Task. Choose a real-world market and find a real-world company

Task. Choose a real-world market and find a real-world company that operates in that
market. Write a 1,000 word essay using the tools of economic analysis to describe and explain,
and relevant diagrams to illustrate how a current or upcoming domestic and/or international
government policy could affect the company and its competitiveness.
1) Briefly describe the nature and characteristics of the chosen company.
2) Which market structure does the market you chose possess?
3) Describe some plausible cause(s) why the government may want to influence the market
(e.g. the market price and/or the market quantity), and explain by which means it could
achieve this. How would this impact suppliers and consumers in the market?
4a) Describe one real-life example of government intervention in the market.
What do you think the intervention was meant to achieve?
4b) (if applicable) How do the price elasticity of demand and the price elasticity of supply
affect the magnitude of the impact from this market intervention?
4c) Overall, who is likely to benefit and who likely to be disadvantaged by the
intervention from 4a)? Is the company you chose likely to benefit or likely
to be disadvantaged by the intervention from 4a)?
Clarifications.
• 4a) and 4c) are the center-piece of your essay. Depending on your specific topic, your
answer to 3) can be quite short or relatively long. 4b) is important if it applies (e.g. in
the case of per-unit taxes in a perfectly competitive market; for some market structures,
you may not be able to say much in answer to 4b).
• The market structure describes the conditions of a market, e.g. whether a market is
perfectly competitive, a monopoly, monopolistic competition, or an oligopoly.
– State which model you base your analysis on. E.g., you may claim that the company
and market you chose are best described by the model of a monopoly.
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Econ 7002 Semester 1, 2018
– It is important that you justify your choice of the model of a market structure.
That is, answer why say the monopoly model (and not say an oligopoly model) is
the appropriate model to base the analysis of your chosen company and market on.
• You can choose a market with any market structure for your essay. However, if you choose
a non-collusive oligopoly, please be aware that you will need to study much of
the underlying theory of oligopolies on your own and do considerable research
on material that we will not cover in class.
By the time we will have discussed monopolies (possibly Sep 18), you should have a good
foundation to analyze perfect competition and monopoly. Monopolistic competition
(which we will cover only later but which is technically very similar to monopoly) and
collusive oligopolies (which are in many regards similar to a monopoly) should also be
quite accessible by then. But you will have to do substantial reading outside of class
if you analyze a non-collusive oligopoly, as different techniques (from game theory) are
needed to tackle non-collusive oligopolies. We will get a sense of such techniques in class,
but not in depths, and also only quite late in the course (possibly on Oct 9).
(If you are interested in an oligopolistic market, you can for example look at models of
“Cournot competition.” It can help if you know calculus for these.)
Frequently Asked Questions.
(a) What is a “current or upcoming policy”?
A current or upcoming policy is a policy that has been introduced in the last 1.5
years, or that is planned for the future. The abolition within the last 1.5 years or
planned abolition of a government policy also counts as a current or upcoming policy.
(b) Do the market and company I choose have to be Australian?
No. However, all references have to be in English (e.g., if you list a newspaper article
as a reference that supports your description of a foreign market, this newspaper article
has to be in English).
(c) I do not have the data to exactly plot the aggregate demand/supply curve in my market.
What can I do?
In almost all cases, you will not have the time or resources to gather the data to exactly
plot the aggregate demand and supply curves for your market.1 Therefore, your figures
will be mostly qualitative rather than quantitative in nature.
1Of course, if you do have the data to exactly plot aggregate demand and/or supply, that is fantastic!
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Econ 7002 Semester 1, 2018
The quantitative figure above exactly specifies where the demand and supply curves run,
whereas the mostly qualitative figure only specifies that the equilibrium price is 2, but
leaves open the exact slopes of D and S etc. The qualitative figure is nonetheless not
random: e.g. D and S still satisfy the laws of demand and supply, respectively.
Qualitative figures still allow you to draw important conclusions. E.g. you may be able to
conclude from your qualitative figures that after the government intervention, the market
price will fall and consumer surplus will increase, even though you will not be able to
determine by exactly how many dollars the price will fall, and by exactly how many
dollars CS will increase.
(d) Do I have to format my essay in a particular way?
Yes. Please comply with the following instructions. Any violation (e.g. missing word
count) may lead to a penalty of 1 mark.
• Include a word count, your first name, your family name and your student number
on your front page. The word count should exclude the references.
• Use 1.5 line spacing or double line spacing. The essay has to be typed, handwritten
essays will not be accepted. Fonts have to be easily readable, including those
used for figure captions.2
(e) My essay is 1,100 words long. Do I have to cut it down to 1,000 words?
Not necessarily. The word count of 1,000 is more a guideline than a strict limit. An
excellent 1,100 word essay will receive a high mark, while a poor 1,000 word essay will not.
However, if you exceed 1,000 words it can be a hint that your essay contains superfluous
information or is not focused enough, which may detract from your mark. Similarly, if your
essay contains less than 1,000 words, it may indicate that your analysis is not profound
enough.
(f) How will my essay be marked?
Your essay mark will be influenced by:
• Content: relevant to the question, sound interpretation and understanding of economic
theory.
• Clarity of argument: logical thinking, clarity and coherence.
• Fit of the theoretical model to the real-world market and company chosen. Fit of
the theoretical analysis of the government intervention to the real-world example of
government intervention.
2Any standard font and font size should do. However, if I need a magnifying glass to read a figure caption,
the font size is too small…
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Econ 7002 Semester 1, 2018
• Use of relevant diagrams to illustrate your arguments.
• Evidence of reading outside of the textbook.
• Use of references: correct referencing format (any standard referencing format is fine)
in your essay and also in the bibliography/references at the end of your essay. You
should provide at least 5 references including your textbook.
• Writing style: correct grammar and spelling; no long sentences and pompous words;
use of quotations, if necessary, must be prudent.
• Presentation: adherence to the guidelines described in the previous paragraph.
(g) How do I submit my essay?
Instructions for the submission of the essay via TurnItIn will be posted on blackboard
closer to the submission deadline. The submission will be electronic only (no hardcopies).
(h) I submitted my essay but cannot see the “similarity report” by TurnItIn. Is this normal?
Yes. In ECON7002, the similarity report3
is only available to the graders.
Check-List and Hints. I recommend that you check your essay against the following bullet
points.
• The main goal of the essay is not to reproduce a textbook analysis, but rather to apply
your knowledge of (theoretical) economic models in one specific, real-world case. Is the
analysis of the real-world example the center piece of my essay?
• Do I explicitly name the one policy whose effects I analyze?
• Is my writing focused (free of unnecessary information) and do I explain my claims
well? Imagine that you write this essay for your CEO. Say you write about Widget
Empire Australia, an Australian subsidiary of Widget Empire Inc., a world-leader in the
production of widgets operating in dozens of countries. You are analyzing the effects of
an import tariff on widgets passed by the Australian Federal Parliament last year.4
– It is important that you underpin your claims by factual information and logical
analysis. For example, your CEO may be frustrated if you just write
“The demand for widgets is relatively inelastic,”
because she cannot really evaluate that claim. She would much prefer that you
explain and justify your claim. For example,
3The similarity report is one of the tools that assist the graders in verifying that no part of your essay has
been plagiarized.
4Of course, while I write about the fictionary company Widget Empire Australia and a fictionary import
tariff here, your essay should be about a real-world company and a real-world government intervention.
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Econ 7002 Semester 1, 2018
“The demand for widgets is relatively inelastic in Australia. This is because
widgets are an essential tool for anybody living close to a beach (like the
majority of the Australian population), and there are no good substitutes
for widgets. Walter Widget (2013) estimates the elasticity of the demand
for widgets to be 0.13 in absolute terms.”
Later, in your bibliography, you can provide the exact reference:
“Walter Widget (2013), ‘Widgets for Everybody,’ Widget International Press,
2nd edition.”
– It is very important not to claim things that you are not sure are true.
– Your CEO is a very busy person. She wants to understand the consequences of
the import tariff on widgets in the shortest amount of time possible. Hence it is
important that your essay is as focused as possible. For example, a brief description
of the nature and characteristics of Widget Empire Australia is useful background
information that helps provide context of your main analysis. It may be useful
for justifying why you based your analysis on the economic model of a monopoly.
However, a history of Widget Empire U.S.A., the U.S. subsidiary of Widget Empire,
may not be necessary to understand your analysis of the Australian widget market.
Your CEO prefers that you skip a description of Widget Empire U.S.A., as she does
not need to understand Widget Empire U.S.A. for the issue at hand.
• Does the model/market structure I chose for my analysis fit my real-world example well?
Do I justify my modeling choice?
• Is my essay well-structured? A clear structure makes your essay easy to read. While
not required, a simple tool that helps with that is to split the essay into different sections,
e.g. (a different number of sections might be appropriate for your essay)
1. Widget Empire Australia: A Brief Overview
2. Possible Government Interventions in the Market for Widgets
3. Australian Import Tariff on Widgets and Their Impact on the Price and Quantity
of Widgets
4. Winners and Losers from the Introduction of the Import Tariff
5. Conclusion
Here, the first section would briefly describe the chosen company. The second section
would briefly describe possible government interventions. This section would not be the
core of the essay. The next two sections would be the core part, and describe one realworld
government intervention and its impact on the market outcome, as well as provide
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Econ 7002 Semester 1, 2018
an analysis of who wins and who loses from the intervention. The final section would
provide a brief conclusion.
• Have I cited sources for all data that I present? It is not good to just write
“Widget Empire Australia’s sales increased by 50% in 2014.”
Rather, provide a source for you claim
“Widget Empire Australia’s sales increased by 50% in 2014 (Walter Widget,
2013).”
and later reference Walter Widget (2013) in your bibliography.
• Have I labeled all figures?
• Have I explained all figures in the text? — It is not enough to just add some figure
to your essay. You also have to explain to the reader what the figure means, and what
conclusions you draw from it.
• Are all my sentences grammatically correct? In general, it is good practice to use plain
English rather than complicated expressions and complicated sentence structures.
• Please be very sure to not plagiarize your essay, or even parts of it. Copying from others,
from textbooks and internet sources is unacceptable (without proper citation) and can
have serious consequences.