Word Limit: 1500 words
This assignment has two parts. In the first part, the questions and analysis are based on the concepts learned in the first five week of lectures and seminars focusing on microeconomic aspects of the unit. The second part of the assignment deals with the concepts learned in the last six weeks of the unit, i.e., macroeconomic analysis with particular emphasis on the issues taught in the week’s six to nine.
Please note that this is an Individual Assignment.
You are planning to set up a business and there are two product options available to you to choose from. In the following, you have to perform a series of economic analysis to choose the best product, its equilibrium pricing and its profitability for you.
- Draw a hypothetical production possibility frontier involving the above two products (you can name these as Product A and Product B) and identify the efficient and inefficient points of production. Now explain using the concepts of opportunity cost and marginal analysis, which business option you will choose and why.
- Now you want to determine the equilibrium price of your chosen product. Explain by using a market demand and supply diagram how the demand and supply curves would look like and how you would determine the equilibrium price of your product. List three factors which would affect the demand curve and list three factors which would affect the supply curve. What happens if you charge a higher price than the equilibrium price?
- a) Collect data on economic growth, unemployment rate and inflation rate for Australia from 1986 to 2005. Present each of the above in three separate tables and in three separate line graphs.
- b) Looking at the graphs and the tables, comment on how the Australian economy has been performing for the above mentioned time period. Discuss possible macroeconomic reasons for the movements in economic growth, unemployment rate and inflation rate in this period.
- c) Explain and illustrate how movements in overall economic growth may affect your business plan in Part I above.
- Do you think that the overall unemployment rate and the inflation rate would have any impact on your business? Explain why and use a diagram to support your explanation. (2 Points)
- Report Presentation, including Grammar, Spelling, Layout, Coversheet, Table of Contents, Referencing, Appendix and overall attention to detail. (2 marks)
 The assignment is worth 20% of your overall grade in the unit.
 In order to download data for economic growth, go to the following page
http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/5206.0Mar%202014?OpenDocument and download Table 1. Key National Accounts Aggregates. Open the excel file and take the second series, named “GDP per capita: Chain volume measures – Percentage changes;”. Note that this data is reported in quarterly frequency.
 In order to download data for unemployment rate, go to the following link
http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6202.0Jun%202014?OpenDocument and download Table 02. Labour force status by Sex – Seasonally adjusted. Open the excel file and take the series named “Unemployment rate – looking for full-time work ; Persons;”. Note that this data is reported in monthly frequency.
 In order to download data for Inflation rate, go to the following page http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6401.0Jun%202014?OpenDocument and download TABLES 1 and 2. CPI: All Groups, Index Numbers and Percentage Changes. Note that this data is reported in monthly frequency.