× Limited Time Offer ! FLAT 20-40% off - Grab Deal Before Its Gone. Order Now
Connect With Us
Order Now

BUA4003 Principles of Economics Report 2 Sample

Assessment Brief

This assignment consists of two separate tasks that must be submitted at the same time. Your response to each task should be no more than 500-600 words plus diagrams. Use headings for Task 1 and Task 2. Your responses can draw on real world examples and sources and must include appropriate diagrams.

Task 1: The Impact of Elasticity on Strategic Choices for Electric Vehicle Producers

You are an industry analyst investigating the global EV market. In your research, you came across the following:

“In 2023, Tesla implemented multiple price adjustments across its model range”

“China's growing middle class and rising incomes have led to a surge in EV sales”

“The recent fluctuations in global oil prices have significantly impacted the adoption rates of EVs”

As an industry analyst, you have been tasked with providing a comprehensive report to help electric vehicle producers understand the importance of elasticity in their strategic decision-making. Prepare a short report (400-500 words plus diagrams) that addresses the following:

1. Price Elasticity of Demand:

- Explain the concept of price elasticity of demand (PED) and its significance for an electric vehicle producer. Illustrate how sensitive the demand for electric vehicles can be to price changes. [Hint: how would Tesla implementing multiple price adjustments across its model range affect the PED?]

2. Income Elasticity of Demand:

- Explain income elasticity of demand (YED) and how changes in consumer income levels can affect the demand for electric vehicles. Illustrate how rising incomes influence demand.

3. Cross-Price Elasticity of Demand:

- Explain the cross-price elasticity of demand (XED) in the context of electric vehicles and their substitutes and complements. Illustrate how prices of related goods can affect the demand for electric vehicles.

Task 2: The implementation of tax policy on petrol cars

Consider yourself as an economist working for the Australian Federal government. In your role, you evaluate issues relating to economic policy proposals. Your task here is to evaluate a proposal for Australia to reduce its air pollution by reducing its use of petrol cars and thus implementing a tax on for each litre of petrol sold. The aim of this policy is to reduce uptake of petrol-powered vehicles. You should focus on the importance of elasticity on the achievement of the objectives of the tax and discuss any potential unintended impacts of the tax (400-500 words plus diagrams).

Intended Learning Outcomes:

1. Apply economic frameworks for policy and business decision-making.

2. Research and apply economic concepts to predict how changes in economic conditions may impact individuals, businesses and industries within market structures.

3. Critically analyse economic data to explain relationships between economic variables and their impacts on policy, business and individuals.

4. Construct and present logical and persuasive economic arguments and communicate concepts professionally.

Referencing

- It is expected that you will reference a range of resources (e.g. the textbook, news media, journal articles, industry reports, the ABS and other sources).

- Attributing authorship correctly helps us all be better scholars. The referencing style for this subject is APA7.

- The Academic Referencing Tool provides detailed referencing examples for the prescribed La Trobe University referencing styles. Select the link if you would like to learn more.

Solution

Task 1: The Impact of Elasticity on Strategic Choices for Electric Vehicle Producers

Introduction

Elasticity therefore defines how sensitive the value of market parameters is to forces of value of economy. Essentially, elasticity is important for any strategic planning among EV producers. This report explores three key types of elasticity. This section focuses on the analysis of the Price Elasticity of Demand (PED), Income Elasticity of Demand (YED), and Cross-Price Elasticity of Demand (XED) to understand the market dynamics of the electric vehicle (EV) market.

1. Price Elasticity of Demand

Figure 1: Price Elasticity of Demand
(Source; Self-made)

Definition and Significance: The Price Elasticity of Demand (PED) is the coefficient to changes in price and is calculated as the ratio of the percentage change in quantity demanded to percentage change in price (Lecocq & Muehlegger, 2019). In the case of EV producers, PED is used to understand how changes in price impact sales volume, revenue, and the direction taken in the market.

Application to Tesla's Price Adjustments: One of the best examples of PED is the regular price changes that Tesla has employed in respect to its physical products. For example, a decrease in price of 10% for Model 3 and a subsequent change of sales of 15% leads to the determination of a PED of -1.5, indicating elastic demand. On the diagram, it is reflected in the decrease of the elasticity of demand, indicated by a flatter curve for the assignment helpline.

Sensitivity Analysis: Elastic demand means small changes in price can cause big changes in the quantity demanded and thereby affect market share. Knowledge about PED assists Tesla to adjust the prices in the right way to maximize its profits while at the same time maintaining competitiveness in the market.

2. Income Elasticity of Demand

 
Figure 2: Income Elasticity of Demand
(Source; Self-made)

Definition and Significance: Income elasticity of demand (YED), on the other hand, tends to point out a change in quantity demanded of a particular good when income moves around (Springel, 2021). The necessity of it is to divide the percentage change in quantity demanded by the corresponding change in income. Thus, for EV producers, YED is an effective tool that reveals how shifts in income affect demand for their products and determines the further course of action.

Impact of Rising Incomes: The improvement in income levels especially in China have greatly enhanced the demand for EV. For instance, the average income increases by 10% although to 20% the consumption of EV rises the corresponding is +2.0. This is depicted by a shift of the EV demand curve rightwards.

2. Cross-Price Elasticity of Demand

 
Figure 3: Cross-Price Elasticity of Demand
(Source; Self-made)

Definition and Significance: Cross-Price Elasticity of Demand (XED) defined as the influence of the relative price of one good on the quantity demanded of another good (Kalthaus & Sun, 2021). It is expressed as the percentage change in quantity demanded of Good A divided by the percentage change in the price of Good B.XED can be used by EV producers to determine on how shifts in the price of related goods like petrol influences the demand of EVs or electric cars.

Effect of Oil Price Fluctuations: Rising oil prices often increase EV demand. For example, a 10% increase in oil prices leading to a 5% rise in EV demand results in an XED of -0.5, indicating that petrol and EVs are substitutes. Diagrammatically, this is shown as a rightward shift in the EV demand curve.

Conclusion

It is, therefore, important for EV producers to understand elasticity such as PED, YED, and XED to enable better strategic decisions. PED demonstrates how to improve the right pricing schemes, YED identifies how shifts in incomes affect demand, XED describes how related products’ prices affect EV sales.

Task 2: The Implementation of Tax Policy on Petrol Cars

Introduction

Levying on petrol has the ambition of mitigating the emission of gases into the atmosphere since the utilization of vehicles that use petrol is unpopular. The policy targets are to reduce the usage of petrol and the resultant emissions (Wangsness & Halse, 2021). Another important concept that should be used to evaluate the policy is elasticity, which captures the impact of price changes on petrol consumption and consumers’ responses.

1. Importance of Elasticity for Policy Objectives

Price Elasticity of Demand (PED): Price Elasticity of Demand (PED) is the degree of responsiveness of quantity demanded of petrol to a change in price of petrol. If the demand for petrol is elastic (PED > 1), an increase in price because of a tax will result in a proportionate reduction in quantity demanded. For example, if a tax increases petrol prices by 20% and the PED is -1.5, the quantity demanded could decrease up to 30%. This significant saving in petrol use is beneficial in the fight against pollution and is useful in achieving environmental goals.

Illustration: An upward shift in the demand curve in an elastic demand scenario indicates that a petrol tax will reduce the quantity demanded in the market. On the same diagram, an increase in price leads to a shift of the initial demand curve (D1) to a steeper curve (D2) that reduced quantity demanded from Q1 to Q2 of petrol. This shift to the left demonstrates that an increase in the price of gasoline reduces its use and consequently minimizes emissions (Bitencourt et al., 2021). In terms of the policy objectives outlined in the diagram, the tax successfully reduces the use of petrol and, as a result, minimizes air pollution, a key environmental and public health concern.

2. Potential Unintended Impacts

Consumer Behavior Changes: One disadvantageous impact of adopting the petrol tax might be the saturated shifting of consumers towards other fuels or higher fuel economy vehicles. With the upsurge in petrol prices, consumers are inclined to buy either EVs or hybrids, trends that may partially neutralize the effect of reduction in petrol consumption. This shift may also help increase the demand for these alternative technologies and may do more than just reduce the usage of petrol.

Economic Impact: The tourists may be affected by the petrol tax since the less fortunate or those who consume significantly higher quantities of petrol are the worst hit as compared to the upper classes. This additional cost could further widen the inequality gap and decrease the funds available for these households (Valogianni et al., 2020). This might lead to low sales of petrol vehicles within the automotive industry thus affecting the manufacturers as well as the dealers in the sale of those models. Although the function is to decrease the use of petrol or is associated with emission reduction the tax would increase government revenue. Having this extra revenue, one can use it for environmental issues, infrastructure developments or to pay other taxes which might counterbalance some of the effects. However, whether these measures will help in eradicating the tax’s adverse effects will depend on the responses and amendments that the government will make on the policy level.

Conclusion

Elasticity crucially affects the petrol tax policy's success in reducing consumption and pollution. While PED helps predict the tax's impact on petrol demand, policymakers must consider unintended consequences, such as shifts to alternative fuels and economic strain on low-income households. If these facets are addressed, the policy stands to benefit by having increased optimality and fairness added to it.

Reference List

Fill the form to continue reading

Download Samples PDF

Related Sample

Assignment Services