price (Becker, 2017). The product is
therefore will be inelastic in nature. The demand for the gasoline is therefore inelastic in
nature. One of the reasons behind this that there is absence of any close substitute available of
gasoline for which it has an inelastic demand. However, in case of long run the demand for
gasoline is relatively elastic to price and the change of income. The elasticity is known to be
quite higher in the long run when compared to the short run.

4BUSINESS ECONOMICS
Figure 1 Inelastic demand
(Friedman, 2017)
Another product which can be taken in to consideration can be the products which are
made of milk. In this case the milk products are therefore termed as the normal goods since
the demand for the goods will increase when the price will go down and will start to decrease
when the price will rise. The price elasticity of the normal goods is therefore said to be
positive in nature. Therefore, normal can be termed as those goods whose income elasticity of
the demand is known to be present between zero and one. The normal are also known to be
necessity goods where the products and services are such that consumers will be buying
regardless of the changes in the level of incomes. Therefore, it can be said that the milk
products can be termed as the normal goods which will be experiencing positive price
elasticities. The income elasticity of the milk products will be positive and it will be always
less than one. When an individual will be having a low income, at that time he will demand
less of the milk product5s. On the other hand, when the price of the milk products decreases,
the individual will be buying the products in huge quantities. The price elasticity of the milk
products is known to be -0.23 in Australia.

5BUSINESS ECONOMICS
Figure 2 Elastic demand
(Friedman, 2017)
The third product which can be taken in to account is the instant coffee. Here in this
case the instant coffee is known to be an inferior good. As in case of inferior goods, it is a
type of good for which the demand will be declining as the level of income in the economy
will rise. People will be not buying more instant coffee packets when the income level will
increase which states that inferior goods are opposite to the normal goods. In case of inferior
products, the consumer will be demanding much less amount when they will be having a
higher level of real income. The demand for the instant coffee packets will be deceasing
when the income will be increasing or the income will be increasing.

6BUSINESS ECONOMICS
Demand
Supply
Pmin
$1.3
0
P
E
Quantity
Answer 3
The Northern Territory here known to have introduced a minimum price on alcohol of
amount $1.30 per standard drink. The imposition of price on the alcohol can be shown in the
following diagram:
Figure 3 Price floor
(Lim et al., 2015)
The Northern Territory here is known to be the lowest legal price for the commodity
which can be sold. Price floors can usually impose by the government for preventing prices
from being too low. Therefore, imposing the minimum price of $1.30 is an example of the
price floor used. In order to make price floor to be effective in nature, the price floor must be
set above the equilibrium price. When the alcohol was sold at the previous equilibrium price,
the quantity sold was lower. When the NT started imposing price floor, the amount of alcohol
sold have increased. The price floor is known to be the lowest legal price which is paid for
the services. Price floors can also be known as the price supports since the price provided by

7BUSINESS ECONOMICS
them prevent it from falling below the certain level (Perkis, Cason & Tyner, 2016). A higher
price therefore means, the producer will be earning a higher income. However, there are
some disadvantages in case of price floor which means consumers need to pay much higher
prices. The price floor will also encourage oversupply and also is quite inefficient in nature.
The price floor will also hurt the society more than it helps. The price floor is also known to
impose a deadweight loss. The deadweight loss is also known as the loss in the economic
efficiency. The consumers in this case will be paying a higher price for the similar service.
One of the disadvantages of the price floor is that price floor creates excessive supply that the
government will be buying the extra quantity. In many cases the government can destroy the
surplus amount. In case of the price floor to be effective in nature, the price floor has to be
above the price of equilibrium. The Northern Territory imposed the price floor which have
been marked as Pmin. The price floor will become a situation when the price charged will be
more than or less than the equilibrium price determined by the market forces of demand and
supply (Perkis, Cason & Tyner, 2016). The price floor has been found to be to be of great
importance in case of the labour wage market.
Answer 4
The question here states that the operators of the Australian airline have claimed that
the airports of Australia have been using their monopoly power by charging exorbitant fees
for the services provided by them. The monopoly market structure is usually characterized by
single seller, in this case it is the Australian airport. In case of a monopoly market structure
the seller usually faces no such competition since the will be sole seller in the market.

8BUSINESS ECONOMICS
Figure 4Monopoly market
(source: Sarafopoulos, 2015)
The features of the monopoly market structure are:
Single seller and large number of buyers: the firm in this case is the sole firm and therefore it
is also known as the industry. The number of buyer4s in this kind of industry is usually7 large
in nature.
Absence of any close substitutes: in case of a monopoly market structure there is
absence of any kind of close substitutes. According to the question, the Australian airport
have no close substitute in the market (Sarafopoulos, 2015). Therefore, it can charge huge
amount of money for the services provided by them. The cross elasticity of demand which is
present between the product of the monopolist and the others are therefore known to be zero.
Difficulty in the entry and exit of the firms: There can be either artificial or natural
entry and exit of firms in the industry. this will take place also when the firm will be making
an abnormal profit.

9BUSINESS ECONOMICS
Firm is similar to the industry: in case of the monopoly market structure, since there is
absence of any kind of close substitutes. The firm is generally treated as an industry.
therefore, there is absence of any kind of difference between industry and firm. Here in this
case, the airport of Australia is only firm providing such services and therefore it can be
treated as an industry. The Australian airports can therefore charge any price according to
their wish.
Price maker: under the market structure of monopoly, the monopolist has full control
over the supply of the services. Due to the presence of huge number of buyers, the demand of
any single buyer will constitute an infinitely minute part of the total demand. For this reason,
buyers need to pay the price which are generally fixed by the monopolist.
As the demand of the services provided by the Australian Airport which is inelastic in
nature, it can therefore fix a high price for its services or can also practice blatant profiteering
(Sarafopoulos, 2015). On the other when the demand of the product is elastic in nature, the
firm will not be able to charge huge amount of prices. The demand is said to be inelastic in
nature, when the consumers have to buy or use the services at whatever price they are been
given.

10BUSINESS ECONOMICS
Reference list
Becker, G. S. (2017). Economic theory. Routledge.
Beine, M., Noël, R., & Ragot, L. (2014). Determinants of the international mobility of
students. Economics of Education review, 41, 40-54.
Friedman, M. (2017). Price theory. Routledge.
Kritz, M. M. (2015). International student mobility and tertiary education capacity in
Africa. International Migration, 53(1), 29-49.
Li, Y., & An, Q. (2018). The Value of Network Externality in a Monopoly Market.
Lim, C. R., Harris, K., Dawson, J., Beard, D. J., Fitzpatrick, R., & Price, A. J. (2015). Floor
and ceiling effects in the OHS: an analysis of the NHS PROMs data set. BMJ
open, 5(7), e007765.
Perkis, D. F., Cason, T. N., & Tyner, W. E. (2016). An experimental investigation of hard
and soft price ceilings in emissions permit markets. Environmental and Resource
Economics, 63(4), 703-718.
Rader, T. (2014). Theory of microeconomics. Academic Press.
Salvatore, D. (2018). Microeconomics Theory.
Sarafopoulos, G. (2015). Complexity in a monopoly market with a general demand and
quadratic cost function. Procedia Economics and Finance, 19, 122-128.
Zeuthen, F. (2018). Problems of monopoly and economic warfare. Routledge.