Unit 201 Economic Decision Making Case Study

UNIT 201 – ECONOMIC DECISION MAKING

TASMANIAN FORESTRY INDUSTRY

STUDENT ID :
STUDENT NAME :
PROFESSOR :
LOCATION : Bahrain
DATE : August, 2014

EXECUTIVE SUMMARY
Tasmania is an island and a part of the Australia. Tasmania's main industries have been forestry, mining and tourism. Tasmania Forestry industry, for long time, had been an issue for Australian government.
There are some steps taken by the Australian and Tasmanian governments to solve Forestry industry issues such as imposing tariff on non-Tasmanian timber products and offering to provide subsidies to support Tasmanian domestic products.
This report is highlighting the impact of the above mentioned governmental policies on the demand and supply of the Tasmanian

They effect governments, producers and customers. And as explained above, when the government put Tariff on the non-Tasmanian products, that will raises the prices for both Tasmanian and Non-Tasmanian timber products. This benefits domestic producers by increasing producer excess, but domestic consumers see the Tariff as a loss for them. On the other hand, and since the tariff acts as a tax, the Australian government gains some revenue from the foreign countries. In this case, the only party who may suffer from imposing a tariff is the domestic customers.
Subsidies:
Subsidies are payments offered by governments to help the domestic producers (Tasmanian timber producers) to reduce their variable costs of production and encourage them to expand their output. (http://www.tutor2u.net/ )
A subsidy can be considered as a benefit given by the government usually in the form of a cash payment or tax reduction. It is given to remove some of load and is often considered to be in the interest of the public. (Investopedia.com)
The impact of offering subsidies by The Tasmanian government:
The effect of Subsidies on Producers:
A subsidy causes the supply curve to shift to the right since the costs will be reduced. This means that more can be supplied at each price of Tasmanian timber products. As shown on the below graph, the supply curve had an outward shift because of the fall in the