Assignment Task
Economic case study Type
Description
The purpose of this economic case study is for students to apply economic theory to real world scenarios. In particular, this assessment will test students’ ability to analyse government policy intervention in the market using economic theory. You are required to write a response to the case study which will be made available at the beginning of Week 3. The relevant topics which will be covered in the economic case study are:
Module 1 – Introduction to Economics
Module 2 – Market Demand, Supply and Equilibrium
Module 3 – Elasticity, taxes and other market interventions Assessment instructions When the case study questions are released in week 3..
Question
1. The use of illicit drugs is a persistent problem facing many societies. Drug dependency can ruin the lives of drug users and their families. Moreover, drug addicts may turn to robbery and other crimes to obtain the money needed to support their habits. In this case study, you are asked to analyse how different approaches the Government of Zamunda may adopt towards cannabis will affect the market for cannabis. Question 1. Suppose the Government of Zamunda increases the number of customs inspectors and police officers to make more cannabis seizures. Illustrate the impact of this policy in the market for cannabis using demand and supply curves. Your diagram should have clearly labelled axes. Indicate whether the policy affects the demand or supply curve. And indicate the market equilibrium before and after the policy is introduced.
2. Suppose the Government of Zamunda introduces stricter alcohol policies with the intention of reducing the amount of cannabis consumption. Why does the government think stricter alcohol policy will reduce cannabis consumption? If the government is correct in its thinking, how would the stricter alcohol policies affect the cannabis market? Use demand and supply curves to illustrate the impact on the cannabis market. Indicate whether the policy affects the demand or supply curve. And indicate the market equilibrium before and after the government policy is introduced.
3. Suppose the Government of Zamunda has decided to legalise the recreational use of cannabis. This means people can now buy cannabis from legal cannabis dispensaries in the market. Discuss the effect of this policy on the cannabis market using demand and supply curves. Indicate whether the policy affects the demand or supply curve or both. And indicate the market equilibrium before and after the government policy is introduced.
4. The Government of Zamunda has decided to impose tax on the sellers of cannabis to raise funds for social programs. Illustrate how the sales tax on cannabis will affect the market in Zamunda using demand and supply curves. Indicate whether the sales tax shifts the demand or supply curve. Indicate the market equilibrium before and after the introduction of tax. Discuss the incidence of tax [i.e. who will be paying much of the tax burden and why].
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