Economic Principles: Analyzing Price Fluctuation and Externalities

This assignment delves into two key economic concepts: price fluctuations, particularly in agricultural products, and negative externalities. It explains that agricultural prices are more volatile due to the unpredictable nature of supply, which is heavily influenced by weather conditions and climate change, unlike manufactured goods where production can be meticulously controlled. The assignment also discusses negative externalities, using smoking as an example, and advocates for policies like smoking bans in public places to mitigate harm to third parties. It further suggests methods to evaluate the effectiveness of such policies, including tracking violations, conducting surveys, and monitoring air quality. Desklib offers students access to similar assignments and past papers to aid their understanding and academic performance.

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PARAGRAPH A
The price of a particular good is dependent on the underlying demand and supply forces. In
case of agricultural products, there is limited fluctuation in demand but the same cannot be
concluded about the supply. The production of these products is dependent on the underlying
weather conditions which to an extent remain outside our control. Also, in the recent years,
climate change has emerged as another challenge which has contributed to higher incidence
of extreme climate events. This typically leads to variation in the production of the various
agricultural crops (Mankiw,2014). Besides, the production of major agricultural crops also
highlights geographical concentration owing to which the price fluctuations are higher when
there is failure of crop or lower production in a major production area. This is not the case
with manufactured goods. Since manufacturing is performed in factories, hence various
aspects related to manufacturing can be meticulously controlled in order to fulfil demand.
Therefore, with regards to manufacturing goods, the primary cause of price fluctuation is the
change in demand or increase in production costs. Thus, it would be fair to conclude that
agricultural products show greater price fluctuation owing to the supply being vulnerable to
external factors which are difficult to control (Krugman and Wells, 2014).
PARAGRAPH B
Negative externality refers to the unintended harm that is suffered by the third party owing to
the economic decision taken by the given individual or entity. This attached negative
externality implies that the production and consumption of such goods should be
discouraged. One example of such goods is smoking. Smoking harms not only the smoker but
extends physical damage to the people present in the vicinity who assume the role of passive
smoker. In order to avoid the same, it makes sense to ban smoking in public places where the
non-smokers may also get exposed to smoking (Nicholson and Snyder,2014). The policy
initiative by University of Adelaide is based on avoiding the above adverse effects on
students and staff members who tend to suffer due to passive smoking. In order to ascertain
the effectiveness of this policy, various techniques can be deployed. One of these would be in
the form of recording the instances of violation which have been recorded in the last six
months. Additionally, a survey can also be conducted across the university to collect the
responses of the students and staff members on the effectiveness of policy. Besides, the air

quality can be regularly monitored and compared with readings obtained when the policy was
not in force (Mankiw, Mankiw and Taylor,2011).

References
Krugman, P. and Wells, R. (2014) Microeconomics 2nd ed. London: Worth Publishers.
Mankiw, G. (2014) Microeconomics. 6th ed. London: Worth Publishers.
Mankiw, G.N., Mankiw, G.N. and Taylor, P. (2011) Microeconomics. 5th ed. Sydney:
Cengage Learning.
Nicholson, W. and Snyder, C. (2014) Fundamentals of Microeconomics.11th ed. New York:
Cengage Learning.