1 ECOM4000 Economics Trimester 1, 2017 Group Assignment Family Name Name Student number State 2 Part 1: Micro Economics [15 marks] Adapted from Petrol companies are involved in hindering competition, a major inquiry into unleaded petrol prices has found. By Peter Veness The report by the Australian Competition and Consumer Commission (ACCC) found “no obvious evidence of price fixing or collusion” but did find there were “fundamental structural issues” that hamper competitiveness. The inquiry found 98 per cent of the unleaded market is controlled by four petrol companies – Shell, Caltex, BP and Mobil. This makes for a very concentrated industry,” the inquiry report said. “Our inquiry found that overall the petrol market in Australia is competitive, however, we did find some structural factors that operate to constrain a fully competitive market at all levels of the supply chain,” The ACCC chairperson told reporters at the inquiry’s release in Canberra. The Assistant Treasurer immediately directed the commission to set up a formal process to monitor petrol prices across the country. In the past, the commission has only performed informal “spot” monitoring of petrol stations. The commission will publicly report annually to the Assistant Treasurer saying that could be changed if the commission found anything of concern. He promised the new directive was only the start of a concerted effort to deliver increased monitoring of the industry. The government has given the commission power to investigate not only prices and costs but profits as well. The NSW premier says the federal government’s commitment to give the consumer watchdog permanent monitoring power over petrol prices is a win for families. “If the ACCC has found that there is no collusion or abuse of market power, then, on the surface we accept that,” The premier told reporters. “But there is a continuing role for the ACCC to ensure that there is no abuse of market power and no abuse when it comes to petrol prices. But the ACCC’s report had still left many questions unanswered, the motoring body said. NRMA already knew there was no “obvious” collusion. 3 The methods retailers used to make sure their prices matched their competitors’ – including a web-based data system that gave retailers real-time updates of their competitors’ prices – were “much more sophisticated”, he said. “It’s collusion in a much more sophisticated form that does not meet the narrow definition of the Trade Practices Act. The government had to make sure the technology was not being exploited to rip off motorists, Mr Evans said. The report gave the new government a starting point to make the market more transparent and competitive. Appointing a petrol commissioner was a “good step”, provided the government gave them powers to keep the oil companies in line and maintain transparency in petrol pricing. === END === Part 1: Micro Economics [15 marks] 1. Based on the article above answer the following questions. a) What type of market do petrol companies operate in wholesale sector? Explain your answer. (3 marks) b) Assume the biggest four oil companies in Australia decided to collude and agree to charge a high price on petroleum products. Graphically demonstrate the price and output in this colluded market compared to a competitive market. (4 marks) c) How and why is the government seeking to increase competition in the petrol sector? Explain your answer with reference to the diagram you constructed in part (b) above. (3 marks) 2. What type of market structure is the petrol station in the retailer sector? Justify your answer. (2 marks) 3. Use diagrams to briefly describe what triggers entry in a competitive market and the process that ends further entry. Use a graph in your explanation. (3 marks) == 4 Part 2: Macro Economics [10 marks] 1. According to the below table, calculate the number of employed, the unemployment rate % and the labour force participation rate (LFPR%) for country Y in January 2013 and in July 2013? (3 marks) 2. Describe the changes in unemployment rate and labour force participation rate, comment on the job situation in country Y? (2 marks) Jan- 2013 Jul-2013 Working age population (WAP) 40,100,000 40,900,000 Labour force (LF) 20,000,000 27,000,000 Unemployed 2,260,000 3,267,000 Employed Unemployment rate (%) Labour force participation rate (LFPR%) Inflation rate (%) 0.8 0.75% 1) Answer: 2) Answer: 5 3. Based on the above unemployment figures, was country Y operating above, at or below full-employment? With an aid of the AD/AS diagram, explain and show the inflation / recessionary gap. Label the x and y axis, and the curves. (2 marks) Answer: 4. Due to a very serious debt-to-GDP ratio for Country Y, it’s decided to conduct an austerity policy. What is austerity? How would austerity measures affect Country Y’s economic growth, unemployment and inflation? (2 marks) Use the AD/AS model to support your answer. Label the x and y axis, the curves. (1 mark) Answer: 6 Part 3: Essay [5 marks] As a group select one of the following countries Australia, Brazil, India, Indonesia, People Republic of China, Japan, and United Kingdom, accessing relevant online resources, using the key macroeconomic indicators to outline, describe, analysis and explain the current economic health of the country. Your analysis should include relevant key economic indicators such as GDP, unemployment rate, inflation rate, balance of payments etc. This business report can be prepared by a group with 3~4 members. In your essay you must apply appropriate economics theories and frameworks, and select appropriate economic data (economic indicators), diagrams, tables and statistics to argue and support your case. Application of citation and formal referencing techniques is required. Due by: Week 11, on the week commencing 29 May 2017 at the beginning of the class to your lecturer for the hard copy.* Electronic Copy to ‘Turnitin’ via “Portal” for plagiarism check on the submission day. Penalty will be applied for late submission. — end—

1 ECOM4000 Economics Trimester 1, 2017 Group Assignment Family Name Name Student number State 2 Part 1: Micro Economics [15 marks] Adapted from Petrol companies are involved in hindering competition, a major inquiry into unleaded petrol prices has found. By Peter Veness The report by the Australian Competition and Consumer Commission (ACCC) found “no obvious evidence of price fixing or collusion” but did find there were “fundamental structural issues” that hamper competitiveness. The inquiry found 98 per cent of the unleaded market is controlled by four petrol companies – Shell, Caltex, BP and Mobil. This makes for a very concentrated industry,” the inquiry report said. “Our inquiry found that overall the petrol market in Australia is competitive, however, we did find some structural factors that operate to constrain a fully competitive market at all levels of the supply chain,” The ACCC chairperson told reporters at the inquiry’s release in Canberra. The Assistant Treasurer immediately directed the commission to set up a formal process to monitor petrol prices across the country. In the past, the commission has only performed informal “spot” monitoring of petrol stations. The commission will publicly report annually to the Assistant Treasurer saying that could be changed if the commission found anything of concern. He promised the new directive was only the start of a concerted effort to deliver increased monitoring of the industry. The government has given the commission power to investigate not only prices and costs but profits as well. The NSW premier says the federal government’s commitment to give the consumer watchdog permanent monitoring power over petrol prices is a win for families. “If the ACCC has found that there is no collusion or abuse of market power, then, on the surface we accept that,” The premier told reporters. “But there is a continuing role for the ACCC to ensure that there is no abuse of market power and no abuse when it comes to petrol prices. But the ACCC’s report had still left many questions unanswered, the motoring body said. NRMA already knew there was no “obvious” collusion. 3 The methods retailers used to make sure their prices matched their competitors’ – including a web-based data system that gave retailers real-time updates of their competitors’ prices – were “much more sophisticated”, he said. “It’s collusion in a much more sophisticated form that does not meet the narrow definition of the Trade Practices Act. The government had to make sure the technology was not being exploited to rip off motorists, Mr Evans said. The report gave the new government a starting point to make the market more transparent and competitive. Appointing a petrol commissioner was a “good step”, provided the government gave them powers to keep the oil companies in line and maintain transparency in petrol pricing. === END === Part 1: Micro Economics [15 marks] 1. Based on the article above answer the following questions. a) What type of market do petrol companies operate in wholesale sector? Explain your answer. (3 marks) b) Assume the biggest four oil companies in Australia decided to collude and agree to charge a high price on petroleum products. Graphically demonstrate the price and output in this colluded market compared to a competitive market. (4 marks) c) How and why is the government seeking to increase competition in the petrol sector? Explain your answer with reference to the diagram you constructed in part (b) above. (3 marks) 2. What type of market structure is the petrol station in the retailer sector? Justify your answer. (2 marks) 3. Use diagrams to briefly describe what triggers entry in a competitive market and the process that ends further entry. Use a graph in your explanation. (3 marks) == 4 Part 2: Macro Economics [10 marks] 1. According to the below table, calculate the number of employed, the unemployment rate % and the labour force participation rate (LFPR%) for country Y in January 2013 and in July 2013? (3 marks) 2. Describe the changes in unemployment rate and labour force participation rate, comment on the job situation in country Y? (2 marks) Jan- 2013 Jul-2013 Working age population (WAP) 40,100,000 40,900,000 Labour force (LF) 20,000,000 27,000,000 Unemployed 2,260,000 3,267,000 Employed Unemployment rate (%) Labour force participation rate (LFPR%) Inflation rate (%) 0.8 0.75% 1) Answer: 2) Answer: 5 3. Based on the above unemployment figures, was country Y operating above, at or below full-employment? With an aid of the AD/AS diagram, explain and show the inflation / recessionary gap. Label the x and y axis, and the curves. (2 marks) Answer: 4. Due to a very serious debt-to-GDP ratio for Country Y, it’s decided to conduct an austerity policy. What is austerity? How would austerity measures affect Country Y’s economic growth, unemployment and inflation? (2 marks) Use the AD/AS model to support your answer. Label the x and y axis, the curves. (1 mark) Answer: 6 Part 3: Essay [5 marks] As a group select one of the following countries Australia, Brazil, India, Indonesia, People Republic of China, Japan, and United Kingdom, accessing relevant online resources, using the key macroeconomic indicators to outline, describe, analysis and explain the current economic health of the country. Your analysis should include relevant key economic indicators such as GDP, unemployment rate, inflation rate, balance of payments etc. This business report can be prepared by a group with 3~4 members. In your essay you must apply appropriate economics theories and frameworks, and select appropriate economic data (economic indicators), diagrams, tables and statistics to argue and support your case. Application of citation and formal referencing techniques is required. Due by: Week 11, on the week commencing 29 May 2017 at the beginning of the class to your lecturer for the hard copy.* Electronic Copy to ‘Turnitin’ via “Portal” for plagiarism check on the submission day. Penalty will be applied for late submission. — end—