(Case Study)

Submitted by: Kay Ann A. Agoyaoy BSA2 11:30-12:30 MWF Submitted to: Professor Mosquera

Case Study 1:

Farmers Group Raps NFA Head on Rice Import Move

1. What will be the effect of the importation on the local consumption of rice? Illustrate. How about on palay production?
The effect of the importation on palay production is that the farmers will be forced to sell their crops even lower than the break-even cost. The reason is that the NFA does not have sufficient money to buy their crops even five percent of this. On the other hand the effect of importation on the local consumption is that the consumers will be divided between the imported rice, which the NFA imported from Indonesia, and the local rice. Some of they will preferred to buy the imported rice for it has the lower price in the market while the others will choose to buy the local rice because it has the good quality or taste. To summon the analysis, the agricultural economy of our country will fluctuate; more consumers will certainly buy the NFA rice than the local rice because of its cheaper cost. We dont need to import rice because the farmers harvest enough rice to support the need of almost 60 million people.

2. How does NFA intend to raise the price of palay to its targeted support price level? Illustrate.
Usually the private sectors hold or control the supply of the palay when there is a high demand and sell it in higher cost. And they will supply more products when there is a low demand. The reason is that as the price increases, the quantity supply of the product increases and as the price decreases the quantity supply decreases.

3. Is the position to import rice compatible with the intention to support palay prices?
No, because there is no local rice shortage so we dont need to import rice. And the importation of rice will affect the agricultural economy of our country.

Case Study 2:

Uniform Tax Rates seen to Burden Consumers

1. Is the proposed sales tax progressive or regressive? Who will be burdened most and why?
The proposed sales tax is regressive. It is said to be regressive because the consumers, especially those with low-income, will definitely burden greater tax. The sellers or the traders will pass the tax burden to the consumers by adding the additional tax to the normal or original cost of the cigarettes. For example, the original price is P2.00 and let say that the tax rate is 12% therefore the total price of each cigarette including the 12% tax is P2.24.

2. Will there be substitution between brands? How?

Yes, there will be substitution between brands. Many people will certainly choose the brand of cigarette with low price instead of those brands with higher price.

Case Study 3:

Beer Sales on Downtrend, Taxes Blamed

1. Is the demand for beer price elastic or inelastic? Explain and illustrate.
The demand for beer is said to be inelastic. The reason for this is the consumer did not respond to the changes of price. And because of additional taxes in beer products the sale of beer is continuously decreasing that may result to losses in the part of the producers.

2. What factors influence this elasticity?

1. Necessities versus Luxuries - It is harder to find substitutes for necessities so quantity demanded will change less. 2. Availability of Close Substitutes - If there are close substitutes, buyers will move away from more expensive items and demand will be elastic. 3. Definition of the Market - The more broadly we define an item, the more possible substitutes and the more elastic the demand. 4. Time Horizon - The longer the time available, the easier to find substitutes and the more elastic the demand. 5. Relative Size of Purchase - Purchases which are a very small portion of total expenditure tend to be more inelastic, because consumers are not worried about the extra expenditure.

3. Is specific tax a better alternative to raise tax revenue? Explain.

No, because specific tax will be just an additional burden to the producers and also to the consumer of the product. If that specific tax will be implemented there will be a decrease in the sale of the beer and it may result to losses in producers part.