10 ways to turn a good paper into a great one

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Advice on scoring higher marks for analysis and evaluation in AS and A2 economics papers

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10 ways to turn a good paper into a great one

  1. 1. Ten Thoughts on Improving Your Economics Papers<br />Economics Revision<br />April 2011<br />
  2. 2. (1) The Importance of the Margin<br />Textbook eco – many decisions are made at the margin<br />Marginal revenue = marginal cost (profit max output)<br />Marginal social benefit = marginal social cost (social equilibrium)<br />Marginal utility of consumption compared to the price<br />But few businesses / people have the capacity to reach such precise equilibrium points – or seek to find them<br />But……<br />Marginal changes in behaviour can have a big effect if enough people make them (e.g. Energy consumption decisions)<br />Changing behaviour ‘at the margin’ can have important social effects – social norms can change + policies can have an impact<br />The fundamental value of something depends on the value of the marginal unit – important in lots of markets (e.g. oil, food)<br />
  3. 3. 2: The Law of Unintended Consequences<br />This is aroot cause of ‘government failure’<br />All government interventions in a market have at least one and often many unintended consequences<br />Easy to have the benefit of hindsight when seeing this!<br />Reasons:<br />Economics is a social science about behaviour<br />Rational agents will look for ways to offset policies that cost them<br />Information failure in government when setting policies<br />Dynamic nature of markets – markets and the agents that inhabit them move far more quickly than government<br />Disintermediation is inevitable in a globalized world<br />
  4. 4. 3: Stakeholders matter!<br />‘Any person or organization that has a legitimate interest in a specific project or policy decision.’<br />Check to see the sources of information in data response questions<br />Identify and comment when value judgements are being made – scores high for evaluation<br />Risk of government failure:<br />Regulatory capture / powerful lobbying <br />Policy decisions made to please a vested interest<br />Inequitable impact between one group and another<br />
  5. 5. Stakeholders<br />Employees of a business <br />Communities where a business is located or affected by a decision<br />Suppliers further down the supply chain<br />Shareholders / owners<br />Creditors <br />Government (and through them – taxpayers)<br />Trade unions (and the workers they represent)<br />
  6. 6. Stakeholders<br />Employees of a business / organization <br />Communities where a business is located or affected by a decision<br />Suppliers<br />Shareholders<br />Creditors <br />Government (and through them – taxpayers)<br />Trade unions (and the workers they represent)<br />NGOs and other advocacy groups (i.e. World Bank, IMF, Pressure Groups)<br />Prospective employees <br />Prospective customers <br />Local communities <br />National communities <br />International community<br />Competitors within a market<br />Professional associations <br />
  7. 7. 4: Time Periods in Economics<br />Be familiar with<br />Immediate (momentary) especially in primary sectors<br />Short run (at least 1fixed factor, diminishing returns)<br />Long run (all factor inputs are variable, economies and diseconomies of scale)<br />Applications of time periods in your analysis<br />Elasticity of supply (micro and macro supply curves)<br />Elasticity of demand (Ped, CPed, Income elasticity)<br />‘Discounting’ the future value of costs and benefits<br />Long run macroeconomic policies e.g. supply-side / trade policy<br />Long run micro policies – e.g. liberalising a market, nationalisation<br />
  8. 8. 5: (a) Demand and supply curves are often non-linear!<br />P<br />P<br />S<br />Changing elasticity of supply as output increases<br />D<br />Q<br />Q<br />
  9. 9. 5(b): Upward sloping demand and downward-sloping supply!<br />P<br />P<br />S1<br />S2<br />S2<br />Long run supply with EoS<br />D<br />Q<br />Q<br />
  10. 10. 6: Change the elasticity to build / develop youranalysis!<br />P<br />S + tax<br />P2<br />S<br />P1<br />D<br />Q2<br />Q1<br />
  11. 11. 6: Change the elasticity to build / develop youranalysis!<br />More close substitutes – higher CPED<br />P<br />P<br />S + tax<br />S + tax<br />P2<br />P2<br />S<br />S<br />P1<br />P1<br />D2<br />D<br />D1<br />Q<br />Q<br />Q2<br />Q2<br />Q1<br />Q1<br />
  12. 12. 7: Most markets are inter-related<br />Changes in relative prices / rewards in one market affect resource allocation in others<br />Key related-market concepts to revise:<br />Substitutes<br />Complements<br />Derived demand<br />Composite demand<br />Joint supply<br />Competitive supply<br />Also important in macroeconomics<br />Factor markets and the economic cycle (labour demand)<br />Bond markets / currency markets / equity markets<br />Macroeconomic effects of external demand/supply shocks<br />
  13. 13. 8: Relative prices, preferences and incentives<br />Markets are powerful – don’t underestimate them – especially the power of setting the right incentives<br />Policy interventions seek to change behaviour of agents<br />People do respond to incentives<br />Govt failure if the incentives turn out to be perverse<br />Govt failure if the incentives are not strong enough (ineffective)<br />Behaviour changes when relative costs &benefits alter<br />Leads to substitution effects (changes in demand for X and Y)<br />Agents react to changes in measured costs and benefits of their actions<br />This requires<br />A sufficient change in relative prices to make a difference<br />Availability of alternative courses of action<br />Sufficient time for agents to respond and react<br />
  14. 14. Examples of changes in relative prices<br />London congestion charge / underground fares<br />National minimum wage<br />Changes in relative prices of low and high carbon energy<br />Relative prices of different crops in farming<br />Relative price of ethical-products <br />Relative prices and demand for exports / imports e.g. Following an exchange rate change<br />Relative prices of legal versus illegal transactions (e.g. crime / organ sales)<br />
  15. 15. 9: Expectations matter!<br />Expectations of the future drive current behaviour!<br />Housing market / property development / decisions on land use<br />Capital investment decisions by businesses (expected profits)<br />Food supply decisions – expected returns from different crops<br />Currency demand and supply – speculative activity in FOREX<br />Monetary policy / inflation – inflation expectations and wages<br />Fiscal policy / tax cuts / govt borrowing – expectations of changes in taxes<br />Formation of expectations:<br />Rational expectations<br />Adaptive expectations<br />
  16. 16. 10: The cost-benefit principle<br />The mother of all economic ideas is the cost-benefit principle. <br />It says that should take an action if, and only if, the extra benefit from taking it is greater than the extra cost<br />The hard part is<br />Identifying the relevant costs and benefits<br />Measuring and valuing them<br />Individual rationality does not always lead to a socially optimum / desirable outcome<br />Behavioural economics questions the core rationality embedded into conventional textbook economics<br />
  17. 17. And finally….<br />Most policy problems require a combination of strategies<br />Understand the meaning of efficiency and equity in markets (allocative, productive, dynamic efficiency)<br />Have the courage to challenge the conventional wisdom<br />Let your diagrams do the work for you – develop the analysis with high quality diagrams<br />Pick out bias in extracts – normative economics <br />Use the data that is provided but be aware of limitations<br />What is rational for individual agents can often leading to outcomes that are damaging for society<br />Be cautious about government intervention – markets often find solutions to intractable problems in the long run – if the incentives are strong enough<br />
  18. 18. Tutor2u<br />Keep up-to-date with economics, resources, quizzes and worksheets for your economics course. <br />

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