Identify the market structure Coles and Woolworths operate in. Make sure you justify your choice of market

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Question:

Identify the market structure Coles and Woolworths operate in. Make sure you justify your choice of market structure using all of the market characteristics used to classify markets. Using your own independent research, provide some facts and brief comments on this market (for example, you may like to discuss metrics like the concentration ratio)

Question 2

Because of their market positions, Coles and Woolworths exhibit a great deal of interdependence and actively advertise against each other. In particular, Coles has been successful with their "Down Down" campaign. Briefly explain what this campaign is, and explain the effect you think it has had on the market position and profitability of both Coles and Woolworths. Draw appropriate diagrams for this market showing the market outcomes for Coles and Woolworths

Question 3

Consider a "game" between Coles and Woolworths that the supermarkets may participate in. The rules of the game are: If both Coles and Woolworths keep prices low, then they will both make a profit of $5,000m. If both Coles and Woolworths keep prices high, then they will both make a profit of $8,000m. If one supermarket keeps prices low and the other keeps prices high, then the low price supermarket will make $9,000m profit and the high price supermarket will make $4,500m profit. Using these rules, solve this game for the Nash equilibrium (make sure to include your diagram and the logic you followed to solve the game). Is your outcome the best one for both Coles and Woolworths? Explain your answer.

Section B: Macroeconomics (20 marks)

Question 1

The Chinese government has recently removed their domestic zero covid policy. Using your own research briefly explain what this policy is, and the effect you think it has had on the Chinese economy. At a minimum, your answer should include commentary about the effect on Chinese GDP, unemployment, inflation and other aspects of the Chinese macroeconomy. Support your comments with appropriate economic data. (Make sure you use reputable economic sources and reference your sources.

Question 2

Outline a possible fiscal policy program the Chinese government could undertake to recover from the effects of the zero covid policy. Draw a diagram of the Chinese macroeconomy using the aggregate demand and aggregate supply (AD/AS) model showing the effect(s) of the zero covid policy, and then after the (successful) implementation of your fiscal policy program. Clearly show on your diagram(s) the before and after cases.

Question 3

The zero covid policy has not just affected the Chinese economy, but economies all around the world. Explain the effect the policy has had on the Australian economy, as well as the impact its removal might have on the Australian economy. Support your answer with appropriate economic theory (the income effect, for example).