EC3040 Economics and Society

Module Code: EC3040

Module Title: Economics and Society

Coursework: final

Coursework weight: this course accounts for 60% of the overall modules mark

Coursework Deadline: Wednesday 8 January 2025 at 16:00. Information on how to submit a file on Moodle can be found on the Moodle Student Guides. Please make sure to submit your coursework well before the due deadline to avoid any possible type of technical and not technical problem. If for any reason you are unable to upload and submit your coursework on Moodle, please email your work before the deadline to the course officers at economics.ug@city.ac.uk

Coursework Aims

The objective of this assignment is to carry out some analysis on a recent policy proposal: the ban on disposable vapes in the UK. You should think of this analysis as providing the background for writing a report on the policy, which you might be expected to do if you worked in a consulting firm or in the civil service. Rather than asking you to prepare a report from scratch, we will guide you step-by-step with various problems to solve. You will not be asked to actually write up a report, but just to submit your answers to the following questions.

To help your analysis, we have provided three documents. The first is a report from the UK parliament into vaping. The second document is an article from the BBC. The third is an academic article on the optimal regulation of vaping.

Marking Criteria

Different types of questions are marked according to different criteria.

For quantitative questions (e.g. Part 2, questions 2-4), we will use the following criteria:

• Analysis (50%): Is your answer correct? If the question is related to one of the models taught in the module, has the model been applied correctly?

• Knowledge and understanding (25%): Does your answer demonstrate that you have understood what concepts from the course to use to solve the problem? Does your answer reflect a good grasp of the course material?

• Structure and clarity (25%): Is your reasoning easy to follow? Did you write out clearly all the steps you used to obtain an answer and explain why each step is necessary? Do you conclude your answer with a sentence summarising your results?

For qualitative questions (e.g. Part 2 question 5), we will use the following criteria:

• Knowledge and understanding (50%): Does your answer demonstrate that you have understood what concepts from the course to use to solve the problem? Does your answer reflect a good grasp of the course material?

• Analysis (25%): Does your answer provide clear insights into the issue under investigation? Are you able to connect the question with other quantitative questions in the assignment or with concepts studied in the course? Does your answer demonstrate some creativity in identifying the key issues in the problem, the limitations of the analysis, and solutions to these issues?

• Structure and clarity (25%): Is the answer clearly written? Does it flow smoothly and logically? Do you provide relevant references to the additional documents when needed?

Only answers that meet all these criteria, when applicable, will be awarded a first (above 70%). Answers that meet some but not all criteria will be awarded grades between 40%-70?pending on how many criteria they meet. Answers that fail to meet a majority of these criteria will be awarded a fail (below 40%).

Academic Integrity, Misconduct Policy and Use of Artificial Intelligence

The Department expects you to uphold academic integrity and good academic practice by demonstrating behaviour that is honest and ethical in all of your academic work. You can get an understanding of what is meant by good academic practice and honest and ethical academic behaviour by consulting the Universitys Academic Integrity & Misconduct Policy and Guidance.

Coursework Information

• You should plan to solve and submit your coursework well in advance of the deadline. If you have several pieces of coursework with the same deadline, you should organise yourselves to allocate enough time to each coursework. This is the best strategy to obtain a high grade.

• You must submit your coursework by uploading it at the link available on

• This is an individual assignment to be completed independently. Collaboration is not permitted: do not make the mistake of replicating somebody else's work. Collusion constitutes academic misconduct and is much easier for us to detect than you might It will have some serious consequences on your future. Cases of plagiarism will be dealt with according to university policies.

• You should write your answers in a Word file (recommended font size: 11). If it helps, you can hand write formulas and insert them into your file as You can either submit your Word file directly on Moodle or convert it to pdf before submitting it.

• The word counts indicated in some questions are indicative. You will not be penalised for writing longer or shorter answers, but the word count should give you an idea of what constitute a good References and equations or formulas are not included in the word count.

• You are allowed to draw diagrams if you find it helpful, but none of the questions require you to produce

• You do not need to make use of references other than the two documents provided. However, if you do, you should use a consistent referencing system. Using outside material without clear referencing constitutes plagiarism.

• When you reference the BBC article or the Parliament report provided, it is sufficient to reference them as``BBC, 2024, p.[X]" and ``House of Commons Library, 2024, p.[X]", replacing [X] with the relevant page number. You do not need to list them in a bibliography at the end of the coursework.

Coursework Task

Part 1 (10 marks)

A report on the vaping ban would start with a broad overview of the costs and benefits of the policy using concepts we have learned in the course. Using the documents provided, give a summary of the main changes introduced by the policy and its likely impact. In particular, you should describe the potential benefits that are expected to arise from the introduction of the ban. You should also describe the potential costs that are expected to arise from the ban. Using concepts from the lectures, you should discuss whether the benefits and costs are related to equity or efficiency concerns. [Suggested word count: 300 words]

Part 2 (30 marks)

Following the broad overview of potential costs and benefits of the policy, the report could then analyse the main objective of the policy using an economic model. Consider two representative citizens: an adult (A) and a teenager (Y ). Each citizen can choose the number of disposable vapes (which can potentially be a fraction of a vape), denoted x, she wants to consume every week. The price of a vape is denoted p. The adult has the following payoff from vaping: u_A(x_A, x_Y ) = 20 ln(1 + x_A) ? px_A ? 5x_Y . The teenager has the following payoff from vaping: u_Y (x_Y , x_A) = 10 ln(1 + x_Y ) ? px_Y ? 10x_A.

1.[2.5 marks] Explain how each term in the payoff functions of the two citizens capture different aspects to consider when analysing the policy and how they are related to the costs and benefits you identified in part

2. [2.5 marks]Suppose first that there is no policy in place to reduce vaping. How many vapes a week does each citizen consume as a function of p? Suppose that p = 5, what is the social welfare (the sum of utilities of the two citizens)?

3. [2.5 marks]Suppose now that the government introduces a tax of ? on each vape consumed. How does the tax change the payoff of each citizen? How many vapes a week does each citizen consume as a function of p and ? ? Suppose that p = 5 and ? = 3, what is the social welfare (the sum of utilities of the two citizens)? Note: in calculating the social welfare, you can ignore the fact that the tax might be redistributed to citizens in some other form. You should only take into account the effect of the tax on consumption and the direct cost of the

4. [2.5 marks]Suppose finally that the government bans vaping altogether. How many vapes a week does each citizen consume? What is the social welfare (the sum of utilities of the two citizens)?

5. [20 marks]Discuss carefully how social welfare changes when the tax or the ban is introduced. What is the intuition behind these changes? Which citizen benefits more from each policy and which policy is best overall? Discuss how the different roles of taxation discussed in the lectures apply to this policy issue. [Suggested word count: 200 words]

Part 3 (30 marks)

Another important part of the report would be to review the evidence available or conduct your own empirical analysis of the impact of this policy. We now want to think about how such an analysis could be conducted.

6. [15 marks] Suppose that you had data to measure the expected benefits of the policy that you identified in Part 1. Write down the simplest regression equation that you could run to estimate the effect of the vaping ban. In particular, you should answer the following questions:
   
   
   • What are the dependent variable and the independent variables? What con- trol variables do you think should be included in this regression?
   
   
   • What unit of observation (time or location) would be most helpful?
   
   
   • What is the main coefficient of interest? What sign would the coefficient have if the policy is effective? What if it is not effective?
   
   
   • Why could this regression face some endogeneity issues such as unobservable confounders or reverse causality?

7. [7.5 marks]Suppose that the ban is implemented at different times in different parts of the What econometric method could you use to measure the effect of the ban? Explain carefully how you would implement the method and how it would address the endogeneity concerns.

8. [7.5 marks]Suppose that the ban is implemented so that no one below the age of 18 as of 2024 will ever be allowed to vape. What econometric method could you use to measure the effect of the ban? Explain carefully how you would implement the method and how it would address the endogeneity concerns.

Part 4 (30 marks)

Finally, we are ready to draw our conclusions about the policy and the limitations of our analysis.

9. [15 marks] Discuss how the model from Part 2, and the evidence we could get to test it, help us understand the debates around the ban on disposable You should illustrate the different opinions on the policy using each of the three documents. Use direct quotes from the documents to illustrate your point whenever possible. [Suggested word count: 300 words]

10. [15 marks]Discuss the limitations of the model we proposed. Drawing on other topics discussed in the module, discuss what other effects the ban could have that we have not modelled. How would you change the model to capture these effects? [Suggested word count: 300 words]