Question

1. The government is currently considering setting a maximum price (price ceiling) for basic goods to ensure that people can get access to these goods at this current time. Fully explain your answer and also use a single diagram to demonstrate the likely outcomes of this policy if the maximum price is set:

1. Below the current free market price                                              

2. Above the current free market price

3. At the current free market price      

2. The Australian government has implemented a number of microeconomic reforms over the past 40 years including deregulation of banking. Do you think banking deregulation has been beneficial or not? Explain your answer. Describe what you think may be the difficulties with microeconomic reform in Australia and highlight an area that you think currently requires microeconomic reform. Justify your answer.

Answer 1

1)

Price Ceiling means the maximum price that the manufacuture or distributors apply to the product. Sometimes this price ceiling is going beyound the control then the intervention arising from government side to reduce the price for the regular usage in the socity. Price Ceiling is basically called price control. This theory is applicable to daily usage products but in the longterm usages the question will be arised how extend it will be work out.

Price ceiling has its own merits and demerits. Direct way it will help to the consumer group for using the product with better rate but in long term usages purpose some demertis are there. It was helpful in shorter market strategies produces has get another way to sustain these price ceiling to apply to other product and services which are also harm to the society as well. Price Ceiling is reduce the burden of economy but it will not work out in long period of time.

Let's See the Diagram showing the Outcome of the policy which was set

2)

Impact on Banking deregulation in Australia

In any form of economy especially in banking structure while we are implied any sort of deregulation means its effect all aspect in the economy and socity. For the deregulation means government can control the all the necessary services of the bank like deposti and loand payment even decided on the intrest rate to decided to the customer group. For appling these deregulation to the banks means its implied more more controls should prevailed in the banking sector to the society. These degradation automatically effect the banking sector itself and to the international economy also its become the situation is going more worse than the actual one.  

Australia has to improve the strategy of their economic and maketable growth through appling micro economic reforms in early of 80's. For appling these micro economic reforms will result in the increase in the productivity of the country. It extends the growth for 5% to 10% in the prodcutivity. There are other factors to be applied in this sytem like market rennovation, control over the market, Changes applied to the traditional monoposit and governemnt sector reforms also.

It is very diffuclt to measure the actual impact of the new strategies are applied. The result of reforms of this micro economic stragies are the reduction of overall expenses management capacith to decide. If the overall expenses are reduced it will help to the market more potential. Another important benefit for this strategy was the globalisation will utalise for this strategy more useful than before.