Australians should reduce the consumption of tobacco

 

1. Suppose that the government decides Australians should reduce the consumption of tobacco and, therefore, it imposes a tax on tobacco products.
a. Should this tax be imposed on producers or consumers? Explain using both words and a diagram.
b. If the demand for tobacco becomes more elastic, will this tax be more effective or less effective in reducing tobacco consumption? (Hint: Draw two diagrams, side by side, with the same supply curve and different demand curves.)
c. If the government also wants to maximise the tax revenue, should it impose taxes on tobacco products with high demand elasticity or low elasticity? Explain.
[6+6+6 = 18 marks]
2. We have demand equation: P = 6-Q and supply equation: P = Q.
a. Calculate the equilibrium price, equilibrium quantity and the total surplus.
b. Suppose government imposes a per-unit tax of $1 on producers. Derive the new supply curve and calculate the new equilibrium price and quantity. Is there any dead weight loss?
c. Now suppose demand becomes more elastic and we have a new demand equation P=4-Q/3. How much is the deadweight loss from a tax of $1 per unit sold? Is the deadweight loss greater or smaller than that in question (b)? Why?
[6+6+6 = 18 marks]
3. Using the AS/AD model, discuss the likely short-run and long-run impacts of the following events with proper diagram(s), assuming that the government takes no further action:
a. A sudden health crisis (such as the coronavirus pandemic in the first half of 2020) that lowers workers’ income (starting from the full-employment level).
b. An income tax cut by the government to support the economy (starting from the full-employment level).
[9+9=18 marks]

Sample Solution

stly, we must consider the development of the individual. Intervention and interactions with care givers are vital to the child’s brain development, a child’s brain development begins prenatal and continues into adulthood (Centre on the Developing child, 2007). Psychological, emotional, social, and cognitive development are all inextricably linked therefore, if one of them is not developed correctly it can have an impact on the others. The primary care giver has the biggest influence on the development of the child (Munsell et al., 2012).

The brain is a complex muscle which adapts and changes to certain traumas in one’s life. In the first year of life 1 million neural connections develop every second (Styles, Jernigan, 2010). Interactions with loved ones or carers are vital for the child for example: babbling and cooing, without these interactions the brain does not develop correctly and pathways shut down. Social interactions are a necessity; ‘it is the experience of social interaction and communication that wires the brain to either its full potential or a compromised state’ (Perry, 2007). This can be compared to Maslow’s Hierarchy of Needs (1943b). When applied to a child’s life, if positive interactions and relationships with care givers are not established they will not have their hierarchy of needs met, therefore never reaching self-actualisation. In the same way, Bowlby’s (1969) attachment theory and supports this. In brief, if a secure attachment is never formed this will affect how people behave in relationships and friendships and will have an ongoing effect on their emotions (Brgaard, 2016). This could then continue into adulthood, if the child never formed affirmative, positive attachments and loving interactions this could affect self-esteem, failure to build relationships and the feeling of being safe, which is supported by Bowlby’s (1969) attachment theory.

Horney (1967) supports Maslow’s theory emphasising that genuine love and discipline develop the feeling of safety and satisfaction in turn building positive relationships. However, if these needs are not met this can lead to feelings of anxiety and may cause hostility towards their primary care giver. Horney also supported nurture over nature, she believed that people are born a blank canvas and their lives are determined by varying experiences, positive interactions whilst acquiring different attributes and not due to DNA. She believed men and women were born equal and brains were malleable by culture, life experiences and desires, whereas Freud (1961) argued this and believed men and women’s brains were very different and the way they were formed was wholly down to DNA.
Freud (1961) founded the study of psychoanalysis, he believed traumas and unreso

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