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Final Online Assessment: ECON1314 Semester 1, 2020

QUESTION 1 

(a) The following prices of 10 houses in Melbourne were recorded (in $‘000): 550, 570, 600, 650, 670, 670, 690, 740, 770, 790. Is the distribution of prices right-skewed, left-skewed or symmetric? 

(b) A survey of 100 borrowers of IDN bank has found that 50 borrowers own their own home, 50 borrowers have a full-time job, and 20 borrowers own their own home and have a full-time job. Given that a randomly selected borrower does not own their own home, what is the probability that they have a full-time job?

(c) Referring to part (b) – are the events owning a home and having a full-time job independent? Explain (note no marks without explanation).

(d) Referring to part (b) – are the events owning a home and having a full-time job mutually exclusive? Explain (note no marks without explanation).

(e) If a null hypothesis is rejected at a 0.05 level of significance, with no other information provided about P-Value, can you conclude that it should also be rejected for a 0.01 level of significance?

The following regression output relates to the analysis of unemployment rates (%) and is required for questions (f)-(j):

(f) What is the meaning of the intercept in this model?

(g) What is the meaning of the slope in this model?

(h) What is the predicted unemployment rate for a 2% interest rate?

(i) At the 5% level of significance, can you conclude that Interest Rate is strongly associated with unemployment? Explain.

(j) What is the unexplained variation amount of the unemployment rate in this model? How can it be improved in this case?

QUESTION 2

(a) Often when a new product is released to the market (e.g. a new iPhone) the demand for the product exceeds its supply but without a subsequent price increase. What economic concept does this example violate?

(b) If the Government is interested in preventing prices of certain products and services to be too high or too low, how can it achieve this task?

(c) If an average of 20% change in the price of chocolate with a 30% change in chocolate sold is recorded for the chocolate company ILC, what is the elasticity coefficient? What does it mean?

(d) Given your answer to part (c) above, what should the company do if they are interested in increasing overall revenue?

(e) Explain why marginal product decreases beyond some point as more labour is added to a fixed factor. What is this phenomenon called?

(f) Market structure is a classification system that is based on the key characteristics of a market.

(g) Explain these characteristics for a company in the banking sector in Australia.

(h) If an economy is currently in the middle of the intermediate range of an Aggregate Supply curve, and there is an increase in Aggregate demand, explain what is likely to happen to this economy’s GDP and inflation and why.

(i) You are asked to advise the Australian Government how they should best increase economic growth in times of economic downturn. Explain what steps the government can take in such case.

(j) The RBA is interested in decreasing the level of unemployment in Australia. What open-market-operations is the bank likely to pursue?

(k) IMCLN is a cleaning services company. Given that the company is operating in a Monopolistic Competition market structure, are they able to control how much they can charge their customers? Explain why or why not.