BEO6600: Business Economics- Victoria University- Bitcoin- Business Assignment Help

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Task: PART 1: BITCOIN Context Bitcoin was created in 2009 as a crytocurrency (virtual currency) that is not controlled nor backed by any government or central bank in the world. It is developed through a technology-based mathematic algorithm that also restricts its supply. The supply of Bitcoins has been targetted to reach its optimum level of 2.1 million Bitcoins by 2140, at which no further Bitcoin will be produced by the algorithm. Bitcoin was initially used by individuals and small businesses for low cost transactions (such as purchase of t-shirts and books) but big corporations (such as Dell Computers, Virgin Airlines, Expedia, Pay Pal, and Google) are now accepting Bitcoin as a medium of exchange. Transactions using Bitcoin as the medium of exchange are recorded in the blockchain, which is like an accounting ledger. This ledger records amounts, times, and account addresses of each transaction and this information is accessible by the public. However, personal information of individuals or the nature/type of transactions in exchange for the Bitcoins are not recorded. This anonymity in Bitcoin usage makes this crytocurrency a potential tool for criminal and money laundering activities (Wilson & Yelowitz 2015). Bitcoin’s market value is determined by market demand and supply. When Bitcoin was first developed in January 2009, its value was $0.00 for several months. Its rise in value was meteoric, surpassing the US dollar in value in 2011 and its value was increased by several times its earlier value within a short span of time (for example, increased from US$100 per Bitcoin in March 2013 to US$1,000 per Bitcoin in November 2013) and gaining rapid momentum in subsequent years (from US$3,000 in November 2017 to US$19,000 in December 2017) before losing in value and plunging to below US$13,000 in late December 2017 (Kelly and Saoshiro 2017). Although Bitcoin is globally traded, there has been no global regulatory framework for it (Datamonitor 2012). The number and size of transactions using Bitcoin or other crytocurrencies is currently small and does not constitute an immediate risk or threat to the global financial and monetary stability (Baur, Hong and Lee 2015; Peters 2017; Rajadhyaksha 2018). However, central banks in developed countries (such as Australia, the US, European Union, Japan, Germany, the UK, France, Canada, South Korea and Russia) and developing countries (including China and India) are monitoring these crytocurrencies that were created outside of their control because these private money alternatives may one day grow to a level that undermines the effectiveness of monetary policies in their economies if left unmonitored (Lam 2017). Questions 1.1 Using a diagram, explain and illustrate the demand curve, supply curve, and their elasticities for Bitcoin. 1.2 Using a diagram, explain and illustrate what caused the increase in Bitcoin’s market price. 1.3 If all cryptocurrencies (including Bitcoin) become a common medium of exchange for a significant proportion of economic activities and  ransactions and they continued to be outside of the control of governments and central banks, undertake an economic analysis of the impact of these cryptocurrencies on Australia’s Gross Domestic Product (GDP) and implementation of monetary policies. PART 2: AUSTRALIA INITIATES WORLD TRADE ORGANISATION (WTO) DISPUTE ACTION AGAINST CANADA Context On 17th January 2018, the Australian government initiated a formal WTO dispute settlement action against Canada’s discriminatory and protectionist behaviour that affects the sale of Australian wine in Canada (Ciono 2018). Australia believes that Canada’s behaviour contravenes the latter’s WTO obligations through its unfair practices towards Australian and other foreign wine producers. Canada is Australia’s fourth largest export market for wine at a sizeable market size of A$185 million. The US has also complained about Canada’s behaviour towards wine imports and is currently negotiating a settlement under NAFTA (North America Free Trade Agreement) for preferential trade access. Key issues in contention that affect the sale of Australian wine in Canada were identified by The Winemakers’ Federation of Australia (2018) as follows: 1. Canada’s liquor board mark-ups and other associated fees, levies and/or taxes are applied differently to the advantage of local Canadian wines. 2. Canada are imposing conditions on local retail outlets and different types of local outlets that mean that it has become impractical for these outlets to sell foreign wine. 3. Providing supplier rebates that favoured Canadian wine producers. 4. Preferential treatments given to Canadian wine regarding shelf space, placement and promotion costs. 5. Canada’s Liquor Control boards subsidising transportation and handling fees of Canadian wine producers for products that may not have even gone through these boards’ retail channel. 6. Canada’s Liquor Control boards provide free laboratory and quality assurance services to local wines but not foreign wines. Questions Conduct an economic analysis of the effects of the following issues identified by The Winemakers’ Federation of Australia (2018): 2.1 The effects of a tariff on Australia wine imports in Canada. Using a diagram, explain and illustrate the impact on consumer surplus, producer surplus and deadweight loss. 2.2 The effects of a subsidy granted by Canada’s Liquor Control boards to Canadian wine producers. Using a diagram, explain and illustrate the impact on consumer surplus, producer surplus and deadweight loss. 2.3 Identify and briefly explain the trade pact(s) that Australia could use to negotiate for free trade access to Canada’s wine market.