Solved: MAE101 Economic Principles

A hard copy of your written assignment is to be submitted into your lecturer’s locker on level 4 by the due date and time. You will need to include an Assignment Cover Sheet, available from the portal, under
“Forms”. Assignments received after the due date or without a completed and signed Assignment Cover Sheet will be penalised accordingly.

N.B. Late extensions will generally not be granted unless there are exceptional circumstances and can only be granted by the Unit Coordinator.
Graphs should be clearly presented with relevant axis labels and a title given to each graph.

Diagrams may be hand-drawn, though you are strongly encouraged to draw them electronically using the feature Insert  Shapes  Line in MSWord. You can also search YouTube for “Drawing demand and supply
diagrams in Word” for assistance.

Your assignment should include footnote identification (name and student ID) on the bottom left hand side, and page numbers, on the bottom right hand side of the page.

Use size 12 font for your assignment and use bold font for the question numbers/parts.
Include at least three(3) authored and scholarly references for your assignment.

Up to four (4) marks will be deducted for insufficient referencing, incorrect in-text citation and for not following the list of instructions below.

The aim of this assignment is to examine some of the economic costs associated with traffic congestion and to consider some approaches used to manage the allocation of road infrastructure. The assignment will draw
on your understanding of some of the key concepts we introduced at the start of the course, together with the core topic examining markets.

Question 1 – Definitions and Concepts
i. Define the following three terms and relate them to your current activity of working on this assignment.
 Trade-off
 Opportunity Cost
 Marginal decision making.
(3 marks)
ii. Consider the cartoon from the New Yorker Collection 1985. Use the concept of the Invisible Hand to discuss what is taking place in the cartoon below. (Use economic terminology to formalise your response).
(2 marks)

Question 2 – Article Analysis

• A more recent article on Melbourne’s traffic congestion appeared in The Age newspaper on the 25 Nov 2016 and may be accessed via the following link:
  http://www.theage.com.au/comment/melbourne-needs-a-userpays-scheme-to-beat-trafficcongestion-20161125-gsxkdf.html
  
  i. What are the explicit and implicit opportunity costs to motorists of road usage? (2 marks)
  ii. List 3 approaches used to improve road congestion that you are familiar with. Explain how they operate to reduce congestion making sure you use economics terminology in your response.
  (You can choose examples from Australia and/or overseas).
  (3 marks)
  Question 3 – Data Collection & Analysis
  i. Using the MSExcel data from the MAE101 student portal where you accessed the assignment, create a time-series line chart of the Total Number of Vehicle Kilometres Travelled, Total Avoidable Congestion Costs (a measure of the DWL) and Air Pollution from road travel. (Your
  time-series line graph should display all three series on the one graph, have a title, axis labels and the source (year) of the data).
  Note: You will need to set the Total Avoidable Congestion Cost series to the Secondary Axis in MSExcel to enable a better comparison of the 3 time-series. To do this, right click on the series in your chart and set to
  Secondary Axis. The right vertical axis will now display this series’ values. (2 marks)
  ii. Comment on the trends of the time-series over the period (including the forecasted years). (1 mark)
  iii. Discuss the relationship between the time-series over the period (including the forecasted years). What explains the interesting relationship between road use and air pollution over the period?
  (2 marks)
  Question 4 – Market Analysis
  i. Using a demand and supply diagram (or a marginal social cost and marginal social benefit diagram), show the inefficiency of (free) public road use during peak travel times. (Label your diagram fully and use realistic axes labels. Give your diagram a title).
  (2 marks)
  ii. Re-draw the demand and supply diagram you used for part (i) above. Show the point of efficient road use on your diagram and the method through which this could be achieved. Shade or indicate on your diagram the Consumer Surplus (CS), Producer Surplus (PS) and Dead Weight
  Loss (DWL) if one is present. (Label your diagram fully and use realistic axes labels. Give your diagram a title).
  (3 marks)
  (5 + 5 + 5 + 5 marks) Total 20 marks