BUS 100 - Project 1 - CourseHero

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Economics

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Feb 20, 2024

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1 Project 1: Questions on Lesson 1-5 Question 1. Referring to the table below, from a financial standpoint, Mark would want to go with Option 1, replacing the engine and selling it afterwards, while incurring a loss of $45,000. We can conclude this by looking at the marginal benefits of choosing to replace the engine ($350K) and subtracting it from the sale price without replacing the engine ($220K), resulting in a $130K (350 – 220 = 130) marginal benefit. The next step would be to consider the marginal cost of taking the additional step of fixing the engine. If he chooses to fix the engine, then he would incur a cost -$100K; however, subtracting the marginal cost from the marginal benefit, we can see that it would still be worthwhile for Mark to replace the engine on the plane in order to receive a marginal net gain of $30K (130 – 100). Action Option 1 – Replaces engine Option 2 – Does not replace engine Buys old plane -295,000 -295,000 Fixes Engine -100,000 N/A Sells Plane +350,000 +220,000 Net Total -45,000 -75,000
2 Question 2. “Victorians rush to buy EVs in last days before state government dumps rebate scheme” – The Guardian The article that I chose relates to “Principle #4: People Respond to Incentives”. The story focuses on the Victorian government in Australia rescinding its $3000 electric vehicle rebate one year earlier than expected. The anticipation of the removal led to 1,300 Victorians rushing to claim the rebate before the program was pulled indefinitely, with roughly 60 claims a day since the announcement in early June. This government incentive is the prime example of the effects that incentives have on consumers that induces a rational person to act. The article goes on to state how and why the government implemented this rebate, explaining that they served two purposes: reduce carbon emissions in Australia by 2030 and achieve a goal of 50% of car sales being electric by 2050. However, a researcher from RMIT university argued that with this early removal of the electric car rebate, the government could risk dissuading people from purchasing electric vehicles as electric vehicle sales currently makeup less than 10% of all car sales, which is still significantly short of the 50% target by 2050. He also goes on to further suggest that governments should create disincentives to help discourage drivers from buying gasoline-powered vehicles, likely by adding fees and taxes on top of the market price. Overall, I think this article does a great job at showing the importance of government incentives/disincentives to help influence rational consumers to change their spending habits and adopt new trends. The article also explains in detail the purpose of the incentives, the goals it hopes to reach, and the consequences of removing incentives from the market. Link: https://www.theguardian.com/australia-news/2023/jun/29/victorians-rush-to-buy- evs-in-last-days-before-state-government-dumps-rebate-scheme Question 3.
3 a) With the implementation of an electric-only lane, it would cause electric vehicle sales to increase at a higher rate. This would be the case due to rational consumers seeing the benefits of quicker commute times as outweighing the cons of owning an electric vehicle. b) Two externalities can result from a implementing an electric-only lane. In terms of positive externalities , this would benefit society, as it would help reduce carbon emissions and pollutants into the air. This would be done theoretically at no cost to bystanders and will help create a positive effect on the environment. In terms of negative externalities , one possible outcome is the backlog and traffic congestion that it could cause on the non-electric lanes, seeing that we are removing one lane of traffic and only giving access to a much smaller group of people (electric vehicle owners). In the short run, this will cause lots of congestion and long traffic times for other drivers consequently for simply owner a gas-powered car. It could also be argued that with the increase in traffic in other lanes, it could inadvertently also affect the environment in a negative way, as more bumper-to-bumper traffic and idling could lead to pollutants in the air. c) It would be a normative statement, as the statements talks about what they ought to do . Evaluating this statement, we would have to not only look at data and facts, but we would have to consider non-data related factors such as ethics, morality, and even political philosophy. Question 4.
4 Question 5.
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