Reference no: EM13671037

Part -1:

1. Based on the article what market form did the market for graduation regalia (a gown, hood and mortar board) at ANU most closely resemble before Mr. Liu started his UniGowns business? Why? Represent this using an economic diagram and the relevant price from the article.

2. Once the students started their rival business (UniGowns) what form did the market for a graduation set at ANU take? Explain your answer with reference to theory. How does the price and quantity in this market compare to the price and quantity before the students started this business?

3. If as described in the article the only suppliers of gowns at ANU was the UC Union and UniGowns, would it be in both their interests to have a price war and compete with each other or to keep prices high? How does this relate the Nash equilibrium in game theory?

4. Describe a business that you and your friends can start this year. What market form (i.e. monopolistic competition) is the market you want to operate in? How will this market form affect your profits? Draw a diagram to represent the market your business will be operating in and your individual cost curves. You will need to do some research here.

5. What was the reason Mr. Liu have for starting the business in the article? Conduct some research into economic theory about the incentives which drive individuals and businesses. Do you believe his reason for starting the business? Why or why not?

Part -2:

1. Explain how "discretionary fiscal policy" can be "countercyclical" and can be used to support aggregate demand. Us an AD/AS model to support your answer.

2. Use an aggregate demand and supply model to demonstrate where the Australian economy is currently operating in relation to full employment and explain the reasons for this. Based on your diagram, the above sources and your own research what phase of the business cycle do you think the Australian economy is currently in? Explain your reasoning.

3. Based on your research evaluate the fiscal policy the government is currently pursuing. Do you believe this is appropriate given the state of the economy at the moment? Why or why not? Use an AD/AS diagram in your discussion.

4. Based on your research evaluate the monetary policy is the RBA is currently pursuing? Do you believe this is appropriate given the state of the economy at the moment? Why or why not? Use an AD/AS diagram in your discussion.

5. What effect do you think the lower dollar could have on inflation in Australia? Why? If in 2015 inflation rose to 4% and unemployment rose to 7% what fiscal policy would you advise the government to pursue? Why? Demonstrate the effects of your proposed policy using an AD/AS model.