What is the relationship between Producers’Surplus and the Elasticity of Supply?

ALTERNATIVE ASSESSMENT 2019/20BCPM0052 PROJECTS, ECONOMICS AND BEHAVIOURAssessment BriefSuppose the UK government wants to build High-Speed Railway 3 (HS3) from Edinburgh to Leeds starting as soon as possible from the Edinburgh end.Please answer three questions about what you have learned from the module with regard to:A)Project appraisal methods,B)The effects of megaprojects on construction, material markets and technology and,C)The effects of megaprojects on the macroeconomy and fiscal policy.A)Project AppraisalThe government has said that any project evaluation must include a financial evaluation, a social cost-benefit analysis and a major risk evaluation.i)What method would you use to carry out a financial evaluation of the project and to which results would you give the greatest importance?ii)In extending the financial evaluation to a Social Cost Benefit Analysis what types of external costs and benefits do you consider ought to be included?iii)What types of economic and financial risks do you consider pose the greatest threat to the project?B)Effect on Construction Material Markets and TechnologyThe government is concerned about the effect of the project on local factor markets, the levels of embedded carbon in the materials used and the opportunities presented by the project to demonstrate the use of new technology.A project of this size is going to have considerable impact on local material markets in the case of products like ready-mix concrete (RMX) and is likely to cause local material prices to rise. Look at Figure 1.a.Suppose the period demand for RMX rises from Q to Q’ as a result of the project going ahead. The project is a price-taker and has a fixed demand for the period. Using the diagram draw in a new demand curve and show the new market-clearing price.b.As a result of the government’s concern about energy consumption it proposes a fixed sum tax of T per cubic metre on RMX because of its high energy consumption and high embedded carbon content. Show the new supply curve and the new market-clearing price. Define and show the following on the diagram: i) Producers’ Surplus and ii) Deadweight Loss. What is the relationship between Producers’Surplus and the Elasticity of Supply?c.The government is also concerned about the effect of the project on the demand for skilled labour. They are also concerned about increasing labour productivity. Accordingly it is a condition for those invited to bid for the project that they must demonstrate the use of a significant level of labour-saving technology in delivering the project. Assume that those bidding for the project use Modern Methods of Construction (off-site manufacturing) to reduce the level of skilled labour required for the whole project. What additional economic (NOT technical) risks might have to be faced in changing the technology when delivering this project?d.The government is also going to use the project (under a separate cost-reimbursable contract) as a testing ground for the use of robotics in large infrastructure projects. What longer-term economic effects do you think the introduction of robotics will have on construction and civil engineering labour markets (as substitutes or complements).C)Effect on the Macroeconomy Fiscal Policyi)A project of this size is going to have potential impacts on the macroeconomy. What effects do you think that the additional project willhave on overall consumption and investment during the delivery of the project? Use a diagram to show the multiplier effect of these impacts.ii)Given the effect on the whole economy discuss the economic effects of funding this project through some combination of the following means:a.Increasing the government deficitb.Increasing general income taxationc.Increasing local business taxation in the areas in which HS3 is builtd.Buying additional land adjacent to HS3 in order to reap increases in land prices as a result of the project? (Land Value Capture)e.Auctioning the operating franchise to a Train Operation Company.REQUIRED PRESENTATIONYou should refer to your Programme Handbook to ensure that you comply with relevant requirements including File Format, Word Count, Timeliness of Submission, Plagiarism and Originality of Text. The Term Paper will be marked electronically and therefore you only need to submit a file to MOODLE. No hard copies of your text are required. The word count should not exceed 3,000 words in accordance with the principles set out in your Programme Handbook.MARKING SCHEMEThe usual marking scheme shown for Term Papers in your Programme Handbook will NOT apply and the allocation of marks between sections a), b) and c) will be 25%, 35% and 30% respectively with an additional 10% for presentation.GUIDANCE ON WORD ALLOCATIONA guideline for the allocation of words would be up to 1,000 words per question. Your total answers should not exceed 3,000 words in total.ADDITIONAL GUIDANCEPart A – Sections i) and ii) can each be answered with a short narrative to show you understand the basic principles. Section iii) requires some deeper thought and more extended discussion.Part B – Sections a. and b. can each be answered with a single diagram without further narrative (provided your diagrams are properly labelled). Section c. will require deeper thought and discussion. In section d. be careful.