QUESTION 1 a)
According to extract 1, analyse the changes in the market for fresh lemons in the Summer of 2019 in Australia using the supply and demand model and assuming a perfectly competitive market. Specify the likely changes in the market outcomes (equilibrium price and quantity).
b) According to Extract 1, what are the likely changes in the market for fresh lemons as we moved into the Winter of 2019. Again, use the supply and demand model assuming a perfectly competitive market and analyse the anticipated changes in the market outcomes. 3 marks. QUESTION 2 a) Refer to extract 2. Using the supply and demand model with wages on the vertical axis and quantity of workers on the horizontal axis, analyse the effect on the market outcomes (wage and quantity of workers) of the imposition of minimum wages in the Australian labour market. 4 marks b) The article cites a study by the RBA suggesting there has been minimal effect on unemployment. Unemployment exists when people that want a job are unable to get a job. Identify the unemployment created by the wage floor on the diagram. Explain and illustrate how the elasticity of demand and/or supply could be the factor that potentially explains why the effect on unemployment is very small. 3 marks QUESTION 3 a) Refer to Extract 3. Using the supply and demand model and assuming a perfectly competitive market, depict the effect of the childcare subsidy on the market outcomes, specifically the price paid by consumers, the price received by sellers, and quantity traded in the market for childcare. 4 marks b) The childcare subsidy is given directly to parents. Would the market outcomes be different if the childcare provider was given the subsidy instead? Explain fully. 3 marks. EXTRACT 1 Lemon shortage and high demand for fresh fruit sends prices skyrocketing ABC Rural by Jessica Schremmer 11 January 2019 Summertime means seafood and cocktails with fresh lemon for many across Australia, but prices for the fruit have skyrocketed. A shortage of Australian-grown lemons has caused supplies to fall and prices to spike. The normal retail price is about $3.99 to $4.99 per kilo but as most lemons currently have to be imported, the fruit is selling for as much as $8.99 per kilo on supermarket shelves Extreme heat reduces Australia's production volumes Sunlands citrus grower Mark Doecke in South Australia's Riverland said the lemon shortage was simply a problem of supply and last year's extreme heat affecting the fruit. "Lemon sales have grown a little bit, there is a bit of extra demand, but supply is the problem," Mr Doecke said. Mr Cant said lemon consumption was increasing and traditionally, Christmas was a high-demand period. "Lemon trees yield most of their crop in winter, so high availability is through March to October." And with lemon consumption increasing, so is production across Australia. Mr Doecke said across the southern growing region in the past three years farmers had seen about a 30 per cent increase in the area planted with lemon trees. "There are a lot of lemons that have gone in so as they come into production, supply will meet demand in the future," he said. EXTRACT 2 Sun, surf and bonzer pay; Wages in Australia The Economist. 432.9152 (July 20, 2019): p34(US). AUSTRALIA HAS long been at the leading edge of minimum wages. The state of Victoria was the second place in the world to introduce a wage floor in 1896, beaten only by New Zealand. A landmark legal case in 1907 took a more expansive view of a fair wage, ruling that it should be enough to maintain a family with three children in "frugal comfort". Australia is still at it: it now has the world's most generous minimum wage, reclaiming a distinction it last held more than a decade ago. The OECD, a club mainly of rich countries, compares minimum wages around the world by adjusting for inflation and the cost of living, and converting them into American dollars. On that basis Australian workers pulled in at least $12.14 an hour last year, up by nearly 4% from 2017. That puts them narrowly ahead of their peers in Luxembourg, ranked second, and a whopping two-thirds better off than federal minimum-wage earners in America. It used to be an article of faith among economists that higher minimum wages would cause job losses, but data from Australia add to evidence that counters that assumption, at least as long as increases are gradual. A study by the Reserve Bank of Australia (RBA), the central bank, examined minimum-wage increases between 1998 and 2008, and found no discernible effect on employment. Similarly, over the past five years, Australia's unemployment rate has fallen steadily. EXTRACT 3 Kindys soak up subsidy Northern Territory News (Northern Territory, Australia). (July 20, 2019): News: p3. MATTHEW KILLORAN GREEDY child care centres have gobbled up almost half the money parents were meant to save from new subsidies by hiking up their fees. A new subsidy system that came into place from July 2 last year was meant to save the average family $1300 in child care fees a year. But new data shows that in the year leading up to the subsidy's introduction the average parent with a child in care 48 weeks of the year is paying $622 more than 12 months ago.