• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
10 Ideas to improve your grades
 

10 Ideas to improve your grades

on

  • 1,788 views

 

Statistics

Views

Total Views
1,788
Views on SlideShare
1,782
Embed Views
6

Actions

Likes
0
Downloads
24
Comments
0

1 Embed 6

http://dbseconomics.blogspot.com 6

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    10 Ideas to improve your grades 10 Ideas to improve your grades Document Transcript

    • tutor2u Economics Blog - 10 Ways for Summer 2011a Great Econ Paper 10 Ways to Improve Your Economics Exam Papers tutor2u Economics Blog Summer 2011 (1) The Importance of the Margin • In textbook economics – many decisions are made at the margin – Marginal revenue = marginal cost (profit max output) – Marginal social benefit = marginal social cost (social equilibrium) – Marginal utility of consumption compared to the price • But few businesses / people have the capacity to reach such precise equilibrium points – or seek to find them • Instead they satisfice or choose rules of thumb • But…… – Marginal changes in behaviour can have a big effect if enough people make them (e.g. Energy consumption decisions) – Changing behaviour ‘at the margin’ can have important social effects – social norms can change + policies can have an impact – The fundamental value of something depends on the value of the marginal unit – important in lots of markets (e.g. oil, food)Copyright www.tutor2u.net 2011 Notfor resale 1
    • tutor2u Economics Blog - 10 Ways for Summer 2011a Great Econ Paper 2: The Law of Unintended Consequences • This is a root cause of ‘government failure’ • All government interventions in a market have at least one and often many unintended consequences • Easy to have the benefit of hindsight when seeing this! • Reasons: – Economics is a social science about behaviour – Rational agents will look for ways to offset policies that cost them – Information failure in government when setting policies – Dynamic nature of markets – markets and the agents that inhabit them move far more quickly than government – Disintermediation is inevitable in a globalized world 3: Stakeholders matter! • ‘Any person or organization that has a legitimate interest in a specific project or policy decision.’ • Check to see the sources of information in data response questions • Identify and comment when value judgements are being made – scores high for evaluation • Risk of government failure: – Regulatory capture / powerful lobbying – Policy decisions made to please a vested interest – Inequitable impact between one group and anotherCopyright www.tutor2u.net 2011 Notfor resale 2
    • tutor2u Economics Blog - 10 Ways for Summer 2011a Great Econ Paper Stakeholders • Employees of a business • Communities where a business is located or affected by a decision • Suppliers further down the supply chain • Shareholders / owners • Creditors • Government (and through them – taxpayers) • Trade unions (and the workers they represent) Stakeholders • Employees of a business • NGOs and other / organization advocacy groups (i.e. • Communities where a World Bank, IMF, business is located or Pressure Groups) affected by a decision • Prospective employees • Suppliers • Prospective customers • Shareholders • Local communities • Creditors • National communities • Government (and through • International community them – taxpayers) • Competitors within a • Trade unions (and the market workers they represent) • Professional associationsCopyright www.tutor2u.net 2011 Notfor resale 3
    • tutor2u Economics Blog - 10 Ways for Summer 2011a Great Econ Paper 4: Time Periods in Economics • Be familiar with – Immediate (momentary) especially in primary sectors – Short run (at least 1 fixed factor, diminishing returns) – Long run (all factor inputs are variable, economies and diseconomies of scale) • Applications of time periods in your analysis – Elasticity of supply (micro and macro supply curves) – Elasticity of demand (Ped, CPed, Income elasticity) – ‘Discounting’ the future value of costs and benefits – Long run macroeconomic policies e.g. supply-side / trade policy – Long run micro policies – e.g. liberalising a market, nationalisation 5: (a) Demand and supply curves are often non-linear! P P S Changing elasticity of D supply as output increases Q QCopyright www.tutor2u.net 2011 Notfor resale 4
    • tutor2u Economics Blog - 10 Ways for Summer 2011a Great Econ Paper 5(b): Upward sloping demand and downward-sloping supply! P P S1 S2 S2 Long run supply D with EoS Q Q 6: Change the elasticity to build / develop your analysis! P S + tax P2 S P1 D Q2 Q1Copyright www.tutor2u.net 2011 Notfor resale 5
    • tutor2u Economics Blog - 10 Ways for Summer 2011a Great Econ Paper 6: Change the elasticity to build / develop your analysis! More close substitutes – higher CPED P P S + tax S + tax P2 P2 S S P1 P1 D D2 D1 Q2 Q1 Q Q2 Q1 Q 7: Most markets are inter-related • Changes in relative prices / rewards in one market affect resource allocation in others • Key inter related-market concepts to revise: – Substitutes – Complements – Derived demand – Composite demand – Joint supply – Competitive supply • Also important in macroeconomics – Factor markets and the economic cycle (labour demand) – Bond markets / currency markets / equity markets – Macroeconomic effects of external demand/supply shocksCopyright www.tutor2u.net 2011 Notfor resale 6
    • tutor2u Economics Blog - 10 Ways for Summer 2011a Great Econ Paper 8: Markets at work! Relative prices, preferences and incentives • Markets are powerful – don’t underestimate them – especially the power of setting the right incentives • Policy interventions seek to change behaviour of agents • People do respond to incentives – Govt failure if the incentives turn out to be perverse – Govt failure if the incentives are not strong enough (ineffective) • Behaviour changes when relative costs & benefits alter – Leads to substitution effects (changes in demand for X and Y) – Agents react to changes in measured costs and benefits of their actions • This requires – A sufficient change in relative prices to make a difference – Availability of alternative courses of action – Sufficient time for agents to respond and react Examples of changes in relative prices and behaviour • London congestion charge / underground fares • National minimum wage • Changes in relative prices of low and high carbon energy e.g. arising from a carbon tax or carbon trading • Relative prices of different crops in farming • Relative price of ethical-products • Relative prices and demand for exports / imports e.g. Following an exchange rate change • Relative prices of legal versus illegal transactions (e.g. crime / organ sales)Copyright www.tutor2u.net 2011 Notfor resale 7
    • tutor2u Economics Blog - 10 Ways for Summer 2011a Great Econ Paper 9: Expectations matter! • Expectations of the future drive current behaviour! – Housing market / property development / decisions on land use – Capital investment decisions by businesses (expected profits) – Food supply decisions – expected returns from different crops – Currency demand and supply – speculative activity in FOREX – Monetary policy / inflation – inflation expectations and wages – Fiscal policy / tax cuts / govt borrowing – expectations of changes in taxes • Formation of expectations: – Rational expectations – Adaptive expectations 10: The cost-benefit principle • The mother of all economic ideas is the cost-benefit principle. • It says that should take an action if, and only if, the extra benefit from taking it is greater than the extra cost • The hard part is – Identifying the relevant costs and benefits – Measuring and valuing them • Individual rationality does not always lead to a socially optimum / desirable outcome • Behavioural economics questions the core rationality embedded into conventional textbook economicsCopyright www.tutor2u.net 2011 Notfor resale 8
    • tutor2u Economics Blog - 10 Ways for Summer 2011a Great Econ Paper And finally…. • Most policy problems require a combination of strategies • Understand the meaning of efficiency and equity in markets (allocative, productive, dynamic efficiency) • Have the courage to challenge the conventional wisdom • Let your diagrams do the work for you – develop the analysis with high quality diagrams • Pick out bias in extracts – normative economics • Use the data that is provided but be aware of limitations • What is rational for individual agents can often leading to outcomes that are damaging for society • Be cautious about government intervention – markets often find solutions to intractable problems in the long run – if the incentives are strong enough tutor2u The tutor2u Economics Blog is  designed to support you  throughout your revision.  Visit it  now and everyday!Copyright www.tutor2u.net 2011 Notfor resale 9