Your Tasks Assume that you have been employed as a consultant to write a report on fuel subsidies. It should follow a normal report structure.
The main body of the report should answer the following questions:
1/ Using a supply and demand diagram illustrate the impact of Asian fuel subsidies.
Indicate the equilibrium quantity and price without a subsidy and with a subsidy. (10% of marks).
2/ Explain which people gain from the subsidy and which people lose. (10%).
3/ Say the income elasticity of demand for fuel for China is 2.0 and the price elasticity of demand is -0.2. If incomes grow by 10% over the next year calculate the impact on equilibrium fuel prices if quantity supplied remains fixed. (10% of marks).
4/ Explain why the long run price elasticity of demand for fuel is likely to differ from the short run elasticity.(10% of marks).
5/ Discuss the externalities involved in the fuel market. (20% of marks).
7/. Discuss the arguments for and against lowering the fuel subsidy. (20% of marks).
Assessment Outcomes At the end of this assessment you should be able to :
Understand the basic microeconomic principles of: supply and demand, elasticity, externalities.
Apply these principles to analyse a particular market
Use the Harvard Referencing scheme correctly
Write a well structured and presented report.