Laffer Curve, Lorenz Curve & Gini Coefficient

We do the Laffer Curve in U4, but its is a simple concept to use when evaluating the implications of using taxation to redistribute income - the others parts are great revision.

- Laffer curve
- Lorenz curve
- Gini Coefficient

Market Failure

Market Failure I
- Positive externalities
- Negative externalities

http://beta.economicspro.eu/vid.php?user=EconomicsPro&video_id=25

Market Failure II
- Public goods
- Under provision of merit and over provision of demerit goods
- Abuse of monopoly power
- Government response to market failure

http://beta.economicspro.eu/vid.php?user=EconomicsPro&video_id=26

Theory of the Firm - Costs and revenues

Costs one

• Fixed costs
• Variable costs
• Distinction between short run (SR) & long run (LR)

http://beta.economicspro.eu/vid.php?user=EconomicsPro&video_id=15

Costs two

• Total cost
• Average cost (AC) & marginal cost (MC)
• Accounting cost + opportunity cost = economic cost

http://beta.economicspro.eu/vid.php?user=EconomicsPro&video_id=16

Costs three

•  Law of diminishing returns

http://beta.economicspro.eu/vid.php?user=EconomicsPro&video_id=17

Revenues

• Total revenue, marginal revenue (MR) & average revenue (AR)
• Distinction between normal (zero) profit & supernormal (abnormal) profit
• Profit maximization in terms of total revenue & total costs and in terms of marginal revenue and marginal costs
• Goals for firms: sales volume maximization, revenue maximization & environmental concerns

http://beta.economicspro.eu/vid.php?user=EconomicsPro&video_id=19

AS Government Intervention in Markets

Maximum and minimum prices, buffer stocks (the theory and the reasons why they fail).

A2 U3 Markets

Video overview - http://www.economicspro.eu/vid.php?user=EconomicsPro&video_id=5

Perfect competition - http://www.economicspro.eu/vid.php?user=EconomicsPro&video_id=20

Monopolistic competition - http://www.economicspro.eu/vid.php?user=EconomicsPro&video_id=22

Oligopoly - http://www.economicspro.eu/vid.php?user=EconomicsPro&video_id=23

Monopoly - http://www.economicspro.eu/vid.php?user=EconomicsPro&video_id=21

AS Economics Metals from copper to silver hit record highs

Metals prices on the London Metal Exchange have risen in the last month.  Can you split the demand and supply factors?

• Why should a strong Yen see Japan buy more metal?
• What is the significance of "oil traded in the region ...$94 per barrel in London for the fifth day in a row ... the commodity could top $100 per barrel in the new year"?
• What do you think is the PED and PES for oil?
• How does this contribute to commodity markets often being volatile?

What influence does the price of Sterling have:

http://www.bbc.co.uk/news/business/market_data/currency/11/12/twelve_month.stm
http://www.bbc.co.uk/news/business/market_data/currency/13/11/default.stm

How market failure could be changed - role for government?

Dan Ariely - Predictably Irrational

Nudge: Improving Decisions About Health, Wealth and Happiness - Richard H Thaler Cass R Sunstein  http://www.youtube.com/watch?v=Dz9K25ECIpU 

http://www.youtube.com/watch?v=mGhsEKC2xDI&feature=related

Market Failure - a longer video; get your notebook ready!

This is good because it gives an overview of the topic and also gives alternative solutions to market failure.

Watch and carefully note:

• pollution permits
• property rights
• positive externalities - it may be a little early for this for U1, but it is certianly topical!
• the welfare could be subsidised
• merit goods
• de-merit goods

Negative Externalities

Unfortunately, the Athenian's download doesn't work!

Also a different take on spillover effects http://www.youtube.com/watch?v=1FQyKMxv4mA&NR=1

Subsidies

Tremendous analysis of the issues here.  Well beyond the text book but you could use much of the evaluation included at AS.

Indirect Taxation

One method of Government intervention is indirect taxation.  This video gives some implications

Can you link these explanations to the concepts of consumer and producer surplus?  This is linked to the concept of the "burden of taxation".

Also note the difference between the "unit tax" and the "ad valorem" tax.

Buffer Stocks

Methods of stabilising prices in volitile markets.

Market Failure - Positive Externalities

http://www.youtube.com/user/pajholden#p/u/6/j4M-90nlReY

Video on Joint demand and derived demand

Excellent explanation here. 

Examples are critical to taking your understanding forward.

AS and A2 Economies of Scale

http://www.youtube.com/user/pajholden#p/u/1/AZshS761WsE

In this video there are examples of the economies of scale and examples of each.  Useful for all economics students.

Consumer and Producer Surplus

http://www.youtube.com/watch?v=qTxniCLYgok&feature=related

http://www.youtube.com/watch?v=MinxczZXtKA&feature=related

Opportunity Cost and Production Possibility Frontiers

Opportunity Cost
http://www.youtube.com/watch?v=ezOdQUzLVAo&feature=related

PPF
http://www.youtube.com/watch?v=a5rxIY46J7s&feature=related

Revision: Videos for Elasticity

PED
http://www.youtube.com/watch?v=MNiEHvw6TTg
http://www.youtube.com/watch?v=DB6rmbAegvE&feature=related

YED
http://www.youtube.com/watch?v=LHv4SnEUcZA&feature=related

PES
http://www.youtube.com/watch?v=20b_zVHmZG0&feature=related

XED
http://www.youtube.com/watch?v=blA5cFnq8Bw&feature=related

Exams are close; here’s one way to plan your revision.

1. Use your scheme of work to identify what to expect on the exam - or make your own from the specification .  Print it off and cut it into sections to create a mindmap, do it on one piece of paper, A3 if you can get it, (unused wrapping paper perhaps?). You can then see the scope of your revision.

3. Review your notes:
a. The chapters provided the big Ideas, the topics - review these as the core elements of you course and your mindmap.
b. For each core idea review its sub-topics and supporting details. Look for themes that link topics: the price mechanism; the functions of prices; efficiency; elasticity; market failure; government failure; government intervention and government failure.
c. For each topic subtopic and theme, provided contrasting examples – on separate paper, explain the examples you have used.

4. Re-read any old tasks you had for practice – particularly the comments. What were the common themes?
a. If your essay indicated that your application was weak, do you understand why? Application is about your use of the context material and other examples to display your understanding of the theory.
b. If it you needed to improve your analysis, break it down. Do you understand the diagrams? Can you use the diagram to analyse?
c. Do your explanations of shifts and movements clearly describe the causes and effects, and counter measures for the problem set?
d. Was evaluation of each paragraph clear and precise?
e. Did your final paragraph(s) clearly answer the question?
f. Do a new essay plan of every weak answer - can you really do it better?

5. Review the types of questions that will be asked so you know how to score points in the examination. Use past papers to practice answers in each of the topic areas.

6.  Write detailed essay plans (rather than the whole essay) – focus on the diagram(s) and the evaluation.

7. Practice the multiple choice questions!

Hypothesis testing to evaluate...

A great way to evaluate, at A2 particularly, is to set the essay statement as a hypothesis. 

The first part still identifies the basic economics of the question - diagrams etc.

The second part sets you the challenge to find evidence that supports the statement - and to indicate the extent to which this is so.

The third part is to find elemenst of an argument that oppose the statement, again indicating the degree to which the counter argument holds.

Finally, you put it all together with you "overall" which part is most convincing and explain why.

Then go for an exception or "twist" factor, where the argument may be turned on its head!

If you struggle with your current methods you should try something new!  This may work for you!

A great BBC resource on Supermarkets - oligopoly..

This article even has a debate on the issue, from a layman's, rather than specifically economics perspective.

Demerit good: Gaming from Parorama

The joy of wasting time - CODDERS of the world, watch this!

Help with Evaluation from T2U

Last few slides are really good!

AQA Economics links

Past papers, answer schemes and examiners reports are great sources of information. 

If an exam question stumps you check the answer scheme for the issues, then analyse them!

For A2 students, the old U5 paper is the equivalent paper to U3.

Work hard, reward for effort is high grades!

U1 - Lincoln - free parking reduces welfare of town! Shock!

In this article, we see that Lincoln has offered FREE Parking to shoppers in the run up to Christamas.  The town lost it's annual Christmas market and seeks to encourage shoppers into the town.

Read the article above then answer the qusestion:

Using the article and your economic knowledge, evaluate the statrement that "measures to boost economic activitity are doomed to fail when they ignore market conditions".

How many marks do you get for evaluation?

9 marks out of 25 are available for evaluation
 
Make diagrams at least 1/3 of a page.  Ensure that they are fully labelled! Make direct reference to them in the essay or they score ZERO!  Evaluate their limitations!

For AS and for part one at A2 you must make direct reference to the text - this means you quote a short RELEVANT piece - failure to do this means loss of marks!

Don't waffle - fully explain examples to make your analysis clear.   Then evaluate the extent to which it applies to the qustion.

At the end of the essay, you need at least one evaluative paragraph.  Look at the question and the evaluative comments made throughout the essay, then directly answer the question.

TWIST factors - how might one factor make this different? e.g. Government has little money, therefore the measures not affordable.  They could do it, but it takes time, which the firm / govenment/ person does not have therefore... etc, etc.  The impact of the measure depends on the PED, XED, YED, PES etc.

Finish your essay and smile!

 

Essays for U1 and U3

Some of you are really making progress in writing your essays others are finding this key skill more difficult to acquire.  There is not just one way of doing this, but I suggest the following pattern as a starting point. 

Paragraph one:

This should define the key term(s) in the essay, and set the context for the essay.  So of you may use this for a mini essay outline (The golden rule - be brief, few marks are directly available for this!).

Paragraphs 2 and 3:

These follow the same pattern; identify an issue relevant to the essay title, provide a relevant example, or a contrasting pair of examples (count double, for A2 particularly) and  analyse it with direct reference to the essay title.  Then evaluate the extent to which the analysis answers the question.

Generally, if you are stuck, consider the implications from the following viewpoints:

• Equilibrium and stability
• Welfare: consumer surplus, producer surplus
• Merit goods are chosen my governments
• The extent of any market failure
• Responsiveness of supply / demand to other factors - elasticity
• The specific way(s) that government intervention could make things better
• The specific way(s) that government intervention could make things worse
• Static efficiency (allocative and productive) and dynamic efficiency
• Market v non-market solutions - e.g. queuing!
• Long Term and short term views

Paragraph 4

This is an overall evaluation: which part of your analysis is most convincing and why? This should directly answer the question and backward reference but not repeat your analysis.

Paragraph 5 - Twist factors

What could turn the answer on its head, that is to say twist the evaluation so that it was different.

E.g.s

• The state of the economy: issues of affordability
• Does the situation change in the long run?
• Can governments afford to allow markets to "adjust"
• The "law of unintended consequences"
• Political policy: economic solutions may not be v socially acceptable solutions

Good luck 

Nb. for practice redo evaluation on past essays - try to evaluate each paragraph as well as at the end.

Y12 Work 3rd December

Economics - P2 and P3 Hi folks, I can't get in, sorry, but it is critical that you use the time wisely. Please do question 26 of the attached past paper, (question 16 attached is the same question bizaarly) but may not open.

 You can do this from the netbooks, or ask someone to print pages 12 and 13 for you.

 Please write the answers to Q16 a, b, and c, in your exercise books, and send me qustion d (350 word max, inc diagrams), by email, by the end of period 3! This will allow me to mark it by Monday.

Issues and areas for discussion include: (remember you select a few that enable you to make an argument of two sides that you can evaluate)
 • Methods of intervention such as subsidy and price ceilings;
 • Effect on relative prices in Italy;
 • Effect on pasta producers and farmers in Italy and elsewhere;
 • Effect on economic efficiency and resource allocation;
 • Opportunity cost arguments;
 • Distributional effects;
 • Short-term versus long-term considerations;
 • Market failure considerations
 • Government failure considerations

Examples of evaluation include: considering the effectiveness of different forms of intervention; debating whether the increase in pasta prices results from short-lived or more permanent underlying causes; assessing the opportunity cost of intervention; considering the effect on economic efficiency.

Y13 Work for 2nd December

Sorry I'm not in today guys, the snow, you know. It is really important that you don't get behind! I know you know this but.... Anyhow, I've updated your kerboodle status so that you can access this year's materials on your own (if you have your passwords).

If not you will have to wait until I work out how!

The work today is identify the principles involved in wage determination from the point of view of the suppliers of labour (individual workers and unions) and from the employers (demand) perspective. Pages 86-90.

Then do question 2a. in full - remember that you will need definitions and three analytical paragraphs, and a diagram to score 15 marks. Next plan the essay for 2b - you will be writing on the netbooks and sendng me it tomorrow!

Government Intervention

Tutor2u covers market failure and government intervention on this PowerPoint

http://tutor2u.net/economics/presentations/aseconomics/marketfailure/IntroductionMarketFailure/default.html

Task One

Learn three reasons for Government Intervention

Market Failure

The failure of the market to provide what we want when we want it can mean that government needs to step in.

• Markets might not look after the health of the nation, elderly or those with disabilities very well.
• Markets may not supply sufficient goods Merit goods when required
• Sometimes businesses take advantage of their monopoly position and consumers appear to suffer
• Often negative externalities, such as pollution, are not dealt with by the market mechanism

Wealth Distribution

When it comes to wealth distribution, the markets can sometimes distribute income and wealth in a way we do not like. They leave some people with little or nothing.

• Children in families with very low incomes may grow up in poverty will significant problems in the future and fewer chances to improve their chances in life.
• Very poor quality housing contrast can cause health problems caused by cold and damp conditions
• Some people live rough with no job, income or home

Economic Performance

Helping the economy to perform better (more efficiently) or in different ways

• Helping small businesses to start up by giving tax breaks or grants could be useful
• Providing help for companies trading abroad could help them compete in export markets
• Providing tax incentives to invest in new machinery also helps make the economy more efficient and productive

Three ways that Government might Intervene

Regulation and Legislation (err one and two)

Some argue that it is better if industries regulate themselves. But self-regulation clearly fails sometimes. Regulation of industry is often through bodies such as the Financial Services Authority, which may not be particularly independent or effective.

• Would stronger regulation have helped prevent the near collapse of Northern Rock BS or the recent financial problems?
• Without regulation, would the standard of care be acceptable standard everywhere?
• Without regulation, would taxis be safe? Furthermore, would many other vehicles be safe?
• Would some companies take advantage of their size to take advantage of suppliers and customers?
• Would smokers still be ruining the health of others whilst polluting the atmosphere of pubs?

Financial Intervention

Sometimes a government can use taxes and subsidies to influence the market.

• Making demerit goods more expensive through taxes, should reduce their consumption and will have long-term benefits for society, as well as raising money in the short term.
• Helping out struggling parts of the economy can reduce the undesirable impact of the markets on some sections of society.

There are always alternatives in determining the best thing to do. Should society tax the “gas guzzlers” 4X4s urban carriers, subsidise the fuel efficient ones, or both, or neither.

Remember that changes can have new costs that also need consideration. The cost of the factory that closes because it can no longer compete; the workers who lose their jobs etc.

Chapter 9 - Government Intervention

Y12 Economics - Period 3-4

I hope you are able to concentrate on these tasks and can work on them in groups. I would have review the activity in two parts as a whole class activity. You can do this on the white board if you wish

It is important that you are able to work while we have the disruptions to school caused by the weather. The request for examples is vital as they provide your analysis with reality and permits judgements to be made more clearly.


Learn the three main reasons for Government Intervention

- Market Failure
- Wealth Distribution
- Economic Performance

For each reasons identify the rationale/justification for Government intervention. You must use examples, contrasting if possible, explain each, (to prove you understand)

Try to keep the economics and the politics separare. Explaining the points of view of different political options could be one way of tackling this. Remember that mainstream political opinion (Conservative/Liberal/Labour) tend to want similar things, increased wealth, welfare and national security, but see different ways to do this.

Learn three ways that Government might Intervene

- Legislation
- Financial
- Regulation

For each way, identify the methods the interventions work. This will involve diagrams for the first method.

Ensure that you descibe each method with appropriate examples.

Cover Work Econ Y12 Wednesday

Y12 Economics

Ensure you have read and taken notes on pages 97-99 – the activity is rather dated now, therefore I want you to read the following:

Focus page 97 of the text book

Monopoly and monopoly power

• Monopolies that they are able to restrict supply so that customers pay a higher price for their products.
• This potentially allows them to make higher levels of profits, than a competitive firm.
• There is a transfer of welfare in the form of consumer surplus to monopoly business as producer surplus.

External benefits of a monopoly

• Higher profits provide the possibility for higher expenditure on R&D. This leads to the potential for new techniques in production and new products, which can raise the welfare of consumers over time.
• Economies of scale – larger scale production can lead to lower average costs as firms are able to use larger machines for example.
• Monopolies with higher R&D and which are able to access economies of scale may be better able to compete in world markets, which brings

Task one

Use the information above, and your research on consumer and producer surplus, in small groups of (three/two), first plan and then produce a response to the question:

“MICROSOFT have been on the cutting edge of innovation, transforming our economy, generating jobs and wealth and boosting our competitiveness in the global market place” (Congressional record, 1998).

Discuss whether, on balance, the impact of Microsoft has been favourable.
You must produce a cohesive and detailed argument – this means using the issues identifies above with fully worked specific examples based on Microsoft, which you evaluate comparatively.