In this assessment task you will take the role of an expert economist, employed by a government department or regulatory authority. Decision-makers in government rely on the advice of experts, like you, when formulating policy or discharging their statutory responsibilities. An expert economist's role in the government decision-making process is two-fold:
- Analysis:Experts are responsible for analysing alternatives, using the specialised knowledge and skills of their discipline. In this analysis, experts evaluate the alterna- tives against the government's objectives and statutory obligations.
- Communication:Experts must communicate their findings to the decision-makers in government - ministers and senior public servants - who, in many instances, do not share the experts' specialised knowledge.
This task will assess your aptitudes in both of these domains. You are to conduct an industry analysis based on the scenario detailed in Chapter 2. This analysis should be completed and presented following the instructions in Chapter 3. Your industry analysis will form the basis for a brief- a short report to the ultimate decision-maker in the scenario
- summarising your recommendations and the associated rationale. The instructions for preparing a brief are detailed in Chapter 4.
Scenario
The government is about to undertake a large program of public works, repairing and upgrading bridges around the city. TheMinistry of Transporthas decided that the public works will be funded, in part, by a new tax on taxi companies. The government's rationale for the new tax is that taxi operators benefit from well maintained roads and bridges, and therefore should contribute to their upkeep.
The Ministry of Transport has developed two competing proposals for the new taxi industry tax:
1. The first proposal is to levy a tax of $2.40 per taxi trip. The tax would be levied on the taxi companies, effectively increasing the cost of each trip to the taxi company by $2.40.
2. The second proposal is to levy a lump-sum tax of $35,000 per day, on each taxi company. The tax would be payable by each taxi company operating in the market, regardless of the number of taxi trips it provides to consumers.
Taxi companies oppose both proposals. In a submission to the Ministry of Transport, the companies claim that a new tax will not have the intended effect. The companies state that they will have no choice but to pass the cost of a new tax on to consumers, in the form of higher prices, and that consequently the burden of the tax will fall on their customers, not the companies themselves.
Your task
TheMinister for Transporthas instructed you to evaluate the two proposals and recommend which of the two proposals the Ministry of Transport should pursue.
In your recommendation you should consider the revenue raised by each proposal, as well as the impact that each proposal will have on both consumers and the taxi industry. In particular, you are to assess the taxi companies' claim that it is consumers who will ultimately bear the cost of any new tax. (The minister is concerned that the public will not support the new taxes if they result in significant price rises.)
How to write the industry analysis
The purpose of your industry analysis is to determine how the market will behave in each of the alternatives under consideration (see the scenario in Chapter 2 for more details). The industry analysis will form the basis for the recommendations you will make in the brief. You must ensure that your analysis is sufficient to support your recommendations. Use the notes from lectures 7-10 as a guide for the types of information that you need to derive. The maximum length for your industry analysis is 3 pages, inclusive of diagrams. Any content in excess of 3 pages will not be read or graded.
As you write the industry analysis, keep in mind that the audience is other expert economists. You should employ the correct economic terminology and assume that the reader has an understanding of the underlying economic theory.
Formatting requirements
The analysis section of this task must be typed using Microsoft Word, or a similar word pro- cessor. The analysis should have a professional appearance, appropriate to a government workplace. Format the analysis as follows:
- Use A4 sized paper. (You can find this setting under ‘Page Setup' in Microsoft Word.)
- All margins to be at least 2.5cm.
- Use a san-serif font such as Arial, Calibri or Helvetica. The same font is to be used throughout the document, for both body text and headings.
- Body text to be 12pt and black.
- Section headings to be 14pt, bold, dark blue and left justified.
- Subsection headings to be 12pt, bold, dark blue and left justified.
- Equations to be typed using the ‘Insert Equation' function in Microsoft Word (or equivalent).
- Variables in equations to be in italics, with subscripts and superscripts as appropriate.
- Diagrams to be computer generated, and fully labelled.
Analysis
In this section you will carry out all of the calculations required to evaluate the alternatives outlined in the scenario. You must show all your working and include sufficient written description for the reader to follow your process. Use the lecture notes and worked solutions in the study guide as an indication of the required level of detail.
Use subsection headings as appropriate to structure your analysis (you should think of the subheadings as ‘signposts' that help the reader to identify where they are within the analytical process, and the path ahead). Use diagrams where they add value by assisting the reader to visualise key elements of your analysis. You should include at least one diagram.
Attachment:- Industry Analysis.rar