Discuss which of the following fall into the categories of consumption, investment, government expenditure and net exports from the Y = C + I + G + NX (X – M) identity, and whether the impact is to increase or decrease GDP.

Unit Code: HI5003
Unit Name: Economics for Business
Assignment: Tutorial Questions
Due: Week 13
Weighting: 50%

Purpose: This assignment is designed to assess your level of knowledge of the key topics covered in this unit

Unit Learning Outcomes Assessed:

1. Acquire a broad understanding of the principles of macro and microeconomics in an economy.
2. Analyse economic environment nationally and internationally and its influence on business and
    national economic performance.
3. Critically analyse government’s fiscal and monetary policy and how they influence the economy
    and business in general.
4. Synthesise theoretical and practical knowledge of economics, a well-developed understanding of
    the language of economics and the tools of economics used by policy makers within or outside the
    country.

Description:

Each week students were provided with three tutorial questions of varying degrees of
difficulty. The tutorial questions are available in the Tutorial Folder, for each week, on Blackboard.
The Interactive Tutorials are designed to assist students with the process, skills and knowledge to
answer the provided tutorial questions. Your task is to answer the following tutorial questions and
submit these answers in a single document.

The questions to be answered are;

Question 1: Week 2  (7 marks)

Debra can make either 12 cakes or 16 cookies in 4 hours. Sam can make either 6 cakes or 12
cookies in 4 hours.

a. Who has an absolute advantage at producing cakes and who has an absolute
    advantage at producing cookies? Briefly explain your answers. (2 marks)
b. State Debra’s and Sam’s opportunity costs of producing one cake and one cookie.
    Draw and place your answer in a table which looks something like this: (3 marks)

c.  If both Debra and Sam concentrate on producing only the product in which they have a comparative advantage, how many cakes and how many cookies will they produce?(2 marks)

Question 2: Week 3 (11 marks)

a. Draw a figure depicting market equilibrium in the ice-cream market. Label the figure
    properly. Briefly explain the figure. (3.5 marks)
b. Draw a new figure depicting the following situation: The weather is suddenly
    unseasonably hot and at the same time the wage of ice-cream salespeople increases.
    Explain your figure, and report on your new equilibrium price and quantity.(7.5 marks)

Question 3: Week 5 (7 marks)

a. ABC Company produces 100 pendants per day. The total fixed cost for the plant is $5000 and
    the total variable cost is $15000 per day. Calculate the average fixed cost, average variable
    cost, average total cost and total cost at the current output level. (4 marks)
b. Calculate Economic profit and Accounting profit from the figures given below for ABC
    Company. (3 marks)
• Total revenue $ 500,000
• Wages and salaries $ 40,0000
• Forgone salary $ 80,000
• Interest paid $ 10,000
• Forgone rent $ 10,000
• Raw materials $ 50,000
• Other payments $ 20,000
• Forgone interest $ 7,000

Question 4: Week 8 (7 marks)

Discuss which of the following fall into the categories of consumption, investment,
government expenditure and net exports from the Y = C + I + G + NX (X – M) identity, and
whether the impact is to increase or decrease GDP.

(a) Charles buys a second-hand textbook from Tim. (1 mark)
(b) When Charles bought the book, he paid Sarah $10 to collect it from Tim. (1.5 marks)
(c) Thomas buys a new house (1 mark)
(d) Your firm sells meat to Indonesia (1 mark)
(e) The fish and chips shop down the road buys fish to make meals for diners.(1 mark)
(f) The same shop buys a deep fryer to fry fish for meals. (1.5 marks)

Question 5: Week 10 (7 marks)

The ABS reported that in September 2007, a cycle peak, the working-age population was
16,808,200, the labour force was 10,979,300, and employment was 10,514,600. Calculate for
that quarter the labour force participation rate and the unemployment rate.
(3.5 + 3.5 = 7 marks)

Question 6: Week 11 (11 marks)

Suppose, initially the Australian economy is at full employment (in other words the economy
is at the potential GDP). Using AD-AS model, explain how would each of the following events
affect the economy both in the immediate and in the long term.

a) A slowdown in China’s economic growth due to the sub-prime crisis in the US.(3.5 marks)
b) Union wage settlements push the wage rate up. (4 marks)
c) An increase in consumer confidence. (3.5 marks)