ECON1025 - Dairy Market Australia | Report
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Added on 2019-09-30
ECON1025 - Dairy Market Australia | Report
Added on 2019-09-30
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[TYPE THE COMPANY NAME]ECON1025 ASSIGNMENT2[Type the document subtitle]Student[Pick the date][Type the abstract of the document here. The abstract is typically a short summary of the contents of the document. Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.]
Q1. The article calls for public policy initiatives to address animal welfare andenvironmental concerns associated with dairy farming. With reference to economicconcepts covered in this course, explain why the government might want to intervene in thedairy market.AnswerThe dairy farming in Australia is going through the crisis. The dairy products are cheap, andthere are a lot of fluctuations that are happening in the markets on both domestic and globalfront. The farmers are facing financial problems due to this. Also, the dairy cows are beingexploited, and the environment is getting adversely affected. So, it is necessary for public policyinitiatives to address animal welfare and environmental concerns associated with dairy farming. It is depicted in the article that the self-interest of the industrialists in dairy farming is producinginefficient results. For example, it is written in the article that the industrialist is making thedairy cows subject to the continuous cycle of impregnation, and are artificially inducing calvingand milking for increasing their productivity. Thus, this is the scenario of market failure as herethe allocation of goods and services are not efficient enough for the dairy activities (Harvey,2013). Improvement is required in this scenario for the betterment of the society. Thus, thegovernment needs to intervene in this.There are different types of goods in the economy. Common goods or common resources arethose that are rival, but they are not excludable. Public goods are those that are neitherexcludable nor rival (Betz, 2014). The dairy farm is a common resource because it has all thecharacteristics of the common resource, i.e. it is rival but non-excludable. Rivalry means thatwhen the dairy farm is used by one consumer or person, its availability or usability for other1
people and consumers declines. For example, the cow has produced milk and a consumer comesand consumes the milk, so he has declined the availability of the cow’s milk for other consumers.Non-excludable means that the consumers cannot be prevented from making use of the dairyfarm (Betz, 2014). Hence, it is a common resource. So, a government needs to intervene becauseif the resource can be used by anyone, so it will get destroyed, and people will make unethicaluse of it. With government interference, the resource use could be regulated, and it could beused properly. The process of animal welfare is a negative externality. Negative externality means that theeconomic transaction’s cost is borne by a third party (Henderson, 2014). The third parties are thepeople, companies, owners', etc. who are affected indirectly. In the article, it is mentioned thatdue to the livestock farming, the climate is getting affected so the people who live in that climateare the third parties, and they suffer due to this negative externality. Therefore, if the governmentintervenes in the dairy farming activities, it could reduce this negative externality by makinglaws, policies or rules in which the third parties are protected from getting affected by theactivities of farming and dairy. 2
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