1. Wheat and the welfare consequences of trade: a. [Basic static analysis of trade] Construct a simple model of the (wholesale) market for wheat globally, and in Australia. Provide a brief but clear explanation to accompany your diagrams, and reflect on what access to international trade means for Australian farmers, food manufacturers (e.g. bakeries) and food consumers (i.e. households). b. [Extended dynamic analysis] The market for wheat is affected by the recent unrest in Ukraine (“Ukraine war could send...”, 2022). Wheat prices are reported to have increased 55 per cent even before the invasion, just based on fears of sanctions and disrupted supply, as Russia and Ukraine account for a large portion of global wheat supply. Russia is also a key supplier of fertilisers used by Australian farmers. How can we expect this to affect Australian wheat producers? What flow-on effects might we expect to see in the wider Australian economy?
1. Wheat and the welfare consequences of trade:
a. [Basic static analysis of trade] Construct a simple model of the (wholesale) market for wheat
globally, and in Australia. Provide a brief but clear explanation to accompany your
diagrams, and reflect on what access to international trade means for Australian farmers,
food manufacturers (e.g. bakeries) and food consumers (i.e. households).
b. [Extended dynamic analysis] The market for wheat is affected by the recent unrest in
Ukraine (“Ukraine war could send...”, 2022). Wheat prices are reported to have increased
55 per cent even before the invasion, just based on fears of sanctions and disrupted
supply, as Russia and Ukraine account for a large portion of global wheat supply. Russia
is also a key supplier of fertilisers used by Australian farmers. How can we expect this to
affect Australian wheat producers? What flow-on effects might we expect to see in the
wider Australian economy?
2. Petrol and the welfare consequences of taxes:
a. [Basic static analysis of tax] Draw a simple model of the retail market for petrol in
Australia. Petrol is taxed in Australia (and in most other countries). Evaluate the welfare
consequences of a tax on petrol. Is this an example of government failure or a
consequence of market failure?
b. [Extended dynamic analysis and reflection] Petrol prices have recently jumped, and this
appears to be directly linked to what’s happening in Ukraine (Hutchens, 2022). Explain
what has occurred, and evaluate the likely effect on (i) consumer expenditure, (ii) revenue
for petrol retailers, (iii) government revenue. Who, if anyone, stands to benefit from this
price shock? Some argue that petrol is too expensive, and that the government should cut
petrol taxes (Worthington, 2022). Is this justifiable, based on economic reasoning?
Step by step
Solved in 2 steps with 1 images
