CASE:
Both, the Labour-led government and the opposition National Party have recently announced they plan to charge returning Kiwis for their stay in managed isolation.
On July 29, 2020, Megan Woods, the minister in charge of managed isolation facilities, announced new legislation that would allow the government to charge some people arriving in New Zealand. Woods proposes to levy a fee of $3,100 for the first adult in a room, $950 for every additional adult, and $475 every additional child. She puts forward only to charge temporary entrants and returnees who left after the legislation came into force.
Woods says, The entire focus of this policy is making sure that we get a balance, that we recognise New Zealanders do have a right to return home but that some travel might be considered discretionary – when thats the case, people should pay.
The opposition National Party would charge anyone returning to New Zealand for the costs of quarantine, whereas governments New Zealand First declares they would vote for the measure but prefer to see a more comprehensive plan that charges all returnees.
TASK:
Using what you learned about private and social costs as well as private and social benefits in private decisions-making, explain why managed isolation has been imposed on cross-border travellers entering into New Zealand. Use a diagram of the market for international air travel to illustrate your point.
Using what you learned about private and social costs as well as private and social benefits in private decisions-making, explain the economic consequences of not charging for managed isolation upon entry.
Given what you understand about the price elasticity of demand and supply, explain how the proposed managed isolation fee legislation will affect travel decisions of New Zealanders and NZ permanent residents and how it will affect the airlines. Use suitable diagrams to illustrate your answer.
Given what you know about the policy, what will be its implication for fairness in New Zealand society?
Based on your discussion, do you think the governments plans will be beneficial for society? In what way would the oppositions plans be better? In what way would it be worse?