They have been written by the Principal Economics Tutor , Mr. Edmund Quek, for everyone who can benefit from them. As the essays were written with the examination time constraint in mind, every essay has room for improvement in the absence of time constraint. Many economics teachers give very long answers to essay questions that are virtually impossible to produce within the examination time constraint.
Consider the impact on all macroeconomic objectives. For example, higher interest rates may reduce inflation, but what about economic growth, unemployment, current account and balance of payments? Consider both the supply and demand side. For example, expansionary fiscal policy can help to reduce demand-deficient unemployment, however, it will be ineffective in solving demand-side unemployment e.
However, if confidence is high, higher interest rates may not actually discourage consumer spending. If the economy is close to full capacity a rise in interest rates may reduce inflation but not reduce growth.
AD falls from AD1 to AD2 However, if there is already a slowdown in the economy, rising interest rates may cause a recession. AD3 to AD3 Micro-evaluation 1.
The impact depends on elasticity of demand In both diagrams, we place the same tax on the good, causing supply to shift to the left. When demand is price inelastic, the tax causes only a small fall in demand. If demand is price elastic, the tax causes a bigger percentage fall in demand.
Time lag In the short term, demand for petrol is likely to be price inelastic. However, over time, consumers may find alternatives, e. In the short-term, investment will not increase capacity, but over time, it may help to increase a firms profitability. Time lags. Depends on market structure If markets are competitive, then we can expect prices to remain low.
However, if a firm has monopoly power, then we can expect higher prices. Depends on business objectives If a firm is seeking to maximise profits, we can expect prices to rise.
However, if a firm is seeking to maximise market share, it may seek to cut prices — even if it means less profit. Behavioural economics In economics, we usually assume individuals are rational and seeking to maximise their utility. Evaluate the possible effects on efficiency and resource allocation of removing these barriers. Explain the meaning of price discrimination and the conditions necessary for price discrimination. Evaluate the view that, because price discrimination enables firms to make more profit, firms, but not consumers, benefit from price discrimination.
Evaluate different ways in which governments could make markets more competitive. Discuss the extent to which new technology, such as the internet, has increased or decreased the competitiveness of markets. Government Intervention Discuss the impact of deregulation on the local bus industry in Great Britain.
Evaluate the view that the government should give financial assistance to firms producing cars in the UK to increase their competitiveness. Evaluate the view that government intervention can correct all the market failures caused by the effects of economic activity on the environment. In some European countries, price controls are imposed upon pharmaceutical companies. Discuss the case for government intervention to control market prices. Discuss whether the government should ever consider nationalising privatised industries?
Labour Markets Footballers receive high pay, while those in disagreeable occupations, such as road sweepers, are among the most lowly paid. How does economic theory explain such differences in pay? Assess the case for and against the government intervening to raise the disposable income of workers on low pay.
Do you agree that if a trade union persuades employers to increase wages in a labour market, employment must inevitably fall in that labour market? Justify your answer? Assess three labour market policies which might be used to increase the level of employment amongst incapacity claimants and lone parents on benefits. Discuss the impact of net migration on UK labour markets Discuss the relative merits of welfare benefits and taxes for reducing relative poverty in the UK.
Discuss the case for a toll on motorway travel. Discuss whether giving increased subsidies to firms providing bus services would correct the market failure arising from urban road congestion.
Discuss factors that may limit economic growth rates in different countries. If the economy is close to full capacity a rise in interest rates may reduce inflation but not reduce growth. Is he reading widely about economic questions raised by Brexit, for example? Evaluate the view that, because price discrimination enables firms to make more profit, firms, but not consumers, benefit from price discrimination. See: behavioural economics.