EC402: Introductory Microeconomics - Economics Assignment Help

Assignment Task:

Regarding the term paper prompt which requires the discussion about the effects of the relative prices changes due to the exchange rate changes on consumers in the UK and the Eurozone, in this essay, we will examine those effects on the general consumers and the specific consumers who are also the producers of goods respectively through using the simple two-good model. Based on the standard knowledge of international economics, the first section will consider how the depreciation of the currency (or an appreciation of the currency) influences the prices of imports and exports. In the following section, assuming that the UK exports the good X and imports the good Y, we will analyze the demand changes of the general and specific consumers in the UK from the perspective of the income and substitution effects. Next, the third section will conduct an analysis on the demand changes of those two consumers from the same viewpoint as the previous section under the assumption that the Eurozone exports the good Y and imports the good X. In the final section, based on the aforementioned examination, the desirable policy response by the government to maintain the consumers’ utility will be investigated.

Term Paper Prompt:

Suppose goods are either produced in the UK or within the Eurozone. Due to Brexit and other political events, there has been a significant change in the exchange rate. Four years ago, in December 2015 for £1 you would get 1.42€, now the same pound only gives 1.20€. This is a significant drop in the exchange rate. Please discuss the effects of this change in the relative prices on consumers in the UK and the Eurozone. In particular, consider the income and substitution effects implied by this change. Using your knowledge from this term’s lectures and readings, what are some policy options available to the government to keep consumers at the level of utility they enjoyed prior to the change? In your answer, be sure to use the terminology and concepts discussed in the module (e.g., taxes, subsidies, price indices, etc.)

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