Discuss the relevant microeconomic theory

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    Tuesday, 7 February, 2012 9:17AM

    “Betel Nut Banned in Honiara Town”

    The selling of Betel nut in Honiara town has now been banned by the Honiara City Council (HTC), effective from Friday last week.

    The news of the ban would most likely bring a possible backlash from Betel nut vendors who like many other vendors within Honiara, stand to lose a huge portion of their daily income.

    “I make at least SB $200 per day selling Betel nut and that caters for my family’s needs like school fees, what has the HTC done to help people like us?” said a vendor in Honiara.

    The HTC has decided to act on the massive spread of people selling Betel nut, many are erecting stalls, similar to those in Rove, within the Honiara town area.

    “The thing is we are not stopping them from continuing their small businesses, but we want them to sell them outside the town area,” he explained. “Some visitors say that the city of Honiara is very dirty, particularly when people sell Betel nut on the streets.”

    The spokesperson says that those sellers who do not act upon the order will be fined SB$100 on the spot.

    “The Arts festival is just around the corner, so although it may be uncomfortable to many, we must do this to give a good first impression to our visitors.”

    Source: Solomon Times Online

    Assessment Instructions:

    Thoroughly read the article and produce a written report/essay of no more than 500 words. In your report, discuss the following:

    In what way is this article a microeconomic article. Discuss the relevant microeconomic theory or theories given in this article.

    Under which market structures are betel nut sellers classified as. Use evidence from the article to justify your reasons.

    Following the ban, what is most likely going to happen to the prices of betel nut in Honiara city and why? Illustrate with the help of demand/supply graphs.

    Use elasticity theory: evaluate the following statement, “Banning betel- nut sellers in Honiara city may also act as a control mechanism to consumption. Do you agree or disagree with this statement? Discuss.

    Marks will also be awarded for:
    1) appropriate command of English
    2)not exceeding 500 words
    3)bibliography and reference

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