Price Elasticity of Demand and Monopoly in the Australian Market

Running head: ECONOMICS
Economics
May 11
2019

ECONOMICS 1
Table of Contents
Introduction................................................................................................................................2
Price Elasticity of Demand for Tobacco products.................................................................2
Price Elasticity of Demand for Automobile...........................................................................3
Complementary Products...................................................................................................4
Price Elasticity of Demand for Alcoholic Drinks..................................................................4
Global Price Elasticity in Alcoholic Drinks.......................................................................6
Monopoly in the Australian Market.......................................................................................6
Government interventions to control the monopoly power...............................................7
Conclusion..................................................................................................................................9
References................................................................................................................................10

ECONOMICS 2
Introduction
Economics is considered to be one of the most important subjects that must be studied in
order to understand its complexity. It illustrates the complex forces that are operated in the
economic system (Piketty, 2017). Besides this, it also describes the relationship between
customer and producer, management, and labor, etc. Even, it describes how the activity in
one segment influences the activity in another segment. Without the complete knowledge of
economic systems, the management of the company cannot work effectively and it may be
impossible for them to work in the business environment (Butler-Bowdon, 2017). The aim of
this report is to discuss some of the key topics of economics that is price elasticity of three
products and monopoly market structure in the Australian market.
Price Elasticity of Demand - Tobacco products
A central structure of the economic theory is that the decreasing or increasing price of any
product results in decreasing or increasing the product’s demand. Price elasticity of demand
is said to be the degree at which utilization of a goods decreases or increased after the
increase or decrease in its price. If the price elasticity of demand for a specific commodity is
low or if it is inelastic then the demand for that product will decrease or increase at very little
level like the retort to the variations in the price (Mücka, 2016). For instance, if the price
elasticity for a specific commodity is 0.1, then the demand for that product will decrease by
just 0.1% for every 1% increase in the product’s price. The demand for the product will
decrease by 1% for a 10% increase in the price, and by 2% for the increase of 20% in the
price. Demand for the good with high price elasticity will decrease at a high level as the
response to the increase in the price. If the price elasticity of demand for the commodity is
about 1.0, then the demand for the same product will decrease by 1% for every rise of 1% in
the price. The demand for item will decline by around 10% for the increase of 10% in the

ECONOMICS 3
price of the product. Similarly, there will be decline in the demand by 20% for the increase of
20% in the price of the product, 100% for a 100% increase in price (Tobacco in Australia,
2019).
For the tobacco products, the demand is not so elastic in comparison to other customer goods.
The study has reliably verified that rise in the price of the tobacco products are tracked by a
reasonable decrease in the number of individuals smoking and the number of tobacco items
that remaining smokers take. The number of people involved in smoking decreased due to an
increase in the tax rated, which results in discouraging the non-users to start, inspire present
consumers to leave and, depress former smokers to smoking again. This is because the
increase in the tax rates leads to increasing tobacco prices for everyone. The small effect of
tax rates on decreasing the use of tobacco can be huge in consideration of the entire
population.
Based on the size of the increase in price, results in decreasing the tobacco products
consumption due to increasing tax rated on tobacco products is quite considerable. In the year
1999, according to the review presented by World Bank, all else being equal, increasing in
the price of around 10% decrease in the consumption of tobacco by about 4% in the
industrialized nations and around 8% in the emerging nations (Tobacco in Australia, 2019).
Price Elasticity of Demand for Automobile
People do not purchase a car to enjoy a luxurious life or rife. But they purchase base to travel
from place to place. The automobile demand in the market is said to be a portion of a bigger
market because of the demand for conveyance in normal. As the price of the specific car
increased, then according to the law of demand the demanded quality will decrease for that
specific car.