ECOM4000_T3_2019_Assignment_Assessment_03 Page 1 Kaplan Business School Assessment Outline Assessment 3 Information Subject Code: ECOM4000 Subject Name: Economics Assessment Title: Individual Assignment Assessment Type: Assignment Word Count: 800-1500 Words Weighting: 20% Total Marks: 65 Submission: Turnitin Due Date: Week 11, Monday 19:55 AEST Instructions • Answer each question directly. You do not need to present answers in essay or report form. • Make sure you explain your diagrams and answer all parts of each question. You do not need to write a huge amount for each question. The word limit is around 800-1500 words. Use the minimum number of words to answer the question (but make sure you answer it fully). • Reference your answers if you are using information from another source using in-text referencing and include a reference list at the end of the assignment. Five (5) marks are awarded for this. You do not need to reference lectures and tutorials. • Consult Academic Success Centre resources on the portal and on campus for assistance with referencing and plagiarism. • The assignment is to be submitted using Turnitin and any plagiarism will therefore be traced. As a result, you could get 0 for your assignment if you copy. • You can insert pictures/diagrams by: • Drawing them in programs like “paint” and pasting it into the document. • Drawing them by hand, scanning and then pasting them as a picture into the word document. • Do not copy pictures of graphs from the internet. You have to draw them yourself. Page 2 Kaplan Business School Assessment Outline Part A: Microeconomics (20 marks) Source 1. Macquarie Analysis: Woolworths Trails Coles on Grocery Prices (by Catie Low) Woolworths is failing to close the gap on Coles when it comes to prices. A Macquarie Securities analysis reveals the cost of a selection of everyday groceries at Woolworths stores has fallen 1.9 per cent since early March. However, Coles did even better, posting a 3.1 per cent cost decline for the same period based on the same goods. Seasonal drops in the cost of fruit and vegetables underpinned grocery price falls for both major supermarket chains. The analysis suggests Woolworths needs to do more to revive its supermarket business, and quickly. "Woolworths is rapidly losing share as their strategy takes time to implement," the report said. Macquarie estimates Woolworths has lost 1.5 per cent of market share in the past year despite broader market growth of about 7 per cent. Page 3 Kaplan Business School Assessment Outline Source: http://www.afr.com/business/retail/woolworths-trails-coles-on-grocery-prices-macquarie-analysis-shows- 20150708-gi7iyz#ixzz3jPN0wEzX Source 2: Supermarkets Price War Fruit and vegetables have just become the latest battleground in the discount war between supermarket giants Coles and Woolworths. Coles' bid to get a bigger share of Australia's grocery market kicked off today with a flurry of ads spruiking discounts on fresh produce. The latest round of cuts comes on top of Coles and Woolworths scrambling to undercut each other on items such as bread and milk. But while lower prices may be good news for consumers, farmers' groups are renewing warnings that the price war risks driving growers out of business. Not all growers are happy. They say the supermarket price wars are making it tough for them to stay in business. William Churchill, spokesman for peak body Ausveg, says dropping prices at Coles places pressure on the rest of the industry. "Ausveg's main concern is, are these discounts for Coles growers sustainable? And what's this going to do to the rest of the industry as growers and farmers who supply to independent retailers, Woolworths, or even just the markets, start to see their sales volumes through those outlets dry up as people start to shift to Coles for these prices," he said. "We're seeing some substantial heartache happening in the milk industry, we're seeing growers producing milk for less money and they're having to work more for that," he said. Source 3: Supporting Diagrams http://www.afr.com/business/retail/woolworths-trails-coles-on-grocery-prices-macquarie-analysis-shows-20150708-gi7iyz#ixzz3jPN0wEzX http://www.afr.com/business/retail/woolworths-trails-coles-on-grocery-prices-macquarie-analysis-shows-20150708-gi7iyz#ixzz3jPN0wEzX http://www.afr.com/business/retail/woolworths-trails-coles-on-grocery-prices-macquarie-analysis-shows-20150708-gi7iyz#ixzz3jPN0wEzX Page 4 Kaplan Business School Assessment Outline Part A: Microeconomics Questions (20 marks) Question 1 What type of market structure do Coles and Woolworths operate in? Justify your answer with reference to some limited research and the appropriate economic theories. Your answer should include a diagram. (5 marks) Question 2 Based on your answer to Question 1, and with reference to the appropriate economic theories, discuss the effects of pricing in this market, especially in regard to revenues. Is it in the interests of Woolworths and Coles to have a price discount war? Why or why not? (6 marks) Question 3 What type of market structure is the market for vegetables provided by farmers? Explain why with reference to Sources 2 and 3 and the appropriate economic theories. (4 marks) Question 4 How would falling prices for vegetable products due to the price war affect the individual vegetable producer? Demonstrate your answer with reference to a diagram showing only an individual farmer’s cost curves. Would small farmers be forced to leave the market in the long-run? Why or why not? (5 marks) Page 5 Kaplan Business School Assessment Outline Part B: Macroeconomics (40 marks) Source 1: Spanish Growth Quickens, Says Central Bank Bank of Spain Raises Its Economic Forecasts for This Year and Next By David Román Updated July 23, 2014 8:06 a.m. ET MADRID—Spain's economy grew at its fastest pace in six years during the second quarter, in contrast to the rest of the euro zone where growth appears to have stalled. The Bank of Spain said Wednesday that Spanish gross domestic product likely expanded 0.5% in the second quarter, compared with the first, up from 0.4% growth recorded in the first quarter. The growth figure is the first official estimate for the three months from April to June. Spain doesn't release annualized growth estimates. According to The Wall Street Journal's calculations, the euro zone's fourth- largest economy grew at an annualized pace of 2% in the second quarter. Economists say this level of growth is likely to make Spain the best or one of the best economic performers in the euro zone in the quarter, largely due to a series of effective economic reforms and because of a rebound effect after a long economic slump. …But observers also caution that Spanish growth may be peaking, as the export-led recovery is in danger of petering out in the absence of a clear improvement in the global economy. Jennifer McKeown, an economist at Capital Economics, said that a higher contribution to Spanish growth from domestic consumption in recent quarters, after years in which companies and households have focused on paying back debt, may not be enough to sustain current expansion rates. Page 6 Kaplan Business School Assessment Outline "Given sky-high unemployment with an unemployment rate of 24.47%, the risk of deflation and the fact that public and private-sector deleveraging has further to run, a recovery led by domestic spending seems unsustainable," Ms McKeown said. "While Spain is set to be one of the euro-zone's best performers this year, with GDP rising by 1% or a bit more, the recovery could yet prove to be short-lived." The Bank of Spain said a gradual recovery in domestic consumption led to a faster-than-anticipated economic rebound. It added that it now anticipates that Spain's economy will grow 1.3% in 2014 and 2% in 2015, slightly above earlier projections of 1.2% and 1.7%, respectively. Spain exited a two-year recession in the second half of last year, and has since been one of the strongest-performing euro- zone economies, buoyed in particular by soaring exports. Source: http://online.wsj.com/articles/spanish-economy-picked-up-pace-in-second-quarter-1406107241 Source 2: Trading Economics Graphs http://online.wsj.com/articles/spanish-economy-picked-up-pace-in-second-quarter-1406107241 Page 7 Kaplan Business School Assessment Outline Source: http://www.tradingeconomics.com/spain/indicators http://www.tradingeconomics.com/spain/indicators Page 8