ASSIGNMENT 2: APPLIED WRITING
Word limit: 1250 words
Task: You will be given a newspaper article to read, and you will be required to answer economic questions based on this reading. Detailed information including the article can be found below.
You are expected to use graphs to explain your answer. It will be important to write within the words limit outlined for the assignment.
INSTRUCTIONS:
Read the following excerpts from the article “Glut to blame for farm-gate milk price falls not big supermarkets” by John Durie published in the Australian on June 28th 2012 and answer all the questions.
Glut to blame for farm-gate milk price falls, not big supermarkets
John Durie The Australian June 28, 2012 12:24PM
VICTORIAN dairy giant Murray Goulbourn has cut farm-gate milk prices by
8.5 per cent to $4.50 per kilogram which leaves farmers at break-even levels due to the glut of milk on world markets.
Milk prices have fallen by 20 per cent over the last year so the 8.5 per cent cut from Murray Goulburn is relatively good but that isn’t much comfort for struggling farmers.
http://www.theaustralian.com.au/business/opinion/glut-to-blame-for-farm- gate-milk-price-falls-not-big-supermarkets/story-e6frg9io-1226411003410
Please answer the following questions using appropriate diagrams. Be sure to explain your answers thoroughly.
1. Assume that milk operates in a perfectly competitive market, use a well- labeled demand and supply model to explain how market equilibrium price of milk is being determined.
[6 marks]
2. Using the same model, explain and illustrate the impact of the glut of milk on the market. Clearly explain the equilibrating process.
[6 marks]
3. If you were the Minister for Agriculture in the Victorian Government, and
the Victorian Dairy Farmers Association asked you to support their members by imposing a legal minimum price, would you support or reject their
request. Use an economic model to explain why you reached your decision.
[7 marks]
4. With the aid of appropriate diagrams, what possible alternative programs could the government implement to increase the prices farmers receive in the market? How does your answer compare with question 3 above? Explain.
[6 marks]
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