MACQUARIE

BUSINESS SCHOOL
Department of Economics

ECON6049 ECONOMIC ANALYSIS, S1 2021

TUTORIAL WEEK 6

1. Think about two types of goods:

(i) 1kg bags of white sugar sold in your local supermarkets
(ii) Take-away coffee sold by your local café
a) Are there many sellers of these goods?
b) Do you try to find the lowest price for this good?
c) For which of these goods would price be your main criterion?
d) Use your answers to help you decide whether the sellers of these goods are
price-takers.

2. Suppose the market for rice in Vietnam is perfectly competitive.

a) Describe how the market demand for rice and supply of rice in Vietnam are
constructed.
b) Assume that currently the price of one kilogram of rice is 15,000 VND
(Vietnam dong, the country’s currency). At this price, the quantity demanded
(Qd) is 80 tonnes, and supplied 65 tonnes. Is this market at the equilibrium? If
not, how can it reach the equilibrium?
c) What would happen to this market if a few farmers stop cultivating rice and
switch to other grains?
d) Would your answer in part c) the same if rice is a differentiated product?

3. Assume the market for onion in India is competitive.

a) Sketch a diagram to illustrate the equilibrium in this market where 5,000
tonnes of onions are sold at a price of 5 Rupees.
b) Draw another diagram to illustrate how individual farmers choose quantity to
maximize their profit.
c) Suppose that the onion farmers get together to form a cartel. They agree to
raise the price to 7 Rupees, and jointly cut production to 3,800 tonnes. How
would this cartel affect the total gains from trade?
d) What would happen if some farmers in the cartel produce and sell more onion
than the quota allowed?
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MACQUARIE
BUSINESS SCHOOL
Department of Economics

4. Examine a recent report by McKinsey&Company (see the link below) and discuss
the following questions:
a) How have consumer sentiment around the globe changed?
b) How have consumer willingness to pay and spend across different categories
of products altered since the outbreak of the Covid19 pandemic?
https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/a-
global-view-of-how-consumer-behavior-is-changing-amid-covid-19