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
Total Marks: 65
Due Date: Week 11, Monday 19:55 AEST
• 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
• 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
• 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.
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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
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Part A: Microeconomics Questions (20 marks)
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)
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)
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)
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)
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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
…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.
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"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 2: Trading Economics Graphs
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