ECON90015 2023 S2 ASSIGNMENT
Due by: Sunday, 8 October, 5pm
GENERAL INSTRUCTIONS (please read carefully)
1. The assignment contributes 30% to your final mark in this subject. It will be marked out of 40 possible marks.
2. There is a total word limit of 2,000 words for the assignment: 1,500 words for Part A and 500 words for Part B. The word limit does not count tables, diagrams, footnotes, and bibliography. Marks may be deducted if the assignment is too long.
3. The assignment must be uploaded as a single file to LMS by the deadline (8 October, 5pm). Penalties for late assignments apply. Please remember to keep a copy of your assignment.
4. Unless you have an APA, extensions are NOT granted by the subject’s lecturers or tutors. See the instructions for requesting an extension in the subject outline.
5. All figures and graphs should be drawn digitally wherever possible. We accept
scanned graphs that are drawn by hand as long as they are drawn clearly and labelled appropriately. Any graphs must be submitted as part of the assignment in a single document. DO NOT print your assignment, draw the graphs, and then scan it: Turnitin will not accept your submission and you will risk accruing late penalties. Instead, scan your graphs and merge them with the main text of your assignment into a single file.
6. The submission system automatically collects your name and identifying information so do not include a cover page with your assignment. Do not include the prompts for Part A or Part B in your assignment: it is enough to label your answer to Part A with “Part A” or “Case Study,” and for Part B with “Part B” or “Essay.” It does not matter what name you give to the file you submit. When uploading to Canvas, do not write anything in the comment field.
7. Start thinking about topics as early as possible!
8. We expect that your topics and approaches will differ substantially between the two
parts of the assignment. This should be clear from the prompts: Part A asks you formally analyse a market, while Part B is much more informal and concerns an every-day phenomenon of your choice. Do not write the same essay twice and just change the question.
9. Maintain academic integrity by avoiding plagiarism and collusion. Familiarise yourself with the university’s policy here. Students, whose assignments are assigned a high similarity score by Turnitin indicating plagiarism, will be referred for an academic misconduct investigation and may face disciplinary action.
PART A – Case Study (30 marks; word limit: 1,500 words)
Choose an Australian industry and analyse the most important factors affecting its profitability by using the relevant concepts and theories we have studied in Lectures 1-8 (or from future lecture topics if you like). You should choose the three or four most-important factors influencing profitability. You can choose factors that are currently affecting your chosen industry, or factors that seem likely to affect the industry’s profitability in the near future. Some possibilities to consider are:
• Internal rivalry and the market structure: Which market structure best describes the market (i.e. perfect competition, monopoly etc.)? Why? Things to consider here are the nature of the firms’ output (homogenous vs. heterogeneous), barriers to entry, “price- taking” vs. “price-making,” and market concentration (a small number of large firms vs. a large number of small firms). Provide measures of industry concentration if you can. Do you have reasons to believe that the market structure is likely to change in the future? Is the struggle for market share and increased profitability reflected mainly in price competition or in non-price competition? If it is non-price competition, what form does it take?
• Barriers to entry: Are there barriers to entry in your chosen industry? That is, is it difficult for new firms to enter or is there free entry? Have any significant new firms entered the industry in the recent past? Consider how brand loyalty, economies of scale, intellectual-property law (e.g. patents and copyrights), and government regulation can each contribute to barriers to entry.
• Substitutes and complements: Are there important substitutes and complements (in consumption) that could affect industry profits? You can consider related products that are either currently available or might soon become available.
• Bargaining power of buyers: Is the input of your chosen industry bought by few large buyers with market power or a multitude of price-taking buyers with no market power? How does that affect profits? Have producers made relationship-specific investments with their buyers?
• Bargaining power of suppliers: Is the market for inputs in your chosen industry concentrated or competitive? Here, you can choose to consider the markets for labour, land, raw materials, and capital. How does the relative concentration in that market affect input costs, and how can input costs affect your chosen industry’s profits? Have the producers in your chosen industry made relationship-specific investments with their input suppliers (for example, moving their factory close to a supplier’s business)? Can the supplier exploit this situation and how would that affect profitability? Are there substitute inputs that producers in your chosen industry can turn to?
• Costs: What sort of cost structures do the firms in the industry face? Do the firms face any economies/diseconomies of scale, scope, and/or learning? How are these cost structures likely to affect firms’ relative sizes or their profit-maximising decisions?
• Technological change: Have there been significant technological changes affecting profitability in the recent past, or are any such changes likely in the future?
• Government policy: How does government policy affect the industry? Are there likely to be changes in government policy in the future that may affect the profitability of the industry?
• Price discrimination: Do firms in your industry engage in price discrimination? If so, how do they do it, and what enables them to be able to price discriminate successfully? What type of price discrimination is it? How important is price discrimination for profits? If price discrimination is currently impossible but was possible in the recent past (or will be possible in the future), discuss how these (expected) changes affect profitability.
• Elasticity of supply/demand: The determination of whether supply and/or demand are relatively elastic or inelastic would often be important when considering the other factors listed above. Still, if you believe that certain factors can change the elasticity of supply or demand in your industry leading to changes in profitability, feel free to discuss them separately.
• COVID-19: Has COVID-19 benefited or hurt the industry’s profitability in the short run, and why? Is that effect likely to last even after the pandemic has been brought under control? Is the industry likely to undergo long-term changes as a result of the pandemic? What do COVID-19’s effects on the industry tell you about its structure?
The above list is not exhaustive. If you think there are other significant microeconomic factors, feel free to analyse them. Remember that you do not need to discuss all of the above points. Your case study also does not need to answer every single question within a given category. It is enough to discuss the 3-4 factors that you consider to be the most important for your chosen industry.
The library's Industry Information databases can be an excellent source of information and assistance in your research and can be accessed here. Some of the databases indexed there include “Porter’s five forces analysis” (PFFA) of Australian industries. Note that we are NOT asking you to perform a five forces analysis! Assignments that follow the five forces framework will lose marks as that framework is not a good fit for this case study’s prompt.
To summarise, in this case study you should:
• Introduce and define the industry that you will analyse;
• Briefly describe the first factor you will study and analyse it to determine how it affects
the industry’s profitability. Where possible, provide evidence;
• Perform the same steps with the second factor you are considering;
• Perform the same steps with the third and fourth factors you are considering (if there is
a fourth one);
• Provide any concluding remarks;
• Add a bibliography, collecting all references cited in the text. (Use the 7th-edition American Psychological Association style, also known as APA 7th citation style. Our library’s excellent citation guide is here.)
The main factors considered in marking will be:
a) Research: For example, does the essay display sound and extensive research of the
industry chosen?
b) Knowledge of economic concepts: Has the essay used the appropriate economic
concepts? Does the essay show a thorough understanding of those concepts?
c) Quality of the analysis and application of economic concepts: Is there a logical and
thorough supporting argument or description of how conclusions have been drawn? Have economic concepts been applied in an effective manner? Are the assumptions clearly described? Is an understanding shown of any relevant qualifications to the conclusion?
d) Presentation: Has the industry been properly defined and identified? Are the writing style and organisation of material such that the main ideas and arguments can be understood? Note that diagrams are often useful for illustrating key economic models and concepts.
Remember, we are looking for sound applications of the key economic concepts that have been taught in the subject.
PART B - Essay (10 marks; word limit: 500 words)
Choose a pattern of events or behaviour that you have personally observed and that you are intrigued by and explain it using an economic concept or concepts we have covered in the subject.
Your limit is 500 words. Please do not stuff your essay with complex terminology. Imagine yourself talking to a relative who has never studied economics. The best essays are ones that would be clearly intelligible to such a person. You can include graphs supporting your argument but that is not mandatory. You need not include a bibliography.
This assignment is not a PhD dissertation. You are not expected to do voluminous research in support of your argument, although a relevant fact or two might help convince yourself and others that you are on the right track. It makes no difference whether your topic is “important,” but try, as best you can, to choose something interesting. A really successful essay is one that begins with a really interesting question (one that makes the listener instantly curious to learn the answer) and then uses an economic principle or principles to
construct an answer. It also does not matter whether your answer is “correct” as long as it is plausible and follows logically from the economic reasons you propose.
You might find it helpful to consider the following prompts while thinking about, writing, and structuring your essay:
1. Has an interesting phenomenon ever caught your eye and made you wonder what the reasons behind it were?
2. Why is this phenomenon interesting to you?
3. Are there some economic concepts covered in class that can explain it? If so, analyse
it using these concepts.
4. How does your economic analysis allow you to better understand the phenomenon
in question?
5. Having applied your analysis, what conclusions can you reach?
The marking criteria in rough order of importance are originality of the question, correct identification and application of the relevant economic concepts, quality of the writing and of the analysis, difficulty of the question/non-obviousness of the question’s answer, and appropriateness of the topic for a 500-word essay.
We strongly encourage you to read Chapter 2 of Robert H. Frank’s The Economic Naturalist1, accessible through LMS’ Readings Online. The chapter contains a number of questions that would be a great fit for this essay, together with short answers. Of course, you cannot use those for your essay: you must find your own original question. Note also that the answers in Frank’s book tend to be shorter than what we are looking for here. Some other examples of good questions are:
• Why do drive-up ATMs have Braille dots on their keypads?
• Why do female models earn so much more than male models?
• Why do retailers put Christmas decorations on display in September?
• Why are child safety seats required in cars but not on airplanes?
• Why are there luggage stores in airports’ airside areas (i.e. after security)?
• Why do many legal professionals offer free initial consultations, while medical
services tend to charge more for the initial diagnostic evaluation?
• Why does Coles tend to price limes and lemons per unit, while Woolworths prices
them per weight?
• Why do airlines charge more for last-minute ticket purchases while theatres follow
exactly the opposite practice?
• Why are designer denim shorts/T-shirts/shower slides so expensive? (Again, you
need to find your own ORIGINAL question!)
1 Credit where credit is due: Prof. Frank is the originator of this part of the assignment. 5
