Assignment questions

1. Think about a competitive market in which you participate regularly. For each of the

characteristics of a competitive market, explain how your market meets these requirements.

1. “In a stunning reversal, the overseas Chinese have dramatically re-entered the Sydney and, to a lesser extent, Melbourne off-the-plan apartment markets. The long-term outlook for the apartment market in our two largest cities has therefore completely changed. And, as I describe below, there are also trend changes on the Gold Coast and in Brisbane.

…… has noticed a limited sample of skilled younger people who are unhappy about the burden Sydney real estate puts on their lifestyle and some are moving to Brisbane or the Gold Coast. This may be contributing to the very strong demand for Gold Coast apartments — a market that was very weak. Brisbane is also responding”

By Robert Gottliebsen, The Australian, March 2017

Write an essay explaining possible changes that could occur in the Gold Coast apartments market. Use appropriate economic model/s in your answer. In writing your answers consider the essence of the story in the scenario and include assumptions you have made in this economic analysis.

1. Think about a business/activity with negative externality. Explain the reason(s) you believe that this business has negative externality. Illustrate consumer, producer and total surplus by drawing relevant diagrams for this business/activity. Then, explain how the negative externality could be internalised through the demand side and how practical is the solution. Illustrate what happens to consumer, producer and total surplus due to this policy.

                                                             SAMPLE SOLUTION

In economics, markets structures are differentiated based on the features and characteristics present in those markets. Classification presents four market structures namely perfect competitive market, monopoly, oligopoly and monopolistic market structures. This paper analyses how my perfect market structure meets its characteristics requirements, current changes in Australian apartment market and the negative externality.

My perfect competitive market is the Australian clothing market which I regularly participate as a consumer. It meets specific requirements as shown explained below.

A large number of Sellers and Buyers

The Australian clothing market consists of many sellers and buyers of the clothing commodity. With the emergence of online selling, the number of buyers and sellers increase on a daily basis. In this kind of a market, single buyers only consume a small portion of the market supply. Likewise, an individual seller only supplies a small part of the total market demand. Since the number of sellers is large enough, they do not influence the market prices irrespective of their purchasing prices.