Microeconomic Impact - Impact on GDP - Economics Assessment Answer

Economics Assessment Task

Your Task

You have been requested to write part of ministerial briefing note for the new minister of the environment in the Australian government. The minister wants to explain to parliament, the consequences of climate change on Australia’s production and consumption of certain goods and services and the impact that these changes may have on the macroeconomy. The minister is interested in the impact on costs, domestic production, imports and exports, prices, inflation, employment and economic growth; and the welfare of producers and consumers of the products.

Select a two products/services that will be impacted by climate change and that impact on Australia’s macroeconomy.

1. Your first product or service should be one where climate change will primarily impact upon demand.

Microeconomic Impact
In your report you should provide answers to the following questions. Why will demand change and in which direction? What will be the impact on prices, production and welfare? You should support your explanation with a well labelled demand and supply diagram.

Macroeconomic Impact #1
How will the changes above impact on GDP? Which components of GDP will most affected? How might inflation and unemployment be affected? What type of inflation and unemployment will be most affected.

2. Your second product or service should be one where climate change will primarily impact upon supply.

Microeconomic Impact
In your report you should provide answers to the following questions. Why will supply change and in which direction? What will be the impact on prices, production and welfare? You should support your explanation with a second well labelled demand and supply diagram.

Macroeconomic Impact
How will the changes above impact on GDP? Which components of GDP will most effected? How might inflation and unemployment be affected? What type of inflation and unemployment will be most affected.

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