MAE101– Economic Principles
Trimester 1, 2022
Assessment Task 1: Individual Assignment
|DUE DATE AND TIME:
PERCENTAGE OF FINAL GRADE:
|Monday, 9th May 2022, by 8:00pm (AEST)
2000 words (Strictly maintained)
Assignment 1 is a written assignment and you have to submit this assignment individually by its
due date of submission (as we have mentioned above). Note that this is an individual assignment
and it is not a group assignment. There is also a word limit, which is maintained strictly.
This assignment is designed whether you have understood the relevant economic concepts
discussed on week 1 to week 6, in particular, you need to make sure that you have understood
the concepts of (i) Demand , Supply and Market Equilibrium (ii) Elasticity and its application (iii)
Government Policies : Tax and (iv) Markets and Welfare.
There are three questions. Some questions also have small parts and some questions require to
read the attached articles carefully. You need to answer all the questions.
o Submit one PDF document, with all content digitally generated (typed, digital diagrams).
o Word limit: 2000 words (strictly maintained). Do not restate the question; just use the question
o Academic integrity: do not collude with others. Submit your own work, referencing all sources
o Students must correctly use the Harvard style of referencing (name – date)
o Proofread for coherence, spelling and grammar.
o Start Early!
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Learning Outcome Details
|Unit Learning Outcome (ULO)||Graduate Learning Outcome (GLO)|
|ULO 1: Describe, analyse and apply key microeconomic concepts||GLO1(Discipline-specific knowledge
|ULO 2: Explain, present and interpret economic tools in a digital
|GLO1 and GLO3(Digital literacy)|
|ULO 3: Obtain and present information and data to a real
world issue, and critique approaches to the issue.
|GLO1, GLO3, GLO4 (Critical thinking)
and GLO8 (Global citizenship)
You are to submit your assignment in the individual Assignment Dropbox in the MAE101 CloudDeakin unit
site on or before the due date.
When uploading your assignment, name your document using the following syntax:
ABC123.pdf’. We prefer that you upload the pdf file.
Submitting a hard copy of this assignment is not required.
You must keep a backup copy of every assignment you submit, until the marked assignment has been returned
to you. In the unlikely event that one of your assignments is misplaced, you will need to submit your backup
Any work you submit may be checked by electronic or other means for the purposes of detecting collusion
When you submit an assignment through your CloudDeakin unit site, you will receive an email to your Deakin
email address confirming that it has been submitted. You should check that you can see your assignment in
the Submissions view of the Assignment Dropbox folder after upload, and check for, and keep, the email
receipt for the submission.
Marking and feedback
Students who submit their work by the due date will receive their marks and feedback on CloudDeakin
by at least two/three weeks from the due date of submission.
Note: Feedback will be given online via comments on the marking rubric and/or on the assignment
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Question 1: The economics of sales tax and online shopping
(Learning Outcomes: ULO1/GLO1, ULO2/GLO3 and ULO3/GLO4)
Imagine a company, A, that sells goods through its physical stores as well as an online trading
platform. Initially there is no sales tax on goods irrespective of whether they are sold through online
or physical stores. Then assume the government imposes a sales tax of $2 per unit of the good
(assuming a fixed amount of tax) only on goods which are sold at the physical store. The company
collects the following data on its sales, which is provided in the following Table 1:
|Price per unit of goods
at Physical store
|Quantity sold at
|Quantity sold via online
at price $7 per unit (as
they are not subject to
|Before sales Tax||$7||3||6|
|After sales Tax||$8||2||8|
a. Calculate the own price elasticity of demand for the quantity sold at the physical store?
b. Based on your results to part (a), do you think consumers who purchased at the physical store
are responsive to the sales tax? Explain.
c. Calculate the total revenue of company A before and after the sales tax. Does the sales tax affect
company A’s total revenue? Explain.
d. Calculate the cross-price elasticity of the. quantity sold online with respect to the price per unit
of goods sold at the physical store. Use your answer to explain what cross price elasticity measure
e. Now suppose Table 1 provides us equilibrium price and quantity, then draw a demand and supply
diagrams for the market of company A’s physical store as well as its online store. Name and fully
label your diagram including both axes and indicate and explain points of interest using P for
price (P1, P2 etc) and Q for quantity (Q1, Q2 etc). Hints: For simplicity assume that supply curve is
upwardly sloped, and the diagrams are consistent with Table 1.
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f. Now work further on your diagram in part (e) to show the impact of a sales tax on quantity sold
at the physical store. Illustrate and explain how the sales tax affects the consumers of the
physical store. Also indicate the area on the diagram that represents tax revenue. How much
burden of tax is born by an individual consumer as well as an individual seller?
g. Classical economists argue that, everything else remains the same (i.e. in the absence of
externalities or market failure), any sort of government intervention on a competitive market
leads to inefficiency. If so then answer the following questions:
i) Do you think that the classical economists are right, in particular, for our case of where
a sales tax is imposed on the sales of a physical store? Calculate deadweight loss (if it
exists!) for physical store (after sales tax) in supporting your argument and also show the
deadweight loss with an appropriate diagram.
ii) Read the article (attached) titled “Consumer behaviour in online shopping is affected by
sales tax” carefully. Explain how online consumers respond to sales tax imposed by the
Question 2: Online shopping tax in Australia and Amazon
(Learning Outcomes: ULO3/GLO4 & 8)
An article published by Chung, F. (2018), “Turnbull’s online shopping tax punishes Aussie
consumers: How to avoid the Amazon rip-off”. The article is attached to this assignment question.
The article is interesting as it analyses the implications of an on-line shopping tax in the Australian
domestic market, in particular, how some big multinational companies, (for example Amazon)
respond to such tax policy taken by our government. Read the article carefully in answering the
following question (using appropriate diagrams with reference to relevant evidence):
Critically analyse the arguments put forth, both for and against an online shopping tax on Amazon using
the above article. You may use other resources to support your argument
Question 3: Price of goods and good’s quality
(Learning Outcomes: ULO3/GLO4)
In economics, we have learnt that good’s price does matter. Given the budget constraint and
everything else remains the same, an individual consumer switches to relatively cheaper goods (also
known as substitution effect).
Often when you visit a chemist shop with your doctor’s prescription, your pharmacist may ask
whether you are interested in buying a relatively cheaper drug (which is biologically equivalent to
your prescribed drug) if it is available. Read the article carefully titled “Economists throw doubt on
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generic drug price advantage over branded version”.1 Explain what seems to be a problem that may
arise when one switches to a cheaper drug (using appropriate diagrams with reference to relevant
5 points will be allocated to the quality of presentation, including digital presentation of diagrams; all
labels and headings on diagrams; proper referencing; assignment submitted as a PDF document; and
quality of writing, taking the total to 100 points.
Your score out of 100 points will be converted to a grade out of 30 marks, or 30% of your final result for
1. Einav, L., Knoepfle, D., Levin, J. and Sundaresan, N. (2014), “Consumer Behavior in online Shopping is
affected by sales tax”. LSE US Centre (which is attached).2
2. Chung, F. (2018). “Turnbull’s online shopping tax punishes Aussie consumers: How to avoid
the Amazon rip-off”, appeared at in news.com.au, (which is attached).
3. Deakin University (2013). “Economists throw doubt on generic drug price advantage over branded
version”, Medical press (which is attached).
• Note that, on week 3, I shall provide additional video clip (optional), which will show
how you can draw a diagram with the help of power point.
• You can also seek help from our Math Mentors for MAE 101. I have already posted
information in detail in the Announcements, which will be found in the HOME page of our
CLoudDeakin site of MAE101.
1 This article is based on the interview of Dr. Nabin about his research findings (which is co-authored with Vijay
Mohan, Pasquale Sgro and Aaron Nicholas), and it is taken by Medical press. The original article is published in the
Berkeley Electronic Journal of Economic Policy and Analysis in Vol12(1).
2 This version is non-technical of the original article published by the same authors in American Economic
Review 2014, 104(1): 1–26
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Extensions will only be granted for exceptional and/or unavoidable circumstances outside the student’s
Students seeking an extension for an assignment prior to the due date should apply directly to the Unit
Chair by completing the Assignment and Online Test Extension Application Form. Requests for extensions
will not be considered after 12 noon, 9th May, 2022. Applications for special consideration after the due date
must be submitted via StudentConnect.
The following marking penalties will apply if you submit an assessment task after the due date without an
approved extension: 5% will be deducted from available marks for each day up to five days, and work that is
submitted more than five days after the due date will not be marked and will receive 0% for the task.
‘Day’ means working day for paper submissions and calendar day for electronic submissions. The Unit Chair
may refuse to accept a late submission where it is unreasonable or impracticable to assess the task after the
Calculation of the late penalty is as follows: this is based on the assignment being due on Monday, 9th May,
2022 at 8:00pm
• 1 day late: submitted– 5% penalty.
• 2 days late: submitted– 10% penalty.
• 3 days late: submitted– 15% penalty.
• 4 days late: submitted– 20% penalty.
• 5 days late: submitted– 25% penalty.
Dropbox closes the Saturday after 11:59pm AEST time.
The Division of Student Life (see link below) provides all students with editing assistance. Students who wish
to take advantage of this service must be organized and plan ahead and contact the Division of Student Life
in order to schedule a booking, well in advance of the due date of this assignment.
Any material used in this assignment that is not your original work must be acknowledged as such and
appropriately referenced. You can find information about plagiarism and other study support resources at
the following website: http://www.deakin.edu.au/students/study-support
For information about academic misconduct, special consideration, extensions, and assessment feedback,
please refer to the document Your rights and responsibilities as a student in this Unit in the first folder next
to the Unit Guide in the Resources area of the CloudDeakin unit site.
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