EC2100: Draw The Indifference Curves With Clothing On The X-Axis: Microeconomics: Behavior And Organizations Assignment, UCC, Ireland

Question 1

Draw the indifference curves with clothing on the X-axis and smartphones on the Y-axis for the following individuals

1. a typical 17-year-old

2. a typical 75-year-old

Clearly explain your reasoning behind the shape of the indifference curves in both diagrams.

Question 2

In a recent budget, the government increased the sugar tax on fizzy drinks. This will have the effect of increasing the price of fizzy drinks.

1. Using diagrams illustrate and explain the income and substitution effects of this price change. (assume fizzy drinks are a normal good, and their quantity consumed is measured on the X-axis. The quantity consumed of ‘all other goods’ is measured in the Y-axis).

2. It is argued that this tax increase affects lower-income households relatively more than higher-income households. A solution would be to compensate lower-income households to offset the cost of the increase in the price of fizzy drinks. Clearly explain, using income and substitution effects and using the diagram developed in part (a), the effect that this would have quantity consumed of fizzy drinks and ‘all other goods’. (assume fizzy drinks are a normal good, and their quantity consumed is measured on the X-axis. The quantity consumed of ‘all other goods’ is measured in the Y-axis).

Question 3

 You are a policy advisor to the Minister for Health. She is looking to reduce the consumption of cigarettes and wants to examine the merits of using nudges versus taxes. Prepare a policy brief for her on the advantages and disadvantages of using nudges and the advantages and disadvantages of using taxes to reduce the consumption of cigarettes.

Question 4

The Irish Government is currently in the process of introducing minimum pricing for alcohol. Examine the implications of such a policy to the resulting price, output, and social welfare in the market for alcohol using diagrams where necessary. Compare this result to the unregulated competitive equilibrium using diagrams where necessary.

Question 5

In 2018, the European Commission (EC) fined a number of leading electronics companies for engaging in anti-competitive behavior. Read the article below and identify the type of anti-competitive behavior that they were accused of, including practices aiming at maintaining the behavior. Provide a clear definition of this type of anti-competitive behavior and clearly explain why this is the type of behavior is considered to be anti-competitive.

Question 6

BBC and ITV are deciding on the Saturday night schedule for their most popular TV show. Assume that there are two-time slots to schedule. The first, from 7.00 pm to 8.00 pm, is the more desirable prime time slot and each TV company wants to schedule its most popular show for this time. If they cannot schedule their show for this time, they will instead take the second time slot, from 8.00 pm to 9.00 pm. Assume the payoffs to both companies for the strategies they have are given below (RTE’s payoffs are given first).

1. Draw a decision tree to summarise the above payoff options assuming that BBC gets to decide on its schedule first. What is the solution to the game? Clearly explain your answer.

2. Given the decision tree and payoffs as they are above, can ITV employ any credible strategy to alter the solution? Clearly explain your answer. In what way could ITV employ a credible strategy to alter the solution. Clearly explain your answer.