Micro and Macroeconomics Analysis for Real World Events

Running head: ECONOMICS
Economics
Name of the Student
Name of the University
Student ID

ECONOMICS1
Table of Contents
Introduction........................................................................................................................2
Answer 1............................................................................................................................2
a) Middle East hostilities and petrol and passengers’ cars market in Australia............2
b) Electric car and petrol car market..............................................................................4
Answer 2............................................................................................................................5
a) Policy of government and impact on aggregate output.............................................5
b) Factors affecting long term economic growth............................................................7
Answer 3............................................................................................................................8
a) Burden of taxation......................................................................................................8
b) Australian supermarket market structure...................................................................9
Conclusion.......................................................................................................................10
References list.................................................................................................................11

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Introduction
Different concepts of economics are useful in understanding implications for
different real world events (Olitsky and Cosgrove 2016). In this report concepts related
to microeconomics and macroeconomics are considered to make some real world
analysis. Question 1 of the report discusses how hostilities in Middle East nations
affects the petrol and passengers’ car market in Australia. In the second part, the
question evaluates interconnection between the electric car market and petrol car
market. Question 2 analyzes the trade-off that a nation faces between current and
future production. In this context, the likely impact of Australian government’s policy to
increases attendance in universities degree on current and future production
possibilities are discussed. This part of the report also discusses different determinants
of economic growth in the long run. Question 3 is about difference in incidence of
taxation between tax on cigarettes and that on coffee. In this part, the paper discusses
market structure of Australian supermarket.
Answer 1
a) Middle East hostilities and petrol and passengers’ cars market in Australia
Hostilities in Middle East is likely to hamper supply of crude oil in Middle East.
Middle East is one of the primary source of oil supply in Australia. Australia imports
large volume of crude oil from Middle East countries. Fall in crude oil production in
Middle East, lowers crude oil supply in the nation. With a decrease in oil supply, petrol
supply falls. Shortage of petroleum in Australia increase petrol price. Now petrol and
passenger cars are complementary goods. Increase in price of petrol reduces demand
for passengers’ cars run by petrol (Karl et al. 2019). The market for passenger cars’
contracts causing a decrease in number of passenger cars sold and increases price of
cars. The dynamics of petrol and passenger cars’ market are shown in the following two
figures.

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Figure 1: Market for petrol in Australia
Figure 1 describes the petrol market in Australia. The demand condition in the
market is presented by the line D0D0. The state of supply is shown by the line S0S0. With
the given demand and supply, equilibrium attains at E0. The outbreak of hostilities in
Middle East reduces supply of petrol in Australian market (Mankiw 2014). Contraction of
supply moves the supply curve left. Equilibrium shifts up from E0 to E1. Quantity of petrol
at equilibrium falls and the price of petrol at equilibrium increases.