Question 1
Using a production possibilities frontier (PPF) diagram, determine how does the PPF change
in response to the following events:
a) Reducing skilled migration into the country
b) Imposing import taxes (tariffs) on intermediate inputs
c) Increasing the expenditure on research and development
d) An increase in the retirement age
e) The effects of natural disaster
Question 2
Identify what sort of effect the following events have:
a) A decrease in oil prices as a consequence of a price dispute in the world oil markets
b) The onset and prevalence of a pandemic
c) The implementation of subsidies to manufacturing of cars in Australia
d) The implementation of a Carbon tax in the economy. A Carbon tax is charged
according to the level of emissions of greenhouse gases in an economy.
e) The implementation of a new loan program to university students in the education
sector
You are required to explain whether the event acts on the demand or supply side, and whether
the event leads to a quantity or price change, or leads to a shift in demand and/or supply.
Make sure to explain what sort of assumptions you are making on the elasticities of demand
and supply.
Question 3
Compare the impact of a recession that reduces consumer income by 10 percent on the
consumption of technology goods and house rentals. Suppose that the income elasticity of
demand for technology goods is 3 and the income elasticity of demand for house rentals is
0.3. Based on your response, make a policy argument to support through government
funding either businesses or house rentals.