Hand-Up 1 (Week 4) Instructions · This hand-up is based on Topics 1 and 2 of BUS114. · You must submit this hand-up at the beginning of class in Week 4. The hand-up will be returned to you with feedback in Week 5. · The hand-up must be hand written. · Your best 3 out of 4 hand-ups count for 25% of your final mark. · Submissions which are 1) through email 2) typed or 3) handed in late will not be accepted. Question 1 Consider the following statement. Heavy rainfall in northern Victoria has damaged grape plantations used in wine production, causing the supply of grapes to fall. This has resulted in a 25% price increase for wine. Is this statement an example of microeconomics or macroeconomics? Briefly explain why. (1 mark) Is this a positive or a normative statement? Briefly explain why. (1 mark) Assessment Information COMMONWEALTH OF AUSTRALIA Copyright Regulations 1969 This material has been reproduced and communicated to you by or on behalf of Kaplan Business School pursuant to Part VB of the Copyright Act 1968 (‘Act’). The material in this communication may be subject to copyright under the Act. Any further reproduction or communication of this material by you may be the subject of copyright protection under the Act. Kaplan Business School is a part of Kaplan Inc., a leading global provider of educational services. Kaplan Business School Pty Ltd ABN 86 098 181 947 is a registered higher education provider CRICOS Provider Code 02426B. Question 2 Are goods developed by the military like roads, factories and new technology for communications an example of land, labour or capital? Explain your answer. (1.5 marks) Question 3 Consider the article below that discusses North Korean government spending. North Korea spends a whopping 22 per cent of GDP (national income) on its military despite blackouts and a starving population. NORTH KOREA spends more than 20 per cent of its annual GDP (national income) on the military despite millions of citizens suffering blackouts and a lack of adequate food. Amnesty International East Asia researcher Arnold Fang said “… the huge commitment to nuclear capability means citizens suffer in other areas of life.” According to the article, what is the opportunity cost of North Korea investing so much money into the military? Explain why. (1.5 marks)
Hand-Up 1 (Week 4)
Question 1: Heavy rainfall in northern Victoria has damaged grape plantations used in wine production, causing the supply of grapes to fall. This has resulted in a 25% price increase for wine.
The above statement is an example of macroeconomics because it dwells on the behavior of economic performance as a whole. It has particularly focused on the aggregate economic changes caused by the effect of heavy rainfall on grape plantations for wine production. The impact has affected the Northern Victoria region through a 25% increase in price of wine, which is a domestic product. It analyzes how the aggregate indicators and the microeconomic factors affect the economic status in Victoria.
Is this a positive or a normative statement? Briefly explain why. (1 mark)
This is a positive statement because it can be tested and either approved or disapproved. Clearly, the statement is objective and value based. The highlighted hypothesis can be tested and the truth behind the ideology analyzed for validity reasons. Such a model is application in formulating economic policies and production strategies.
Question 2: Are goods developed by the military like roads, factories and new technologies for communications an example of land, labor or capital? Explain your answer.
Goods developed by military like roads, factories and new technologies are examples of labor because they are human efforts physically done with a goal of earning income through the process of production. Any compensation that the military force will be entitled to in return for their productivity is known as wages or employee productivity. In a direct cooperation with land, production is possible because land is a passive factor. All goods developed through military works are classified under production factors as the military is determined to do much more in the economic system.
Question 3: According to the article, what is the opportunity cost of North Korea investing so much money into the military?
In Northern Korea, focusing on military spending basically means other spending priorities are foregone which might result into unreliable infrastructure from schools, hospitals to roads. Choosing one alternative here will lead to the fall of the rest. This is an extreme example of how unrelenting focus on military spending affects the standard of living for its people. The tradeoff on military spending is painful for its economic grounds.