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1. This assignment is worth 20% 2. It is due on Sunday 23th November at 11:00pm SA time 3. The word limit is 1250 (10% up or down) 4. Go back to each lecture slide before you start your assignment 5. Question-Answer format is acceptable 6. Answer each question separately - there is no need for an introduction or conclusion. 7. You MUST draw diagrams for each questions. 8. Make sure to fully label diagrams; and clearly indicate changes you make to graphs. 9. Specify any assumptions you make and use clear, concise and coherent set of arguments in your discussion/analysis. 10. There is no need to provide actual data/numbers as this is a conceptual exercise. 11. Submit your assignment in Word file (PDF or other format is not acceptable). 12. Support your discussion with appropriate graphs. 13. Hand-drawn graphs are accepted. 14. You can make use of snipping tool to attach your hand drawn graphs to your word file. 15. There are no resubmissions allowed. 16. In accordance with the Division of Business guidelines, assignments submitted late without permission from the course coordinator/s will attract a penalty of 5% of the total possible marks for the assignment per day for each day late, or part thereof, after the due date. 17. There is no need for additional references; however, you can draw upon other references (but cite) in support of any particular arguments you make in your discussion. 18. Need to provide references, using Harvard referencing guidelines only. 19. Please use academic references PNLY. Poor URL or NEWS references are not accepted. Assignment 2_ ECON1008” High Tasmanian lavender production costs a barrier to a booming industry By Natalie Whiting Updated 7 Jan 2018, 10:30am One of Tasmania's most colourful crops could be heading into a purple patch. The state's lavender industry is expanding due to growing demand from tourists and the essential oils industry, but high local production costs remain a hurdle. Across the state, fields of the flower are being harvested, but industry players are warning more of the purple flowers need to be grown on increased acreage to bring down costs. Essential Oils CEO Simon Wells said demand for essential oils globally was growing, including for lavender. "There's no doubt that demand for Tasmanian essential oils is growing dramatically, and premium customers are really chasing the story of Tasmania and Brand Tasmania," he said. "There are certainly major essential oils companies globally looking to Tasmania as an alternative site to actually produce significant volumes of lavender oil." Currently lavender is a small part of the business, but that could be about to change. "We're interested in the possibility of expanding on a major scale," Mr Wells explained. It's not the only lavender grower with expansion plans. The Port Arthur Lavender Farm currently harvests about 10,000 plants, and is also planning to ramp up production. "In the next few years we are going to progressively ramp that up to about 35,000 here on site in Pawleena, just to try to keep up with our demand," owner Brendan Dean said. But he said the demand for this lavender was local, and was made into products and food sold to tourists. "Since opening our visitors centre at Port Arthur — that was about four years ago now — it has steadily increased every year," Mr Dean said. "We're still trying to keep up to that demand for product." http://www.abc.net.au/news/2018-01-07/tasmanian-lavender-industry-facing-growth-challenges/9308346 Please read the article ‘High Tasmanian Lavender production costs a barrier to a booming industry’published on January 7th 2018 and answer the following questions: Questions 1. Assuming lavenders are sold in a perfectly competitive market, use the supply and demand diagram to describe, ceteris paribus, major factors contributing to the price of lavender to change in Australia. In your discussion make sure to explain the process of moving to the new equilibrium output and price. (7 marks) 2. a. Using the determinants of price elasticity of demand, discuss whether the demand for lavender to be inelastic or elastic? (4 marks) b. Based on your discussion of elasticity, Illustrate and analyse the effect on total revenue of the firms in the lavender market following the price change. (4 marks) 3. a. Identify the major costs involved in operating a lavender farming business in the short run. Show which of these you would consider to be variable costs, fixed costs or a mix of fixed and variable. (3 marks) b. Assuming Lavender farm is operating in short run, Explain why they might experience diminishing returns in their production. (4 marks) 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. Total marks: 25 marks