Principles of Microeconomics : Assignment

Added on - 28 May 2020

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Running head: INTRODUCTION TO MICROECONOMICSIntroduction to microeconomicsName of the studentName of the UniversityAuthor note
1INTRODUCTION TO MICROECONOMICSTable of ContentsAnswer 1:...................................................................................................................................2a).............................................................................................................................................2b)............................................................................................................................................3c).............................................................................................................................................4d)............................................................................................................................................5Answer 2:...................................................................................................................................6a).............................................................................................................................................6b)............................................................................................................................................6Answer 3:...................................................................................................................................7a).............................................................................................................................................7b)............................................................................................................................................7c).............................................................................................................................................8d)............................................................................................................................................9Answer 4:.................................................................................................................................11a)...........................................................................................................................................11b)..........................................................................................................................................11c)...........................................................................................................................................12Reference:................................................................................................................................13
2INTRODUCTION TO MICROECONOMICSOutputPriceQ0P0Demand Curve CanadaSupply Curve AustraliaPCPAQ1OAnswer 1:Australia now can export beef to Canada due to free trade agreement (Sun 2015).Under this scenario, answer the given question 1 are as follow:a)According to the question, if the government of Australia subsidise its beef supply,then the cost of exporting beef will fall (Tebaldi 2017). It will enhance the demand of theAustralasian beef in Canada due to reduced price, which is the direct outcome of the exportsubsidy provided by the Australian government. On the other hand, there will be scarcity ofbeef in the domestic market of Australia, leading to a rise in price of the beef in the market(Dinget L,2014).Figure1: Effect of export subsidySource: (created by author)According to the figure 1, Q0was the initial equilibrium quantity of Australian beef and P0was the initial equilibrium price. With rise in export subsidy, Output will rise to Q1and the
3INTRODUCTION TO MICROECONOMICSDemand CurveSupply CurvePriceOutputOACDEFGHPAPCPSAExportprice for the Canadian market will fall to PC. However, the price for beef in the Australianmarket will rise to PA, which is higher than the equilibrium price (McGovern 2017).b)In order to find the consumer surplus, total surplus and government revenue we haveto consider the diagram 2. According to the diagram, P is the equilibrium price, if there is notrade between the countries.Figure 2: Change in surplus and revenueSource: (Created by Author)Post subsidy, price of the beef in the Australian market will hike up to the PAand theprice in Canadian market will be PC. This price rise in Australian market will lead to a fall inConsumer Surplus by (A+D); whereas the producer surplus will increase up to the level of(A+D+F) due to increased sell in the Canadian market. This entails that consumer surplusduring post subsidy will increase and it will affect the total surplus, which can be gainedthrough producer and consumer surplus. Combining this we can perceive that total surplus is
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