EFB223 Economics 2

EFB223 Economics 2

Assessment item 2: Essay Assignment

Assignments are to be submitted via TurnitinThis document contains important information about your assessment. You will need to read it carefully to understand what is required.

What role did rumor play in Australia’s toilet paper frenzy? (The Sydney Morning Herald) (5 March 2020)

David Savage, an associate professor at the University of Newcastle … said two key drivers of human behaviour were leading to the run on toilet paper: loss aversion and herd behavior. Dr Savage said images of empty supermarket shelves in Asia led some Australians to believe similar shortages could occur here.

Humans are “loss averse” and are generally willing to pay exorbitant prices for a product rather than miss out altogether, he said.

Coronavirus: Toilet paper scarcity rolls on with pressure on supermarket suppliers (The Canberra Times) (4 April 2020)

“In terms of toilet paper, demand is still outstripping supply by a long shot. When it gets on the shelves it doesn’t last at all.”

Why are people stockpiling toilet paper? (The Conversation) (5 March 2020)Niki Edwards of QUT claims “People don’t seem interested in substitutes. Supermarket shelves are still full of other paper towels and tissues.”

But

Alex Russell of CQU claims “there aren’t easy substitutions. If the supermarket is out of a particular ingredient for dinner, you can just get something else, or an entirely different dinner. But if there’s not a roll of toilet paper, then that’s pretty frustrating for everyone. Sure, tissues or paper towels, but it’s not quite the same, is it?”

Global toilet paper prices rise in COVID-19’s wake (Finder) (7 May 2020)Australia was near the top of the list for highest price rises, seeing the cost of four rolls of toilet paper jump 9.09% over roughly the last month.

Case study

To address the shortage of toilet paper, the Australian government has appointed you as their economic advisor and have tasked you to write up a document that addresses the following:

Provide a background overview of the market for toilet paper in Australia (before and after the coronavirus outbreak).
Analyze the events that led to the rise of the price of toilet paper. You are expected to produce relevant diagrams, which reflect these changes and outcomes.
Critically discuss the impact on the economic welfare on both domestic consumers and domestic suppliers (i.e. supermarkets and others selling toilet paper; not manufacturers). (Hint: what is economic welfare?).
In anticipation that the outbreak would be prolonged, you are asked to
analyze the quota approach employed by supermarkets (i.e. limit of toilet paper per person).
consider and analyze one other economic policy that may address the shortage of toilet paper in Australia.
both analyses should consider the policy impact on the economic welfare of domestic consumers and suppliers.

While it is relevant to consider social and normative issues, your essay should focus on economic analysis and should address such aspects as consumer and producer welfare, efficiency, functions of market and government intervention amongst other things. In preparing for this essay you should read as widely as possible. As a first step you should read Chapters 1 – 7 of your text to get a good understanding of the relevant economic theories. Note also that although this is primarily a microeconomic case study, you are free to consider (but not essential) relevant macroeconomic theories/issues where appropriate.

Essay guide, format and word limit

Where appropriate, consider and apply assumptions; and economic concepts.
Citations from journal articles (not textbooks) are essential in demonstrating in-depth research.
Word limit (2000 words with 10% tolerance. The word limit excludes words in Tables, Diagrams, and Reference lists).
You may use headings to help organize your ideas but they are not necessary.
Abstract or executive summary is not required.
A minimum font size of 11 and 1½ spacing is recommended.
You are expected to use appropriate diagrams to enable you to concisely demonstrate your line of reasoning