Suppose you are a farmer with 20 hectares of land on which you could grow either wheat or barley.
You can allocate however much land you want to each crop.
a. Draw a Production Possibilities Frontier depicting this situation.
b. Explain what a Production Possibilities Frontier is and what the diagram represents, including
what points on, below and above the PPF represent.
c. Explain why the PPF that you have drawn has the shape that it does.
d. Is it possible to use just the PPF to find the best allocation for the crops? Explain.
1 ECON7200 Economic Principles (M) Semester 2 Assignment 1 1. Suppose you are a farmer with 20 hectares of land on which you could grow either wheat or barley. You can allocate however much land you want to each crop. a. Draw a Production Possibilities Frontier depicting this situation. b. Explain what a Production Possibilities Frontier is and what the diagram represents, including what points on, below and above the PPF represent. c. Explain why the PPF that you have drawn has the shape that it does. d. Is it possible to use just the PPF to find the best allocation for the crops? Explain. 2. Read the following excerpts from ‘Goat meat as alternative meat source has producers struggling to keep up with demand’ by Jessica Schremmer 2 August 2019. (https://www.abc.net.au/news/rural/2019-08-02/goat-meat-prices-soar-amid-drought-and-strong- consumer-demand/11374994) Goat meat producers are struggling to keep up with demand as consumers turn to alternative meats, and a dwindling supply due to the drought sees prices jump to record levels. Prices remain at $9–10 per kilo, after over-the-hook prices hit an all-time high of $10.30 per kilo carcase weight in May this year. Meat and Livestock Australia's Julie Petty said last time they saw a significant price spike was in 2017 at $7.50 but current prices were unprecedented. "For a producer, if you do have animals that are ready to be sent to market it's an excellent price to be receiving for these animals," Ms Petty said. However, she explained the drought and tough seasonal conditions forced many producers to destock their properties some time ago, which led to a reduced supply. "We are seeing increased strong demand on both the international and domestic market," she said. Goat Industry Council Australia's Campbell McPhee said, as the world market was screaming out for more of Australia's goat meat, he hoped it encouraged people to invest in the industry. "Domestically there has certainly been an increase of consumption of goat meat and people are looking for an alternative meat." Your task: Use the demand and supply model (including a diagram or diagrams) to support an explanation of why the price of goat meat has recently reached an all-time high according to this excerpt. https://www.abc.net.au/news/rural/2019-08-02/goat-meat-prices-soar-amid-drought-and-strongconsumer-demand/11374994 https://www.abc.net.au/news/rural/2019-08-02/goat-meat-prices-soar-amid-drought-and-strongconsumer-demand/11374994 https://www.abc.net.au/news/rural/2019-08-02/goat-meat-prices-soar-amid-drought-and-strong-consumer-demand/11374994 https://www.abc.net.au/news/rural/2019-08-02/goat-meat-prices-soar-amid-drought-and-strong-consumer-demand/11374994 2 3. Read the following article: Netflix Tested a Price Hike in Australia (FORTUNE) By TOM HUDDLESTON JR. May 15, 2017 (https://fortune.com/2017/05/15/netflix-price-hike-australia/) Netflix customers in Australia could soon be facing steeper monthly charges. The popular streaming service on Monday confirmed that it recently tested higher subscription prices for new customers in Australia. The company—which has nearly 100 million global subscribers and expanded to Australia in 2015—has reportedly tested raising prices for new subscribers by as much as three Australian dollars (AU). Netflix’s test resulted in some Australian customers seeing price increases for the streaming service’s Basic plan (going from AU$8.99 to AU$9.99 per month), while Netflix’s Standard plan increased AU$2 to AU$13.99 and the Premium plan increased AU$3 to AU$17.99 per month, according to The Australian. Netflix confirmed the tests, but emphasized that it has not yet formally announced any permanent price increases. “We continuously test new things at Netflix and these tests typically vary in length of time,” the company said in a statement. “In this case, we are testing slightly different price points to better understand how consumers value Netflix. Not everyone will see this test and we may not ever offer it generally.” Your task: Discuss why you think Netflix conducted this test and what you think they found from that test based on their later decisions. Refer in particular to concepts from the Week 3 lecture topic, such as what price elasticity of demand is and how it is calculated and used, its relationship with revenue, and relevant determinants of price elasticity of demand. _______________________________________ Grading: Please refer to the grading rubric that is available on MyUni, and ensure that you have addressed the assessment criteria found there. Additional Information and Tips Because this is your first written assignment in this course, here are some extra tips about how to approach not just this task but also others throughout the semester. (see next page) There is no specific word limit on this assignment, or future assignments. We would generally expect them to be 1-2 pages in length, although what is appropriate to answer the question/s provided to a high standard may vary from week to week. You should draw your own diagrams, either electronically or by hand. We would recommend by hand as this is the best practice for the final exam. In which case students will often scan or take a photo to get them into a typed electronic document. Please make sure that you do not inappropriately take content, either written or diagrams, from other sources and that you appropriately reference any content if you need to. http://fortune.com/2017/05/15/netflix-price-hike-australia/ https://fortune.com/2017/05/15/netflix-price-hike-australia/ 3 https://www.adelaide.edu.au/writingcentre/resources/avoiding-plagiarism This is not a research assignment, so you do not need to specifically seek out references other than the article provided and the course content. However, any sources that you use should be appropriately referenced. Although you may discuss this task with classmates informally, each student must submit their own individual work, which should not be high in similarity to another student’s. Please keep in mind that the assignments will go through an electronic plagiarism detection system. Please ask on the MyUni discussion board as soon possible before the due date if you require any further clarifications on the format, requirements and expectations for this assignment. https://www.adelaide.edu.au/writingcentre/resources/avoiding-plagiarism