BUSS102 MARKET MICROECONOMICS Principles
Session 1, 2017
Tutorial Presentation: Group 5
Due: Week 10 Tutorial Class
1. A recent Australian government-commissioned health report shows
that tooth decay among children and low income earners has risen
by 10% since 2000. Should the government subsidise dental care
for children and low income earners? Critically discuss. Use
appropriate economic tools, including diagrams, studied in this unit
to illustrate your arguments.
2. In 2010, the Australian government imposed a tax on Alcops to
reduce teenage binge drinking and alcohol-related harms and
hospitalization, and also to raise tax revenue. However, by the end
of the financial year no reductions in teenage binge drinking and
alcohol-related harm were recorded and, moreover, the revenue
raised from the tax was 6% less than predicted.
a. As an economist, are you surprised about the outcome of the
government’s tax policy? Critically discuss. Use the demand and
supply model and other appropriate microeconomic tools you have
learned in this unit to illustrate your argument.
b. Who bore a greater burden of the tax, the buyers or sellers of
Alcops? Was the outcome of the tax efficient?
c. What other policy could the government implement to reduce
teenage binge drinking and alcohol-related harm and
hospitalization? Explain.
Price
(dollar per tonne)
Quantity
demanded
(kilo tonnes)
Quantity
supplied
(kilo tonnes)
100 2,000 0
150 1,400 600
200 1,200 800
250 1,000 1,000
300 800 1,200
350 600 1,400
400 0 2,000
3. The table shows the demand and supply schedules for US wheat
market. The US Farm Bill 2012 indicates that the domestic price of
wheat will be set at $300 per tonne, which is above the market
equilibrium level of $250 per tonne, in order to support for domestic
wheat growers. At the market equilibrium, 1,000 kilo tonnes (Kt)
are supplied.
a. The US Farm Bill 2012 indicates that the domestic price of wheat is
set at $300 per tonne, which is above the market equilibrium level
of $250 per tonne, in order to support for domestic wheat growers.
On a graph, show if it creates a shortage or a surplus in the market
for wheat, and explain why and by how much.
b. On a graph, explain how the price control in the US would change
the consumer surplus, producer surplus, and deadweight loss in the
domestic wheat market. Assume that the US does not trade wheat
internationally. Also, calculate the changes in consumer surplus,
producer surplus and deadweight loss. (Remember 1 kilo tonne =
1,000 tonnes)
c. Is the outcome of the US Farm Bill fair? critically discuss.