Demand And Supply For Alcohol Products Task Assignment 2 consists of two problem questions (worth 15 marks each) based on text material. Text material which may be relevant to the questions may be drawn from any of text chapters 1-10.
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Answer the following:
Question 1
Assume the government wishes to reduce alcohol consumption by considering a higher excise tax on alcohol products. Collect information on estimates for the price elasticity of demand for alcohol products. Based on these elasticity estimates illustrate using a demand/supply diagram(s) who bears the burden of the higher excise tax, consumers or producers.
As an alternative for reducing alcohol consumption assume the government is alsoconsidering the imposition of a minimum price on alcohol products. Using ademand/supply diagram illustrate the consequences of imposing a minimum price on alcohol for the consumption of alcohol products. Provide comment on the relative merits of increasing excise taxes compared to imposing a minimum price on alcohol products for reducing alcohol consumption.
Question 2
a) Assume that in long-run equilibrium the minimum point of the LRAC curve for a table manufacturer’s tables in $200 per table. Under conditions of monopolistic competition, will the long-run price of a table be above $200, equal to $200 or less than $200. Explain your answer.
b) What are of the characteristics of an oligopolistic market? Give three examples of industries with oligopolistic firms in Australia. Justify your examples by relating them to the characteristics of oligopolistic firms.
c) What are the characteristics of a monopolistically competitive market? Give three examples of industries with monopolistically competitive firms in Australia. Justify your examples by relating them to the characteristics of monopolistically competitive firms.
d) Assume that two firms make up a natural duopoly. What are the conditions which may make this occur? Sketch the market demand curve and cost curves that describe the situation in this market and that prevent other firms from entering.
Rationale
The questions address the following learning outcomes:
- be able to apply demand and supply analysis to make a range of market related decisions
- be able to explain and defend why it is important to understand the structure of the market in
which a firm operates - be able to critically examine and demonstrate why it might be necessary for government to
intervene in the production of goods and services and in the distribution of income
Marking criteria
50%)
levels of critical analysis. Demonstrates ability to reflect on conclusions and their policy implications.
critical analysis. Able to justify conclusions. Able to synthesise and draw conclusions from multiple perspectives.
Presentation
Answers should be typed and diagrams must be clear and neat and preferably drawn
electronically. Hand-drawn diagrams are acceptable.
Requirements
APA referencing must be used when citing literature. Assignments must be submitted
through Turnitin.
Presentation
Answers should be typed and diagrams must be clear and neat and preferably drawn
electronically. Hand-drawn diagrams are acceptable.
Requirements
APA referencing must be used when citing literature. Assignments must be submitted
through Turnitin.
Answer ( 1 )
Please briefly explain why you feel this answer should be reported.
Introduction
The taxation on alcohol products aims to reduce the consumption by a population to eradicate the ill effects
of drinking. To find out the price elasticity of demand of alcohol information on levels of consumption in a
population is needed which is quite diverse.
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However in Australia at present few of the important and valuable
data are not available in the field of public health. For instance, the sales data of alcohol is known to be
collected and analyzed by the alcohol beverage industry, but it is not accessed by the public.
A variety of taxes is imposed on the alcohol products like excise tax and Wine Equalization Tax (WET). It is
argued that the taxation should be based on volume so that all alcoholic beverage can be taxed equally.
1. Price elasticity of demand for alcohol products
The consumption of alcohol in Australia is one of the highest in the world. And it is ranked in the top 30
highest alcohol-consuming countries in the world out of 180. A number of reviews have prompted that the
mean price elasticity of demand for alcohol products in Australia are: -0.7 for spirits, -0.4 for beer and -0.7 for
wine. While for overall the as per the data derived in 2007 the price elasticity was calculated to approximately
−0.5 (Gallet, 2007; Wagenaar et al., 2009; Fogarty, 2010). This suggests that a 10% increase in the alcohol
price will lead to a fall in the consumption of the alcohol by 5%. But there are other factors which should be
taken into account as the price elasticity of alcohol is also depended upon the drinking culture, economic
conditions and popularity of different beverages that have varied social meanings (Casswell, 1999). In
economic modeling, it was also provided that a 10% rise…[/swpm_protected]