ECON100: Economic Essentials for Business Spring 2022 Assessment 3
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ECON100: Economic Essentials for Business
Spring 2022
Assessment 3: Research Report
Submission Guidelines:
1. Report length: up to 1,500 words. Word count (excluding references) must be provided.
2. Include the title page and table of contents.
3. Write your name, student number and tutorial class at the title page.
4. Marks will be deducted for poor grammar, spelling mistakes, and poor presentation (maximum 3 marks).
5. Please pay attention to general formatting (i.e, Font: Times NR 12, Spacing: 1.5; paragraphing: as necessary, and page numbering etc.)
6. Your answers must be typewritten, graphs can be drawn using a suitable software.
7. All work should be your own. Pease do NOT copy paste graphs, pictures or tables found in other publications online. Doing this will make one’s report look amateurish and superficial. It is a normal practice to refer to figures and tables published in other sources without reproducing them. Marks will be deducted for graphs or other material copied directly from online sources. Producing your own graphs and tables using data collected from various sources is encouraged (but not required, you should do it only if you think it will enhance the quality of your answer).
8. You should answer each question in a new page. No need to follow the format of a formal
essay.
9. Please stay on topic and use economic arguments. An economic argument proceeds by spelling out the assumptions of the model and then deriving the conclusions. It excludes information and consideration that are not directly relevant to the topic. The goal is to allow the reader to see the logic of the argument as it proceeds from the statement of facts to the conclusion. Consequently, particular attention will be paid to the logical flow of the essay. 10. List of references must be provided at the end of the essay. These might include newspaper articles, research reports, data sources etc. References must be presented in alphabetical order.
11. This is an individual assignment. When you submit your essay via Turnitin a Similarity Report will be generated and checked for evidence of plagiarism or collaboration. The section below is reproduced from the subject outline to help you navigate all issues related to proper referencing and academic integrity. Plagiarism Prevention: The Faculty of Business has introduced an e-learning module which aims to orientate you with the knowledge and resources to: avoid problems related to plagiarism, develop your capacity to integrate evidence into your arguments, reference correctly. The online module is openly available for use by students at any stage in their degree. You are strongly encouraged to use the module to help in assessing the academic integrity of your written work.
The module can be accessed via
Energy Markets in Crisis
Recently, the Australian National electricity market (NEM), for the first time, was suspended across all states, and reflected the depth of the price and supply crisis plaguing Australia’s biggest electricity market. Some economists and energy policymakers expressed their views with regards to causes of this energy crisis, its consequences and the potential remedies to fix the market failure. For instance, read the following three articles published in The Conversation:
a) Australia’s National Electricity Market was just suspended. Here’s why and what happens next - https://theconversation.com/australias-national-electricity-market-was-just- suspended-heres-why-and-what-happens-next-185136
b) Should Australian governments nationalise the electricity sector? It’s not that simple -
https://theconversation.com/should-australian-governments-nationalise-the-electricity- sector-its-not-that-simple-185203
c) Want a solution for the energy crisis gripping Australia’s east? Look west -
https://theconversation.com/want-a-solution-for-the-energy-crisis-gripping-australias-east- look-west-185124?utm_medium=Social&utm_source=Twitter#Echobox=1655360616-1
Please answer the following six questions based on the above three articles.
Question 1:
Consider the wholesale market for electricity in Australia where wholesale electricity prices are determined by the interaction of market demand and supply curve. Explain, using the help of demand and supply curves, why the equilibrium prices of wholesale electricity increased in Australia. In your diagram, you should explain a factor each bringinging about a change in supply and a change in demand. Assume that the change in demand was lower
than the change in
supply.
(4 marks)
Note: The x-axis should represent the quantity of electricity (in terms of megawatt hour (MWh)) and the y-axis should represent price of electricity ($/MWh)).
Question 2:
The electricity market operator of Australia, AEMO, perceived that the wholesale equilibrium market prices determined in Question 1 is actually unsustainable and therefore symbolises a market failure. It therefore decided to intervene in the market by setting a price ceiling of $300/MWh. Explain the resulting wholesale market distortions as a result of
this mandatory pricing rule that the AEMO introduced. (4 marks)
Question 3:
How did AEMO manage to avoid the market distortions identified in Question 2? Here, we are focusing on those electricity producers with a cost of producing electricity greater than
$300 per MWh. (2 marks)
Question 4:
Electricity markets in Western Australia avoided this energy crisis problem which the eastern states of Australia could not avoid. One of the reasons was the differences in gas
export policy. Explain. (4 marks)
Question 5:
The Australian Bureau of Statistics estimates that energy expenditure is typically just 3% of the overall household expenditure. Politicians have often relied on this ABS estimation to defend the little impact of energy price rise on inflation. I find this to be misleading and
problematic. Why?
(2 marks)
Question 6:
As electricity prices continue to soar, we will eventually fill the pinch in our household budget. However, we also have the opportunity to adjust our electricity consumption behaviour over-time. Identify and explain two factors that increases the elasticity of
demand for electricity in the long-run. (4 marks)
2022-09-24