Assignments are compulsory and must be presented by the due date. Students should stick strictly to the word limit. Penalty marking at the rate of 1% per 100 words (or part thereof) will be imposed on papers that exceed the word limit. Students may add a reasonable amount of material to appendices, but should only use appendices as a way of supplying corroborating evidence for points made in the body of their assignment. Under no circumstances should students use appendices as the main vehicle for carrying their analysis forward. If they do, then such appendices will be included in the word count.
TASK DESCRIPTION
Read the article written by Benjamin Zhang “Airline CEOs are warning that plane tickets are about to get more expensive” published in Business Insider Australia on6 th June 2018. Answer the three questions that follow the article using economic models where appropriate. Answer each question separately and include an introduction and conclusion to the whole assignment. Specify any assumptions you have made and use clear, concise and coherent arguments. Wherever you use ideas from sources to support your arguments make sure you cite them according to UniSA Harvard conventions.
FRAMEWORK FOR EACH ANSWER
1. Identify the key issue in the questions provided.2. Analyse these key mentioned in the case study, within the context of the concepts discussed in the lectures and textbook.3. Use the appropriate economic model to illustrate the key issues graphically. Fully label the model and clearly indicate where changes occur.4. Explain the model and discuss the outcome.5. Provide the list of references used in answering the questions.Read the article ‘“Airline CEOs are warning that plane tickets are about to get more expensive” published in Business Insider Australia on 6th June 2018 and answer the following questions:Q1 (a). Using the demand and supply model, explain and illustrate graphically why prices of the plane tickets are expected to rise in the future. In your answer make sure you discuss the equilibrating process, and clearly outline the assumptions in discussing the factors causing an increase in price.Q1 (b). Using the demand and supply model, explain and illustrate graphically, the effect of this expected increase in price on the current market for air travel. In your answer, make sure you clearly discuss the effect on current price and quantity.Q2 (a). Use the determinants of price elasticity of demand to analyse whether the demand for ‘air travel’ is likely to be price elastic or inelastic.Q2 (b). Based on your analysis in Q2 (a) explain and illustrate graphically what will happen to the total revenue of the airline industry following an increase in fuel prices.Q3. Assume that Australian government has imposed tax on air travel. Discuss how tax creates inefficiency in the market. Further, based on your answer in
Q2 (a)explain and illustrate graphically how the burden of tax will be shared between consumers and producers. In your answer, make reference to the concepts of consumer and producer surplus.Your assignment will also be assessed on how effectively you can communicate with the reader; i.e. how well you have presented your arguments and ensured your analysis is logical and consistent. Consequently, 3 marks will be awarded for effective writing including proper grammar, referencing and formatting. Importantly, make sure you use appropriate diagrams in your analysis. Please check the FAQs for Assignment 2 if you have further questions on this assignment.
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