ECON1001 – Semester 2 – 2021 Essay This assignment requires you to explore a ‘real-world’ application of economics. Detailed instructions are provided below. Background To answer the questions below, you should consider the Australian electric motor vehicle market (consider electric vehicles only, not hybrid vehicle). Read the following articles and answer the questions below. The readings below are only meant to introduce you to the topic, you will need to do some further research. • https://www.smh.com.au/politics/federal/morrison-government-rules-out- subsidies-in-electric-vehicle-strategy-20210204-p56zju.html • https://www.industry.gov.au/news/new-funding-for-fast-charging-stations-for- electric-vehicles • https://www.transport.nsw.gov.au/projects/electric-vehicles/charging-an-electric- vehicle Questions a. Consider the market for electric vehicles in Australia. Briefly describe and define the market structure. Your discussion could address issues such as the number of sellers, product characteristics and the barriers to entry to this market. (5 marks) (recommended 100-150 words) b. In Australia, the Tesla supercharge stations only service Tesla vehicles due to a Tesla proprietary plug. Why would the Tesla company do that? (Hint: how do we expect this to impact on the demand for a Tesla car and the price it can charge for the car?). Carefully explain the impact of this change. Use a diagram as an aid to your explanation. (10 marks) (recommended 150 words) c. Now, assume that there are two types of consumers – business and average travellers. Business travellers have a high valuation of electric cars. However, average travellers have a low valuation of these cars (for simplicity, assume that there are only two car models: model 3 and model X). While Tesla knows the willingness to pay for each type of consumer, it cannot observe the type of any given traveller (that is, Tesla does not know whether a particular consumer is a business or average traveller). What pricing strategy would you now recommend? What conditions are required for your recommendation to be implemented? Provide intuition for your recommendation. (15 marks) (recommended 200 words) d. Now, suppose there are only two electric vehicle producers – Tesla and BMW. Using game theory, explain whether BMW and Tesla will design the same plug or different plug. What factors should the firms take into consideration? (15 marks) (recommended 200-250 words) The following criteria relate to the entire assignment: • 5 marks – Synthesis, use of relevant research and correct referencing. • 5 marks – Clarity of expression (including grammar and spelling), presentation (including, but not limited to, formatting, numbering and clarity of graphs, tables, charts or figures if used), communication (including appropriate vocabulary) and structure (including use of paragraphs and headings). Assignment Guidelines 1. The written assignment is 700 words long (+/-10%, maximum is 770 words). The word count does not include the reference list, any tables and diagrams. Headings and sub- headings (e.g. based on the questions posed) are allowed to structure the assignment and are part of the word count. Students need to indicate the word count on the assignment itself. 2. When responding to these questions you should use relevant models and concepts covered in this course. State clearly any assumptions you make. It is critical that you set up a clear and logical discussion. 3. You must support statements you make with logical reasoning and supporting evidence, where possible. Your claims should be, where appropriate, supported by references to the existing work (and detailed in a reference list). 4. Reference list [*This section is NOT included in the word count*] This section should list the references used in the paper. Use APA reference and citation style (7th edition). For more information about the APA reference and citation style, please refer to the APA 7th referencing guide, which is available on the Canvas site and on the Library’s APA style site. Below is a simple example of an in-text reference and a reference list entry: In-text reference: […] In contrast to most other introductory microeconomics textbooks, Nguyen and Wait (2016) discuss all economic concepts in a very concise manner. […] Reference list: Nguyen, B. & Wait, A. (2016). Essentials of Microeconomics. London, UK: Taylor & Francis. 5. You need to use appropriate language and submit a professional piece of work. Avoid slang or colloquial terms. Make sure you check your spelling, punctuation and grammar before submitting. 6. Do not include your name in the file. Your essay will be anonymously marked. Submission instructions The essay is due on Friday 29 October 2021 at 23:59pm (Sydney time) and should be submitted through the essay upload link on Canvas. Your work will be submitted to the similarity detecting software Turnitin for analysis. An essay submitted 1 second late is automatically marked as late by the software so do not wait until the last minute to submit your essay. File Format: The system only accepts doc, docx, pdf files. Late Submissions: Extensions are available through the formal Special Consideration System. The late penalty is calculated by section 7A(4) of Assessment Procedures 2011, which provides: (4) For every calendar day up to and including ten calendar days after the due date, a penalty of 5% of the maximum awardable marks will be applied to late work. (a) The penalty will be calculated by first marking the work, and then subtracting 5% of the maximum awardable mark for each calendar day after the due date. Pursuant to clause 8(2) of Resolutions of the Faculty of Arts and Social Sciences for coursework awards, section 7A applies to ECON1001. The closing date for the essay is Friday 12 November 2021 at 23:59 pm (Sydney time). Any essay submitted after this date will not be marked and will receive a zero. Submission Issues: Make sure you take a screenshot of the submission as proof you have submitted your assignment. Should submission problems occur, please contact the unit coordinator (Huy Vu, huy.vu@sydney.edu.au).