Scanned with CamScannera 4. Introduction 2. Valuing an Example Example The anal sis analysis, Ten gPeeife policy instruments is called o impacts in individ’ ill be looking ata range ofp Particularly inter ccut! Markets in @ normative fram rl Tested ework. We are Thus we will be in the effects of the policies on individual welfare, surplus (PS) looking at consumer surplus (CS) arid aly moan hoe we will be keeping in mind tae Cand PS have second rome) itd effects and priced values. Most policies do hard to nla eee and also impact on unpriced factors that are environment, Surpl ch as rural life style and the quality of the starting point, DIYS Measures such as CS and PS provide us with a Pplict welfare olicies and their Industry Often governments Rie eee have to make decisions that effect the viability of an industry. Eas listing of Tasmanian forests will wipe out most of the asmanian bee industry. Bees compete with natural pollinators and may spread plant pathogens. Their presence may actually prevent some Plant species from ever being pollinated and hence result in their extinction. World Heritage Listing would require that bees be kept out of the forest. Bee keepers say this would wipe out 80% of their production and hence destroy their industry. They claim the industry is worth millions to the Australian economy. Urban encroachment on agricultural land has led to controversy over _ sub-division laws. Developers say that the this land is best used for housing because of its proximity to cities. The rural community claims that such encroachment destroys ‘good’ land and may threaten the viability of some industries. (Much of the orchard industry around Sydney is now gone). We often hear industry representatives talking about the value of their industries. Yet how do we measure such values? There are two types of values priced values These include incomes flowing from \! industry and consumer benefits. i ic (but ofsen just as riced values These include more esoteric (( f festa) things like lifestyle, costs of unemployment, heritage values and the like. a Scanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerPc Pp Fixed Tax $ deadweight supply loss a I b pre tax price line LITE c demand revenue + quantity Pc = price paid by consumer Pp = price received by producer Pc - Pp = unit tax Change in consumer surplus = dbaPc Change in producer surplus = dbcPp Deadveight loss = abc Scanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerLerner Symmetry Condition An x per cent tariff on all imported goods is equivat ent 10 4 tax on all exports. a” py [Taritts | Price vith ta, world price domestic demand quantity no tariff trade tariff revenue = bdfc consumer loss = gdeh~ producer gain = gbah ~ dead weight loss = abc + def © Scanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerScanned with CamScannerMac» policy income tax you pay a higher proportion of y re bad. ‘This has the cffecrg with progressive good years than in income as (ax in ing income. cag, Income $2,000 no tai in $38 000 tax. come of $100 000 you pay’ 2. Provisional tax forthe following tax year. It is based on ay paced on past earnings. If income fluctuate This is tax paid in advance ta refund if your income falls. estimate of future earnings you pay more in good years then Be 3. Loss carryover sses to be carri This allows incom ied forward to future years for tax ‘The tax laws allow los fe to be smoothed over g assessment Purposes. number of years. 4. Income Equalisation Deposits. ‘These allow income to be spread over a number of years for ta purposes. This is usually undertaken to minimise tax burden and itis debatable whether they actually stabilise income. Macroeconomic policy may also effect the stability of farm income. 1, Interest rate policy eg, Interest rate policy will influence the stability of costs the government is buying and selling bonds to offset shocksi the money market the interest rate is likely to be more stable, ‘Also restrictions on lenders/banks in terms of the type of er they can extend. Exchange rate (ER) policy A floating ER will influence commodity price stability. see quite wide currency fluctuations today. Twent e ER was managed so that it never chang’ n for this was that it created a stableScanned with CamScanner