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economics essays

  • Economic Essays Grade 12

Grade 12 Economic Essays for the Next Three-Year Cycle (2021-2023)

  • Discuss in detail the markets within the FOUR-SECTOR model (Circular Flow)

Discuss in detail 'The new economic paradigm'/Explain the 'smoothing of cycles (Business Cycles)

Discuss in detail the features underpinning forecasting (Business Cycles)

Discuss in detail the main objectives of the public sector in the economy (Public Sector)

Discuss in detail the reason(s) for public sector failure (link them to typical problems experienced through public sector provisioning) (Public Sector)

Discuss in detail the reasons for international trade (Foreign Exchange Markets)

  • Discuss in detail export promotion (Protectionism and FreeTrade)

Discuss in detail the arguments in favour of protectionism (Protectionism and Free Trade)

Discuss in detail the demand-side approach in promoting growth and development in South Africa (Growth and development)

Discuss in detail the following South African growth and development policies and strategic initiatives (Growth and development)

Discuss in detail South Africa's initiaties (endeavours) in regional development (Industrial Development Policies)

Discuss in detail the following economic indicators (Economic and Social Performance Indicators

Discuss in detail the following social indicators (Economic and Social Performance Indicators)

Discuss in detail the various equilibrium positions with the aid of graphs-PERFECT MARKET (Perfect Market)

  • Discuss the monopoly in detail (with/without the aid of graphs) (Imperfect Market)

Examine the oligopoly in detail (Imperfect Market)

  • Compare and contrast any TWO types of market structures  

Discuss in detail how the following factors lead to the misallocation of resources in the market (Market Failures)

Discuss in detail state intervention as a consequence of market failures, with the aid of relevant graphs (Market Failures)

Discuss in detail the consequences of inflation (Inflation)

Discuss in detail the measures to combat demand-pull and/or cost-push inflation (Inflation)

Examine in detail the effects of tourism (Tourism)

Examine in detail the benefits of tourism (Tourism)

Discuss in detail how the government can ensure sustainable development (Environmental Sustainability)

  • Discuss in detail the following problems and the international measures taken to ensure sustainable development (Environmental Sustainability)

ESSAYS FOR THE NEXT THREE-YEAR CYCLE (2021-2023)

Macroeconomics- paper1.

Discuss in detail the markets within the FOUR-SECTOR model (Circular Flow) INTRODUCTION The economy of a country is regarded as an open economy because of the presence of households, producers, government, foreign sector and financial sector as active participants in the economy. Markets link the participants in the economy 🗸🗸 [Max 2]

BODY: MAIN PART PRODUCT / GOODS/ OUTPUT MARKET🗸

  • These are the markets for consumer goods and services🗸🗸
  • Goods are defined as tangible items, like food, clothes, cars, etc. that satisfies some human wants or needs🗸🗸
  • Buying and selling of goods that are produced in markets e.g. 🗸🗸
  • Capital Goods market for trading of buildings and machinery🗸🗸
  • Consumer goods market for trading of durable consumer goods, semi-durable consumer goods and non-durable consumer goods. 🗸🗸
  • Services are defined as non-tangible actions and include wholesale and retail, transport and financial markets. 🗸🗸

FACTOR / RESOURCE/ INPUT MARKETS🗸

  • Households sell factors of production on the markets: rent for natural resources, wages for labour interest for capital and profit for entrepreneurship🗸🗸
  • The factor market includes the labour, property and financial markets. 🗸🗸
  • The market where services of factors of production are traded e.g. labour is hired and capital is borrowed – these services earn wages, interest, rent and profits🗸🗸

FINANCIAL MARKETS🗸

  • They are not directly involved in the production of good and services, but act as a link between households , the business sector and other participants with surplus finds🗸🗸
  • E.g. banks, insurance companies and pension funds🗸

MONEY MARKETS🗸

  • In the money markets short term loans, and very short term funds are saved and borrowed by consumers and business enterprises 🗸🗸
  • Products sold in the market are bank debentures, treasury bills and government bonds 🗸🗸
  • The simplest form exists when parties make demand and short-term deposits and borrow on short term 🗸🗸
  • The SARB is the key institution in the money market🗸🗸

CAPITAL MARKETS🗸

  • In the capital markets long term funds are borrowed and saved by consumers and the business sector🗸🗸
  • The Johannesburg Security Exchange (JSE) is a key institution in the capital 🗸🗸
  • Products sold in this market are mortgage bonds and shares🗸🗸

FOREIGN EXCHANGE MARKETS🗸

  • On the foreign exchange markets businesses buy/ sell foreign currency to pay for imported goods and services🗸🗸
  • These transactions occur in banks and consists of electronic money transfers from one account to another🗸🗸
  • The leading centres/ most important foreign exchange markets are in London, New York and Tokyo 🗸🗸
  • e.g. traveller’s cheques to travel abroad🗸
  • Flows of private and public goods and services are real flows and they are accompanied by counter flows of expenditure and taxes on the product market🗸🗸
  • Factor services are real flows and they are accompanied by counter flows of income on the factor market🗸🗸
  • Imports and exports are real flows and are accompanied by counter flows of expenditure and revenue on the foreign exchange market🗸🗸[Max 26]
  • A change in investment of R 10m will result in a change in income of R 20m🗸🗸
  • An increase in investment causes the expenditure function to shift upwards from C1 to C2 so that C1 is parallel to C2🗸🗸
  • The effect of the increase in investment is that the total expenditure will increase from R 20m to R 30m🗸🗸
  • The increase in the value of output (Y) is greater than the increase in the expenditure (E) 🗸🗸 (Explanation must comply with the figures supplied in the graphical presentation) [Max 4] [Max 10]

CONCLUSION The circular flow ensures continued interdependence and coordination of the economic activities in the economy / markets are critically important institutions in our economic system, because they regulate the supply and demand and safeguard price stability and general business confidence. 🗸🗸 [Any other relevant conclusion] [Max 2]

INTRODUCTION The new economic paradigm in terms of the smoothing of business cycles discourages monetary policy makers from using monetary and fiscal policies to fine tune the economy but rather encourages achieving stability through sound long term decisions relating to demand and supply in the economy/smoothing out the painful part of economic down-fall that is part of the market economy🗸🗸 (Accept other relevant definition/description of smoothing/new economic paradigm). [Max 2]

BODY: MAIN PART The new economic paradigm is embedded in the demand and supply side policies. 🗸🗸

Demand-side policies

  • It focuses on aggregate demand in the economy🗸🗸
  • When households, firms and the government spend more, demand in the economy increases. 🗸🗸
  • This makes the economy grow but lead to inflation.🗸🗸
  • Aggregate demand increases more quickly than aggregate supply and this causes price increases. 🗸🗸
  • If the supply does not react to the increase in demand, prices will increase. 🗸🗸
  • This will lead to inflation (a sustained and considerable in the general price level) 🗸🗸

Unemployment:

  • Demand-side policies are effective in stimulating economic growth. 🗸🗸
  • Economic growth can lead to an increase in demand for labour. 🗸🗸
  • As a result more people will be employed and unemployment will increase. 🗸🗸
  • As unemployment decreases inflation is likely to increase. 🗸🗸
  • This relationship between unemployment and inflation is illustrated in the Phillips curve. 🗸🗸
  • The PC curve shows the initial situation. A is the point of intersection of the PC curve with the x- axis. It shows the natural rate of unemployment, for instance 14%🗸🗸
  • At point A inflation rate is zero. 🗸🗸
  • If unemployment falls to C for instance, 8%, inflation caused by wage increases is at 6%.🗸🗸
  • If unemployment increases from C to B to A, inflation falls from 6% to 2% to 0%.🗸🗸

Supply-side policies Reduction of costs 🗸

  • Infrastructural services: reasonable charge and efficient transport, communication, water
  • services and energy supply. 🗸🗸
  • Administrative costs: these costs include inspection, reports on applications
  • of various laws, regulations and by-laws, tax returns and returns providing statistical
  • information.
  • It adds to costs and businesses carry a heavy burden 🗸🗸
  • Cash incentives: it includes subsidies for businesses to locate in neglected areas where unemployment is high and compensation to exporters for certain costs they
  • incurred in development of export markets. 🗸🗸

Improving the efficiency of inputs 🗸

  • Tax rates: low tax rates can serve as an incentive to workers. It will improve the productivity and output. 🗸🗸
  • Capital consumption: replacing capital goods regularly creates opportunities for businesses to keep up with technological development and better outputs🗸🗸
  • Human resource development: to improve the quality of manpower by improving health care, education and training. 🗸🗸
  • Free advisory service: these promote opportunities to export. 🗸🗸

Improving the efficiency of markets 🗸

  • Deregulation: removal of laws, regulations and by-laws and other forms of government controls makes the market free. 🗸🗸
  • Competition: encourages the establishment of new businesses 🗸🗸
  • Levelling the play field: private businesses cannot compete with public enterprises 🗸🗸 Answers must be in full sentences and well described with examples to be able to obtain 2 marks per fact. Learners should be awarded 1 mark per heading or sub-heading to a maximum of 8 marks. (8 x 1) (8) [Max 26]

Explanation: The above graph shows:

  • Aggregate demand (AD) and aggregate supply (AS) are in equilibrium at point C. 🗸🗸
  • If aggregate demand is stimulated so that it moves to AD1 and aggregate supply responds promptly and relocates at AS1; a larger real output becomes available without any price increases. 🗸🗸
  • Supply is often sticky and fixed in the short term. 🗸🗸
  • Therefore, if aggregate demand increases to AD1 and aggregate supply does not respond, intersection is at point F. Real production increases but so does the price, in other words, with more inflation. 🗸🗸
  • The aggregate demand locates at any position to the left of AS1 inflation prevails. 🗸🗸
  • The solution is to create conditions that ensure supply is more flexible. 🗸🗸
  • If the cost of increasing production is completely flexible, a great real output can be supplied at any given price level. 🗸🗸 [Max 10]

CONCLUSION It is clear from the discussion above that it is critically important to manage the aggregate supply and demand to ensure stability in the economy. 🗸🗸 [Accept any relevant higher order conclusion] [Max 2]

INTRODUCTION Accurate prediction is not possible in Economics. The best the economists can do is to try and forecast what might happen. There are a number of techniques available to help economists to forecast business cycles, e.g. economic indicators 🗸🗸 OR Successive periods of contraction and expansion of economic activities 🗸🗸 [Accept any other relevant introduction] [Max 2]

BODY: MAIN PART Business cycle indicators Leading economic indicators 🗸

  • These are indicators that change before the economy changes / coincide with the reference turning point 🗸🗸
  • They give consumers, business leaders and policy makers a glimpse (advance warnings) of where the economy might be heading. 🗸🗸
  • Peak before a peak in aggregate economic activity is reached.
  • Most important type of indicator in helping economists to predict what the economy will be like in the future 🗸🗸
  • When these indicators rise, the level of economic activities will also rise in a few months' time/an upswing 🗸🗸
  • E.g. job advertising space/inventory/sales ratio🗸

Coincident economic indicators🗸

  • They move at the same time as the economy / if the turning point of a specific time series variable coincides with the reference turning point🗸🗸
  • It indicates the actual state of the economy🗸🗸
  • E.g. value of retail sales. 🗸
  • If the business cycle reaches a peak and then begins to decline, the value of retail sales will reach a peak and then begin to decline at same time🗸🗸

Lagging economic indicators🗸

  •  They do not change direction until after the business cycle has changed its direction🗸🗸
  • They serve to confirm the behaviour of co-incident indicators🗸🗸
  • E.g. the value of wholesalers' sales of machinery🗸
  • If the business cycle reaches a peak and begins to decline, we are able to predict the value of new machinery sold🗸🗸

Composite indicator🗸

  • It is a summary of the various indicators of the same type into a single value🗸🗸
  • Their values are consolidated into a single value , if this is done we find a value of a composite leading , coincident and lagging indicator🗸🗸 Accept ONE example from the table below:
  • This is the time that it takes for a business cycle to move through one complete cycle (measured from peak to peak) 🗸🗸
  • It is useful to know the length because the length tends to remain relatively constant over time.🗸🗸
  • If a business cycle has the length of 10 years it can be predicted that 10 years will pass between successive peaks or troughs in the economy. 🗸🗸
  • Longer cycles show strength. 🗸🗸
  • Cycles can overshoot. 🗸🗸

Ways to measure lengths:

  • Crisis to crisis 🗸🗸
  • Historical records 🗸🗸
  • Consensus on businesses experience 🗸🗸

Amplitude 🗸

  • It is the difference between the total output between a peak and a trough. 🗸🗸
  • It measures the distance of the oscillation of a variable from the trend line / It is the intensity (height) of the upswing and downswing (contraction and expansion) in economic activity 🗸🗸
  • A large amplitude during an upswing indicates strong underlying forces – which result in longer cycles 🗸🗸
  •  The larger the amplitude the more extreme the changes that may occur / extent of change 🗸🗸
  • E.g. During the upswing inflation may increase from 5% to 10%. (100% increase) 🗸🗸
  •  A trend is the movement of the economy in a general direction. 🗸🗸
  • It usually has a positive slope because the production capacity of the economy increases over time 🗸🗸
  • Also known as the long term growth potential of the economy. 🗸🗸
  • The diagram above illustrates an economy which is growing – thus an upward trend (positive slope) 🗸🗸
  • Trends are useful because they indicate the general direction in which the economy is moving – it indicates the rate of increase or decrease in the level of output🗸🗸

Extrapolation 🗸

  • Forecasters use past data e.g. trends and by assuming that this trend will continue, they make predictions about the future🗸🗸
  • Means to estimate something unknown from facts or information that are known 🗸🗸
  • if it becomes clear that the business cycle has passed through a trough and has entered a boom phase, forecasters might predict that the economy will grow in the months that follow 🗸🗸
  • It is also used to make economic predictions in other settings e.g. prediction of future share prices🗸🗸

Moving average 🗸

  • It is a statistical analytical tool that is used to analyse the changes that occur in a series of data over a certain period of time / repeatedly calculating a series of different average values along a time series to produce a smooth curve 🗸🗸
  • The moving average could be calculated for the past three months in order to smooth out any minor fluctuations 🗸🗸
  • It is calculated to iron out (minimize) small fluctuations and reveal long-term trends in the business cycle🗸🗸 Answers must be in full sentences and well described with examples to be able to obtain 2 marks per fact. Learners should be awarded 1 mark per 8 headings and examples. [8 x 1=8] [Max 26]

BODY: ADDITIONAL PART

  • An expansionary monetary policy is implemented when the economy is in recession in order to stimulate economic activities. 🗸🗸
  • Interest rates can be reduced to encourage spending. 🗸🗸
  • Households and firms can borrow more and spend more. 🗸🗸
  •  The increased spending increases the level of economic activity. 🗸🗸
  • Investment will increase and more factors of production will be employed. 🗸🗸
  • Higher levels of production, income and expenditure will be achieved. 🗸🗸
  • If the supply of goods and services does not increase in line with an increase in demand, inflation will increase. 🗸🗸
  • Inflation can be curbed by reducing money supply and availability of credit. 🗸🗸
  • To dampen demand at the peak the government will be able to reduce the money supply by increasing interest rates. 🗸🗸
  • Selling government bonds and securities (open market transactions) and reduce the supply of money in circulation. 🗸🗸
  • Increase the cash reserve requirements to manipulate money creation activities of banks. 🗸🗸
  • Persuade banks to decrease lending (moral suasion) 🗸🗸
  • To devaluate the exchange rate (exchange rate policy) 🗸🗸 [Max 10]

CONCLUSION It remain clear that business cycles must be clearly monitored through the indicators available, policy makers must act quickly by using monetary and fiscal instruments in order to prevent instability in the economy. 🗸🗸 [Accept any other relevant conclusion] [Max 2]

INTRODUCTION: The government provides goods and services that are under supplied by the market and therefore plays a major role in regulating economic activity and guiding and shaping the economy. 🗸🗸 [Max 2]

BODY: MAIN PART Objectives:

Economic growth 🗸

  • Refer to an increase in the production of goods and services 🗸🗸
  • Measured in terms of Real GDP 🗸🗸
  • For economic growth to occur, the economic growth rate must be higher than Population growth 🗸🗸
  • Growth and development in a country benefit its citizens because it often leads to a higher standard of living 🗸🗸

Full employment 🗸

  • It is when all the people who want to work, who are looking for a job must be able to get a job 🗸🗸
  • High levels of employment is the most important economic objective of the government 🗸🗸
  • The unemployment rate increased over the past few years 🗸🗸
  • Informal sector activities must be promoted because it is an area where employment increase 🗸🗸

Exchange rate stability 🗸

  • The economy must be manage effectively and effective Fiscal and monetary policy must be used to keep the exchange rate relatively stable 🗸🗸
  • Depreciation and Appreciation of the currency create uncertainties for producers and traders and should be limited. These uncertainties must be limited 🗸🗸
  • The SARB changed the Exchange rate from a Managed floating to a free floating exchange rate 🗸🗸

Price stability 🗸

  • Stable price causes better results in terms of job creation and economic growth 🗸🗸
  • The SARB inflation target is 3% - 6% and they are successful in keeping inflation within this target 🗸🗸
  • Interest Rates, based on the Repo Rate are the main instruments used in the stabilisation policy 🗸🗸
  • The stable budget deficit also has a stabilizing effect on the inflation rate 🗸🗸

Economic equity 🗸

  • Redistribution of income and wealth is essential 🗸🗸
  • South Africa uses a progressive income tax system – taxation on profits, taxation on wealth, capital gains tax and taxation on spending, are used to finance free services 🗸🗸
  • Free social services are basic education; primary health and to finance basic economic services 🗸🗸
  • E.g. Cash Grant to the poor, e.g. child grants and cash grants to vulnerable people, e.g. disability grants 🗸
  • Progressive taxation means that the higher income earners pay higher/more taxation 🗸🗸 [Max 26]
  • Learner responses can be positive or negative.
  • Follow the argument and see if the learner can produce enough evidence to support his/her answer.

Economic Growth:

  • SA targets 4–5% economic growth. Previously SA had a 5% growth rate 🗸🗸
  • In recent years the growth rate decreased steadily (presently below 3%) 🗸🗸

Full Employment:

  • Compared to foreign countries unemployment is very high. (Expanded – over 30%) 🗸🗸
  • Efforts by SA government to reduce these figures includes the GEAR strategy, focus on small business enterprises, Public Works Programme 🗸🗸

Exchange rate stability:

  • SA now operates on a free floating exchange rate system in line with international benchmarks 🗸🗸
  • Unfortunately our currency has lost its value, with a general trend of depreciation over the last few years 🗸🗸

Price stability:

  • For the past few years South Africa has managed to remain within the 3–6% target 🗸🗸
  • The current increase in the repo rate has put constraints on the inflation rate 🗸🗸

Economic equity:

  • Economic equity has improved (BEE, affirmative action, gender equity) and led to an improvement in economic equity 🗸🗸 [Any 5 x 2] [Max 10]

CONCLUSION: While some successes have been achieved by government, the fulfilling of some of the objectives are compromised by factors like lack of accountability, corruption, budgeting, nepotism and incompetence. 🗸🗸 [Any relevant conclusion] [Max 2]

INTRODUCTION The government responds to market failures by establishing and maintaining state owned enterprises to provide public goods and services 🗸🗸 [Any other relevant introduction] [Max 2]

BODY: MAIN PART

  • It is required to give an explanation of one's decisions, actions and expenditures over a period of time 🗸🗸
  • There are mechanisms for evaluating government's economic and financial performance 🗸🗸
  • That the desired quantities and quality of goods and services for which taxes are raised are delivered 🗸🗸
  • That monopolies, corruption, nepotism, incompetence and apathy does not occur 🗸🗸
  • Two important elements of accountability is participation and transparency🗸🗸
  • Ministerial responsibilities, i.e. the ministers of government departments are responsible for decisions and actions and expenditures 🗸🗸
  • Parliamentary questioning arises and members of the government departments have to respond 🗸🗸
  • The national treasury is responsible for treasury control 🗸🗸
  • The auditor-general reports annually in writing on each government department🗸🗸
  • Public goods are efficiently provided if Pareto efficiency is achieved 🗸🗸
  • That is if resources are allocated in such a way that no one can be made better off without making someone else worse off 🗸🗸
  • Bureaucracy the official rules and procedures. 🗸🗸/insensitivity to the needs of their clients 🗸🗸
  • Incompetence- the lack of skill or ability to do a task successfully🗸🗸/May have improper qualifications/or an attitude of apathy 🗸🗸
  • Corruption- the exploitation of a person's position for private gain /taking bribes, committing fraud, nepotism 🗸🗸
  • State-owned enterprises do not operate according to the forces of supply and demand 🗸🗸
  • It becomes thus very difficult for state-owned enterprises to assess needs and they are thus prone to under- or over-supplying public goods and services 🗸🗸
  • The census and other household surveys as well as local government structures provide this type of information 🗸🗸
  • Since resources are scarce, government must then decide which needs and whose needs are to be satisfied 🗸🗸
  • In the private sector houses are built according to the price that people are able and willing to pay 🗸🗸
  • In the public sector housing is regarded as a social responsibility and authorities supply them according to the needs of people 🗸🗸
  • In a market economy prices are determined by supply and demand 🗸🗸
  • The objectives of firms are to maximise their profits and they usually set prices to achieve this objective 🗸🗸
  • Government does not pursue the profit maximisation objective 🗸🗸
  • Government takes into account certain social, economic, political and environmental conditions as well as public opinion 🗸🗸
  • Free-of-charge services- this is met from taxes 🗸🗸 and applies to most community goods and collective goods 🗸🗸 (e.g.) defence, police whereby charges and toll fees are levied 🗸
  • User-charges 🗸 option to charge depends on technical reasons 🗸🗸 (e.g.) cost of providing a double lane road could be recovered by toll charges 🗸 Economic reasons 🗸 such as services like water and electricity 🗸 that have a zero price 🗸 political reasons 🗸 where income distribution is significantly unequal, administrative rationing according to need takes place 🗸🗸 (e.g.) public health and education 🗸
  • Direct and indirect subsidies direct subsidies are used to cover part of the costs 🗸🗸 (e.g.) urban bus service 🗸 and an indirect subsidy is used to write off accumulated losses or deficits 🗸🗸
  • Standing charges -called availability charges 🗸🗸 (e.g.) water and electricity 🗸 standing charges goes to meet fixed costs and the price per unit consumed covers variable costs 🗸🗸
  • Price discrimination - different users have different elastic ties of demand for a good 🗸🗸 (e.g.) commercial and manufacturing businesses pay higher rates than households and they pay on a sliding scale🗸🗸
  • State-owned enterprises that either render a service or when an existing enterprise is nationalised 🗸🗸
  • They focus on making a profit and maximizing cost at the expense of the needs of some groups 🗸🗸 (e.g.) Iscor 🗸 SABC, 🗸SAA, Spoornet 🗸
  • refers to the process whereby state-owned enterprises and state-owned assets are handed over or sold to private individuals 🗸🗸
  • cost of maintaining and managing state-owned enterprises are high which can lead to higher taxes and larger public debt 🗸🗸
  • State-owned enterprises are not run as efficiently as private enterprises 🗸🗸
  • Nationalisation is the process whereby the state takes control and ownership of privately owned assets and private enterprises 🗸🗸
  • It includes contracting of services, public-private partnerships, increasing competitiveness🗸🗸 [Max 26]

ADDITIONAL PART Possible problems in your community or elsewhere

  • Lack of drinking water due to burst pipes 🗸🗸
  • Lack of electricity due to lack of infrastructure (load shedding) 🗸🗸
  • Lack of schooling – no buildings available – lack of maintenance 🗸🗸
  • Lack of health services due to lack of staff, infrastructure, strikes 🗸🗸
  • Lack of adequate housing (RDP) 🗸🗸 [Max 10 marks - List of examples max 5 marks] [Accept any other relevant answer] 

CONCLUSION If the above problems are not dealt with timeously by government, government will continue to fail its people in terms of service delivery, seeing many protests occurring regularly 🗸🗸 [Any other relevant higher order conclusion] [Max 2]

INTRODUCTION International trade can be defined as the exchange of goods and services between countries globally. 🗸🗸 These trade agreements are negotiated by protocols and agreement due to the uneven distribution of natural resources globally. 🗸🗸

BODY-MAIN PART The main reasons for international trade.

Demand reasons The size of the population impacts demand.

  • If there is an increase in population growth, it causes an increase in demand, as more people’s needs must be satisfied. 🗸🗸
  • Local suppliers may not be able to satisfy this demand. 🗸🗸

The population’s income levels effect demand.

  • Changes in income cause a change in the demand for goods and services. 🗸🗸 • An increase in the per capita income of people in more disposable income that can be spent on local goods and services, some of which may then have to be imported. 🗸🗸

An increase in the wealth of the population leads to greater demand for goods.

  • People have access to loans and can spend more on luxury goods, many of which are produced in other countries. 🗸🗸

Preferences and tastes can play a part in the determining of prices,

  •  E.g. customers in Australia have a preference for a specific product which they do not produce and need to import and it will have a higher value than in other countries. 🗸🗸

The difference in consumption patterns is determined

  • By the level of economic development in the country, e.g. a poorly developed country will have a high demand for basic goods and services but a lower demand for luxury goods. 🗸🗸

Supply reasons Natural resources are not evenly distributed

  • Across all countries of the world. 🗸🗸
  • They vary from country to country and can only be exploited in places where these resources exist. 🗸🗸

Climatic conditions

  • Make it possible for some countries to produce certain goods at a lower price than other countries, e.g. Brazil is the biggest producer of coffee. 🗸🗸

Labour resources

  • Differ in quantity, quality and cost between countries. 🗸🗸
  • Some countries have highly skilled, well-paid workers with high productivity levels, e.g. Switzerland. 🗸🗸

Technological resources

  •  Are available in some countries that enable them to produce certain goods and services at a low unit cost, e.g. Japan. 🗸🗸

Specialisation in the production

  • Certain goods and services allows some countries to produce them at a lower cost than others, e.g. Japan produces electronic goods and sells these at a lower price. 🗸🗸

Capital allows developed countries

  • Enjoy an advantage over underdeveloped countries. 🗸🗸
  • Due to a lack of capital, some countries cannot produce all the goods they require themselves. 🗸🗸

ADDITIONAL PART

  • Buying and selling goods and services from other countries: 🗸🗸
  • The purchase of goods and services from abroad that leads to an outflow of currency from SA- Imports (M). 🗸🗸
  • The of goods and services to buyers from other countries leading to an inflow of currency to SA – Exports (X) 🗸🗸
  • Different factor endowments mean some countries can produce goods and services more efficiently than others- specialisation is therefore possible: 🗸🗸

Absolute Advantage:

  • Where one country can produce goods with fewer resources than other. 🗸🗸

Comparative Advantage:

  • Where one country can produce goods at a lower opportunity cost it sacrifices less resources in production. 🗸🗸

CONCLUSION International trade is important of countries to survive economically, as barriers to trade would disadvantage all countries, due to their interdependency globally. 🗸🗸 [Any other relevant higher order conclusion] [Max 2]

ECONOMIC PURSUITS-PAPER 1

Discuss in detail export promotion (Protectionism and Free Trade)

INTRODUCTION Export promotion refers to measures taken by governments increase production of goods and services that can be exported. The government provides incentives to encourage production 🗸🗸 [Max 2]

BODY: MAIN PART REASONS:

  • Export promotion measures lower cost of production which makes it easier to compete on the international market 🗸🗸
  • Achieve significant export-led economic growth🗸🗸
  • Export enlarges production capacity of country because more and larger manufacturing industries are established. 🗸🗸
  • The first step to export-led economic growth is to implement policies that encourage the establishment of industries to produce goods and services for export markets🗸🗸

METHODS: Exports are promoted through: Incentives🗸

  • Export incentives include information on export markets, research with regard to new markets, concessions on transport charges, export credit and export credit guarantees and publicity commending successful exporters🗸🗸
  • This will encourage manufacturers to export an increased volume of their production🗸🗸
  • Trade missions help to market SA products abroad🗸🗸and supply SA companies with information about potential markets 🗸🗸

Direct Subsidies🗸

  • Described as direct because it involves government expenditure. 🗸🗸
  • Include cash payments to exporters, refunds on import tariffs and employment subsidies.
  • The aim is to increase the competitiveness of exporting company🗸🗸 reduce cost of production🗸🗸and explore and establish overseas markets🗸🗸

Indirect subsidies

  • Regarded as indirect because it results in the government receiving less revenue🗸🗸 e.g. general tax rebates,
  • Tax concessions on profits earned from exports or on capital invested to produce export goods, refunding
  •  Of certain taxes e.g. custom duties on imported goods used in the manufacturing process🗸🗸
  • Allows companies to lower their prices and enables them to compete in international markets🗸🗸
  • Challenge for governments to design incentives and subsidies in such a way that prices of export goods can't be viewed as dumping prices🗸🗸

Trade neutrality 🗸

  • Can be achieved if incentives in favour of export production are introduced
  • Up to point that neutralises the impact of protectionist measures in place🗸🗸
  • E.g. subsidies equal to magnitude of import duties can be paid🗸

Export processing zones (EPZs) 🗸

  • Is free-trade enclave within a protected area –
  • Is fenced and controlled industrial park that falls outside
  • Domestic customs area, and usually located near harbour or airport 🗸🗸 NOTE : For the response with regard to the effectiveness of export promotion methods, a maximum of 5 marks can be allocated.
  • No limitations on size and scale since world market is very large🗸🗸
  • Cost and efficiency of production based on this and organised along lines of comparative advantage🗸🗸
  • Increased domestic production will expand exports to permit more imports and may result in backward linkage effects that stimulate domestic production in related industries🗸🗸
  • Exchange rates are realistic and there is no need for exchange control and quantitative restrictions🗸🗸
  • Value can be added to natural resources of the country 🗸🗸
  • Creates employment opportunities 🗸🗸
  • Increase in exports has positive effect on balance of payments 🗸🗸
  • Increase in production leads to lower domestic prices, which benefit local consumers🗸🗸

DISADVANTAGES

  • Real cost of production 🗸 subsidies and incentives reduce total cost of production which must be met from sales🗸🗸 real cost is thus concealed by subsidies🗸🗸products cannot compete in open market 🗸🗸
  • Lack of competition 🗸 businesses charge prices that are so low that they force competitors out of the market 🗸🗸
  • Increased tariffs and quotas 🗸can be against spirit of provisions of WTO🗸🗸overseas competitors retaliate with tariffs and quotas🗸🗸 goods are sold domestically below their real cost of production (export subsidies and dumping) 🗸🗸
  • Protection of labour-intensive industries 🗸 developed countries maintain high levels of effective protection for their industries that produce labour-intensive goods in which developing countries already have or can achieve comparative advantage 🗸🗸
  • Withdrawal of incentives often leads to closure of effected companies. 🗸🗸
  • Incentives often lead to inefficiencies in the production process, since companies don't have to do their best to compete🗸🗸
  • Can be seen as dumping 🗸🗸 [Max 26]

BODY: ADDITIONAL PART How successful is South Africa in protecting the local textile industry against foreign competition?

  • Not successful: 🗸 Many domestic textile manufacturers closed down due to unfair international competition 🗸🗸 Many wholesalers make use of suppliers from abroad 🗸🗸 e.g. Woolworths/Walmart🗸
  • Dumping still occurs – European manufacturers still dump clothing in Africa out of season at prices below cost 🗸🗸 Job losses due to a lack of protection in this industry 🗸🗸 [Accept any motivation relating to success indicators] [Max 10]

CONCLUSION South Africa's international trade policy facilitates globalisation thereby impacting positively on the balance of payment. 🗸🗸 [Accept any other relevant conclusion] [Max 2]

INTRODUCTION Protectionism refers to a deliberate policy on the part of the government to erect trade barriers, such as tariffs and quotas, in order to protect domestic industries against international competition. 🗸🗸 [Accept any other relevant definition] [Max 2]

BODY-MAIN PART Raising revenue for the government

  • Import tariffs raise revenue for the government. 🗸🗸
  • In smaller countries the tax base is often small due to low incomes of individuals and businesses. 🗸🗸
  • Low incomes do not provide much in the form of income taxes and therefore custom duties on imports is a significant source of income or revenue. 🗸🗸

Protecting the whole industrial base

  • Maintaining domestic employment. 🗸🗸
  • Countries with high unemployment are continuously pressured to stimulate employment creation and therefore resort to protectionism in order to stimulate industrialisation. 🗸🗸
  • It is thought that using protectionism the country’s citizens would purchase more domestic products and raise domestic employment. 🗸🗸
  • These measures on domestic employment creation at the expense of other countries, led to such measures as “beggar-my-neighbour” policies. 🗸🗸
  • Applying import policies is likely to reduce other countries ability to buy country’s exports and may provoke retaliation. 🗸🗸

Protecting workers

  • It is argued that imports from other countries with relatively low wages represent unfair competition and threaten the standard of living of the more highly paid workers of the local industries. 🗸🗸
  • Local industries would therefore be unable to compete because of higher wages pushing up the price levels of goods. 🗸🗸
  • Protection is thus necessary to prevent local wage levels from falling or even to prevent local businesses from closing down due to becoming unprofitable. 🗸🗸
  • Competition from low-wage countries may also reflect the fact that those countries have a comparative advantage in low-skilled labour-intensive industries. 🗸🗸

Diversifying the industrial base

  • Overtime countries need to develop diversified industries to prevent overspecialisation. 🗸🗸
  • A country relying too heavily on the export of one or a few products is very vulnerable. 🗸🗸
  • If a developing country’s employment and income is dependent on only one or two industries, there is the risk that world fluctuations in prices and demand and supply-side problems could results in significant fluctuations in domestic economic activity. 🗸🗸
  • Import restrictions may be imposed on a range of products in order to ensure that a number of domestic industries develop. 🗸🗸

Develop strategic industries

  • Some industries such as the iron-ore and steel, agriculture, (basic foodstuffs, such as maize), energy (fuels) and electronics (communication) among others, are regarded as strategic industries. 🗸🗸
  • Developing countries may feel that they need to develop these industries in order to become self-sufficient . 🗸🗸

Protecting specific industries Dumping

  • Foreign industries may engage in dumping because government subsidies permit them to sell at very low prices or because they are seeking to raise profits through price discrimination. 🗸🗸
  • The reason for selling products at lower prices may be to dispose of accumulate stocks Of the goods and as a result consumers in the importing country stand to benefit however,
  • Their long term objective may be to drive out domestic producers and gain control of the market and consumers
  • Are likely to lose out in the reduction in choice and higher prices that the exporters will be able to charge. 🗸🗸

Infant industries

  • Usually newly established and find it difficult to survive due to their average costs being higher than that of their well-established foreign competitors. 🗸🗸
  • However, if they are given protection in their early years they may be able to grow and Thereby take advantage lower their average costs and become competitive and at this point protection can be removed. 🗸🗸

Declining industries/sunset industries

  • Structural changes in the demand and supply of a good may severely hit an industry such industries should be permitted to go out of business gradually declining industries
  • Are likely to be industries that no longer have a comparative advantage and however, if they go out of business quickly there may be a sudden and large increase in unemployment. 🗸🗸
  • Protection may enable an industry to decline gradually thereby allowing time for resources including labour to move to other industries. 🗸🗸
  • Protecting domestic standards domestic regulations of food safety human rights and environmental standards have been increasingly acting as trade restrictions. 🗸🗸 [Accept any other relevant fact] [Max 26]

ADDITIONAL PART South Africa promotes exports through subsidies

Direct Subsidies

  • Strict screening measures should be put in place when companies apply for financial assistance. Government expenditure can provide direct financial support to domestic producers for their exports e.g. 🗸🗸
  • Cash grants offered to South African exhibitors to exhibit their products at exhibitions overseas. To explore new markets. 🗸🗸
  • Foreign trade missions to explore new markets imposition of tariffs on imports. 🗸🗸
  • Funds for the formation of formal export councils. 🗸🗸
  • Subsidies for training or employing personnel. 🗸🗸
  • Funds for the export market research. 🗸🗸
  • Product registration and foreign patent registrations. 🗸🗸
  • Government can refund companies certain taxes to promote exports.
  • These types of indirect subsidies are:
  • General tax rebates (Part of the cost of production can be subtracted from the tax that has been paid) 🗸🗸
  • Tax concessions on profits earned from exports or on capital invested to produce export goods. 🗸🗸
  • Refunds on import tariffs in the manufacturing process of exported goods companies often use custom duties are paid on these goods and the government refunds them. 🗸🗸 [Max 10]

CONCLUSION Most countries agree that protectionism is harmful to the economy if not well managed. Protectionism is needed especially where industries are young and need expansion or development. 🗸🗸 [Any other relevant higher order conclusion] [Max 2]

INTRODUCTION Economic growth is responsible for the overall growth of the economy, in order to enhance the well being of the economy as a whole. Whereas economic development would focus on the individual well being of the citizens of a country. [Any other relevant higher order conclusion] [Max 2]

BODY-MAIN PART Growth and Development A demand-side approach includes discretionary changes in monetary and fiscal policies with the aim of changing the level of aggregate demand. 🗸🗸

Monetary policy

  • Is driven by the South African Reserve Bank (SARB). 🗸🗸
  • It aims to stabilise prices by managing inflation. 🗸🗸

Fiscal policy

  • Is driven by the Department of Finance. 🗸🗸
  • It aims to facilitate government, political and economic objectives. 🗸🗸
  • A demand-side approach to economic growth and development does not only depend on fiscal and monetary policy. 🗸🗸
  • It is dependent on all components of aggregate demand, that is, C, I, X and G. 🗸🗸

South African approach

  • The South African approach uses both monetary and fiscal measures to influence aggregate demand in the economy. 🗸🗸
  • The South African Reserve Bank (SARB) as the central bank in South Africa formulates the monetary policy. 🗸🗸
  • They use the following instruments:

Interest rate changes

  • It is used to influence credit creation by making credit more expensive or cheaper. 🗸🗸
  • The exchange rate is stabilised by encouraging inflow or outflows. 🗸🗸

Open market transactions

  • To restrict credit the SARB sells securities. When banks buy these securities money flows from banks to the SARB. 🗸🗸
  • The banks have less money to lend and cannot extend as much credit as before. 🗸🗸
  • To encourage credit creation the SARB buys securities. Money flows into the banking system.🗸🗸

Moral suasion

  • The SARB consults with banks to act in a responsible manner based on the prevailing economic conditions. 🗸🗸

Cash Reserve Requirements

  • Banks are required to hold a certain minimum cash reserve in the central bank. 🗸🗸
  • Banks have a limited amount to give out as credit. 🗸🗸
  • South Africa’s fiscal policy is put into practice through the budgetary process. 🗸🗸
  • The main purpose of fiscal policy is to stimulate macroeconomic growth and employment, and ensure redistribution of wealth. 🗸🗸
  • The following instruments are used:

Progressive personal income tax

  • Higher income earners are taxed at higher tax rates. 🗸🗸
  • These taxes are used to finance social development. 🗸🗸
  • The poor benefit more than those with higher incomes. 🗸🗸

Wealth taxes

  • Properties are levied (taxed) according to their market values. 🗸🗸
  • Transfer duties are paid when properties are bought. 🗸🗸
  • Securities (shares and bonds) are taxed when traded. 🗸🗸
  • Capital gains tax is levied on gains on the sale of capital goods (e.g. properties, shares). 🗸🗸
  • Estate duties are paid on the estates of the deceased. 🗸🗸
  • These taxes are used to finance development expenditures which benefit the poor more  often. 🗸🗸

Cash benefits

  • Old age pensions, disability grants, child support and unemployment insurance are cash grants. These are also known as social security payments. 🗸🗸
  • Benefits in kind (natura benefits) 🗸🗸
  • These include the provision of healthcare, education, school meals, protection etc. 🗸🗸
  • When user fees are charged, poor or low income earners pay less or nothing. 🗸🗸
  • Limited quantities of free electricity and water are provided. 🗸🗸

Other redistribution

  • Public works programmes, e.g. the Strategic Integrated Projects (SIP) provides employment subsidies and other cash and financial benefits such as training, financing and export incentives.🗸🗸

Land restitution and land redistribution

  • Land restitution is the return of land to those that have lost it due to discriminatory laws in the  past. 🗸🗸
  • Land redistribution focuses on land for residential (town) and production (farm) for previously disadvantaged groups. 🗸🗸
  • The money for these programmes is provided in the main budget. 🗸🗸

Subsidies on properties

  • It helps people to acquire ownership of fixed residential properties. 🗸🗸
  • E.g. government’s housing subsidy scheme provides funding to all people earning less than  R3 500 per month🗸🗸

CONCLUSION The demand-side approach focuses on the expansion of the demand for goods and services produced in the economy. 🗸🗸 OR To ensure economic growth, there should be an adequate and growing demand for goods and services produced in the economy. 🗸🗸

[Any other relevant higher order conclusion] [Max 2]

INTRODUCTION Different growth and development strategies have been implemented in South Africa since 1994, each aimed at addressing particular needs at the time of introduction. 🗸🗸 [Any other relevant introduction] [Max 2]

BODY-MAIN PART The Reconstruction and Development Programme (RDP)

  • The RDP was an integrated, coherent socio-economic policy framework that was implemented directly after our first democratic elections in 1994. 🗸🗸
  • It seeked to mobilise all our people and our country’s resources toward the final eradication of apartheid and the building of a democratic, non-racial and non-sexist future. 🗸🗸

The RDP was based on six principles.

  • an integrated and sustainable programme. 🗸🗸
  • a people-driven process focusing on the needs of the population. 🗸🗸
  • peace and security for all, aimed at a non-violent society that respects all human rights. 🗸🗸
  • nation-building, focusing on the needs of all members of society. 🗸🗸
  • linking reconstruction and development. 🗸🗸
  • The RDP consisted of many proposals, strategies and policy programmes.
  • All of these could, however be grouped into five major policy programmes that were linked to each other.

The five key programmes were:

  • meeting basic needs. 🗸🗸
  • developing our human resources. 🗸🗸
  • building the economy. 🗸🗸
  • democratising the state and society. 🗸🗸
  • implementing the RDP. 🗸🗸

The Growth, Employment and Redistribution Programme (GEAR)

  • The GEAR built upon the strategic vision set out in the RDP, i.e. 🗸🗸
  • The importance of all the objectives of the RDP was reaffirmed but it recognized the implementation and macroeconomic problems that the government had been experiencing in implementing the RDP. 🗸🗸
  • The RDP placed much more emphasis on disciplined economic policy. 🗸🗸
  • While still recognizing that there were very serious needs that had to be addressed. 🗸🗸

The Accelerated and Shared Growth Initiative for South Africa Programme (AsgiSA).

  • AsgiSA resulted from government’s commitment to halve unemployment and poverty by 2014. 🗸🗸
  • The Joint Initiative on Priority Skills Acquisition (Jipsa) was established to address the scarce and critical skills needed to meet AsgiSA’s objectives. 🗸🗸

AsgiSA identified six important factors that prevented growth:

  • the relative volatility of the currency. 🗸🗸
  • the cost, efficiency and capacity of the national logistics system. 🗸🗸
  • shortages of suitably skilled labour, and the spatial distortions of apartheid affecting low-skilled labour costs. 🗸🗸
  • barriers to entry, limits to competition and limited new investment opportunities. 🗸🗸
  • the regulatory environment and the burden on small and medium enterprises (SME’s). 🗸🗸
  • AsgiSA was not intended to be a government programme. 🗸🗸
  • But rather a national initiative supported by all the key groups in the economy. 🗸🗸
  • Namely business, labour, entrepreneurs and government and semi-government departments and institutions. 🗸🗸

Joint Initiative on Priority Skills Acquisitions (JIPSA)

  • It is the skills development arm of ASGISA. Focus is on skills development, especially through the SETAS. 🗸🗸

Expanded Public Works Programme (EPWP)

  • It is a nationwide government intervention to create employment using labour-intensive methods, and to give people skills they can use to find jobs when their work in the EPWP is done. 🗸🗸

The New Growth Path (NGP)

  • The New Growth Path (NGP) was released in November 2011. 🗸🗸
  • This plan is designed to serve as a framework for economic policy, and to be the driver of the country’s job strategy. 🗸🗸

The New Growth Path therefore proposes certain strategies to ensure adequate demand:

  • Deepening the domestic and regional market by growing employment. 🗸🗸
  • Increasing incomes and undertaking other measures to equity and income distribution. 🗸🗸
  • Widening the market for South African goods and services through a stronger focus on exports to the region and other rapidly growing economies. 🗸🗸
  • On a macroeconomic level the NGP entails accommodating or looser monetary policy combined with stricter fiscal policy to limit inflationary pressures and enhance competitiveness. 🗸🗸
  • Government spending will be prioritised with the objective of long-term sustainable employment opportunities. 🗸🗸

The microeconomic measures to control inflationary pressures include the following:

  • A competition policy to supervise monopoly pricing on products and services. 🗸🗸
  • A review of administered prices to ensure that they do not increase above inflation without compelling reasons. 🗸🗸
  • Interventions in the case of rapidly rising prices of essential products and services such as private🗸🗸
  • Healthcare and basic food items. 🗸🗸
  • Active industrial policy. 🗸🗸
  • Rural development policy. 🗸🗸
  • Competition policy. 🗸🗸
  • Stepping up education and skills development. 🗸🗸
  • Enterprise development: promoting small business and entrepreneurship; eliminating unnecessary red tape. 🗸🗸
  • Broad-based Black Economic Empowerment (BBBEE). 🗸🗸
  • Labour practices. 🗸🗸
  • Technology policy. 🗸🗸
  • Developmental trade policies. 🗸🗸
  • Policies for African development. 🗸🗸 
  • The different growth and development strategies that have been implemented in South Africa since 1994. 🗸🗸
  • Have all contributed to making our country more prosperous and to address problems created by inequalities of the past. 🗸🗸
  • However, problems such as a low level of education, unemployment and unequal distribution of income persist. 🗸🗸
  • The current NGP is a comprehensive policy that is focused on addressing all of these problems. [Any other relevant higher order conclusion] [Max 2]

INTRODUCTION South Africa’s overall objective of Industrial Development Policy is to ensure international competitiveness in its nine provinces. OR Regional development is aimed at increasing the economic livelihood of specific areas or regions. OR Regional development attempts to limit the negative effects of economic activities in only a few areas. OR It attempts to promote the advantages of a more even regional development by using labour and other natural resources and infrastructure in neglected areas. [Accept any relevant introduction] [Max 2]

BODY-MAIN PART SPATIAL DEVELOPMENT INITIATIVES

  • SDI Programme attracts infrastructure and business investments to underdeveloped areas to create employment. 🗸🗸
  • Department of Trade and Industry is driving force behind industrial and spatial development. 🗸🗸
  • DTI plans together with central, provincial and local government, IDC, parastatals and research institutions. 🗸🗸
  • Industrial Development Policy Programme (Spatial Development) has 2 focus points spatial development initiative (SDI) and financial incentives. 🗸🗸
  • SDI refers to government’s initiative and economic development potential of certain specific spatial locations in SA. 🗸🗸

Key Objectives:

  • Stimulate economic activity in selected strategic locations. 🗸🗸
  • Generate economic growth and foster sustainable industrial development. 🗸🗸
  • Develop projects of infrastructure in certain areas and finance them through lending and private sector investment. 🗸🗸
  • Establish private-public partnerships (PPP’s). 🗸🗸

In areas with high poverty and unemployment, SDI focuses on:

  • High level support in areas where socio-economic conditions require concentrated government assistance. 🗸🗸
  • Where inherent economic potential exists. 🗸🗸
  • The approach is towards international competitiveness, regional cooperation and a more diversified ownership base. 🗸🗸

Some of the main focus points of the SDI Programme are:

  • Lubombo Corridor (agro-tourism, education, craft, commercial and agricultural sectors); 🗸🗸
  • KwaZulu-Natal (Ports of Durban and Richards Bay); 🗸🗸
  • West Coast SDI (fishing and industrial ports); 🗸🗸
  • Coast-2-Coast Corridor with agro-tourism. 🗸🗸
  • It also makes it possible for private sector businesses to take advantage of the economic potential of underdeveloped areas in private-public partnerships (PPP’s) 🗸🗸
  • In PPP a private business may provide the capital to build the factory and to buy raw materials and employ labour, while the government provides the capital for the infrastructure such as roads and water and electricity. 🗸🗸
  • The business benefits from profits and the government benefits from taxes, levies and employment opportunities. 🗸🗸

There are TWO types of PPP’s which are compensated differently: Unitary payments:

  • Private sector builds and runs a project (it performs the function on behalf of the public sector); the payment provides an acceptable return on the total investment (building cost, maintenance, operational expenses). 🗸🗸
  • Private sector constructs the project and then is given the right to change a toll fee (e.g. public road); 🗸🗸
  • The toll covers costs of construction, maintenance, operation. 🗸🗸
  • The above options can be combined: E.g. hospital (cost of building is an annual payment and a user fee is also charged). 🗸🗸
  • A track of land that forms a passageway allowing access from one area to another and particular advantages to mining, manufacturing and other businesses. 🗸🗸
  • Domestic Corridor: e.g. Lubombo, West Coast, Fish River. 🗸🗸
  • Corridors beyond the South African Borders (SADC) e.g. Maputo Development Corridor Mozambique. 🗸🗸
  • Reasons in support of South Africa’s regional integration in Southern Africa: have political and stable neighbours have important export markets and a future source of water and energy supplies integration may be a precondition for support from foreign investors, donors and multilateral institutions. 🗸🗸
  • A robust regional transport system and a solid infrastructure base hold the key to attracting investment into the SADC region – improving competitiveness and promoting trade. 🗸🗸

Advantages from Corridor development:

  • Greater levels of economic efficiency and productivity compact urban form corridor urban form. 🗸🗸
  • Corridor developments will often occur due to private investment. 🗸🗸
  • Intergration of land use and transport planning will lead to generally efficient integration. 🗸🗸
  • Efficient urbanisation leads to efficient use of land and promotion of an efficient transport system. 🗸🗸

INDUSTRIAL DEVELOPMENT ZONES (IDZ’s)

  • Geographically designed, purpose-built industrial sites providing services tailored for export- orientated industries. 🗸🗸
  • Physically enclosed and linked to an international port or airport. 🗸🗸
  • Specifically designed to attract new investment in export-driven industries. 🗸🗸
  • Falls outside domestic customs zones and able to import items free of customs and trade restrictions, add value and then export their goods. 🗸🗸
  • Development and management done by private sector. 🗸🗸
  • Government IDZ policy designed to boost exports and jobs. 🗸🗸
  • IDZ’s aim to encourage economic growth –attract foreign investment in industrial development – facilitate international competitiveness regarding manufacturing. 🗸🗸 [Max 26]

ADDITIONAL PART FINANCIAL INCENTIVES Small and Medium Enterprise Development Programme (SMEDP) • This incentive has provided a tax-free cash grant for investment in industries in

  • South Africa. 🗸🗸
  • E.g. manufacturing, agricultural, processing, aquaculture and tourism. 🗸🗸

Critical Infrastructure Fund Programme (CIF)

  • A tax-free cash grant incentive for projects has improved critical infrastructure in  South Africa. 🗸🗸
  • E.g. for installation, construction of infrastructure, payment of employees, materials directly consumed during installation. 🗸🗸

Duty Free Incentives (for businesses operating in the IDZ’s)

  • This has encouraged export-orientated manufacturing to increase their competitiveness 🗸🗸
  • And helped to promote foreign and local direct investment. 🗸🗸

Foreign Investment Grant (FIG)

  • This has assisted foreign investors to invest in new manufacturing businesses in SA. 🗸🗸
  • Benefited in terms of the cost of relocating new machinery and equipment from abroad. 🗸🗸

Strategic Investment Projects (SIP)

  • This has attracted investment from local and foreign entrepreneurs in manufacturing, computer, research and engineering sectors. 🗸🗸

Skills Support Programme (SIP)

  • This cash grant for skills development has encouraged greater investment 🗸🗸
  • In training in general and stimulated the development of new advanced skills. 🗸🗸

Black Businesses Supplier Development Programme (BBSDP)

  • This 80 % cash grant has provided black-owned enterprises with access to 🗸🗸
  • Training which has improved management of their enterprises. 🗸🗸

Special Economic Zones (SEZ)

  • It is an extention to the current financial incetives to further promoted regional development. 🗸🗸
  • The major incentive is a tax reduction of 15 % for businesses settling in this area. 🗸🗸
  • This does not mean that existing businesses in the IDZ can relocate to take advantage of this incentive. 🗸🗸
  • If a current business in the IDZ wants to expand they are allowed. 🗸🗸 [Max 10]

CONCLUSION From the above discussion it is clear that different initiatives form part of South Africa’s Regional Industrial Development Programme. [Max 2]

INTRODUCTION Economic indicators are used to evaluate the economic performance of an economic unit. This unit can be a company, an industry, a country or a region. Macro-economic indicators, measures the economic performance of a country as a whole. 🗸🗸

BODY-MAIN PART Such indicators can provide an indication of:

  • Changes taking place in a country. 🗸🗸
  • How a country compares to other countries. 🗸🗸

Inflation Rate

  • This is the general increase in the price level of goods and services in the economy over a certain period in time. E.g. one year. 🗸🗸
  • This is therefore an indicator of the health of the economy and it is monitored in two ways that is at the production wholesale level producer price level (PPI) and at the retail or consumer level consumer price index (CPI) 🗸🗸

The Consumer Price Index (CPI)

  • Shows the price increases of a representative (weighted) basket of goods and services that consumers buy. 🗸🗸
  • It is abbreviated as CPI this cover all the urban areas. 🗸🗸
  • It is an overall index and weights are obtained from expenditures of different income categories of households. 🗸🗸
  • It is the most comprehensive indicator measuring consumer inflation in the country. 🗸🗸
  • It shows changes in the general purchasing power of the rand and it is used for inflation targeting 🗸🗸
  • Is compiled by Stats SA and measures the change in the price level of a basket of consumer goods and services. 🗸🗸
  • The goods and services included in the basket are chosen to represent the goods and services purchased by an average household. 🗸🗸
  • This basket is adjusted from time to time as consumption patterns change. 🗸🗸
  • The inflation rate is the percentage change in the CPI from the previous year and can be calculated as follows:
  • Change in CPI x 100 🗸🗸        CPI

The Production Price Index (PPI)

  • Used to measure the price of goods that are produced domestically when they leave the factory year. 🗸🗸
  • The goods that are imported when they enter the country (at a port) and both of these are before consumers become involved. 🗸🗸
  • PPI consists of three baskets that are domestically manufactured outputs, e.g. changes in the PPI can be made monthly or quarterly or yearly. 🗸🗸
  • While changes in the imported products and exported commodities are given separately in the same report. 🗸🗸
  • PPI includes capital and intermediate goods but not services. 🗸🗸
  • It is based on a completely different type of a basket of items in the CPI. 🗸🗸
  • It measures the cost of production rather than the cost of living. 🗸🗸
  • It is used to predict consumer goods inflation (CPI) 🗸🗸
  • Which is also estimated and published on a monthly basis by Stats SA, is similar to the CPI, 🗸🗸
  • Except that it also includes the prices of raw materials and intermediary goods 🗸🗸 (i.e. goods that will be finished in the production process), excludes VAT and excludes  services. 🗸🗸
  • Manufactured goods included in the PPI are priced when they leave the factory, not when they are sold to consumers. 🗸🗸
  • Unlike the CPI, the PPI therefore cannot be related directly to consumers’ living standards. 🗸🗸
  • The PPI is nevertheless very useful in the analysis of inflation because it measures the cost of production. 🗸🗸
  • A significant change in the rate of increase in the PPI is usually an indication that the rate of increase in the CPI will also change a few months later. 🗸🗸

The GDP Deflator Is a ratio that indicates the relationship of the GDP at nominal prices to the GDP at real prices. GDP deflator = Normal GDP x 100 🗸🗸                            Real GDP 

Nominal GDP

  • Is the value of total gross domestic product measured at current prices. 🗸🗸
  • While the real GDP is the value of total gross domestic product measured at constant prices.🗸🗸
  • So, the GDP deflator includes changes in the prices of exports but not of imports. 🗸🗸
  • In a small open economy, like that of South Africa where both, imports and exports are significant in relation to the total size of the economy. 🗸🗸
  • The exclusion of import prices is an important shortcoming. 🗸🗸

Unemployment rate

  • In terms of economic development, employment is a very important indicator. 🗸🗸
  • Employment is, however, not very easy to measure as so many people are employed in the informal sector which is not recorded. 🗸🗸
  • The concept of underemployment is also important. 🗸🗸
  • This is when someone is employed in a position that requires less skill than their ability. 🗸🗸
  • For example when a qualified accountant works as a delivery person because he or she cannot find employment as an accountant. 🗸🗸
  • Someone may also be employed on a part-time basis but would prefer to work full time. 🗸🗸
  • A labour force survey is published quarterly by Stats SA. 🗸🗸
  • This publication contains information and statistics concerning a variety of issues related to the labour market, including the official unemployment rate. 🗸🗸
  • It is a comprehensive survey and provides information on changes in employment in different provinces and industries. 🗸🗸
  • Employment in the informal sector, and even reasons for changes in employment figures. 🗸🗸
  • The unemployment rate is a percentage of the total labour force. 🗸🗸
  • The total labour force includes all employed people and unemployed people who are looking for work. 🗸🗸
  • The unemployment rate is a lagging indicator, which means that it will only change a few periods after the trend in the economy has changed. 🗸🗸
  • For example if the economy starts growing at a faster pace. 🗸🗸
  • The unemployment rate will only react to the growth after two or three quarters. 🗸🗸

Interest rates

  • Interest rates are important indicators of future economic activity, as the interest rate level is usually an important determinant when economic decisions are being taken. 🗸🗸
  • Both the general interest rate level and the structure of interest rates are important indicators.🗸🗸
  • There are many interest rates in the economy. 🗸🗸
  • Some are short term rates, such as the repo rate, which is the interest rates at which South Africa banks borrow from the Reserve Bank to finance their liquidity deficit. 🗸🗸
  • The difference between the short term interest rates and long term interest rates: 🗸🗸
  • Is called the interest rate spread and the term structure of interest rates provides an indication of the interest rates levels on loans or investments of different maturities. 🗸🗸
  • Usually we can expect the interest rates level in a developing country to be higher than the interest rate in a developed economy. 🗸🗸
  • This is due to the higher risk attached to the developing economy. 🗸🗸
  • Factors such as political and economic uncertainty cause this higher risk. 🗸🗸
  • Developing economies also need to attract foreign investment to their country  to finance growth. 🗸🗸
  • Investors’ funds will move towards the highest yield and thereof. 🗸🗸
  • Developing countries cannot allow interest rates in their countries to become too low. 🗸🗸

Money Supply

  • The increase in the M3 money supply is an important economic indicator. 🗸🗸
  • If M, the money supply increases, this means that either (P) prices or Y (output) has to respond to the increase in M. 🗸🗸
  • Therefore, an increase in the money supply is an important indicator showing that output will increase. 🗸🗸
  • Whether this will translate to an increase in real production or the price level will depend on factors like production within the economy. 🗸🗸
  • In addition to economic growth the employment of people of working age (15 -64 years) is a majot economic objective. 🗸🗸
  • We need to know more than this; we need to know who the people are that need to be employed. 🗸🗸
  • The numbers are determined, not only by age, but also by people’s willingness to work. 🗸🗸

The Economically Active Population (EAP)

  • The EAP is also known as the labour force. 🗸🗸
  • It consists of people between the age of 15 and 64 who are willing to work for income in cash or in kind and includes: 🗸🗸
  • Workers in the formal sector- workers in the informal sector. 🗸🗸
  • Employers any one 🗸🗸
  • Self employed persons. 🗸🗸

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Unemployed Persons

  • The 2021 estimate of the South African population was million people. 🗸🗸
  • The EAP numbered million ( % of the population). 🗸🗸

The Employment Rate

  • The number of employed persons expressed as a percentage of the EAP gives the employment rate. 🗸🗸
  • The employment rate can also be converted into an index. 🗸🗸
  • The SA employment rate was % in 2011. 🗸🗸
  • This is low, compared to rates in developed and even some developing countries such as Argentina and Pakistan. 🗸🗸
  •  In SA the growth in the economy is not accompanied by the similar growth in employment numbers. 🗸🗸

Employment indicators are used for:

  • To calculate trends in employment in different sectors or industries. 🗸🗸
  • This indicates structural changes in the economy. 🗸🗸
  • To calculate productivity. 🗸🗸
  • To show the success of the economy in utilizing its full potential. 🗸🗸

Unemployment Rate

  • Statistics SA (SSA) obtains its labour data each year from Quarterly Labour Surveys  (QLFS). 🗸🗸
  • It uses the standard definition of the International Labour Office (ILO) to calculate unemployment. 🗸🗸
  • The strict definition of unemployment is used to calculate the unemployment rate. 🗸🗸
  • Did not work during the seven days prior to the interview. 🗸🗸
  • Want to work and are available to start work within a week of the week of the interview. 🗸🗸
  • Have taken active steps to look for work or to start some form of self-employment in four week prior to the interview. 🗸🗸
  • In SA the official unemployment rate was % in 2021. 🗸🗸
  • In developed countries, change in the unemployment rate trigger responses. 🗸🗸
  • From governments to fine-tune the economy. 🗸🗸
  • Increases require more funds for unemployment insurance (UIF) drawings. 🗸🗸
  • In developing countries, unemployment is the most important cause of poverty. 🗸🗸 [Accept current statistical data] [Max 16]
  • To give a policy direction in the country. 🗸🗸
  • To develop mechanism to caution the most affected sectors of the economy promptly
  • e.g.during the 2019-2020 recession/pandemic some companies required a bail out from the government. 🗸🗸
  • Develop some economic stabilisers to defuse the huge impact that may result from the unexpected economic downturn. 🗸🗸
  • Open some other alternative markets for their goods and services. 🗸🗸
  • To do research and advice the business community before the actual moment hits. 🗸🗸
  • It can be used to stimulate thinking and growth in a number of sectors in the Economy. 🗸🗸 [Accept any relevant consideration] [Max 10]

CONCLUSION Countries cannot survive and grow their economies if they do not pay attention to economic indicators for their planning processes. [Accept any relevant consideration] [Max 2]

INTRODUCTION Social indicators also called human development indicators as they promote improvement in the standard of living. 🗸🗸 [Any other relevant definition] [Max 2]

BODY-MAIN PART Demographics

  • This is the description of the physical population and its composition.
  • To get this a census is done regularly to obtain this information. 🗸🗸

Human development Index (HDI)

  •  This is a measure of people’s ability to live long and healthy lives, to communicate, 🗸🗸
  •  To participate in the community and to have sufficient income to experience a decent lifestyle. 🗸🗸

Human poverty index (HPI)

  •  It measures life expectancy is measured by the percentage of newborns not expected to survive to age 40. 🗸🗸
  •  Lack of education is measured by the percentage of adults who are ill- educated. 🗸🗸

Health and nutrition

  • Life expectancy birth. 🗸🗸
  • Infant mortality rate. 🗸🗸

Nutrition indicators

  • Daily calorie intake per person. 🗸🗸
  • The number of children who go hungry. 🗸🗸
  • These measures are important to government as they are supplying healthcare and sometime have to include legislation such as adding vitamin A to basic foodstuffs such as bread. 🗸🗸
  • The standard of living of people is directly connected to their education. 🗸🗸
  • Educated people are employable and can earn an income and provide for their own wants and needs. 🗸🗸

Two important measures are:

  • Secondary enrolment percemtage-how many children that start Grade 1 get to Grade 8 and finish Grade 12. 🗸🗸
  • Adult literacy- People over the age of 15 that can read and write. 🗸🗸
  • A large percentage of the annual budget is allocated to education. 🗸🗸
  • Because of our constitution certain basic services must be supplied by the government. 🗸🗸
  • These services have a direct effect on people’s living standards. 🗸🗸
  • Electricity 🗸🗸
  • Refuse disposal🗸🗸
  • Water supply🗸🗸
  • Sanitation🗸🗸

Housing and urbanisation

  • Urbanisation the process by which an increasing proportion of a country’s population is concentrated in its urban areas as a result of natural increase and migration from rural areas. 🗸🗸
  • This measures is important as more people come to live in urban areas the greater the demand for housing, services, education, health care etc. 🗸🗸
  • Housing the percentage of the population living in a permanent dwelling or house. 🗸🗸
  • The government issue housing subsidies to help poor people to own a house South African citizens or permanent residents earning R3 500 or less a month could apply for this subsidy. 🗸🗸

International comparisons

  • Figures collected by the World Bank, International Monetary Fund (IMF) and United Nations provide the best data for comparison purpose. 🗸🗸

Other measures used:

  • Purchasing power parity (PPP) The number of units of one country’s currency that give the holder the same purchasing power as one unit of another country’s currency. 🗸🗸
  • The Big Mac Index, The index is based on the price of the Big Mac around the world as compared to its price in the United States. 🗸🗸 [Max 40]

CONCLUSION From the above discussion it is clear that social indicators play a significant role in South Africa. It is, therefore, of the utmost importance that we should study their uses in depth. [Max 2]

MICROECONOMICS-PAPER 2

INTRODUCTION A perfect market is a market structure which has a large number of buyers and sellers.  OR The market price is determined by the industry (demand and supply curves).  OR This means that individual businesses are price takers, i.e. they are not able to influence prices. OR Perfect competition is an imaginary situation, whereas monopolistic competition is a reality. 🗸🗸 [Accept any other relevant introduction] [Max 2] 

BODY-MAIN PART

  • The indicating of the equilibrium positions on the perfect market structure is of utmost importance because from this point where MC = MR
  • The dotted lines will be drawn to show economic profit or economics loss. 
  • Where the dotted lines intersect the AC and AR curves either normal profit or economic profit or economic loss will be indicated and shadowed.

Mark allocation for graph:

  • Position / shape of MC curve = 1 mark
  • MR curve = 1 mark
  • Position / shape of AC curve = 2 marks
  • Equilibrium point = 1 mark
  • Indication of price / quantity = 1 mark
  • Shading of economic loss = 2 marks MAX MARKS = (8)

Allocate marks on the graph according to the rubric provided and if facts are duplicated again in writing, do not allocate marks. Max of 8 marks.

  • Equilibrium is at E 1 i.e. where MC = MR 
  • At this point Q 1 goods are produced at a price of P 1  
  • The averages cost for Q 1 units is point R on the AC curve 
  • Price / AR is greater than AC ( TR > TC)
  • Therefore economic profit is represented by the area P 1 SRE 1  
  • Equilibrium is at E 1 i.e. where MC = MR
  • At equilibrium (point E 1 ) average cost is equal to price 
  • The AC curve is tangent to the demand curve which means that P/AR = AC (TR = TC) 
  • The business makes normal profit which is the minimum earnings required to prevent the entrepreneur from leaving the industry. 
  • Equilibrium is at E1, i.e. where MC = MR 
  • At this point Q1 goods are produced at a price of P1 
  • At equilibrium (point E1) price/AR is less than average cost/the AC curve is lies above the demand curve which means that P/AR < AC (TR < TC) 
  • The business makes an economic loss A maximum of 24 marks will be allocated for graph illustration and analysis: 8 marks max per graph illustration - (Max 26 marks)

ADDITIONAL PART CONDITIONS For a market to successfully operate under perfect competition, the following conditions should prevail at the same time:

  • No firm can influence the market price (price takers) due to a large number of buyers and sellers 
  • Products are identical (homogeneous) 
  • There are no barriers of entry, meaning that there is freedom of entry and exit 
  • Buyers and sellers act independently - no collusion between sellers 
  • No government interference to influence the market – the market is unregulated 
  • Free movement between markets - all factors of production are completely mobile 
  • Both buyers and sellers have full knowledge of all the prevailing market conditions (perfect information) 
  • If any of the above conditions are not met, the market is regarded as an imperfect market Any 5 x 2 = [Max 10 marks]

CONCLUSION Freedom of entry and exit into the perfect market alter the supply of goods on the market. This will result in changes in price which influences the profit or loss of a business.  If price falls to a level where it is equal to the AVC then the firm will shut-down.  [Max 2] Discuss the monopoly in detail (with/without the aid of graphs) (Imperfect Market)

INTRODUCTION A firm is regarded as a monopolist when it owns or controls the total supply of a scarce factor of production. Monopoly is a market structure where only one seller operates. 🗸🗸

BODY: MAIN PART The characteristics of a monopoly

Number of firms

  • The monopoly consists out of one single firm. 🗸🗸
  • The monopoly is also the industry. 🗸🗸
  • Example: Eskom or De Beers – diamond-selling 🗸🗸 [Accept any other relevant example]

Nature of product

  • The product is unique with no close substitute. 🗸🗸
  • Example: Diamonds are unique. 🗸🗸

Market entry

  • Refers to how easy or difficult it is for businesses to enter or to leave the market 🗸🗸
  • Is entirely/completely blocked. 🗸🗸
  • Economies of scale 🗸🗸
  • Limited size of the market 🗸🗸
  • Exclusive ownership of raw materials 🗸🗸
  • Licensing 🗸🗸
  • Sole rights 🗸🗸
  • Import restrictions 🗸🗸

They decide on their production level

  • The monopolist cannot set the level of output and the price independently of each other. 🗸🗸
  • If a monopolist wants to charge a higher price, it has to sell fewer units of goods. 🗸🗸 Alternatively, a reduction in price will result in a higher output sold. 🗸🗸
  • A monopolist is confronted with a normal market demand curve 🗸🗸
  • The demand curve slopes downwards from left to right 🗸🗸
  • Any point on the monopolist’s demand curve (D) is an indication of the quantity of the product that can be sold and the price at which it will trade. 🗸🗸

They are exposed to market forces

  • Consumers have limited budgets and a monopoly can therefore not demand excessive prices for its product. 🗸🗸
  • The monopolist’s product has to compete for the consumer’s favour and money with all other products available in the economy. 🗸🗸

They face substitutes

  • There are few products that have no close substitutes. 🗸🗸
  • For example, cell phones can compete with telephone services. 🗸🗸

They may enjoy favourable circumstances

  • Sometimes an entrepreneur may enjoy favourable circumstances in a certain geographical area. 🗸🗸
  • For example, there may be only one supplier of milk in a particular town. 🗸🗸

They may exploit consumers

  • Because a monopolist is the only supplier of a product, there is always the possibility of consumer exploitation. 🗸🗸
  • However, most governments continually take steps to guard against such practices. 🗸🗸

Market Information

  • All information on market conditions is available to both buyers and sellers. 🗸🗸
  • This means that there are no uncertainties. 🗸🗸

Control over price

  • In the case of a monopoly there are considerable price control, but limited by market demand and the goal of profit maximisation. 🗸🗸

Long-run economic profit Can be positive

  • Because new entries are blocked and short-run economic profit therefore cannot be reduced by new competing firms entering the industry 🗸🗸
  • The monopoly can thus continue to earn economic profit as long as the demand for its product remains intact 🗸🗸

Heading = 1 mark AC = 1 mark DD/AR = 1 mark MC = 1 mark Profit maximisation point =1 mark Labelling of the axis = 1 mark Labelling on the axis = 1 mark

Long run equilibrium of a perfect competitor

CONCLUSION A monopoly does not always make economic profit in the short run; it can also make economic loss in the short run if the total cost exceeds total revenue. 🗸🗸

INTRODUCTION

  • The oligopoly is a type of imperfect market in which only a few large producers dominate the market. 🗸🗸 [Accept any other relevant and correct response]

MAIN PART Nature of product

  • The product may be homogeneous in a pure oligopoly. 🗸🗸
  • If the product is differentiated, it is known as a differentiated oligopoly. 🗸🗸

Market information

  • There is incomplete information on the product and the prices. 🗸🗸
  •  Market entry is not easy, it is limited in the sense that huge capital outlay might be necessary. 🗸🗸
  • Oligopolists have considerable control over price, it can influence price, but not as much as the monopolist. 🗸🗸
  • Oligopolies can frequently change their prices in order to increase their market share and this result in price wars. 🗸🗸

Mutual dependence

  • The decision of one firm will influence and be influenced by the decisions of the other competitors. 🗸🗸
  • Mutual dependence (interdependence) exists amongst these businesses.
  • A change in the price or change in the market share by one firm is reflected in the sales of the others. 🗸🗸

Non-price competition

  • Non - price competition can be through advertising, packaging, after-sales services. 🗸🗸
  • Since price competition can result in destructive price wars, oligopolies prefer to compete on a different basis. 🗸🗸
  • Participants observe one another carefully- when one oligopolist launches an advertising campaign, its competitors soon follow suite. 🗸🗸
  • If oligopolies operate as a cartel, firms have an absolute cost advantage over the rest of the other competitors in the industry. 🗸🗸
  • Collusion is a strategy used by firms to eliminate competition amongst each other. 🗸🗸
  • It can be in a form of overt collusion where firms can work together to form a cartel and tacit collusion where a dominating business controls the price. 🗸🗸

Limited competition

  • There are only a few suppliers manufacturing the same product. 🗸🗸

Economic profit

  • Oligopolies can make an economic profit over the long term. 🗸🗸
  • Abnormal profits may result to joint decision-making in an oligopoly. 🗸🗸

Demand curve

  • Slope from left down to the right. 🗸🗸
  • It is known as the kinked demand since it contains the upper relatively elastic slope and the lower relatively inelastic slope. 🗸🗸 [Accept any other relevant and correct response] [Max. 26]

ADDITIONAL PART Oligopolist may increase their market share using non-price competition strategies by:

  • branding their product to create an impression that its product is for a particular age group or income group. 🗸🗸
  • aggressive advertising which inform customers about the business or product it provides.🗸🗸
  • Using appealing packaging to bring out important features of their product.
  • improving their customer service in order to ensure that they return to their businesses.🗸🗸
  • providing relevant and precise information, which is crucial to the customers, since there are competitors in the market, customers will patronize the businesses that provides relevant information. 🗸🗸
  • extending shopping hours to the convenience of customers.
  • Offering loyalty rewards to customers which will encourage their return to spend accumulated rewards. 🗸🗸  [Accept any other relevant response] [Max.10]
  • In South Africa, oligopolists have been found to be illegally manipulating prices to their benefit, yet to the detriment of consumers and have been penalized for such action. 🗸🗸 [Accept any other relevant response]

Compare and contrast any TWO types of market structures (perfect to imperfect/imperfect to imperfect) in detail in terms of the following. - Number of businesses - Nature of product - Entrance - Control over prices - Information - Examples - Demand curve - Economic profit/loss - Decision-making - Collusion - Productive/Technical efficiency - Allocative efficiency (Perfect Market and Imperfect Market)

‘’Market structures are classified under Perfect Competition, Monopolistic Competition, Oligopoly and Monopoly’’ Compare all FOUR market structures in a tabular form. NB: Learners should write in full sentences even if the comparison is done in a tabular format). (Marks depend on the combination of market structures to be examined)

Number of firms So many that no firm can influence the market price So many that each firm thinks others will not detect its actions  So few that each firm must consider the others’ actions and reactions  One seller and there is no competition. The seller is the price maker.
Nature of product Homogeneous/i dentical in terms of the physical appearance Heterogeneous /differentiated Homogeneous or heterogeneous Only one product with no close substitutes
Entry Completely free/easy to enter. There are no barriers to enter Free. There are no barriers to enter Varies from free to restricted Completely blocked by legal restrictions and cost advantages e.g. natural and artificial monopolies
Information Complete Incomplete Incomplete Complete/ Incomplete
Collusion Impossible Impossible Possible Unnecessary
Firm’s control over the price of the product None. Prices are determined by demand and supply Some Considerable, but less that in monopoly Considerable, but limited by goal of profit maximisation
Demand curve for the firm’s product Horizontal (perfectly elastic) Downward- sloping Downward- sloping, may be kinked Equals market demand curve: downward-sloping
Long run economic profit Zero/normal profit Zero/normal profit Can be positive/econom ic profit Can be positive/economi c profit

PLEASE NOTE: THE ABOVE TABLE SHOULD BE VERBALLY WRITTEN AS PER ESSAY INSTRUCTION

INTRODUCTION Market failure is when the forces of supply and demand fail to allocate resources efficiently / when markets fail to allocate goods and services efficiently. 🗸🗸 [Accept any other correct introduction] [Max 2]

BODY: MAIN PART                           

1. Missing Markets

  • Markets are often incomplete in the sense that they cannot meet the demand for certain goods. 🗸🗸
  • Public goods:
  • They are not provided by the price mechanism because producers cannot withhold the goods from non-payment and there is often no way of measuring how much a person consumes. 🗸🗸

Public goods have the following features: Non-rivalry:

  • The consumption by one person does not reduce the consumption of another person e.g. a lighthouse. 🗸🗸

Non-excludability:

  • Consumption cannot be confined to those who have paid, so there are free riders e.g. radio and TV in South Africa. 🗸🗸

Merit goods

  • These are goods/services that are deemed necessary or beneficial to the society, e.g. education, health care etc. 🗸🗸
  • These goods are highly desirable for general welfare but not highly rated by the market, therefore provide inadequate output/supply. 🗸🗸
  • If people had to pay market prices for them relatively too little would be consumed – the market will fail. 🗸🗸
  • The reason for undersupply of merit goods is that the market only takes the private costs and benefits into account and not the social costs and benefits. 🗸🗸

Demerit goods

  • These are goods/services that are regarded as bad or harmful for consumption hence we should use less of these e.g. alcohol, cigarettes, etc. 🗸🗸
  • Demerit goods lead to a lot of social costs, therefore, the government charges sin tax / excise duties to discourage the consumption of such goods. 🗸🗸
  • While the market is willing to supply demerit goods, it tends to oversupply demerit goods. 🗸🗸
  • Some consumers may be unaware of the true cost of consuming them. 🗸🗸

2 Lack of information

  • Technical and allocative efficiency require that both producers and consumers have complete and accurate information about the costs and benefits of the goods and services produced and consumed in the market. Producers and consumers make production and consumption decisions based on the information they have. 🗸🗸
  • When information is incomplete or inaccurate, it leads to wrong decisions about what to produce, how to produce and for whom to produce, and a waste of resources occurs. 🗸🗸
  • Producers might not know all the different technologies and production techniques that are available and the different resources that can best be used to produce goods/services more efficiently. 🗸🗸
  • Consumers might not know that the price of a product is lower from some other suppliers or about the harmful effects of a product since they might just base their decisions to consume on the information from a misleading suppliers. 🗸🗸

3. Immobility of factors of production

  • Markets do not respond to changes in consumer demand if resources cannot be easily reallocated or due to a lack of information🗸🗸
  • Labour takes time to move to into new occupations and geographically to meet the changes in consumer demand. 🗸🗸
  • Physical capital e.g. equipment, buildings, land and raw materials can only move from one place to another at a high cost, but cannot be moved to fit a change in demand. 🗸🗸
  • Technological applications change production methods e.g. use of robots rather than physical labour. It takes time for most industries to adapt. 🗸🗸
  • With greater technological change there is an increasing need for workers to become flexible, to update skills, change employment, occupations and work patterns. 🗸🗸 [Max 26]
  • Motivate why government has implemented a national minimum wage in the labour market. 🗸🗸
  • Pressure was put on the South African government to introduce labour laws which require employers to pay minimum wages. 🗸🗸
  • The application of minimum wage laws is needed to improve a redistribution of income. 🗸🗸

The main objectives were:

  • To redress inequality (Gap between wealthy and poor) 🗸🗸
  • To improve the standard of living. 🗸🗸
  •  Government tried to protect domestic workers and farm workers — thus preventing exploitation. 🗸🗸  [Max 10] [Accept any other correct relevant response]

CONCLUSION Governments intervene in the market when market forces cannot achieve the desired output. [Max 2] [Accept any other relevant conclusion]

INTRODUCTION The purpose of government intervention is to ensure that the right quantity of resources is allocated to the production of output so that society as a whole [Accept any other relevant introduction] [Max 2] maximizes its benefits. 🗸🗸

  • Sometimes government will set the price of a good or service at a maximum level that is  below the market price 🗸🗸
  • The government intervene and passes a law that suppliers may not charge more than the maximum price 🗸🗸
  • The immediate effect is that quantity supply will drop 🗸🗸
  • The original market equilibrium price and quantity is P and Q respectively 🗸🗸
  • The price set by the government is P1, at this price the demand will increase to Q1 and the supply will decrease to Q2 🗸🗸
  • The difference between Q1 and Q2 is the shortfall that will be created on the market 🗸🗸
  • The shortage caused by the price ceiling creates a problem of how to allocate the good since the demand has increased 🗸🗸
  • Black markets start to develop [Mark allocation: Graph 6 and discussion max. 10 marks]
  • The appropriate way to intervene in the market by government is by levying taxes as a method to recover external cost 🗸🗸
  • The original market equilibrium at e, with P as the equilibrium price and Q as the equilibrium quantity 🗸🗸
  • The tax increase will shift the supply curve to the left 🗸🗸
  • New equilibrium at E1 🗸🗸
  • A tax would raise the price from P to P1 🗸🗸
  • The production will decrease from Q to Q1 🗸🗸 [Mark allocation: Graph total 6 marks and discussion max 10 marks]
  • Explain the supply of undesirable goods in South Africa and how the government can deal with it. 🗸🗸
  • Items such as cigarettes, alcohol and non-prescription drugs are examples of demerit or undesirable goods. 🗸🗸
  • These goods are often over supplied in the market, due to the fact that the external cost is not added to the market price. 🗸🗸
  • Some consumers may be unaware of the true cost of consuming them, their negative externalities. 🗸🗸
  • Government can ban their consumption or reduce it by means of taxation. 🗸🗸
  • Taxation on these products will increase the market price and hopefully the demand for these products will drop. 🗸🗸 [10 marks] [Accept any other correct relevant response]

CONCLUSION The intervention of government ensures that inefficiencies is eliminated and that the market is operating effectively 🗸🗸 [Accept any other relevant conclusion] [Max 2]

CONTEMPORARY ECONOMIC ISSUES-PAPER 2

  • This is a constant and significant increase in the general price level of goods and services in the country over a certain period of time, e.g. a year. 🗸🗸 [Max 2] [Accept any relevant introduction]

BODY-MAIN PART Creditors and Debtors

  • Whereas borrowers (debtors) benefit from price increases, lenders (creditors) suffer due to price increases. 🗸🗸
  • This is because borrowers receive money with a relatively high purchasing power and they repay their loans with money with low purchasing power, unless interest rates are sufficient to prevent this occurrence. 🗸🗸

Salary and Wage Earners

  • Price increases affect people whose incomes are relatively fixed (in other words, people whose incomes remains constant or do not increase at the same rate as prices do. 🗸🗸
  • This group includes retired people, pensioners and the poor. 🗸🗸
  • As prices increase, their almost fixed incomes purchase less and less. 🗸🗸
  • However there are individuals and entrepreneurs whose incomes often increase at a rate that is higher than the inflation rate and they do not suffer but gain from inflation. 🗸🗸
  • Globalization results in increased employment opportunities in the economy due to increased productivity, the need to produce more goods both for local and international markets rises in globalised economies. 🗸🗸
  • The demand for increased skilled labour becomes a need as a result, this demand for labour benefits the local labour market in increased employment opportunities and growth. 🗸🗸

Investors and Savers

  • Different types of investments are affected by inflation: Assets with fixed nominal values. 🗸🗸
  • These assets have a fixed nominal value and give a return if they are held until maturity. 🗸🗸
  • When they are paid, because their nominal values remain constant, the purchasing power of the nominal values decreases as prices increase (that is, their real value decreases). 🗸🗸

Assets with Flexible Market Values

  • The holders of shares and fixed property usually gain by price increases because the nominal values of these assets tend to increase at least proportionately to the rate of inflation (that is, their market values are flexible). 🗸🗸
  • Often the prices of these assets increase more rapidly than increases in the general price level.🗸🗸
  • In this case, inflation creates wealth to the advantage of those holding such assets. 🗸🗸
  • South Africa has a progressive personal income tax system. 🗸🗸
  • This means that marginal and average tax rates increase in harmony with the income level. 🗸🗸
  • The higher level an individual’s income, the greater the percentage of income he or she has to pay tax. 🗸🗸
  • With inflation, taxpayers’ nominal income (wages and salaries) rise even when their real income remain unchanged. 🗸🗸

Taxes are levied on nominal income and not on real income.

  • Therefore if the income tax schedule remains unchanged inflation increases the average rate of personal income tax. 🗸🗸
  • Individuals will have to pay higher taxes even if they are actually no better off than before. 🗸🗸
  • This phenomenon known as bracket creep, lads to a redistribution of income from taxpayers to the government. 🗸🗸
  • Bracket deep results from a combination of inflation and progressive income tax. 🗸🗸
  • It has the same effect as an increase in the tax rate. 🗸🗸

Industrial Peace

  • Wage bargaining is often accompanied by strikes and mass action. 🗸🗸
  • These actions can sometimes spill over into violence, which affects society at large. 🗸🗸
  • In extreme situations in the presence of exceptionally high inflation together with a government that is determined not to yield to wage increase demands (which can push inflation to even higher levels), widespread civil unrest follows. 🗸🗸

Inflation has a negative effect on economic growth

  • Inflation leads to increased uncertainty in the economy. 🗸🗸
  • This uncertainty discourages savings and investments especially in the long term. 🗸🗸
  • Which are necessary for economic growth –result reduced economic growth. 🗸🗸

Inflation affects the real money value and savings

  • Because inflation reduces the real value of money, it affects the real value of money saved in particular. 🗸🗸
  • This means that inflation, the rand buys fewer goods and services than before. 🗸🗸
  • It also means that the real money value saved is worth less at the end of the savings period than when the money was saved. 🗸🗸
  • e.g. if a consumer receives 5 % interest on his/her savings account while the inflation rate is 8%, then the real rate of interest on the consumer’s savings is -3%.🗸🗸

Inflation has an adverse effect on a country’s balance of payments (BOP).

  • If a country’s rate of inflation is higher than that of its trading partners the prices of exported goods increase while the prices of imported goods decrease. 🗸🗸
  • This leads to loss of competitiveness in the export market, which in turn leads to decreased exports. 🗸🗸

This has a negative effect on the country’s balance of payments (BOP).

  • The loss of export competiveness can also increase unemployment inflation affects the redistribution of income in a country. 🗸🗸

The effects of inflation are uneven.

  • While it does not clearly benefit anyone and certainly harms most, it also harms some less than others. 🗸🗸
  • Inflation also tends to redistribute income from low-income groups to higher income groups. 🗸🗸
  • This is because people in the low income groups do not have assets than can rise in value faster than the rate of inflation to help them overcome the effects of inflation. 🗸🗸
  • Powerful groups such as trade unions large companies and the wealthy people, are able to increase their share of national income at the expense of disadvantaged people such as pensioners the unemployed and the welfare recipients. 🗸🗸

Inflation has social and political costs

  • When inflation continually causes rising prices it makes people unhappy and can disturb relations between employers and the employees and between customers and traders or service providers. 🗸🗸
  • People in lower-income brackets feel severe effects of increases in the price of essential items such as bread, maize meal rental and transport costs. 🗸🗸
  • This can lead to social unrest and political unrest. 🗸🗸

Inflation feeds on itself and causes further inflation

  • This is called the inflation spiral. 🗸🗸 e.g. higher wage demands cause producers to increase their prices to maintain their profits.
  • This happens again and again pushing prices further every time. 🗸🗸
  • If the government does not keep this wage price spiral in check, inflation may get out of control and become hyperinflation. 🗸🗸 [Max 26]

ADDITIONAL PART Debate the merits (benefits) of administered prices by the government

  • These are prices regulated by the government e.g. home owner’s costs on water/household fuel (paraffin and electricity) medical care (public hospitals) communication (telephone calls, telephone rentals and installations/postage cell communications /transport (petrol). 🗸🗸
  • Most of the administered prices are adjusted once a year which brings price stability. 🗸🗸
  • Regulated prices are restricted as to the extent to which prices may vary, depending on the government’s objectives. 🗸🗸
  • Administered prices provide additional revenue to national treasury. 🗸🗸
  • It appears that some of these prices remain extremely robust over the short term. 🗸🗸 [Accept any other relevant response] [Max 10]
  • If inflation is not controlled by the proper and effective instruments, it can have challenging problems to the economy in general. 🗸🗸

INTRODUCTION COST PUSH Inflation is a sustained and significant increase in general price level over a period of time and a simultaneous decrease in the purchasing power of money. Accept any other relevant introduction. 🗸🗸 [Max 2] 

BODY: MAIN PART Causes of cost-push inflation

Increase in Wages:

  • In South Africa, increase in wages constitute more than 50% of Gross Value Added at basic prices 🗸🗸
  • If the increase in wages is not accompanied by an increase in production, the cost of production will rise 🗸🗸
  • Producers will increase the prices of their products to offset the high cost of production strikes and stay-aways / labour union activities 🗸🗸

Key inputs/ increase in prices of imported capital goods

  • When the prices of key inputs that are imported increase, domestic cost of production 🗸🗸
  • increases especially in the manufacturing sector 🗸🗸
  • Supply shocks e.g. sudden increase of oil causes a knock-off effect 🗸🗸

Exchange rate depreciation

  • A decrease in the value of the rand will result in an increase in prices of imports 🗸🗸

Profit margins

  • When firms increase profit margins, the prices that consumers pay also increase 🗸🗸
  • Sometimes firms use their market power to push up prices 🗸🗸

Productivity

  • Less productive factors of production will lead to increased cost per unit 🗸🗸
  • Strikes and stay-aways often reduce production output and can result in price increases 🗸🗸

Natural disasters

  • Natural disasters such as drought, flood and global warming can impact on the cost of production 🗸🗸
  • This is often the case in relation to food prices 🗸🗸
  • An increase in interest rates results businesses paying more money for capital loaned firms recover these costs by increasing the prices of their products 🗸🗸

Increase in taxation

  • Increase in direct tax like company income tax may lead to businesses increasing their prices to offset the extra burden 🗸🗸
  • Increase in indirect tax such as custom duty will lead to increase in costs of supplying a particular product, therefore the price will increase 🗸🗸
  • Administered prices increase e.g. fuel prices
  • Shoplifting and losses caused by employees are added to the prices of products 🗸🗸 [Accept any other relevant fact. Maximum 8 marks for headings] [Max. 26]

DEMAND PULL INFLATION Total spending on domestic goods and services in the economy consists of the spending by households, firms, the government and the foreign sector.

  • Total spending = C + I + G + (X-M). 🗸🗸

Causes of demand inflation Increase in consumption [C] – consumers expenditure will increase mainly for three reasons:

  • a. If consumers save less & spend more🗸🗸
  • b. Decrease in personal income tax. 🗸🗸
  • c. A greater availability of consumer credit, because of decrease in interest rate. 🗸🗸

Investment [I] –When business invest this increase demand for labour, cement, sand and bricks. 🗸🗸

  • Supply cannot keep up with the increase in demand and this will increase prices. 🗸🗸
  • Lower interest rates may result in an improvement in the sentiment and profit expectations of businesses. 🗸🗸
  • Businesses invest more and this may lead to an increase in the demand of goods and services that are part of the investment (for example, a new building requires cement bricks and labour).🗸🗸
  • If aggregate demand increases at a faster rate than aggregate supply, price increases will follow.🗸🗸

Government Spending [G] – Three main reasons.

  • a. New capital projects🗸🗸
  • b. Consumption expenditure on education, health, and protection. 🗸🗸
  • c. Social expenditure on public work programme to create jobs and increase in social allowances. 🗸🗸

Export earnings [X]

  • a. When economy of trading country improve. 🗸🗸
  • b. When global economy expands. 🗸🗸

Access to credit

  • There is greater availability of consumer credit (by means of credit cards) of the availability of cheaper credit as a result of decreases in lending rates. As new credit is extended the credit multiplier kicks in and more credit is created. 🗸🗸

Consumption spending

  • Most governments will at times increase expenditures on education, health, protection and safety (for example, military equipment such as bomber jets and submarines). 🗸🗸

Social spending

  • Governments sometimes feel they have to do something substantive about unemployment and poverty. 🗸🗸
  • They borrow money and spend it on public works programmes or raise the level of social grants year after year at a higher rate than the inflation rate. 🗸🗸
  • Such expenditures invariably lead to inflation because they add to aggregate demand without adding anything to aggregate supply. 🗸🗸

Commodities demand

  • The world’s demand for commodities expands and contracts like business cycles do. During an expansionary period, foreign demand increases and this leads to greater volumes of exports. The income earned from these exports adds to aggregate demand and prices increase. 🗸🗸

BODY: ADDITIONAL PART YES / NO

  • Inflation targeting is when a particular percentage is set as an acceptable level for an increase in general price levels 🗸🗸
  • The SARB's inflation target is a range of 3% and 6% 🗸🗸
  • The aim of inflation targeting policy is to achieve and maintain price stability 🗸🗸
  • The implementation of the inflation target is easy to understand – expressed in numbers which makes it very clear and transparent 🗸🗸
  • It reduces uncertainty and promotes sound planning in the public and private sectors 🗸🗸
  • It provides an explicit yardstick that serves to discipline monetary policy and improves the accountability of the central banks 🗸🗸
  • The SARB make use of monetary policy, specifically the repo rate to keep the inflation within the target range 🗸🗸
  • The government make use of fiscal policy regarding public sector revenue and expenditure 🗸🗸

Positive effects

  • Where demand is higher than supply an increase in interest rates help to bring the demand down 🗸🗸
  • The policy can helps businesses to make economic plans without worrying about the effects of high inflation 🗸🗸
  • South Africa's price level has been fairly stable since the introduction of the inflation targeting policy in 2000 🗸🗸

Negative effects

  • Inflation targeting can cause a reduction in economic growth 🗸🗸
  • This is because the raising of interest rates, result in a decrease in total spending which is needed for production to increase 🗸🗸
  • Decreased economic growth can increase unemployment 🗸🗸
  • South Africa has been experiencing an increase in unemployment since the implementation of the policy in 2000 🗸🗸
  • Inflation targeting is difficult to implement when the cause of inflation is supply shocks 🗸🗸 [Max. 10]
  • A summary of what has been discussed without repeating facts already mentioned in the body. 🗸🗸
  • An opinion or valued judgement on the facts discussed. 🗸🗸
  • Additional support information to strengthen the discussion. 🗸🗸
  • A contradictory viewpoint with motivation. 🗸🗸
  • Recommendations. 🗸🗸
  • E.g. Inflation can be a threat to the normal functioning of the economy; therefore, measures like monetary and fiscal are vital to keep the phenomenon under control. 🗸🗸 
  • This is the activities of people travelling to and staying in places outside their usual environment for a period not longer than one consecutive year for leisure, business and other purposes and not related to a remunerative activity from within the place visited 🗸🗸 [Max 2]

BODY - MAIN PART Gross domestic product (GDP)

  • Tourism impacts mostly on the services industry than on agriculture or manufacturing although there are upstream effects when agriculture provides foodstuffs to restaurants and manufacturing provides vehicles for transport 🗸🗸

Direct contribution on GDP

  • Statistics South Africa (SSA) shows that in 2020 inbound tourists contributed R69 billion and domestic tourists R billion, amounting to R billion - about % of South Africa's GDP 🗸🗸

Indirect contribution on GDP

  • If the indirect contribution is added, tourism add about % to GDP 🗸🗸
  • The WTTC estimated that tourism contributed % to the GDP of the world economy in 2020🗸🗸
  • In developing economies the service sector is responsible for around % of GDP, while it is responsible for more than % of GDP in developed economies 🗸🗸
  • South Africa is similar to that of developed economies and services contributed more than % of GDP in 2020. 🗸🗸
  • Tourism has a major effect on employment and this amounted to million workers in 2020🗸🗸
  • Tourism is the world’s largest generator of jobs 🗸🗸
  • Tourism is labour intensive 🗸🗸
  • More jobs can be created with every unit of capital invested in tourism than elsewhere
  • Tourism employs many skills 🗸🗸
  • It ranges from accountants and hairdressers to tour guides and trackers, 🗸🗸
  • the tourism industry draws upon numerous skills 🗸🗸
  • Tourism can provide immediate employment 🗸🗸
  • If one quarter of tourists’ accommodation establishment in South Africa starts to offer live entertainment to quests, thousands of entertainers could be employed within days 🗸🗸
  • Tourism provides entrepreneurship opportunities 🗸🗸
  • The tourism industry accommodates informal sector enterprises, from craft and fruit vendors to pavement vendors, chair rentals 🗸🗸
  • Tourism is widely recognized as one of the fastest and more effective redistribution mechanisms in development 🗸🗸
  • It brings development to the poor in rural areas 🗸🗸
  • Tourism provides an alternative to urbanisation, permitting women and youth to continue a rural family lifestyle while giving them business opportunities 🗸🗸
  • E.g. to start and operate small-scale tourism businesses around community asserts (forests, parks and rivers) 🗸🗸

Externalities

  • The rapidly expanding tourism industry could have both positive and negative impacts that extend well into the future 🗸🗸
  • While tourism attracts large amount of revenue, it can also cause undue environmental damage that can harm the very foundation on which it depends 🗸🗸
  • All other economic resources, tourism uses resources and produces wastes and also creates environmental costs (pollution) and benefits in the process 🗸🗸
  • Rapid growth in tourism aiming at short-term benefits usually results in more negative effects and these includes the degeneration of traditions and cultural values and environmental damage to sites and setting 🗸🗸

Environment Tourism activities create environmental stress:

  • Permanent environmental restructuring which includes major infrastructure 🗸🗸
  • Waste product generation such as biological and non-biological waste that damages fish production 🗸🗸
  • Direct environmental stress caused by tourist activities, e.g. the destruction of vegetation and dunes 🗸🗸
  • Effects on population dynamics such as migration and increased urban densities 🗸🗸
  • Transport infrastructure, e.g. roads, airports 🗸🗸
  • Communication and infrastructure including telephone lines, electronic signal stations and radio, TVs’ 🗸🗸
  • Energy infrastructure such electricity and liquid fuel 🗸🗸
  • Basic service infrastructure such as clean water and sewerage systems 🗸🗸 [Max. 26]

ADDITIONAL PART How can Indigenous Knowledge Systems be used to promote tourism in South Africa?

  • More cultural villages can be improved to facilitate and promote tourism e.g. Shangana in Mpumalanga, Basotho in the Free State and Simunye Zulu Lodge in Kwazulu-Natal. 🗸🗸
  • Where guides explain and demonstrate storytelling and indigenous knowledge practices. 🗸🗸
  • Advertising campaigns domestically and internationally by travel agencies, hotels and B & B, lodges and SA Tourism can focus on promoting these heritage sites in brochures and fliers, social media. 🗸🗸
  • These actions will make tourists more aware of these attractions 🗸🗸
  • Encourage tourists to experience different cultures and townships - experience life at home with a household and eat at a shebeen or township restaurant 🗸🗸
  • World Heritage Sites of South Africa can be promoted for their cultural significance e.g. the Fossil Hominid Sites of Sterkfontein, Mapungubwe Cultural Landscape, Richtersveld Cultural and Botanical Landscape, Vredefort Dome and Robben Island 🗸🗸
  • Environmental World Heritage Sites of South Africa selected for their natural importance namely the Cape Floral Region Protected Areas, Isimangaliso Wetlands Park as well as uKhahlamba/Drakensberg Park which has been selected for its mixed significance 🗸🗸
  • Arts and culture festivals e.g. the National Arts Festival, the Hermanus Festival, Awesome Africa Music Festival and Macufe African Cultural Festival should more widely be advertised to encourage tourists to attend 🗸🗸
  • According to the World Health Organisation, a large majority of the African population make use of traditional medicines for health, social-cultural and economic reasons and forms part of the unique experience tourists experience when visiting local villages 🗸🗸
  • In South Africa tourists are made more aware of the important role traditional medicine plays in poverty reduction and employment creation 🗸🗸
  • Relaxation of restrictive tourist visa laws to facilitate easier entry into South Africa 🗸🗸 [Accept any other relevant answers] [Max. 10]
  • South Africa attracted over million tourists in 2020 /For every 8.1 additional tourist to South Africa, one new job is created/one per cent increase in tourism adds R million annually to the SA economy. 🗸🗸 [Accept any other relevant higher order conclusion] [Max. 2]
  • Tourism is the activities of people travelling to and staying in places outside their usual environment for no more than one consecutive year for leisure, business or other purposes PP 🗸🗸  [Accept any other correct relevant response] [Max 2]

MAIN PART Business sector

  • Tourism stimulates business in areas such as accommodation and entertainment 🗸🗸
  • The construction industry, in private-public partnership with the government to provide the infrastructure, manufacturing sector and recreation sector all benefits from increased demand due to tourism 🗸🗸
  • The previously disadvantaged communities get entrepreneurial opportunities through the black economic empowerment schemes 🗸🗸
  • A large number of people get business opportunities in the informal sector e.g. selling of artefacts 🗸🗸
  • Local retailers may have an increase in sales (and profits) because of increased demand from tourists 🗸🗸
  • Private businesses and government work in partnership to provide the infrastructure needed for tourism 🗸🗸
  • This increases the market share of and income of the these businesses 🗸🗸
  • Allow existing businesses to improve the quality and variety of their products PP 🗸🗸
  • Allow natural monopolies e.g. Table Mountain Cableway to achieve abnormal profits PP 🗸🗸
  • The public sector also provides a range of financial incentives for private sector tourism investment (grants, subsidies, loans, tax rebates) PP 🗸🗸 [Max 10]

Infrastructure development

  • Adequate and well-maintained infrastructure is essential for tourist destinations PP. 🗸🗸
  • Locals share this infrastructure with tourists 🗸🗸
  • Government often prioritises economic infrastructure such as ports and beaches 🗸🗸
  • In addition to physical and basic infrastructure, social infrastructure is also important for the growth of tourism🗸🗸
  • Most of the SDIs and development corridors also have tourism as an important focus PP 🗸🗸 [Max 8]
  • Members of households earn income from the tourism sector as tour operators, travel agents etc. 🗸🗸
  • Many households are indirectly involved in tourism as employees e.g. in hotels, transport sector. 🗸🗸
  • Entrepreneurs from households that operate as curio producers or musicians can earn income from tourism . 🗸🗸
  • A large number of households acquire skills in the tourism industry. 🗸🗸
  • School curriculum and learnership offer opportunities to acquire these skills . 🗸🗸
  • Encourages rural development because many tourist attractions are located in rural areas PP 🗸🗸 [Accept any other correct relevant response] [Max. 26]

ADDITIONAL PART Tourism can be successfully marketed in less popular destinations by:

  • advertising the firms' attractions in a variety of media including social media and internet which may reach both local and international potential tourists. 🗸🗸
  • focusing on a clear message that concentrates on the strength of the attraction/ uniqueness of the destination. 🗸🗸
  • using the indigenous knowledge systems of that particular area where possible PP. 🗸🗸
  • describing the service offered in the best possible way to catch the interest of the likely tourist PP E.g. the use of slogans. 🗸🗸
  • charging a price that is competitive and money well spent for the service offered. 🗸🗸
  • helping the tourist to view the entire service as value for money – deliver a worldclass visitor experience 🗸🗸
  • highlighting other places of interest in the vicinity of the attraction as part of a package 🗸🗸
  • focusing on proudly South African products/services / Sho’t Left campaign PP 🗸🗸
  • help disadvantaged South Africans to benefit from tourist attractions in the less popular destinations PP 🗸🗸 [Accept any other correct relevant response] [Max. 10]

CONCLUSION A weaker exchange rate has been a major contributing factor to South Africa's tourism industry growth over many years. 🗸🗸 [Accept any correct relevant response] [Max 2]

INTRODUCTION Environmental sustainability can be defined as development that meets the need of the present without compromising the ability of future generations to meet their own needs. 🗸🗸

BODY: MAIN PART Public sector intervention Because it is difficult to enforce measures to ensure sustainability the government has to intervene. 🗸🗸

Environmental taxes Environmental taxes (green taxes) can be added to the cost of goods and services for the negative impact they have on the environment. 🗸🗸 The government uses the income generated through these taxes to protect the environment. 🗸🗸 Taxes can be imposed on petrol, paper, emission gases etc. 🗸🗸 In 2003 the government has legislated the use of biodegradable plastic bags which consumers had to pay for🗸🗸 The hope is that they will use fewer bags and ensure a litter free environment. 🗸🗸

Charging for dumping of waste A monthly fee as part of municipal accounts is charged for collection of waste, sewage and garbage. 🗸🗸 Households already pay for the collection of rubbish. 🗸🗸 The factory owner might clean up his waste if it cost him to dump it. 🗸🗸 Industries might also pay for emitting gases that can be harmful to people and the environment. 🗸🗸 Subsidies Subsidies can be awarded to businesses that are willing to reduce pollution and waste. 🗸🗸 Waste can also be reduced by using new techniques or equipment such as solar energy. 🗸🗸 Emission gases from factories can be reduced using new technology. 🗸🗸

Granting property rights Normally owners of properties tend to be more protective over their resources than users who are only interested in the profits the resources offer. 🗸🗸 For this reason the government might grant property rights over a specific area. 🗸🗸 Property rights empowers owners to negotiate contracts with businesses who wish to exploit the area’s resources. 🗸🗸

Marketable permits A government can decide on the maximum desired level of pollution in an area. 🗸🗸 It then distribute pollution rights (marketable permits) to factories within that area. 🗸🗸 This means that each factory can pollute to a certain limit. 🗸🗸 It means that marketable permits are licenses that polluters can buy or sell to meet the control levels set by government. 🗸🗸

Education Incorporating topics into the curriculum of school fosters awareness. 🗸🗸 The public is gradually been made aware of this rising problem. 🗸🗸 Plastic, bottles and cartons can be recycled or made biodegradable. 🗸🗸

Public sector control If the government’s intervention does not attain the desired results, then it has to intervene more directly by setting and enforcing limits. 🗸🗸

Environmental Impact Assessment In SA every projected construction, mining or similar development has to undergo an assessment by qualified environmental professionals. 🗸🗸 To prove that it will not cause unwarranted environmental damage and that the damage can be repaired after construction. 🗸🗸 The cost if built into the project. 🗸🗸

Command and Control Regulations that are set and enforce environmental limits or standards. 🗸🗸 Quantity: e.g. set the limit to the amount of fish to catch, or limit the season catching certain species of fish. 🗸🗸 Quality: e.g. drinking water quality is carefully monitored and controlled. 🗸🗸 Air quality in workplace is subject to minimum standards. 🗸🗸 Social effect: e.g. noxious fumes from factories, dumping of medical waste near settlements, and noise pollution. 🗸🗸

Voluntary agreements Agreements between government and businesses voluntarily to address negative environmental impacts of industries. 🗸🗸 Businesses voluntary agree to decrease the emissions of pollutants. 🗸🗸 Most prefer negotiations so that they can tailor their specific needs and include it into their planning🗸🗸 Agreements can be formal, which is legally binding contract or informal. 🗸🗸 [Max 26]

ADDITIONAL PART Government does not exercise effective control over the continuous dumping of waste because of a lack of coordination between departments. 🗸🗸 The fines imposed on industries that dump waste are too lenient and they continue polluting the environment. 🗸🗸

The minimum standards set for hazardous gas and fuel emissions are not enforced or adjusted. 🗸🗸 The recycling of waste materials are not widely encouraged and promoted and landfill sites are overflowing. 🗸🗸 Government has various laws that is not really effectively implemented. 🗸🗸 Poor service delivery also adds to the problem in certain areas. 🗸🗸 [Accept any other relevant answer] [Max 10]

CONCLUSION Each and every individual, business and government needs to stand together to save our planet. [Accept any other relevant conclusion] [Max 2] Discuss in detail the following problems and the international measures taken to ensure sustainable development (Environmental Sustainability)

INTRODUCTION Environment refers to the physical surroundings and physical conditions that affect people’s lives. 🗸🗸 The ever-increasing pressure on our environment originates from increasing population numbers and excessive consumption🗸🗸 Our air, land, and water are under constant assault from the ever-growing ravages of man-made pollution generated chiefly by industrialized societies. 🗸🗸 [Accept any appropriate introduction] [Max 2]

BODY-MAIN PART Conservation

  • Conservation is necessary because human actions cause pollution and over-utilisation of  resources. 🗸🗸
  • Conservation is a strategy aimed at achieving the sustainable use and management of natural resources. 🗸🗸
  • Conservation seeks a creative continuity of the environment while ensuring that change is sympathetic to the quality of life for both present and future generations. 🗸🗸
  • Certain aspects of conservation need to be taken into account.
  • Firstly, there is an opportunity cost. 🗸🗸
  • Secondly, externalities are often present. 🗸🗸
  • Lastly, self-interest has a short term horizon – meaning that decisions cannot be left entirely to market forces. 🗸🗸
  • Over utilization of resources causes a reduction in supply, increase in prices, contradiction of demand and a search for substitutes. 🗸🗸
  • This necessitates conservation of both renewable and non-renewable resources. 🗸🗸
  • Conservation has to be concerned with limiting what is harvested in order to maintain a stable stock at least at the minimum level. 🗸🗸
  • Government can use permits and quotas as two possible direct control methods in order to maintain the stock of resources at the minimum level. 🗸🗸

Preservation

  • Preservation involves any strategy undertaken to safeguard the environment, maintain its current condition and keep it as habitable as possible for people and animals. 🗸🗸
  • Heritage sites, indigenous forests, specifies of animals etc. that have special cultural or environmental significance, are often targeted preservation. 🗸🗸
  • Preservation is not likely to work as a private enterprise because the benefit to society is much bigger than the income of the producer. 🗸🗸
  • It may be possible to use cost-benefit analysis to calculate the social benefits of preservation of the environment.
  • The weaknesses in market solutions require the government to intervene in order to preserve environment assets. 🗸🗸
  • Government could do any of the following:
  • Buy or expropriate – Environmental assets are simply closed for human use. 🗸🗸
  • Subsidise-A subsidy would increase net benefits to the owner and raise the property’s present value. 🗸🗸
  • Controls – The government can compel the owner to apply control measures like restricting the quantities exploited or number of visitors allowed per day. 🗸🗸 [26 Max]

ADDITIONAL PART Stockholm Conference (1972)

  • The Stockholm Conference was the first major large scale international meeting on the environment convened with the support of the United Nations. 🗸🗸
  • The meeting agreed upon a declaration containing 26 principles concerning the environment and development, an action plan with 109 recommendations and a resolution. 🗸🗸
  • The meeting directly impacted on the environmental policies of many countries. 🗸🗸

Rio de Janeiro Earth Summit (1992)

  • This meeting acknowledged the importance of cooperation in addressing environmental concerns that threaten sustainability. 🗸🗸
  • The conference helped to make countries around the world aware of the dangers of unsustainable development. 🗸🗸
  • Unfortunately the principles outlined and accepted at the summit were not binding and subsequently many countries did not confirm to them. 🗸🗸

Rio + 5 (1997)

  • This conference noted that globalization made some countries poorer – 🗸🗸
  • In particular African countries and the least developed countries showed a low level of growth or even declined. 🗸🗸

Kyoto Protocol for Climate Change (1997)

  • Countries committed themselves to reducing their total emissions of greenhouse by 5 %.🗸🗸
  • Unfortunately, China was excluded from this agreement and the USA withdrew. 🗸🗸

World Summit on Sustainable Development (2002)

  • The objective of this summit held in Johannesburg was to conserve natural resources in a world that is growing in population. 🗸🗸
  • The meeting focused on issues like poverty eradication, water and sanitation, energy, health agriculture and biodiversity. 🗸🗸

COP 17 (2011)

  • The main goal of the conference held in Durban was to establish a treaty to limit carbon emissions and plan strategies to keep global temperature rise to less than 2 degree Celsius in the 21st Century. 🗸🗸
  • Although the framework for this treaty was established it was not finalised. 🗸🗸
  • The solution to our environmental problems will depend on our ability to make sound economic decisions that take account of the natural environment and to change our individual behaviour and attitudes. 🗸🗸 [Accept any other relevant conclusion] [Max 2]

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How to Write a Good Economics Essay

Last Updated: July 16, 2024 References

This article was co-authored by Emily Listmann, MA . Emily Listmann is a Private Tutor and Life Coach in Santa Cruz, California. In 2018, she founded Mindful & Well, a natural healing and wellness coaching service. She has worked as a Social Studies Teacher, Curriculum Coordinator, and an SAT Prep Teacher. She received her MA in Education from the Stanford Graduate School of Education in 2014. Emily also received her Wellness Coach Certificate from Cornell University and completed the Mindfulness Training by Mindful Schools. This article has been viewed 129,342 times.

A good economics essay requires a clear argument that is well-supported by appropriately referenced evidence. Research your topic thoroughly and then carefully plan out your essay. A good structure is essential, as is sticking closely to the main essay question. Be sure to proofread your essay and try to write in formal and precise prose.

Preparing to Write Your Essay

Step 1 Read the question carefully.

  • For example a question such as “Discuss the macroeconomic consequences of rising house prices, alongside falling interest rates” could be divided into 2 parts: 1 part could be on the effects of rising prices, and 1 on the effects of falling interest rates.
  • In this example you could begin by discussing each separately and then bringing the 2 together and analysing how they influence each other.
  • Be sure to keep the question at the forefront of your mind and don’t veer off topic. [1] X Research source

Step 2 Research the topic thoroughly

  • Be sure that you understand all the key terms that you are being asked about.
  • Try to keep your reading focussed closely to the essay question.
  • Don’t forget to look at any lecture or class notes you have made.
  • 3 Come up with a thesis statement . A thesis statement is the main argument you will make in your essay. It should be 1-2 sentences long and respond to the essential question that’s being asked. The thesis will help you structure the body of your essay, and each point you make should relate back to the thesis.

Step 4 Plan out your content.

  • Once you have put together a list of key points, then try to add in some more detail that brings in elements from your research.
  • When you come to write out your essay, you can develop a paragraph based on each point.

Step 5 Think about your...

  • All of the evidence and explanation will be in the main body of the essay.
  • Order the key points in the body of your essay in such a way that they flow logically.
  • If you are writing a longer essay, you can break the main body into different sections. [2] X Research source
  • If you have a word limit, be sure to take this into account when you are planning.
  • Allocate yourself a rough number of words per section.
  • The introduction and conclusion can be just a paragraph each.

Writing the Essay

Step 1 Write the introduction...

  • What your essay is about.
  • What material you will cover in the essay.
  • What your argument is. [3] X Research source

Step 2 Outline your argument.

  • Having this stated clearly at the start can help you to stay focussed on the question as you work your way through the essay.
  • Try writing out this one or two sentence statement and sticking it up in front of you as you write, so it’s stays at the forefront of your mind.

Step 3 Write the body of the essay.

  • Try to begin each paragraph with a sentence that outlines what the paragraph will cover.
  • Look at the opening sentence of each paragraph and ask yourself if it is addressing the essay question. [5] X Research source

Step 4 Provide evidence for your argument.

  • Try to engage with arguments that run counter to yours, and use the evidence you have found to show the flaws.
  • It might help to imagine someone reading the essay, and anticipating the objections that he might raise.
  • Showing that you have thought about potential problems, and you can make an argument that overcomes them, is a hallmark of an excellent essay. [6] X Research source
  • If there is conflicting evidence, discuss it openly and try to show where the weight of the evidence lies.
  • Don’t just ignore the evidence that runs counter to your argument.

Step 5 Write the conclusion...

  • In the conclusion you can add a few sentences that show how your essay could be developed and taken further.
  • Here you can assert why the question is important and make some tentative suggestions for further analysis.

Proofreading and Making Revisions

Step 1 Check for divergences away from the question.

  • As you read through it, think about how closely you stick to main overarching question.
  • If you notice paragraphs that drift off into other areas, you need to be tough and cut them out.
  • You have a limited number of words so it’s essential to make every one count by keeping tightly focussed on the main question.

Step 2 Assess the quality and depth of your argument.

  • Think about how you use the evidence too. Do you critically engage with it, or do you merely quote it to support your point?
  • A good analytical essay such discuss evidence critically at all times.
  • Even if the evidence supports your argument, you need to show that you have thought about the value of this particular piece of data.
  • Try to avoid making any assumptions, or writing as if something were beyond dispute.

Step 3 Check spelling, grammar and style.

  • Remember an academic essay should be written in a formal style, so avoid colloquialisms.
  • Avoid contractions, such as “don’t”, or “won’t”.
  • Try to avoid paragraphs that are more than ten or fifteen lines long.
  • Think about how it looks on the page. [8] X Research source

Step 4 Check your referencing and bibliography.

  • Always include a bibliography, but don’t include references to things you haven’t read or didn’t inform your argument. [9] X Research source
  • Your teacher will know if you just add a load of titles into your bibliography that are not evidenced in the body of your essay.
  • Always follow the bibliography format used by your department or class.

Community Q&A

Community Answer

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  • ↑ http://www.economicshelp.org/help/tips-economic-essays/
  • ↑ http://www.writing.utoronto.ca/advice/planning-and-organizing/organizing
  • ↑ http://carleton.ca/economics/courses/writing-preliminaries/academic-essay-writing/
  • ↑ https://www.economicsnetwork.ac.uk/archive/lse_writing/page_11.htm
  • ↑ https://www.royalholloway.ac.uk/economics/documents/pdf/essaywriting-departmentofeconomics.pdf

About This Article

Emily Listmann, MA

Before you begin writing your economics essay, make sure to carefully read the prompt so that you have a clear sense of the paper's purpose and scope. Once you have read the prompt, conduct research using your textbook and relevant articles. If you cannot find research materials, ask your instructor for recommendations. After your research is done, construct a 1-2 sentence thesis statement and begin outlining your main ideas so that your essay will have a clear structure. Make sure to leave time to write a draft and revise your work before it is due. If you want to learn more, like how to cite the sources you used for your essay, keep reading the article! Did this summary help you? Yes No

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economics essays

How to Write an Economics Essay: Key Steps for Writing

economics essays

What is Economics Essay?

How to choose an economics essay topic, good economics essay topics, economics essay format, how to write an economics essay, economics essay example.

If you've been assigned an economics essay, this article is the guide you need to structure it effectively. Start by carefully reading and analyzing the question, then follow these steps:

  • Read Recommended Material : Begin with lecture notes and core textbooks and supplement with additional readings.
  • Understand and Answer the Question : Reformulate the question in your own words if necessary, and stay focused on answering it directly.
  • Show Understanding and Accuracy : Ensure your discussion is accurate, write in your own words, and avoid extensive quotes.
  • Structure Your Essay : Include a clear introduction, body, and conclusion.
  • Use Appropriate Methods and Detail : Integrate relevant models, diagrams, and methods.

If you still struggle after reading this article, PaperWriter can assist with your essay. Our online paper writer will ensure you receive a well-researched, quality paper!

An economics essay is a specialized form of academic writing that delves into economic concepts, theories, and issues. What sets it apart from other types of writing, for example, an article review example , is its focus on the economic aspects of various subjects, its emphasis on data analysis, and its application of economic principles to real-world scenarios.

  • Economic Perspective: This kind of writing approaches topics from an economic perspective, considering factors like given price and consumer's desire. It analyzes economic phenomena, such as market behaviors, price changes, production, and consumption, to provide a deeper understanding of the subject matter and its impact on total demand.
  • Data-driven: These essays often rely on data and statistics to support arguments and conclusions. Whether you're discussing the impact of inflation on a nation's economy or the correlation between education and income, data plays a central role in validating your points.
  • Application of Economic Theories: They frequently apply economic theories and models to explain and predict economic behaviors. Understanding theories like supply and demand, elasticity, or market structures is crucial in constructing a compelling argument.
  • Interdisciplinary Nature: They can intersect with various disciplines. For instance, you might write an economics essay on the environmental impact of government policies, which blends economic concepts with environmental science and policy analysis.
  • Policy Implications: Many economics essays explore the policy implications of economic findings. They discuss how specific economic phenomena might influence government decisions or corporate strategies.
  • Real-World Relevance: Unlike purely theoretical essays, economics papers are rooted in real-world issues. They seek to address current economic challenges, such as unemployment, inflation, trade deficits, and more, making them highly relevant to contemporary society.

Choosing the right economics essay topics is key to writing a great paper. Here's how to pick a topic that will set you up for success:

How to Choose an Economics Essay Topic

  • Identify Your Interests - A topic you are passionate about will make the writing process more enjoyable and engaging, so think about the areas of economics that fascinate you.
  • Review Course Material - Look through your lecture notes, textbooks, and assigned readings for topics that have been discussed in class. This way, you'll find a relevant and manageable topic.
  • Consider Current Events - Economic issues in the news can be a great source of inspiration. Look for recent developments or ongoing debates that you can analyze.
  • Focus on a Specific Question - Narrow down broad topics to a specific question or issue. For example, instead of writing about "inflation," focus on "the impact of inflation on small businesses in the last five years."
  • Check for Available Resources - A good topic will have plenty of academic papers, statistics, and case studies to support your argument, so ensure there is enough data and research available on your chosen topic.
  • Get Feedback - Discuss your ideas with your instructor or classmates to get feedback and refine your topic. This can help you choose a topic that is both interesting and feasible.

Choosing good extended essay topics for economics in 2024 can be an exciting opportunity to delve deep into a subject that interests you. Here are some intriguing ones from our nursing paper writing service :

The Impact of Digital Currencies on Traditional Banking: Analyze the rise of cryptocurrencies and their potential to disrupt traditional banking systems, considering factors affecting demand and market equilibrium.

Economic Consequences of Climate Change Policies: Investigate the economic effects of government policies aimed at combating climate change, including carbon taxes and emissions trading schemes, and their impact on market demand and equilibrium price.

The Gig Economy: Explore the economic implications of the gig economy, including its impact on traditional employment, income inequality, and labor regulations, as well as its influence on quantity demanded and supply curve dynamics.

The Economics of Healthcare Access: Analyze the factors affecting healthcare access and affordability, with a focus on healthcare systems in different countries, and how these factors relate to particular price points and market prices.

Income Inequality and Economic Growth: Investigate the relationship between income inequality and a nation's economic growth, examining how inequality affects productivity and overall economic well-being, potentially leading to shifts in aggregate demand.

The Economics of Renewable Energy Adoption: Study the economic factors driving the adoption of renewable energy sources and their impact on energy markets and sustainability, affecting supply curve dynamics and market equilibrium.

Trade and Economic Growth: Analyze the relationship between international trade and a country's economic growth, considering trade agreements, tariffs, and export-oriented policies and their influence on demand curve shifts.

The Economics of Education: Investigate the economic effects of education, such as its impact on earning potential, social mobility, and national economies, potentially influencing market demand for educational services.

Economic Impact of the Aging Population: Explore how the aging population affects economic systems, including issues related to healthcare, pensions, and workforce dynamics, leading to changes in market equilibrium.

The Economics of Big Tech Companies: Analyze the economic influence and implications of large technology corporations on markets, competition, and innovation, possibly affecting aggregate demand and market price for tech-related products and finance essay writing service .

An effective economics essay, much like other academic essays, follows a structured format that clearly presents your argument and supports it with evidence. Here's a detailed guide to formatting your paper:

Section Content
Title Page Clearly state the topic of your essay.
Include your full name.
Add the course name and code.
Indicate the submission date.
Abstract Provide a brief summary of your essay, including the main argument and key findings (150-200 words).
Introduction Explain why the question is important in the real world or for the field of economics.
Present your main argument or answer to the question.
Summarize the main points you will discuss in the essay, matching the order of your paragraphs.
Literature Review Summarize existing research and theories related to your topic.
Identify gaps in the current literature that your essay will address.
Explain how your essay contributes to the existing body of knowledge.
Methodology Describe the methods you used to gather data and conduct your analysis.
List the sources of your data, such as surveys, databases, or case studies.
Mention any models, diagrams, or statistical tools you used.
Main Body Organize your paragraphs in a logical order, such as by importance, chronology, or causation.
Start each paragraph with a sentence that clearly addresses the essay question.
Follow the topic sentence with detailed reasoning and evidence. Use specific examples, data, and case studies.
Discussion Discuss the significance of your findings and how they relate to your thesis.
Explain the broader implications of your findings for the field of economics or real-world applications.
Acknowledge any limitations in your research and suggest areas for future study.
Conclusion Recap your main arguments and findings.
Reaffirm your thesis statement in light of the evidence presented.
Highlight the importance of your conclusions for the real world or the discipline of economics.
Suggest possible directions for future research on the topic.
References List all the sources you cited in your essay in the appropriate format (typically APA or MLA).
Optionally, include a list of additional readings that are relevant to your topic.
Appendices Include any additional material, such as charts, graphs, or detailed data tables, that support your analysis but are too lengthy to include in the main body.

Writing an economics essay involves a structured approach that clearly presents your argument and supports it with evidence. To write a clear essay, follow this economics essay structure:

economics essays

Introduction

Your economics essay introduction should set the context and present your main argument. Here's how to structure it:

  • Context Statement : Explain why the question is important. For example, "The impact of minimum wage laws on employment is a crucial issue in economic policy, affecting both workers and businesses."
  • Answer the Question : Provide your main argument. For example, "Raising the minimum wage can lead to higher unemployment among low-skilled workers."
  • Summarize Your Argument : Briefly outline the main points you will discuss. For example, "This essay will examine the effects of minimum wage increases on employment, consumer spending, and business costs."

The main body should logically develop your argument. Here's how to organize it:

  • Paragraph Structure : Each paragraph should start with a clear topic sentence that addresses the question.
  • Topic Sentence : "Higher minimum wages can increase unemployment among low-skilled workers."
  • Reasoning and Evidence : "Studies have shown that businesses may reduce their workforce to offset increased labor costs. For instance, a study by Neumark and Wascher (2007) found that a 10% increase in the minimum wage could reduce employment among teenagers by 1-2%."

Continue this structure for each point you want to make, ensuring each paragraph flows logically to the next. Also, effective use of modifiers can make your arguments clearer and more precise. For example, instead of saying, "Minimum wage laws affect employment," you can say, "Stricter minimum wage laws significantly affect employment among low-skilled workers." You can find out more on how to use modifiers in our dedicated article.

In the conclusion part, summarize your argument and restate your main point. Highlight the significance of your findings.

  • Summarize Your Argument : "In summary, while raising the minimum wage aims to improve living standards, it can also lead to higher unemployment, reduced consumer spending, and increased business costs."
  • Restate Your Answer : "Therefore, raising the minimum wage can have negative effects on employment."
  • Significance : "Understanding these impacts is crucial for policymakers to balance the benefits and drawbacks of minimum wage increases."

Stressed About Your Economics Essay Deadline?

Our experts are here to create top-notch writing for you, even when time is running out!

economics essays

In the realm of economics, mastering intricate theories and principles can often prove challenging. That's why our expert college admission essay writing service has crafted a practical economics essay example to shed light on complex concepts and provide a clear roadmap for understanding the subject.

Title: The Impact of Minimum Wage on Income Inequality

Income inequality has become a pressing concern in modern economies. As the wealth gap widens, policymakers and economists are increasingly focusing on potential solutions to address this issue. One such solution is the adjustment of minimum wage rates. This essay delves into the complex relationship between minimum wage policies and income inequality, exploring the various mechanisms through which minimum wage can either exacerbate or mitigate income disparities. By analyzing empirical evidence and economic theories, we aim to provide a comprehensive view of the effects of minimum wage on income inequality.

Minimum Wage and Low-Income Workers

Minimum wage policies have a direct impact on low-income workers. When the minimum wage is increased, these workers experience a boost in their earnings. This, in theory, should reduce income inequality, as those with the lowest incomes see an increase in their wages. For example, studies by Smith and Johnson (2020) found that a $1 increase in the minimum wage led to a significant rise in the income of low-wage workers, contributing to a reduction in income inequality.

Effects on Employment and Income Inequality

However, the relationship between minimum wage and income inequality is more intricate. Critics argue that raising the minimum wage can lead to job losses, particularly in industries with tight profit margins. This raises concerns about unemployment among low-skilled workers. For instance, the Congressional Budget Office (CBO) projected that a $15 minimum wage, if implemented, could lead to the loss of 1.3 million jobs by 2024.

Regional Disparities

Another aspect to consider is regional disparities in the cost of living. A uniform minimum wage may not account for variations in living costs across different regions. In high-cost metropolitan areas, the minimum wage may still fall short of providing a livable income, contributing to income inequality.

Income Substitution

Some argue that the impact of minimum wage on income inequality is offset by a phenomenon known as 'income substitution.' When the minimum wage is increased, employers may reduce non-wage benefits, such as health insurance or retirement contributions, to offset increased labor costs. As a result, the total compensation package for low-wage workers may not improve substantially, and income inequality may persist.

Counter Arguments

It's essential to acknowledge counter arguments as well. Proponents of minimum wage increases argue that they not only benefit low-wage workers but also stimulate economic activity. When low-income individuals earn more, they tend to spend more, boosting demand and potentially leading to job creation. Furthermore, minimum wage policies can improve overall labor productivity by incentivizing workers to stay in their jobs longer, thus enhancing their skills and value in the labor market.

In conclusion, the relationship between minimum wage policies and income inequality is multifaceted. While increasing the minimum wage can directly benefit low-income workers and potentially reduce income inequality, it is crucial to consider the broader implications. The impact on employment, regional disparities, and the potential for income substitution should all be taken into account when evaluating the effectiveness of minimum wage policies in addressing income inequality. Economists and policymakers must carefully balance the desire to uplift low-wage workers with the need to maintain a competitive labor market and promote economic growth.

  • Smith, A., & Johnson, B. (2020). The Impact of Minimum Wage on Income Inequality. Journal of Economic Research, 45(3), 311-328.
  • Congressional Budget Office (CBO). (2021). The Effects of a Minimum-Wage Increase on Employment and Family Income. https://www.cbo.gov/publication/56193

As we wrap up this article, let's quickly recap the main steps for writing an economics essay:

  • Choose a topic that interests you and aligns with your course.
  • Read recommended materials thoroughly.
  • Reformulate the essay question in your own words.
  • Structure your essay with a clear outline.
  • Use models, diagrams, and data to support your arguments effectively.

Last but not least, always rely on our expert help—PaperWriter offers professional assistance for crafting a strong essay.

How Do You Start an Economic Essay?

To start an economic essay, begin with a clear introduction that includes a thesis statement. Briefly outline the main points you will discuss in your essay. Include a hook, such as a surprising statistic or a relevant quote, to engage the reader and make sure your thesis statement clearly presents the argument or question you will address in your essay.

How Do I Write an Economics Essay?

To write an economics essay, follow these steps:

  • Research : Gather relevant data and sources.
  • Outline : Plan the structure of your essay.
  • Introduction : State your thesis and main points.
  • Body : Develop each point with evidence and analysis.
  • Conclusion : Summarize your findings and restate your thesis.

Is an Economics Essay in APA or MLA?

Economics essays are typically written in APA format. This format includes in-text citations and a reference list at the end. However, always check your assignment guidelines or ask your instructor, as some institutions may prefer MLA or another citation style.

  • updated writing steps for choosing a topic and writing essays;
  • updated format;
  • added FAQs.
  • Essay Writing in Economics -Useful Advice . (n.d.). https://www.st-andrews.ac.uk/assets/university/schools/school-of-economics-and-finance/documents/advice-essay-writing.pdf
  • ‌ How to Structure Your Economics Essay . (n.d.). https://www.ibmastery.com/blog/how-to-structure-your-economics-essay

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How to Write a Good Economics Essay

Governor November 28, 2019 Real World Applications 3 Comments

Many students ask “How to write an economics essay?” This Guide to Writing a Good Economics Essay is applicable to both IB economics as well as the Singapore JC A-Level H2 economics examinations. Many of the pointers here are also applicable to large-mark case study questions.

6 Steps to Writing a Good Economics Essay

Step 1: dissect the question.

Make sure you analyse and fully understand the KEYWORDS and REQUIREMENTS of the question. This is a very important skill that is taught in our economics tuition classes .

For example, “Best”, “Most Effective” are closely related but mean different things.

Paraphrase the question to make it simpler if necessary.

Take note of the command word (eg: Explain, Discuss) as it determines the approach needed for the essay, for example, whether two sides are needed or one side is sufficient. Below are some common examples found in economics essay questions:

Command Words                                      Action Required

Account for                                                 Explain why

Analyse                                                        Break it down into step-by-step explanations

Assess                                                          For & Against. Consider other factors.

Compare                                                      Identify Similarities & Differences

Distinguish                                                   Point out differences

Discuss                                                        Explore both sides

Evaluate                                                       The Good and The Bad.

Explain                                                          Show why and how

Explain whether                                            Cover both possibilities

Examine                                                        Look closely. How so and how not so?

To What Extent                                              Yes…..But….Judgment

Remember to look out for the context in the question. This is usually given in the form of a country (eg: Singapore). The examples in your essay must be tailored to this particular context (for example, do not suggest interest rate policy for Singapore as that is considered infeasible in the Singapore context). If no context is given, any real-world example can be used.

Keep in mind the question throughout the essay and remember to always answer the question. Don’t go off-point!

Common Examiner’s Comment :  Not Answering Question (NAQ))

Step 2: Plan Your Answer

Take some time to consider what economic framework you will use to approach the question. Scribble down your main thesis and anti-thesis points. Ensure they ANSWER THE QUESTION.

Step 3: Essay Introduction

In the introduction, include definitions of keywords in the question and spell out the economic framework you will employ for your answer as well as key definitions.

Step 4: Body of Essay

In the body , there will be several paragraphs. 

The number of points/paragraphs depends on the question. It is common to require 2 main points for each 10 mark essay and similarly for 15 mark essay questions. Under each main point, there may be 1-2 sub-points.

Use one paragraph for each sub-point you are making.

However, do not be too focussed on the number of points or paragraphs. The key is to answer the question.

For each body paragraph , use TET’s PEEL(ED) structure. Include only one main idea per paragraph.

  • Point – Write your point in the first sentence so that markers will know what the paragraph will be about. The topic sentence must directly answer the question!
  • Explanation – Explain what you mean
  • Elaboration – Provide further analysis with clear step-by-step economic reasoning. This part may be done with examples as well as diagrams.
  • Link – Link your explanations back to the Point and to answer the question.
  • Exemplification – Give an example to support your reasoning. It can be statistics or real-world examples (for Case Studies, evidences from the Case must be uncovered!)
  • Diagram – Where possible, araw an appropriate diagram with correct labelling and refer to it in your answer. This is crucial to show economic reasoning. Diagrams are very important for economics essays!

These are of course much easier said than done! Thus, students in our economics tuition classes are regularly honed to achieve such output including with tips and tricks to spark off the correct thinking process.

Our resources including the Study Guides for A Level and IB economics also provide a very powerful and handy reference on the depth of analysis required to score the highest marks.

Common Examiner’s Comment :  Mere statements and claims. No economic rigour.

Step 5: In-Body Evaluation

This applies especially to the 15 mark essays for A-Level Economics. A total of 5 marks is catered for Evaluation. Students should attempt to achieve about 2-3 in-body evaluation marks by pointing out how the thesis and anti-thesis points may not be true due to certain assumptions made that may not hold. Students may write “However,….may not necessarily happen……It would depend on whether….”. This statement can be written after the associated sub-point has been made.

Step 6: CONCLUDING SECTION

This only applies to the 15 mark essay questions.

Earn more evaluation marks by making a reasoned judgement. Deliver your verdict like a Judge! 

Check back on the question before you embark on this. Ensure your judgement answers the question.

So the question now is, how does a judge arrive at and deliver a verdict? Certainly, you should not be summarising or merely paraphrasing your main points in the conclusion. Obviously, you cannot expect more marks by saying the same thing over and over again!

After a verdict and reasons have been provided, consider providing further relevant insights and/or recommendations.

Common Examiner’s Comment :  Repetitive. Mere Summary.

Here are some quite common types of Concluding Sections 

  • Consider the relative importance of thesis and anti-thesis factors. Which factors are most important or pertinent in the given context? For example, certain policies better fit specifc types of economies.
  • Consider short-term vs long-term pros and cons. Do the short-term benefits outweigh the long-term costs? Is the policy more effective in the long-term, and if so, how pressing is the problem that needs to be addressed?
  • Suggest a multi-policy approach, in which each policy has strengths and weaknesses that allow them to complement each other.

There is no way to really memorise evaluation points as every question and context is different. After all, you are being tested on higher-order thinking!

There are other evaluation tips that our students will receive but the key point here is that the training of the mind to think and apply economics is essential. That is where our weekly economics lessons come into play and that is why our students are often asked questions in class and trained to think on their feet. As ex-student Xue Min from YIJC testified, Chief Tutor Mr. Kelvin Hong does not just spoon-feeds our students but mentors them in their thinking to arrive at the answers. This was different from other tutors that her classmates experienced and eventually this was the key to Xue Min’s A grade.

In your essay, write in simple and clear sentences. Everything you write should be value-adding. You do not have to spend time showing off vocabulary as no extra points are awarded for language. Focus on economic reasoning. Use succinct and effective examples which support the point you are trying to make as well as accurate diagrammatic analyses.

For samples of great economics essays, please check out our free Economics Model Essays and sample Past JC A-Level Economics Questions and Answers .

For our econs publications that are sold worldwide, please check out our A Level & IB Economics Study Guides and Model Essays Publications

About The Economics Tutor

Founded by Kelvin Hong in 1998, The Economics Tutor is one of the leading economics tuition in Singapore . We provide a comprehensive program to guide students in understanding complex economic concepts and applying them through case study analyses, essay writing and discussion of real world events.

For 24 years, the way we teach JC Economics Tuition (A Level Economics Tuition) and  IB Economics Tuition  classes helped learners appreciate economics and everything it entails on a much larger scale. We take things step-by-step, implement effective techniques in memorising frameworks and give every student the chance to nurture their ideas. 

We don’t just solely focus on helping you get stellar grades and perfect scores. We make sure that we also hone the critical thinking skills and investment / business decisions you can use outside the four walls of your classroom.

Looking for a fun, engaging and probably the best economics tutor in Singapore? Look no further—check out our extensive and high quality economics resources on the website such as our IB and A Level Economics Publications

Book your lesson today and master the nuances of economics in our next class!

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economics essays

A State-Ranker’s Guide to Writing 20/20 Economics Essays

So, you want to know how to improve your preliminary and HSC economics essay...

Cory Aitchison

Cory Aitchison

State Ranks (Economics and Chemistry) & 99.95 ATAR

1. Introduction to this Guide

So, you want to know how to improve your preliminary and HSC economics essay writing? Look no further! In this guide, I’ll be covering key tips to help YOU smash the structure, amaze with your analysis, conquer the contemporary, and ultimately master the mystery of maximising your marks.

My name is Cory Aitchison, currently one of the Economics tutors at Project Academy . I completed the HSC in 2018, achieving a 99.95 ATAR as well as two state ranks — 6th in economics and 12th in chemistry. Graduating from Knox Grammar School, I also topped my grade in economics and was awarded Dux of the School for STEM. Believe it or not, at the beginning of Year 11 I initially struggled with economics due to the transition in conceptual thinking required in approaching economic assessments in comparison to my other subjects such as English. However, through Year 11 and Year 12, I built up key tips and strategies — that I’ll be sharing with you in this guide — to help me not only consistently achieve top marks in my internal assessments, but to ultimately go on to achieve the results I did in the HSC.

2. The Correct Way to Write

First off, you need to understand something: HSC economics essays are NOT english essays! They aren’t scientific discussions, nor geography reports, nor historical recounts. They’re unique and often quite different from other essays that you might’ve done previously in high school. The style of writing and approach to answering questions can be confusing at first, but follow these tips and you’ll be ready in no time:

Phrasing should be understandable and concise

Unlike some subjects where sophisticated phrasing is beneficial to getting marks, HSC economics essays should emphasise getting your point across with clarity. This means don’t run your sentences on for too long, be aware of any superfluous words, and make sure you actually understand yourself what you’re trying to say in a sentence.

For example:

GOOD: “An increase in interest rates should lead to decreased economic growth.”

NOT GOOD: “As a result of a rise or increase in interest rate levels from their previous values, the general state of economic activity in the domestic economy may begin to decrease and subsequently indicate the resultant situation of a decrease in economic growth.”

“Understandable” does not mean slang or lacking in terminology

Just because you want to get a point across, doesn’t mean you should resort to slang. In fact, using economic terminology is a strong way to boost your standing in the eyes of the marker — if you use it correctly! Always make sure you use full sentences, proper English grammar, and try and incorporate correct economic terms where possible.

GOOD: “This was a detrimental outcome for the economy.”

NOT GOOD: “This was a pretty bad outcome for the economy.”

GOOD: “The Australian Dollar depreciated.”

NOT GOOD: “The Australian Dollar decreased in value.”

Analysis should be done using low modality

Modality just refers to the confidence of your language — saying something “will” happen is strong modality, whereas saying something “might” happen is considered low modality. Since a large portion of economics is about applying theory, we have to make sure that we are aware that we are doing just that — talking about the theoretical, and so we can’t say for sure that anything will happen as predicted.

Some useful words include:

May, Might, Should, Could, Can theoretically

Don’t use words like:

Must, Will, Has to, Always

3. How to use Statistics

“What’s most important is that this contemporary is used to bring meaning or context to your argument…”

Using contemporary (statistics) can often seem straightforward at first, but using it effectively is usually harder than it looks. Contemporary generally refers to applying real-world facts to your analysis to help strengthen (or weaken) the theoretical arguments. This can include many different statistics or pieces of information, including:

  • Historic economic indicators, such as GDP, inflation, GINI coefficients, exchange rates, or unemployment rates
  • Trends or economic goals, such as long-term GDP growth rates, or the stability band for inflation
  • Names of economic policies, such as examples of fiscal or microeconomic policies
  • Specifics of economic policies, such as the amount spent on infrastructure in 2017

economics essays

Whatever statistics you deem relevant to include in your essay, what’s most important is that this contemporary is used to bring meaning or context to your argument — just throwing around random numbers to show off your memorisation skills won’t impress the marker, and in fact might appear as if you were making them up on the spot. Rather, your use of contemporary should actively improve your analysis.

GOOD: “Following a period of growth consistently below the long-term trend-line of 3%, the depreciation of the AUD to 0.71USD in 2017 preceded an increase in economic growth to a 10-year high of 3.4% in 2018.”

NOT GOOD: “Economic growth increased by 1 percentage point in 2017 to 2018”

NOT GOOD: “GDP was $1.32403 trillion in 2017”

GOOD: “The 2017 Budget’s Infrastructure Plan injected $42 billion into the economy — up 30% from 2016’s $31 billion, and 20% higher than the inflation-adjusted long-term expenditure.”

NOT GOOD: “The 2017 Budget’s Infrastructure Plan injected $42 billion into the economy”

That in mind, don’t think that these statistics have to be overly specific. As long as the general ideas gets across, it’s fine. You don’t need to say “$1,505,120” — just “$1.5 million” will suffice.

Ask yourself: if I get rid of the contemporary from my paragraphs, does the essay still have enough content?

Further, don’t get roped into the “contemporary trap” — where you fall into the mindset that “if I memorise all these statistics, my essay will get good marks”. Including numbers and contemporary at the expense of having a robust theoretical explanation and analysis will definitely be detrimental in getting you top marks. Particularly in trial exams and the HSC when you’ve got all these numbers floating in your head, it can be tempting to try and include as many as you can (often just because you can!). To avoid this, always try and focus your arguments on analysis and syllabus content first, contemporary second. Ask yourself: if I get rid of the contemporary from my paragraph, does the essay still have enough content?

4. Must Have Insightful “However”s

If you really want to extend your analysis and show the marker that you know your stuff, including insightful “however”s is a strong way to do it. What I mean by this is that for each of your paragraphs, try and include a counterpoint that highlights the flexible nature of economic theory. There are broadly two kinds of “however”s:

Theoretical “However”s

These are counterpoints that are based on theory — often there will be theoretical limitations for many of the concepts you come across in economics. It’s always important to include these limitations as it reinforces your knowledge of the actual content of economics.

“Although the Budget and fiscal policy can be effective at stimulating economic growth, it is also restricted by the “implementation time lag” limitation since it is only introduced annually.”

Contemporary “However”s

These are counterpoints that are based on contemporary — highlighting how although something should happen theoretically, this isn’t usually what is observed in reality. This can be particularly powerful in that it combines your knowledge of theory with your analysis of contemporary.

“Despite the expansionary stance that the RBA adopted in 2012–2016 for monetary policy, Australia’s annual GDP growth rate has remained below the trend rate of 3% — against the theoretical expectations. This could be attributed to factors such as …”

5. How to Interpret the Question

When you first look at a question, before you even put pen to paper, you need to come up with a plan of attack — how can you ensure that you answer the question correctly, and give the markers what they want? There are three main points to look for when interpreting essay questions:

Knowing your verbs

As you may (or may not) know, NESA has a bank of words that they like to pull from when writing questions, and these words impact how they want their question answered. These verbs should help steer your analysis onto the right path. For example:

Explain: “Relate causes and effects”

To answer these questions, you have to demonstrate a thorough understanding of how theory and events impact each other and the economy. This verb particularly emphasises the idea of a process — you need to be able to make clear links as to how each step leads to the next, rather than just jumping to the outcomes.

Analyse: “Draw out and relate implications”

These questions usually wants you to investigate the connections between different aspects of economic theory. Generally this involves showing a holistic understanding of how different areas (such as micro- and macroeconomic policies) come together to make a cohesive impact on the economy. It usually helps to think back to the syllabus and how the points are introduced when figuring out which ideas to link together.

Assess/Evaluate: “Make a judgement based on value/a criteria”

These require you to not only critically analyse a topic but also come to a conclusion given the arguments you provided. This type of question usually gets you to make a judgement of the effectiveness of some economic theory — such as the ability for economic policies to achieve their goals. Make sure you actually include this judgement in your answer — for example, say things like “strong impact”, “highly influential”, “extremely detrimental”.

Discuss: “Provide points for and/or against”

Similar to assess, discuss wants you to provide arguments towards and against a particular topic. Although it doesn’t require a specific judgement to be made, it does place greater emphasis on showing a well-rounded approach to the argument — providing relatively equal weightings towards both the positive and negative sides of the discussion.

Linking to the syllabus

When trying to understand what the question wants from you, I found the best way to approach it is to consider what points in the syllabus it is referring to (To do this, you need to have a solid understanding of the syllabus in the first place). Once you’ve located it, try drawing upon other topics in the vicinity of that dot point to help you answer the question.

economics essays

For example, if the question mentions “trends in Australia’s trade and financial flows”, then you know from the syllabus that you probably need to talk about value, composition and direction in order to get high marks. Further, it may also be worth it to bring in ideas from the Balance of Payments, as this is the next dot point along in the syllabus.

Digging into the source

For essay questions that provide a source for you to include in your answer, this is another goldmine from which you can discern what the marker really wants. If the source mentions microeconomic policy, it probably wasn’t on accident! Even if it may not be obvious how to link that to the question immediately, try and draw upon your knowledge and implications and see if there’s a different angle that you might be missing.

6. Putting it All together — Structuring your essay

My essays usually consisted of four main parts: an introduction, a background paragraph, body paragraphs, and a conclusion.

Introduction

Your introduction should not be long. I rarely wrote an introduction longer than three sentences.

First sentence: Answer the question (thesis)

Try and answer the question, while including the main key words of the question in your answer. Don’t directly restate it — instead, try and add meaning to it in a way that represents what you’re trying to get across in your essay.

For example: if the question was “Assess the impact of microeconomic policy in improving economic growth in Australia”, my first sentence might be “Microeconomic policy has had a significant impact in increasing aggregate supply and thus long-term economic growth in Australia since the 1960s”.

Next sentences: Introduce your arguments/paragraphs

In this part, it’s fine to almost list your paragraphs — there’s no need to do a whole sentence explaining each. That’s what the paragraphs themselves are for.

For example: using the same question as above, my next sentence might be “Although trade liberalisation may have been detrimental for short-term growth in manufacturing, policies such as competition policy and wage decentralisation have been highly effective in fostering economic growth in Australia”.

Background Paragraph

The aim of a background paragraph is threefold: to get across the main theory that underpins your argument; to establish the economic context for your argument; and to show the marker that you “know your stuff”.

For example, if the essay was on monetary policy, you may want to describe the process of Domestic Market Operations (how the reserve bank changes the cash rate) in your background paragraph, so that you don’t need to mention it each time you bring up changing stances. Further, it may be good to showcase the current economic climate — such as GDP growth rate and inflation — to give context to your analysis in your essay.

Some ideas for what to include in this paragraph include:

  • Key theory such as DMOs or the rationale for macroeconomic policies
  • Economic indicators that provide context to the time period that you’re working in, such as growth rates, inflation, unemployment rates, exchange rates, cash rates, etc.
  • A brief description of the recent Budget (if talking about fiscal policy), including the stance and outcome

Bear in mind that this paragraph shouldn’t be too long — it isn’t the focus of your essay! Instead, aim for around 100–150 words at most. At this point in your essay, it may also be good to include a graph (more on this later).

Body Paragraphs

There’s no set rule for how many body paragraphs to include in your essay — I generally aim for at least 4, but there’s no real limit to how many you can (or should) write! Unlike english essays, it’s totally acceptable to just split a paragraph in two if you feel like the idea is too large to be written in one paragraph (as long as each paragraph makes sense on its own).

When writing a paragraph, I usually follow this structure:

Topic sentence

This is where you answer the question, and outline your argument or idea for this paragraph. If you are doing a discuss/assess/evaluate essay, try and make your judgement or side obvious. For example: “Trade liberalisation has been detrimental in its impact on economic growth in manufacturing industries”.

These sentences are where you bring together the theory and contemporary to build up your argument. Remember, the theory should be the focus, and contemporary a bonus. Try and weave a “story” into your analysis if you can — you should be showing the marker how everything fits together, how causes lead to effects, and ultimately bringing together relevant economic concepts to answer the question. Feel free to also include graphs here when they help strengthen your argument.

Fit in your “however” statements here. For discuss questions, this however section may take up a larger part of the paragraph if you choose to showcase two opposing arguments together.

Link your argument back to your overarching thesis, and answer the question. Following on from your “however” statement, it can often be a good idea to use linking words such as “nevertheless”, “notwithstanding”, or “despite this” to show that taking into account your arguments presented in the “however” statement, the overarching idea for the paragraph still remains.

Like the introduction, your conclusion should not be overly long. Rather, it should briefly restate the arguments made throughout your essay, and bring them all together again to reinforce how these points help answer the question.

economics essays

Aggregate Demand / Supply Graph

Graphs are a great way to add extra spice to your essay — not only does it help strengthen your explanations of economic theory, it also makes it look like you wrote more pages than you actually did! Graphs, such as aggregate demand graphs, business cycle graphs, and Phillips curves, can be great in reinforcing your ideas when you mention them in your essay. They usually come either in background paragraphs or body paragraphs, and it’s usually best to draw them about a quarter to a third of the page in size. It’s also good practice to label them as “Figure 1” or “Graph 1”, and refer to them as such in your actual paragraph.

Although they can be beneficial, don’t try and force them either. Not all essays have appropriate graphs, and trying to include as many as you can without regards for their relevance may come across negatively in the eyes of the marker.

8. How to Answer Source Questions

If your essay question involves a source, try and refer to it multiple times throughout your essay. For example, this can be in the background paragraph and two of your body paragraphs. Rather than just adding in an “…as seen in the source” to one of your sentences, try and actively analyse it — show the marker that you understand why they included it, and how it actually helps strengthen your arguments.

9. Plan You Essay

Don’t be afraid to use the first page of your answer booklet as a planning page. Taking a couple minutes before you answer the question to lay out your scaffold for body paragraphs is a great first step to helping ensure that you actually end up answering the question to the best of your abilities. It also serves as a great reminder to keep checking as you finish each paragraph to ensure that you actually wrote what you intended. Just make sure to make it clear to the marker that those scribbles on the page are just a plan, and not your actual essay!

10. How to Prepare for Essays in the Exam

I find it much better to prepare paragraphs and ideas that you can draw upon to help “build up” a response during the exam itself.

Don’t go into the exam with a pre-prepared essay that you are ready to regurgitate — not only are there too many possibilities to prepare for, but it’s also unlikely that you’ll actually answer the question well with a pre-prepared response.

Instead of memorising sets of essays before the exam, I find it much better to prepare paragraphs and ideas that you can draw upon to help “build up” a response during the exam itself. What I mean by this, is that in your mind you have a “bank of different paragraphs” and ideas from all the topics in the syllabus, and when you read the exam, you start drawing from different paragraphs here and there to best formulate a response that answers the question. This allows you to be flexible in answering almost any question they can throw at you.

On top of this, ensure you have a solid foundation in both the theory and contemporary — knowing what statistics or topics to include in your essay is useless knowledge unless you have the actual content to back it up.

Now that you know the basics of how to write a good HSC economics essay, it’s time to start practising! Have a go, try out different styles, and find what works best for you. Good luck!

If you would like to learn from state ranking HSC Economics tutors at Project Academy, we offer a 3 week trial for our courses. Click to learn more !

economics essays

Complete Guide to HSC Biology Module 7 - Infectious Diseases

Studying HSC Biology? This one's for you. Key concepts, sample answers, and tips - all in one spot.

Beau Burrows

Beau Burrows

Biology Tutor, Band 6 in Biology

economics essays

How to study for HSC: Constructing Study Habits

Learn how to construct the best study habits in to ace the HSC, written by 99+ ATAR tutors and distinguished achievers.

Riddhish Chanda

Riddhish Chanda

Chemistry Team at Project Academy

economics essays

How I Achieved a 99.80 ATAR with 8+ Hours of Sleep Every Night

Here are 4 effective HSC study tips from the Vice Captain of Baulkham Hills!

Rishabh Jain

Rishabh Jain

Head of HSC Chemistry

economics essays

Complete Guide to HSC Economics – How to Ace HSC Economics

Taking my years of teaching Economics and distilling it into one post.

Aatish Budhwani

Aatish Budhwani

99.75 ATAR and 97 in Economics

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Home — Blog — Topic Ideas — 120 Essay Topic in Economics: Useful Ideas and Tips

120 Essay Topic in Economics: Useful Ideas and Tips

Economic Essay Topics

An essay on the study of economics offers a fascinating exploration of how societies allocate scarce resources to meet their unlimited wants and needs. Economics, often referred to as the "dismal science," provides valuable insights into the workings of markets, businesses, governments, and individual decision-making processes. As a social science, it analyzes human behavior in relation to the production, distribution, and consumption of goods and services.

By studying economics papers topics , students delve into a wide range of topics, ranging from microeconomics, which focuses on individual economic agents such as households and firms, to macroeconomics, which examines broader aspects of the economy, including inflation, unemployment, and economic growth.

The essay typically begins with an introduction that sets the context and provides a clear thesis statement outlining the main argument. It is essential to showcase a solid understanding of economic principles and theories while employing real-world examples and data to support arguments.

One of the critical aspects of an economics essay is the analysis of economic models and concepts. Students may explore theories like supply and demand, elasticity, market structures, cost-benefit analysis, fiscal and monetary policy, and more. Using empirical evidence and case studies, they can apply these concepts to real-world situations to demonstrate their understanding and analytical skills.

Moreover, an essay on economics often involves discussing current economic issues and policies. Analyzing economic challenges faced by countries, the impact of globalization, income inequality , environmental sustainability, or the role of government intervention are just a few examples of pertinent topics. Not surprisingly, many students have difficulty writing them. Perhaps we can help you if you study some economics essay examples and improve your knowledge.

To craft a compelling economics essay, students should conduct thorough research, draw from reputable sources, and critically evaluate various viewpoints. The essay should present a coherent and logical flow of ideas, supported by evidence and data, leading to well-reasoned conclusions. And in any case, it’s worth starting with an analysis of suitable topics, and in this article, we will try to help you by providing various ideas for reflection.

✨ Most Popular Economic Essay Topics

  • The Role of Government in Shaping Economic Policies: A Comparative Analysis
  • Globalization and its Impact on Emerging Economies
  • Income Inequality: Causes, Consequences, and Solutions
  • The Economics of Climate Change: Mitigation and Adaptation Strategies
  • The Pros and Cons of Free Trade Agreements on National Economies
  • Monetary Policy and its Effects on Inflation and Unemployment
  • The Economics of Healthcare: Examining Costs, Access, and Quality
  • The Impact of Technological Advancements on Economic Growth
  • Behavioral Economics: Understanding Irrational Decision-Making
  • The Economics of Education: Investing in Human Capital
  • The Housing Market Bubble: Lessons from the 2008 Financial Crisis
  • The Role of Entrepreneurship in Economic Development
  • The Economics of Artificial Intelligence and Automation
  • Government Debt and Fiscal Policy: Evaluating Sustainable Practices
  • Economic Effects of the COVID-19 Pandemic: Challenges and Recovery Strategies

💡 Important Economic Essay Topics

Studying economics is essential for several reasons, as it provides valuable insights into the functioning of societies, markets, and individual decision-making processes. Here are some key reasons why studying finances and economics is important:

  • Understanding Human Behavior: Economics analyzes how individuals, households, and firms make choices in the face of limited resources and unlimited wants. It provides a framework to understand human behavior and decision-making , which is crucial for businesses, policymakers, and individuals alike.
  • Allocation of Resources: Economics helps societies allocate scarce resources efficiently. By studying concepts like supply and demand , production, and distribution, economists can identify optimal resource allocation to maximize overall welfare and economic growth.
  • Impact of Policies: Economic analysis informs policymakers about the potential consequences of their decisions. It helps in formulating effective policies related to taxation, trade, monetary, and fiscal matters, aiming to improve economic conditions and societal well-being.
  • Business Decision-Making: For businesses, understanding economic principles is crucial for strategic planning, pricing strategies, market analysis, and assessing risks and opportunities. Economic insights enable businesses to adapt to changing market conditions and make informed decisions.
  • Global Perspective: Economics provides a global perspective, allowing nations to engage in international trade and understand the implications of globalization . It fosters cooperation and collaboration between countries to address economic challenges on a global scale.
  • Addressing Inequality: Economic studies shed light on income and wealth distribution, allowing societies to address issues of inequality and poverty. Understanding the root causes of economic disparities can help design policies to promote inclusive growth and social justice.
  • Personal Finance Management: Understanding economic principles can benefit individuals in managing personal finances, making informed investments, and planning for the future.

Thus, the study of economics is critical to understanding the complex dynamics of modern societies and economies. It is economics papers topics that provide individuals, businesses, and policymakers with valuable tools to make informed decisions, promote sustainable growth, and address pressing social and economic challenges locally, nationally, and globally.

Socio-Economic Essay Topics

  • The Ever-Evolving American Dream.
  • Is the American Dream Still Alive?
  • The American Dream: Success, Mobility, Critiques.
  • Socialism and Capitalism.
  • Addressing Disparities of Health Equity.
  • Relationship Between Income Inequality and Crime Rates.
  • Abolishing Federal Minimum Wage: A Proposal.
  • Impact of Minimum Wage Policies.
  • Universal Basic Income: A Viable Solution or a Dangerous Experiment
  • Poverty Alleviation Strategies: Lessons from Successful Programs.
  • Unemployment and its Socio-Economic Effects.
  • The Influence of Social Media on Consumer Behavior and Society.
  • Socio-Economic Factors in Urbanization and Rural Migration.
  • Socio-Economic Implications of Aging Populations.
  • Immigration and its Effects on Socio-Economic Dynamics.
  • Socio-Economic Effects of Access to Quality Healthcare and Education.
  • Social Mobility and its Correlation with Economic Prosperity.
  • The Intersection of Socio-Economic Status and Health Outcomes.
  • The Role of Culture in Shaping Socio-Economic Patterns.
  • Corporate Social Responsibility: Balancing Profitability and Social Welfare

International Economics Essay Topics

  • The Impacts of Global Trade Agreements on Developing Economies
  • Exchange Rate Policies and Their Effects on International Trade
  • Foreign Direct Investment and Economic Development
  • The Role of Multinational Corporations in the Global Economy
  • Economic Integration in Regional Blocs: Pros and Cons
  • The Balance of Payments: Trends and Challenges
  • International Capital Flows and Financial Crises
  • The Effectiveness of International Aid in Promoting Economic Growth
  • The Economics of Globalization: Prospects and Challenges
  • International Economic Sanctions: Rationale and Consequences
  • The Role of International Organizations in Global Economic Governance
  • The Impact of International Migration on Sending and Receiving Countries' Economies
  • Trade Liberalization and Income Inequality in Developing Countries
  • The Economics of Foreign Aid: Achievements and Limitations
  • International Economic Policies and Income Distribution.
  • The Significance of the Stock Market: History, Function, and Future
  • Understanding Supply and Demand Dynamics
  • The Role of Digital Currency in Shaping International Trade
  • Environmental Policies and Their Impact on Global Economic Relations
  • Technological Innovations and Their Influence on Global Supply Chains

Labor Economics Essay Topic Ideas

  • The Evolution of Work and Employment
  • FNP Employment Contract
  • The Gig Economy: Challenges and Opportunities for Workers
  • Labor Unions and Collective Bargaining in Modern Economies
  • Technological Advancements and the Future of Work
  • Labor Mobility and its Effects on Economic Growth
  • Youth Unemployment: Addressing the Challenges of Entry into the Labor Market
  • Labor Market Segmentation: Understanding Dual Labor Markets
  • The Economics of Immigration and its Impact on Local Labor Markets
  • Gender Wage Gap: Analyzing Causes and Closing the Divide
  • Automation and Job Displacement: Policy Responses for the Workforce
  • Human Capital Investment: Education and Training in the Labor Market
  • Labor Market Policies for Aging Populations and Retirement Transitions
  • Labor Market Flexibility and Employment Protection Legislation
  • Income Inequality and its Connection to Labor Market Outcomes
  • The Economics of Occupational Safety and Health
  • Discrimination in the Workplace: Examining Persistent Disparities
  • The Economics of Unemployment Insurance: Incentives and Impact
  • Informal Labor Markets: Challenges and Policy Approaches
  • Labor Economics of Developing Countries: Unique Issues and Solutions

Essay Topics in the Economics of Sports

  • The Economics of Professional Sports Leagues: Revenue Sharing and Competitive Balance
  • Stadium Financing and Economic Impact on Local Communities
  • The Role of Salary Caps in Professional Sports: Fairness and Competitiveness
  • Sports Sponsorship and its Influence on Branding and Revenue Generation
  • Economic Analysis of Mega Sporting Events: Costs and Benefits
  • Ticket Pricing Strategies in Sports: Maximizing Revenue and Fan Engagement
  • Sports Betting and its Economic Implications
  • The Economics of Player Transfers and Player Valuation in Sports
  • Sports Broadcast Rights and Media Economics
  • Youth Sports Participation and its Long-term Socio-Economic Effects
  • The Economic Impact of Sports Facilities on Tourism and Local Economies
  • Sports Analytics: The Role of Data in Player Performance and Team Strategies
  • The Economics of Sports Franchise Relocation and Expansion
  • Economic Incentives for Athletes: Performance-Based Contracts and Bonuses
  • Sports Merchandising and Consumer Behavior: Factors Influencing Sales
  • Esports Economics: The Rise of Competitive Video Gaming
  • Sports Development Programs and Economic Growth in Developing Countries
  • Economic Challenges of Doping and Anti-Doping Policies in Sports
  • Sports Economics and Fan Loyalty: Factors Affecting Fan Spending and Attendance
  • The Economic Impact of Sports Injuries on Players and Teams.

Essay Topics on City Economics

  • Urbanization and Economic Growth: Trends and Implications
  • The Economics of Gentrification: Effects on Housing and Communities
  • Urban Transport Economics: Evaluating Public Transit and Mobility Solutions
  • Urban Planning and Land Use: Balancing Economic Development and Sustainability
  • The Impact of Urban Renewal Projects on Local Economies
  • Housing Affordability in Urban Areas: Challenges and Policy Interventions
  • Economic Incentives for Urban Development: Tax Incentives and Subsidies
  • The Economics of Urban Sprawl: Costs and Benefits
  • Urban Informal Economies: Informal Sector Dynamics and Contributions
  • Urban Poverty and Social Exclusion: Analyzing Economic Disparities
  • The Economics of Urban Crime: Strategies for Crime Reduction
  • Urban Environmental Economics: Managing Pollution and Sustainability
  • Smart Cities and the Economics of Technological Urban Innovations
  • Urban Economic Resilience: Coping with Shocks and Disruptions
  • The Economics of Urban Education: Addressing Inequality in Schools
  • Urban Infrastructure Investment and Economic Productivity
  • The Role of Cultural and Creative Industries in Urban Economies
  • Urban Tourism Economics: Balancing Tourist Impact and Local Needs
  • Urban Agriculture and Food Security: Economic and Social Benefits
  • Urban Governance and Economic Development: The Role of Local Government.

Business Economics Essay Topics

  • Cost-Benefit Analysis in Business Decision Making
  • Customer Reviews and Sales Figures in E-commerce
  • Market Structure and Business Performance: A Comparative Analysis
  • Business Cycles and Their Impact on Economic Stability
  • The Role of Entrepreneurship in Economic Growth and Innovation
  • The Economics of Corporate Mergers and Acquisitions
  • Business Ethics and their Influence on Economic Outcomes
  • The Economics of Risk Management in Business Operations
  • International Trade and its Effects on Business Competitiveness
  • Environmental Sustainability in Business: Balancing Profit and Social Responsibility
  • Business Strategy and its Relationship with Economic Performance
  • The E-Commerce Impact on Traditional Businesses
  • The Economics of Advertising and Consumer Behavior
  • Business Innovation and its Influence on Industry Dynamics
  • Small Business Economics: Challenges and Opportunities for Growth
  • Economic Analysis of Market Entry and Exit Strategies
  • Technology Adoption and its Impact on Business Efficiency
  • The Role of Financial Markets in Business Operations and Investment
  • The Economics of Supply Chain Management: Efficiency and Resilience
  • Business Taxation and its Effects on Investment and Profits.

💫 Tips on How to Write Your Essay in Economics

Writing an economics essay can be intellectually stimulating but rewarding as it allows you to explore complex economic concepts, express your understanding effectively, and learn from various economics paper topics. To create a compelling economics paper topic, follow these basic steps:

  • Understand the Essay Prompt: Carefully read and comprehend the essay prompt to grasp the specific question or topic you are required to address. Identify key terms and concepts to guide your research and analysis.
  • Research and Gather Evidence: Conduct in-depth research using reputable sources such as academic journals, books, and economic databases. Collect relevant data and evidence to support your arguments and strengthen the essay's credibility.
  • Create a Clear Thesis Statement: Formulate a concise and clear thesis statement that outlines the main argument or position you will be defending in the essay. The thesis should be specific, focused, and reflect the main point of your paper.
  • Plan and Organize: Outline your essay structure before you begin writing. A well-structured essay should have an introduction, body paragraphs, and a conclusion. Each body paragraph should discuss a single main idea or argument, supported by evidence.
  • Introduction: Start with an engaging introduction that provides context for your essay and introduces your thesis statement. Hook the reader's attention and provide a brief overview of the key points you will be discussing.
  • Body Paragraphs: Each body paragraph should begin with a topic sentence that presents the main idea of the paragraph. Use evidence and examples to support your arguments and relate them back to your thesis. Analyze the data and discuss its implications in relation to the topic.
  • Use Economic Terminology: Incorporate relevant economic terminology and concepts to demonstrate your understanding of the subject matter. However, avoid jargon that might confuse the reader.
  • Critical Analysis: Provide a critical analysis of the economic theories and evidence presented. Evaluate strengths and weaknesses, and consider alternative viewpoints to present a balanced perspective.
  • Counterarguments and Rebuttals: Address potential counterarguments to your thesis and provide well-reasoned rebuttals. Acknowledging opposing views enhances the credibility of your essay.
  • Conclusion: Summarize the main points discussed in the essay and restate your thesis in a conclusive manner. Avoid introducing new information in the conclusion.
  • Proofread and Edit: After completing your essay, review it carefully for clarity, coherence, and grammar. Ensure that your arguments flow logically, and make any necessary revisions to strengthen the overall quality.
  • Cite Your Sources: Properly cite all the sources used in your research following the citation style specified by your instructor (APA, MLA, Chicago, etc.).

By following these steps, you can write a well-structured and persuasive economics essay that demonstrates your grasp of economic concepts and analytical skills, contributing to a comprehensive understanding of the subject matter.

economic research topics

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economics essays

Economics Essays

Wednesday, June 9, 2021

Why deflation is bad.

Deflation in the UK in the 1920s.

There are several reasons why deflation is considered to be harmful to the economy.

  • Discourage buying. When general prices are falling, consumers tend to delay purchasing. For example, rather than buy a flatscreen today, they wait a year when they will be cheaper. The effect of falling prices is to depress consumer spending leading to lower economic growth.

economics essays

Demand for labour falls to D2 causing equilibrium wage to fall to W2. But, if wages are sticky downwards they remain at W1 causing unemployment of Q3-Q1.
  • Monetary Policy Becomes ineffective . With deflation, zero interest rates may be too high. Even quantitative easing may be insufficient to get people spending. ( deflation and monetary policy )  The problem is that it is difficult to cut interest rates below zero and so the monetary authorities cannot adequately deal with the slow growth and deflation.
  • Inflation vs Deflation
  • Deflationary spiral
  • What is more likely inflation or deflation?
  • Definition of deflation

Friday, March 20, 2020

How much can the government borrow.

  • Historical precedents . In WWII, the OBR said the UK ran a budget deficit of nearly 27% of GDP. By the early 1950s, UK national debt had risen to 240% of GDP. Yet this was not a significant problem. In the post-war period, the UK enjoyed a long period of economic expansion, where debt to GDP ratios fell. In March 2020, UK debt to GDP ratio was around 80% of GDP, so there is significant room for an increase in government debt.

economics essays

  • Government's have the ability to create money . Some economists (especially those believing in MMT ) argue the only constraint to government borrowing is inflation. In other words, higher government spending financed by printing money is only a problem when it causes inflation. In a severely depressed economy, with inflation falling (and possibly deflation) it maybe desirable for the government to create money and target a positive inflation rate. In 2009/10 recession, US and UK financed some borrowing through quantitative easing .
  • In a recession , most economists accept that a rise in government borrowing is necessary to offset the fall in private sector investment and spending. Keynesian economics says expansionary fiscal policy can help an economy recover. But austerity (cutting spending) can make the recession worse, worsening tax revenues and be counter-productive in cutting borrowing.
  • During a period of economic growth when the economy is close to full capacity, government borrowing can cause many problems such as crowding out of the private sector, pushing up interest rates, and possible inflationary pressures.
  • Does it print its own currency?
  • Do markets trust the government to maintain low inflation and not default?
  • What are the interest rate on government bonds?
  • What is the state of the economy?
  • What is the purpose of government borrowing?
  • To what extent is the government borrowing from domestic or foreign investors?

Levels of government debt

  • US 117% of GDP in 1945 (gross federal debt (1)
  • UK 240% of GDP in the early 1950s 
  • Japan has national debt over 230% GDP

How does the government finance its debt?

  • Selling government bonds to the private sector - either domestic or foreign. The private sector buy bonds because the security and interest rate on them.
  • The Central Bank can finance shortfall in revenue by increasing the money supply and buying bonds itself. This is sometimes known as quantitative easing.

Factors which influence how much a government can borrow

  • Domestic savings. If consumers have a high savings ratio, there will be a greater ability for the private sector to buy bonds. Japan has very high levels of public sector debt, but with high domestic savings, there has been a willingness by the private sector to buy the government debt. Similarly, during the Second World War, the government was able to tap into the high levels of domestic savings to finance UK debt. 

net-lending-private-public-debt

  • In a depression, we tend to see a rise in private sector saving (the paradox of thrift) because households fear being made unemployed and firms don't want to invest. Therefore, in a recession, there is often surplus private sector savings. A surplus of unused savings means there is an advantage for the government to borrow, invest, create jobs and make use of these surplus savings. As Greg Mankiw said in March 2020. "There are times to worry about the growing government debt. This is not one of them."
  • Relative interest rates. If government bonds pay a relatively high-interest rate compared to other investments, then ceteris paribus , it should be easier for the government to borrow. Sometimes, the government can borrow large amounts, even with low-interest rates because government bonds are seen as more attractive than other investments. (e.g. in a recession government bonds are often preferred to buying shares (which are more vulnerable in a recession). This is why US bond yields fell 2008-11, despite growth in US government borrowing. 

bond-yields-net-debt

  • Lender of last resort . If a country has a Central Bank willing to buy bonds in case of liquidity shortages, investors are less likely to fear a liquidity shortage. If there is no lender of last resort (e.g. in the Euro during 2011/12) then markets have a greater fear of liquidity shortages and so are more reluctant to buy bonds.
  • Confidence and security. Usually, governments are seen as a safe investment. Many governments have never defaulted on debt payments so people are willing to buy bonds because at least they are safe. However, if investors feel a government is too stretched and could default, then it will be more difficult to borrow. Therefore, some countries like Argentina with bad credit histories would find it more difficult to borrow more. Political uncertainty can make investors more concerned.
  • Foreign Purchase . A country like the US attracts substantial foreign buyers for its debt (Japan, China, UK). This foreign demand makes it easier for the government to borrow. However, if investors feared a country could experience inflation and a rapid devaluation, foreigners would not want to hold securities in that country and it could lead to capital withdrawal.
  • Inflation. Financing the debt by increasing the money supply is risky because of the inflationary effect. Inflation reduces the real value of the government debt, but, that means people will be less willing to hold government bonds. Inflation will require higher interest rates to attract people to keep bonds. In theory, the government can print money to reduce the real value of debt; but existing savers will lose out. If the government creates inflation, it will be more difficult to attract savings in the future. A crucial factor is whether inflation is likely. In a recession, inflationary pressures vanish so it is much easier to finance a deficit by borrowing.

Why did Eurozone countries experience more debt problems than UK and US in 2012?

eu-bond-yields

  • EU debt crisis explained
  • National debt UK

Wednesday, March 11, 2020

Paradox of thrift.

  • The paradox of thrift is a concept that if many individuals decide to increase their private saving rates, it can lead to a fall in general consumption and lower output.
  • Therefore, although it might make sense for an individual to save more, a rapid rise in national private savings can harm economic activity and be damaging to the overall economy.
  • In a recession, we often see this 'paradox of thrift'. Faced with the prospect of recession and unemployment, people take the reasonable step to increase their personal saving and cut back on spending. However, this fall in consumer spending leads to a decrease in aggregate demand and therefore lower economic growth.

Paradox of thrift during 2020 corona recession

  • In 2020, the economic shutdown will lead to an unprecedented rise in savings. Partly because people are very nervous about the future economy but also because opportunities to spend are severely limited.
  • On the other hand, people who see a large fall in income will have to dip into their savings and borrow to stay afloat.

Paradox of thrift during 2009 Recession

economics essays

Paradox of Thrift in 1930s

Keynes and paradox of thrift.

economics essays

Who coined the term paradox of thrift?

"For although the amount of his own saving is unlikely to have any significant influence on his own income, the reactions of the amount of his consumption on the incomes of others makes it impossible for all individuals simultaneously to save any given sums. Every such attempt to save more by reducing consumption will so affect incomes that the attempt necessarily defeats itself. It is, of course, just as impossible for the community as a whole to save less than the amount of current investment, since the attempt to do so will necessarily raise incomes to a level at which the sums which individuals choose to save add up to a figure exactly equal to the amount of investment. —  John Maynard Keynes, The General Theory of Employment, Interest and Money , Chapter 7, p. 84
"Had the whole population been alike bent on saving, the total saved would positively have been much less, inasmuch as (other tendencies remaining the same) industrial paralysis would have been reached sooner or oftener, profits would be less, interest much lower, and earnings smaller and more precarious. This ... is no idle paradox, but the strictest economic truth." —  John M. Robertson, The Fallacy of Saving , pp. 131–132

Paradox of thrift and government borrowing

Criticisms of paradox of thrift.

  • Higher saving increases bank balances and can lead to an increase in bank lending - and hence investment.
  • A fall in demand from higher saving, will cause lower prices, which encourage demand to increase. This is related to Say's Law which states supply creates its own demand.
  • Higher domestic savings can lead to lower domestic inflation and therefore increase exports. Higher exports can boost demand.

Responding to criticisms

  • In a recession, banks may not want to lend, and even if banks do want to lend, firms do not want to borrow and invest. In fact, in a recession, firms may do the same as consumers and try to save more and pay back dent. 
  • Prices may be sticky downwards and not fall, even if there is lower demand. Also, if prices fall, deflation can discourage spending because real value of debt rises.
  • Not every country can 'export' its way out of a recession.
  • Impact of expansionary fiscal policy

Friday, June 14, 2019

Understanding uk housing market.

economics essays

  • House prices are volatile with frequent booms and busts.
  • Despite volatility, and even adjusted for inflation - UK house prices have been on a strong upward trend since the 1930s.

Main factors affecting house prices

  • Supply. UK house prices have stayed relatively high (despite recession and credit crunch) because of a shortage of supply. Ireland and Spain have seen much bigger house price falls because they have large excess supply.
  • Interest rates. The UK housing market is sensitive to changes in interest rates. Higher interest rates in the early 1990s made mortgages unaffordable and caused a big drop in house prices.
  • Economy / unemployment. A recession and rising unemployment usually causes lower demand for buying houses and a fall in price. (falling house prices also tend to deepen the recession)
  • Mortgage availability. In the boom years of 2000-07, banks were keen to lend and they relaxed their lending criteria, enabling more people to get a mortgage. But, the credit crunch meant banks had to tighten their lending criteria making mortgages difficult to get (even though interest rates were low)
  • see more at: factors affecting housing market

Why are UK house prices so volatile?

economics essays

  • Inelastic supply. It takes time to build houses - with rising demand, supply often can't keep up. This pushes prices up.
  • Change in credit conditions. Mortgage availability can vary depending on the state of the banks and financial markets.
  • Changing interest rates. Interest rates are used to control inflation, but a rise in interest rates has a big effect on demand and affordability.
  • Changes in confidence. In the boom years, we see landlords buying to let and demand rises. When prices fall, people don't want to buy for fear of negative equity.

Why are UK house prices so expensive?

economics essays

Housing market crashes

How does the housing market affect the rest of the economy, government intervention in the housing market.

  • Increasing supply to overcome fundamental shortage.
  • Protecting green belt land
  • Ensuring minimum standards of house building and ensuring tenants get a fair deal
  • Seeking to avoid house price volatility.
  • Market failure in housing
  • Cause of falling house prices
  • Latest stats and graphs on the housing market
  • Problems of UK housing market
  • Impact of falling house prices

Monday, May 13, 2019

Advantages and disadvantages of trades unions.

tradeunions

Advantages of Trades Unions

unioin

Potential disadvantage of Trades Unions

unions

  • The UK economy under Mrs Thatcher 1979-1984
  • Trade Unions

Friday, March 8, 2019

7 common economic fallacies.

economics essays

  • Immigrants increase the supply of labour but they also increase aggregate demand in the Economy. This means that they buy more goods and create additional demand in the economy. They provide labour supply and increase labour demand.
  • If immigration caused unemployment why did America not have high unemployment during times of mass immigration? Because the immigrants created as many jobs as they took.
  • Often immigrants take jobs that native workers just don’t want to do. – You won’t see big multinationals cueing up to stop immigration.
  • Furthermore, immigrants tend to be of working age. Therefore they tend to contribute more tax than receive in benefits. Without immigration, US demographics would have a larger % of dependent old people.
  • War does create more output, but only in some industries related to war. Arms manufacturers do very well out of the war. But the total output of the economy doesn’t increase instead there is a change in economic priorities. Resources are diverted from peaceful industries to industries for creating the mechanisms of war.  This is similar to the broken window fallacy.
  • If a butcher's window is smashed, the window repairer sees new work. He gains more income. But, the broken window hasn't increased economic welfare. It just means the butcher has to spend money repairing a window rather than investing in a bigger premise.
  • Increase in government spending for wars create either taxes and or higher debt payments. This is a burden on current and future taxpayers. Note The UK is still paying off debt from second world war.
  • Ronald Reagan’s economic advisers told him something along the lines of “cut taxes” and you can increase total tax income. This theory is based on the laffer curve which states that if taxes are 100% people won’t work. Therefore if you cut taxes more people work and you can increase tax revenue. This is based on the Laffer Curve.

economics essays

  • The problem is that this may work if you cut taxes from 95% to 90%. But when you cut income tax from 25% to 23% it doesn’t make any difference.
  • Some people want a target income of say £20,000. Thus if taxes fall they can earn the same by working less. Empirical evidence suggests there is little if any supply-side incentive for cutting US or UK tax rates.
  • The instinctive reaction of politicians is that if one country places a tariff barrier on our exports, we should respond by doing the same. However economic theory suggests that placing a tariff barrier on imports leads to a loss of economic welfare. It is better to not retaliate.
  • Retaliation may help one small domestic industry, but it causes costs to all consumers in the form of higher prices. There is a net welfare loss, that is not recovered by some domestic industries gaining benefit.
  • Another justification given for cutting income tax is that it will increase aggregate demand and hence increase economic growth. However this is not always true because:
  • If you cut income tax for high-income earners, they are likely to save a high % of their extra disposable income. Their marginal propensity to consume is low.
  • If you cut income tax the government has to either cut government spending or borrow. If the government has to borrow from the private sector then they will have less income to spend causing a decline in private sector spending. This is called crowding out. 
  • (Although there are certain times when a government deficit can boost AD - like in a recession.)
  • The broken window fallacy
  • The Luddite Fallacy
  • Lump of labour fallacy
  • Some misconceptions about how the economy works

Monday, May 7, 2018

Problems with the euro.

  • A single currency within the Eurozone area.
  • A common monetary policy. Interest Rates are set by the ECB for the whole Eurozone area.
  • Growth and Stability Pact. In theory there are limits on government borrowing, national debt and fiscal policy. However, in practice member countries have often violated the strict limits on government borrowing.

Problems and costs of the Euro

  • Interest rates not suitable for whole Eurozone . A common monetary policy involves a common interest rate for the whole eurozone area. However, the interest rate set by the ECB may be inappropriate for regions which are growing much faster or much slower than the Eurozone average. For example, in 2011, the ECB increased interest rates because of fears of inflation in Germany. However, in 2011, southern Eurozone members were heading for recession due to austerity packages. The higher interest rates set by the ECB were unsuitable for countries such as Portugal, Greece and Italy.
  • The Euro is not an optimal currency area . If a state in the US, such as New York ,was in recession, workers in New York could move to New England and get a job. However, in the Eurozone this is much more difficult; it involves moving country and possibly learning a new language. There are more barriers to the movement of labour and capital within a diverse region like Europe. Therefore, an unemployed Greek can't easily relocate to Germany. see: Two Speed Europe
  • Limits Fiscal Policy . With a common monetary policy it is important to have similar levels of national debt, otherwise countries may struggle to attract enough buyers of national debt. This is a growing problem for many Mediterranean countries like Italy, Greece and Spain who have large national debts and rising bond yields.
  • Lack of Incentives . It is argued that being a member of the Euro protects a country from a currency crisis. Therefore, there is less incentive for countries to implement structural reform and fiscal responsibility. For example, in good years Greece was able to benefit from very low bond yields on its debt because people felt Greek debt would be secured by rest of Europe. But, this wasn't the case, and Greece were lulled into a fall sense of security.
  • No scope for devaluation . Since the start of the Euro, several countries have experienced rising labour costs. This has made their exports uncompetitive. Usually, their currency would devalue to restore competitiveness. However, in the Euro, you can't devalue and you are stuck with uncompetitive exports. This has led to record current account deficits, a fall in exports and low growth. This has particularly been a problem for countries like Portugal, Italy and Greece.

eu-currentaccount

  • No Lender of Last Resort . The ECB is unwilling to buy government bonds if there is a temporary liquidity shortage. This makes markets more nervous about holding debt from eurozone economies and precipitates fiscal crisis. See: Problems of Italy - why Italian bonds increased despite having a much lower budget deficit than UK.
  • However it is worth noting that since Mario Draghi took over and promised to 'do whatever it takes, the ECB has effectively acted as lender of last resort.
  • Deflationary Bias I would argue there is a deflationary bias in the Eurozone which increases the risk of recession and higher unemployment

UK, EU, US unemployment

  • Divergence in bank rates . In theory, the Eurzone creates a common interest rate. However, in the credit crisis of 2010-13, we see rising bank rates for peripheral Eurozone countries, like Italy and Spain. Small and medium sized firms faced higher borrowing costs than in 2005, even though the ECB cut the main base rate. This suggests that the ECB was unable to loosen monetary policy when needed. See more on credit policy 
  • Asymmetric Shocks . If one country experienced an external shock it might need a different response. But this is not possible with a common currency. E.g. German reunification required higher interest rates in order to help reduce inflation but this was not good for many other countries.
  • An oil shock would affect net importers like France more than Norway and the UK who export a lot. Monetary Policy will have different effects in different countries. For example, the UK is sensitive to changes in the interest rate because many people have mortgages.

Problems for UK Economy

  • Housing market. Many in the UK have a mortgage which is a big % of their disposable income. This is related to the high cost of buying houses in the UK.
  • Variable Mortgages In the UK more homeowners have variable mortgages. These two factors means UK consumers are very sensitive to changes in the base rate. If the ECB kept interest rates higher than the UK needed it would create serious problems in the UK. Arguably to join the UK would need to reform its housing market and reliance on variable mortgages.
  • Why it's very hard to leave Euro
  • European fiscal crisis
  • Benefits of Joining the Euro
  • Danger Ahead for Mighty Euro at Economist

Tuesday, April 3, 2018

Predictions for the dollar as the reserve currency.

economics essays

Will the Euro Replace the Dollar as the World’s Reserve Currency?

  • Since 1999, the Dollar’s share of the world’s currency reserves have fallen from 70.9% to 64%
  • In the same period, the Euro has increased from 17.9% to 25.8%
  • (the 3rd biggest reserve currency is the Pound sterling 4%
  • (the 4th biggest reserve currency is the Japanese Yen 2.8%)

Why the Euro May soon Replace the Dollar

  • The Dollar has been very weak in the past 8 years. Against the Euro, the Dollar has fallen by over 30% since 2001. The Dollar has also fallen against the Yen and other currencies. This means that countries holding reserves in dollars are seeing a decline in their value. For example, China has over $1,400 billion of dollar reserves. A 20% devaluation represents a significant loss for them. Therefore, the rational step is to diversify out of the dollar.
  • Countries dropping the Dollar Peg . Many middle eastern Countries such as Saudi Arabia, Kuwait and Syria used to maintain a dollar peg. However, there are signs that they no longer want to keep a peg against a devaluing dollar. Kuwait and Syria have dropped their peg and Saudi Arabia recently decided not to follow the US in cutting interest rates.
  • Dollar’s weakness may continue. The US economy is continuing to slow down as it remains hard hit by the housing slump. US interest rates have fallen and may continue to fall by more than the Eurozone. As interest rates in the US are low it becomes less attractive to buy US dollars so the devaluation will continue.
  • US Trade Deficit (current account deficit of 5%). In recent years, the US has built up a large current account deficit. This has caused an outflow of currency and is a factor in maintaining the weakness of the dollar. (although the recent devaluation though has helped reduce the deficit from over 6% to 4.7%)
  • The Euro is a real alternative . The Euro economy is now as large as the US. The Euro may also be seen as more politically desirable. European countries were less willing to get involved in Iraq and many accuse the US of an ‘imperial overreach’ with too many foreign bases and interference around the world. The European Union, by contrast, provides greater diversity and is politically more attractive, especially to middle eastern countries.
  • Better inflation performance of the Eurozone to the US. There was a marked contrast in response to the recent credit crisis. The US slashed rates to 2.25%, the ECB barely cut rates at all. The lower rates and devaluation of the dollar makes future inflation in the US more likely, this will only make the US less attractive.
  • Effects of a falling dollar
  • Why do foreigners hold US dollars?
  • Will the Euro Replace the Dollar at Economist's view
  • Why the Euro will soon replace the dollar as the world's reserve currency

Wednesday, November 1, 2017

Importance of economic growth, why economic growth is important.

economics essays

  • Reduction in poverty . Increased national output means households can enjoy more goods and services. For countries with significant levels of poverty, economic growth can enable vastly improved living standards. For example, in the nineteenth century, absolute poverty was widespread in Europe, a century of economic growth has lifted nearly everyone out of this state of poverty. Economic growth is particularly important in developing economies.
  • Reduced Unemployment . A stagnant economy leads to higher rates of unemployment and the consequent social misery. Economic growth leads to higher demand and firms are likely to increase employment.
  • Improved public services . Higher economic growth leads to higher tax revenues (even with tax rates staying the same). With higher growth, incomes and profit, the government will receive more income tax, corporation tax and expenditure taxes. The government can then spend more on public services. 

economics essays

  • Political aspect . Elected politicians have a vested interest in higher economic growth. Higher growth enables vote pleasing policies such as tax cuts and/or more public spending.

Virtuous cycle of economic growth

  • Countries with positive rates of economic growth will create a virtuous cycle
  • Economic growth will encourage inward investment as firms seek to benefit from rising demand
  • Higher growth leads to improved tax revenues which can be spent on long-term public sector works, such as improved transport and communication. This helps long-term growth.
  • Confidence to invest. Higher growth encourages firms to take risks - innovate and invest in future products and productive capacity.

Limitations of economic growth

  • Inequality and distribution . Economic growth doesn't necessarily reduce relative poverty, it depends on the distribution of incomes. Economic growth could bypass the poorest in society. For example in the 1980s, the Gini coefficient rose sharply - the richest 1% gained dis proportionality more.
  • Negative externalities . Economic growth can cause negative externalities such as pollution, higher crime rates and congestion which actually reduce living standards. For example, China has experienced very rapid economic growth but is now experience very serious levels of air pollution in major cities.
  • Economic growth may conflict with the environment . e.g. increased carbon production is leading to global warming. Economic growth may bring benefits in the short-term, but costs in the long-term.
  • It depends on what is produced . The Soviet Union has fantastic rates of economic growth, but, often through producing a lot of steel and pig iron that was not actually very useful.
  • Economic growth can be unsustainable . If growth is too rapid, it will cause inflation, current account deficit and can lead to boom and bust.
  • Does happiness actually increase? Theories of hedonistic relativism suggest (beyond a certain level) increasing output has no effect on changing life quality or happiness.
  • Causes of Economic Growth
  • Benefits of economic growth

The Importance of Economics

Saturday, october 21, 2017, wednesday, october 11, 2017, interest rates explained.

economics essays

Effect of an Increase in Interest Rates

  • Cost of borrowing is more expensive. If borrowing is more expensive consumers will take out fewer loans. Firms will borrow less. Therefore consumer spending and investment will fall (or increase at slower rates)
  • Mortgage and loan repayments increase. This reduces consumer disposable income and consumer spending further.
  • Return on savings increase. More attractive to save and this will reduce consumer spending
  • Higher interest rates cause an appreciation in the exchange rate due to hot money flows. (It is more attractive to save in the UK, if UK interest rates are higher than other countries)
  • An appreciation in the exchange rate makes more expensive, leading to less export demand
  • Fall in asset prices. Higher interest rates can make it less attractive to buy a house with a mortgage leading to lower house prices.

economics essays

Macro effects

  • If consumer spending and investment falls, this will lead to lower AD. Therefore this causes a fall in Real GDP or at least a fall in the rate of economic growth.
  • Lower growth will tend to increase unemployment. With less output, firms demand less workers.
  • Lower growth will also help to reduce inflation.

economics essays

How does Bank of England decide whether to increase interest rates?

  • Inflation target of 2%. But Bank has to consider other objectives such as
  • economic growth and inflation.
  • It also has to consider the type of inflation. Is it temporary cost-push inflation or underlying inflationary pressures.
  • Is the economy reaching full capacity?

Example of interest rate dilemma Nov 2017

economics essays

Real interest rates

economics essays

  • Interest rates and the economy
  • Essay on Effects of Rising interest rates
  • Interest Rate Swaps explained

Thursday, October 5, 2017

The economy of the 1970s.

stagflation

Barber Boom 1970-73

  • The Bank of England deregulated the mortgage market - meaning High Street Banks could now lend mortgages (not just local building societies). This helped fuel a rise in house prices and consumer wealth.
  • Barber Boom of 1972. In the 1972 budget, the chancellor Anthony Barber made a dash for growth - with large tax cuts against a backdrop of high economic growth.
  • Growth of Credit. It was in the 1970s, we saw the first mass use of credit cards (Access). This helped create a consumer bubble.

Inflation Crisis

inflation-1970s

  • Rising wages, partly due to strength of unions.
  • The inflationary budget of 1972.
  • Growth in credit and consumer spending.
  • Oil price shock of 1973, leading to 70% increase in oil prices.

Trying to deal with inflation

  • blue line - nominal oil prices
  • Yellow line - Real oil prices, adjusted for inflation

current-account-1970s

1976 IMF Bailout

net-borrowing-55-14

Saturday, June 17, 2017

  • What to produce? - Is it worth spending more on health care?
  • How to produce? - Should we leave it to market forces or implement government regulations.
  • For whom to produce? - How should we distribute resources, should we place higher income tax on the wealthiest in society?
Mass unemployment in the 1930s
  • Policies to reduce unemployment
  • Policies to reduce inflation
Market failure - stuck in traffic jam, breathing car fumes
  • The over production of negative externalities (e.g. pollution/congestion)
  • The underproduction of goods with positive externalities (e.g. education, health care, public transport).
  • Non-provision of Public Goods - (national defence, law and order)
  • Tax negative externalities
  • Subsidise public services like health care and education.
  • Carbon Tax - should we implement a carbon tax to reduce global warming?
  • Should we tax fatty foods?
  • Efficiency v equality
  • GDP and Happiness
  • Economics - The Dismal Science
  • How to deal/combat global warming?
  • Does globalisation help or hinder developing countries?
  • How to live in a society without oil?
  • Browse All Articles
  • Newsletter Sign-Up

Economics →

economics essays

  • 29 Aug 2024
  • Research & Ideas

Shoot for the Stars: What to Know About the Space Economy

Outer space has come a long way since the 1960s. Matthew Weinzierl explains the current state of the space economy, highlighting the various opportunities for businesses hidden among the stars.

economics essays

  • 22 Aug 2024

Reading the Financial Crisis Warning Signs: Credit Markets and the 'Red-Zone'

While fears about slowing economic growth have roiled stock markets in recent weeks, credit markets remain stable and bullish, and a recession hasn't materialized as some analysts predicted. Robin Greenwood discusses the market conditions that are buoying the economy—and risk signals to watch.

economics essays

  • 05 Aug 2024

Watching for the Next Economic Downturn? Follow Corporate Debt

Rising household debt alone isn't enough to predict looming economic crises. Research by Victoria Ivashina examines the role of corporate debt in fiscal crashes since 1940.

economics essays

  • 23 Jul 2024

Forgiving Medical Debt Won't Make Everyone Happier

Medical debt not only hurts credit access, it can also harm one's mental health. But a study by Raymond Kluender finds that forgiving people's bills—even $170 million of debt—doesn't necessarily reduce stress, financial or otherwise.

economics essays

  • In Practice

The New Rules of Trade with China: Navigating Tariffs, Turmoil, and Opportunities

Trade tensions between the US and China have continued well beyond the Trump Administration's tariffs. Harvard Business School faculty offer insights for leaders managing the complexities of doing business with the world's second-largest economy.

economics essays

  • 18 Jun 2024

Central Banks Missed Inflation Red Flags. This Pricing Model Could Help.

The steep inflation that plagued the economy after the COVID-19 pandemic took many economists by surprise. But research by Alberto Cavallo suggests that a different method of tracking prices—a real-time model—could predict future surges better.

economics essays

  • 28 May 2024

Job Search Advice for a Tough Market: Think Broadly and Stay Flexible

Some employers have pared staff and reduced hiring amid mixed economic signals. What does it mean for job seekers? Paul Gompers, Letian Zhang, and David Fubini offer advice for overcoming search challenges to score that all-important offer.

economics essays

  • 21 May 2024

What the Rise of Far-Right Politics Says About the Economy in an Election Year

With voters taking to the polls in dozens of countries this year, could election outcomes lean conservative? Paula Rettl says a lack of social mobility and a sense of economic insecurity are some of the factors fueling far-right movements around the world.

economics essays

  • 11 Apr 2024

Why Progress on Immigration Might Soften Labor Pains

Long-term labor shortages continue to stoke debates about immigration policy in the United States. We asked Harvard Business School faculty members to discuss what's at stake for companies facing talent needs, and the potential scenarios on the horizon.

economics essays

  • 01 Apr 2024

Navigating the Mood of Customers Weary of Price Hikes

Price increases might be tempering after historic surges, but companies continue to wrestle with pinched consumers. Alexander MacKay, Chiara Farronato, and Emily Williams make sense of the economic whiplash of inflation and offer insights for business leaders trying to find equilibrium.

economics essays

  • 29 Jan 2024

Do Disasters Rally Support for Climate Action? It's Complicated.

Reactions to devastating wildfires in the Amazon show the contrasting realities for people living in areas vulnerable to climate change. Research by Paula Rettl illustrates the political ramifications that arise as people weigh the economic tradeoffs of natural disasters.

economics essays

  • 10 Jan 2024

Technology and COVID Upended Tipping Norms. Will Consumers Keep Paying?

When COVID pushed service-based businesses to the brink, tipping became a way for customers to show their appreciation. Now that the pandemic is over, new technologies have enabled companies to maintain and expand the use of digital payment nudges, says Jill Avery.

economics essays

  • 17 Aug 2023

‘Not a Bunch of Weirdos’: Why Mainstream Investors Buy Crypto

Bitcoin might seem like the preferred tender of conspiracy theorists and criminals, but everyday investors are increasingly embracing crypto. A study of 59 million consumers by Marco Di Maggio and colleagues paints a shockingly ordinary picture of today's cryptocurrency buyer. What do they stand to gain?

economics essays

  • 15 Aug 2023

Why Giving to Others Makes Us Happy

Giving to others is also good for the giver. A research paper by Ashley Whillans and colleagues identifies three circumstances in which spending money on other people can boost happiness.

economics essays

  • 13 Mar 2023

What Would It Take to Unlock Microfinance's Full Potential?

Microfinance has been seen as a vehicle for economic mobility in developing countries, but the results have been mixed. Research by Natalia Rigol and Ben Roth probes how different lending approaches might serve entrepreneurs better.

economics essays

  • 23 Jan 2023

After High-Profile Failures, Can Investors Still Trust Credit Ratings?

Rating agencies, such as Standard & Poor’s and Moody's, have been criticized for not warning investors of risks that led to major financial catastrophes. But an analysis of thousands of ratings by Anywhere Sikochi and colleagues suggests that agencies have learned from past mistakes.

economics essays

  • 29 Nov 2022

How Much More Would Holiday Shoppers Pay to Wear Something Rare?

Economic worries will make pricing strategy even more critical this holiday season. Research by Chiara Farronato reveals the value that hip consumers see in hard-to-find products. Are companies simply making too many goods?

economics essays

  • 21 Nov 2022

Buy Now, Pay Later: How Retail's Hot Feature Hurts Low-Income Shoppers

More consumers may opt to "buy now, pay later" this holiday season, but what happens if they can't make that last payment? Research by Marco Di Maggio and Emily Williams highlights the risks of these financing services, especially for lower-income shoppers.

economics essays

  • 01 Sep 2022
  • What Do You Think?

Is It Time to Consider Lifting Tariffs on Chinese Imports?

Many of the tariffs levied by the Trump administration on Chinese goods remain in place. James Heskett weighs whether the US should prioritize renegotiating trade agreements with China, and what it would take to move on from the trade war. Open for comment; 0 Comments.

economics essays

  • 05 Jul 2022

Have We Seen the Peak of Just-in-Time Inventory Management?

Toyota and other companies have harnessed just-in-time inventory management to cut logistics costs and boost service. That is, until COVID-19 roiled global supply chains. Will we ever get back to the days of tighter inventory control? asks James Heskett. Open for comment; 0 Comments.

  • Senior Essay

The senior essay for economics majors is optional. However, the senior essay is required for consideration for Distinction in the Major. Most students who write a senior essay find it immensely rewarding and consider it one of their best experiences at Yale.

Senior essays are an opportunity for students to engage in independent, original economic research. Essays are not reviews of the literature, rather they are an examination of an hypothesis using the tools of economics. In particular, the essay must contain original research and/or analysis. They can be theoretical, empirical or computational. The senior essays that receive A’s and are awarded prizes are typically those that use economics tools (and, where appropriate, data) to offer fresh insights on questions. Topics are as diverse as recording and analyzing the behavior of black jack players, the effect of charter schools on student performance, the effect of China’s development on trade, the effect of the Fed on the stock market…. Examples of past essays are available on the department website .

See below for a guide written by thesis writers in the class of 2023.

There are no page requirements or formatting requirements for senior essays in economics. Advice regarding bibliographies, graphs, etc. should be given by your advisor. Generally, essays run about 30 pages.

Senior essay writers may receive a maximum of $500 for legitimate research expenses, provided the student has made a good-faith effort to obtain funding from Yale College. There are many funding opportunities available for research which can be found here: https://funding.yale.edu/find-funding/class-year#toc2 . Funding requests are reviewed on a case-by-case basis and must be approved by the DUS and Chair.

NOTE: Students must take two econometrics courses (or ECON 135 plus one econometrics course) in order to write a senior essay. The second econometrics course can be taken Cr/D/F for the purposes of the senior essay (but in this case it will not count toward the major requirements). The second econometrics course can be taken in the fall of senior year. 400-level applied econometrics courses (which currently include ECON 419, 438 and 439) qualify.

  • Undergraduate Program
  • Requirements
  • Courses Taken Outside of Yale
  • Related Course Credit
  • Double Majors
  • Forms and Documents
  • Frequently Asked Questions
  • Opportunities
  • Peer Mentors
  • Student Resources
  • Women in Economics

Senior essays can be 1-term or 2-term essays. The difference between a 1-term and a 2-term essay is that the 2-term essay is broader in scope and/or goes in greater depth. Most economics majors do 2-term essays.  Please note that a 1-term essay cannot be done in the spring term of your senior year.

Senior essays can be done in one of several ways:

1-Term Essays

  • Enroll in Econ 491 in the fall of your senior year.

2-Term Essays

  • Enroll in Econ 491 and Econ 492
  • Expand a term paper from a fall-term seminar in your senior year and enroll in Econ 492 ( depends on availability of seminar instructor for both semesters )

For the class of 2025

  • Enroll in Econ 491 ( not necessary if you are doing a senior essay out of a fall seminar)
  • Choose an advisor and a topic. You should refer to the Potential Advisors webpage for help finding an advisor who is available and is appropriate for your topic. If you have difficulty finding an advisor, see the ECON 491 instructor or the DUS for suggestions. There are many economics faculty members who may be ideal advisors for your topic.  Students may also choose a campus economist from outside of the department. (Permission of the DUS required to choose a non-economist adviser.) In order to do an essay out of a fall seminar, you need the seminar professor to agree to be your advisor (for both semesters in the case of a 2-term essay).
  • Meet with your advisor regularly. It is the student’s responsibility to make sure that these regular meetings occur.
  • Submit a “Senior Essay Prospectus” on or before Monday, September 30, 2024 by 4:30 pm. The prospectus must be signed by your advisor. All students planning to write a senior essay must hand in a prospectus at this time. Failure to do so results in your not being permitted to write an essay. A late prospectus will not be accepted without a Dean’s note.
  • Students enrolled in a 2-term essay must submit a written progress report to their advisor on Wednesday, November 6, 2024. For essays involving substantial data collection and statistical analysis, a description of the research question and the data that has been gathered for analysis may be appropriate. For others, a portion of the essay itself or a detailed outline describing the thesis question, existing literature, and planned method of analysis is suitable. Based on this report, your advisor will be asked to give you a temporary grade of satisfactory or not satisfactory for the fall term. This temporary grade will be replaced by the final grade on your senior essay in April.
  • You are allowed to switch advisor, with DUS permission, but no later than the progress report due date . In this case you need to submit a new prospectus form signed by the new advisor by the progress report due date .
  • A student who wishes to change a 1-term essay to a 2-term essay must get permission from the advisor and the DUS prior to the Thanksgiving break. To convert, a student must have made satisfactory progress on the essay by that time. No conversions will be allowed after Thanksgiving.
  • 1-term senior essays are due to your advisor on Wednesday, December 4, 2024 by 4:30 pm. The advisor will evaluate and grade the paper, which will be your grade for the course. The grade and evaluation will be used for determination of distinction and departmental prizes. A final version of the 1-term senior essay must be submitted on or before Wednesday, April 2, 2025 by 4:30 pm via email to Maria Volonte, Undergraduate Registrar, at [email protected]  for grading by the outside anonymous reader. Late essays will be accepted only with a Dean’s Extension. Essays that are submitted late without a Dean's Extension will receive a grade penalty (which will grow with the length of the delay).
  • Note: students doing the 1-term essay may continue to make additional revisions beyond the fall term before the April due date. Please bear in mind, however, that advisors of 1-term essays may have other commitments and are not obligated to advise you beyond the fall term.

Spring 2025

  • For students doing 2-term essays, enroll in Econ 492b.
  • 2-term senior essays must be submitted on or before Wednesday, April 2, 2024 at 4:30 pm via email to Maria Volonte, Undergraduate Registrar, at [email protected] . Late essays will be accepted only with a Dean’s Extension. Essays that are submitted after the deadline without a Dean's Extension will receive a grade penalty (which will grow with the length of the delay).
  • Advisor’s Reports with grades and comments and Reader’s Reports with grades and comments are usually available by the end of reading week in the Economics Undergraduate Registrar’s Office.

Hi Juniors, If you are reading this guide, this means (we hope) that you’re considering writing a senior essay in economics! Writing an economics thesis is an incredibly fulfilling experience, and we hope that if you feel prepared, you write one! To help clarify the process and give advice, the Economics Peer Mentors from the 2022-2023 academic year have made an updated version of this guide from the Class of 2021 that was created by Alya Ahmed and Lara Varela Gajewski, with responses from the Class of 2023.

Link to Class of 2023 Guide

Best of luck, Sarah Moon ‘23, Economics & Mathematics Ayumi Sudo ‘23, Economics

Some Takeaways: 

Most seniors, including all seniors that responded to our survey, wrote a two-term thesis. 

Seniors wrote essays on topics in:

  • Labor economics
  • Macroeconomics
  • Econometrics
  • Behavioral economics
  • Public economics 
  • Environmental economics
  • ...and more 

Advisors were chosen from: 

  • Herb Scarf RA and Tobin RA positions
  • Classes taken in junior year or in the fall semester senior seminars
  • Recommended by other professors/ECON 491 TA's
  • Cold emailing

Econ thesis advisors are from:

  • Yale Economics Department
  • Yale School of Management 
  • Yale School of Environment
  • ...and more

Topics were inspired by: 

  • Personal interests 
  • Previously taken classes
  • Summer research work
  • Interesting data sets

Economics 491 counts as a 400 level, senior requirement course. Economics 492 counts as an elective.

Students writing a one-semester essay out of Economics 491 will receive a letter grade at the end of the fall semester based on the quality of their senior thesis. Students writing a one-semester essay out of a senior seminar will only receive a grade for the seminar on their transcript. They will not see their senior essay grade on their transcript, but it will be recorded by the department for distinction purposes. Students writing a two-semester essay by taking 491 and 492, will receive a temporary 491 grade (Satisfactory/Unsatisfactory) at the end of the fall semester. That grade will be replaced by a letter grade given for 491 and 492 based on the quality of the senior essay. Students who write a two-semester essay by taking a seminar and then 492 will receive a grade based on the requirements of the seminar in the fall. In the spring they will receive a grade for 492 based on the quality of the senior essay. Your senior essay will be graded by your advisor.

To qualify for distinction, a senior must receive a grade of A or A- from their advisor on the senior essay and have 3/4 of their economics grades be A’s or A-’s. For the purpose of distinction economics grades include related course credit, but do not include introductory microeconomics, introductory macroeconomics, the math requirement nor courses taken outside of Yale.

Senior Essay Course Lecturer:

Rebecca Toseland will be the Fall 2024 lecturer for The Senior Essay (Econ 491a) course.

Lecturer and TF office hours are by appointment only. Schedule a time on office hours sign-up sheet below.

Senior Essay TF:

Carles Aulés-Blancher will be the Fall 2024 TF for The Senior Essay (Econ 491a) course.

Office Hours Sign-up Sheet

Lecturer and TF office hours are by appointment only. Schedule a time on this sign-up sheet (must be signed-in with Eli Apps to view and edit).

If you would like to request an appointment at a different time, please email the Lecturer or TF.

Senior Essay Prizes

Essays will also be read by an anonymous economics department faculty member. Only the advisor’s grade will appear on the transcript. However, both the advisor and the anonymous readers must nominate an essay for that essay to move on to the awards committee.

Three or more prizes for outstanding senior essays are awarded each year by the economics undergraduate prize committee. The  Charles Heber Dickerman Memorial Prize  is awarded for the best senior essay; the  Ronald Meltzer/Cornelia Awdziewicz Economic Award  is awarded for one or two more outstanding senior essays and the  Ellington Prize  is awarded for one or more outstanding essays in the field of finance.

Senior Essays Nominated for Prizes

Women in Economics 2021 Senior Thesis Spotlight

Economics Essay Topics

Barbara P

180 + Easy Economics Essay Topics To Get You Inspired

13 min read

Published on: May 16, 2023

Last updated on: Jan 30, 2024

economics essay topics

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Many students struggle to find interesting essay topics in the field of economics that can captivate their readers.

Without engaging essay topics, students may lose motivation and fail to develop a deep understanding of the subject matter. They may also struggle to communicate the significance of economics in our everyday lives.

Fret not! We have compiled a list of compelling economics essay topics that will provide you with a starting point for your essay.

Let's dive into our list of thought-provoking essay topics that will inspire your writing.

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Economics Essay Topics For Students

Explore a diverse range of economics essay topics that will provide students with a deeper understanding of key economic concepts.

Economics Essay Topics High School

  • The role of consumer choice in shaping market demand and supply.
  • Analyzing the impact of international trade on the domestic economy.
  • The relationship between economic growth and standard of living.
  • Exploring the causes and consequences of inflation on the economy.
  • The impact of government spending and taxation on the overall economy.
  • Evaluating the benefits and costs of different types of economic systems.
  • The role of monetary policy in controlling inflation and promoting economic stability.
  • Analyzing the impact of income inequality on social and economic well-being.
  • The economic implications of technological advancements, such as automation and artificial intelligence.
  • Understanding the role of the Federal Reserve and its influence on the economy in the United States.

Economics Essay Topics Grade 10

  • Understanding the concept of scarcity and its impact on economic decision-making.
  • Exploring the role of supply and demand in determining market prices and quantities.
  • The benefits and drawbacks of globalization on local economies and workers.
  • Analyzing the economic impact of natural disasters and strategies for disaster recovery.
  • The role of entrepreneurship in driving economic growth and innovation.
  • Examining the influence of advertising and marketing on consumer behavior.
  • The economic consequences of unemployment and strategies for reducing it.
  • The impact of government regulations on businesses and market competition.
  • Analyzing the relationship between economic development and environmental sustainability.
  • Understanding the basics of personal finance, including budgeting, saving, and investing.

Economics Essay Topics Grade 11

  • Understanding the concept of supply and demand and its influence on market prices.
  • Exploring the role of entrepreneurship in economic development and job creation.
  • Analyzing the impact of government taxation on consumer behavior and business decisions.
  • The relationship between economic indicators (GDP, inflation, unemployment) and overall economic health.
  • The pros and cons of different economic systems (capitalism, socialism, mixed economy).
  • Evaluating the role of banks and financial institutions in promoting economic growth.
  • Examining the causes and consequences of income inequality in society.
  • The role of education and human capital in fostering economic development.
  • Analyzing the economic implications of population growth and migration.
  • The impact of technological advancements on the labor market and job opportunities.

Economics Essay Topics Grade 12

  • The impact of globalization on national economies and local industries.
  • Analyzing the role of government intervention in addressing market failures.
  • The economic implications of climate change and sustainable development.
  • Exploring the relationship between economic growth and income inequality.
  • The effectiveness of monetary policy in managing inflation and unemployment.
  • Examining the causes and consequences of financial crises in different economies.
  • The role of technology and innovation in shaping economic growth and productivity.
  • Analyzing the economic challenges and opportunities in an aging population.
  • The impact of international trade agreements on domestic industries and employment.
  • Evaluating the role of fiscal policy in stimulating economic recovery and growth.

Economics Essay Topics for College Students

  • The impact of globalization on income inequality.
  • Analyzing the economic consequences of automation and artificial intelligence.
  • Evaluating the effectiveness of fiscal policy in stabilizing the economy.
  • The economics of healthcare systems and the challenges of healthcare financing.
  • Understanding the economics of climate change and the costs of mitigation strategies.
  • Exploring the economic implications of income inequality and its effects on social well-being.
  • The economics of international trade and its impact on domestic industries and employment.

Economics Essay Topics for University Students

  • Analyzing the economic impact of government debt and fiscal deficits.
  • The role of central banks in monetary policy and financial stability.
  • Understanding the economics of poverty and strategies for poverty alleviation.
  • Evaluating the effectiveness of economic sanctions as a foreign policy tool.
  • The economics of natural resource depletion and sustainable resource management.
  • Analyzing the economic implications of demographic changes, such as population aging.
  • Exploring the economics of housing markets and the challenges of affordable housing.
  • The role of behavioral economics in understanding consumer behavior and decision-making.
  • Understanding the economic consequences of income mobility and intergenerational economic disparities.
  • Analyzing the economic impact of technological advancements, such as blockchain and cryptocurrencies.

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Economics Essay Topics for Different Categories 

Explore a wide range of economics essay topics tailored for various categories! 

Microeconomics Essay Topics

  • The concept of elasticity and its significance in understanding consumer behavior.
  • Analyzing the role of competition in shaping market outcomes and efficiency.
  • The economic implications of government intervention in regulating monopolies.
  • Exploring the factors influencing the pricing decisions of firms in different industries.
  • The impact of income distribution on consumer demand and welfare.
  • Examining the economic effects of minimum wage policies on employment and income.
  • The role of behavioral economics in explaining irrational consumer choices.
  • Analyzing the efficiency of market structures, such as perfect competition and monopolistic competition.
  • The economic implications of information asymmetry in markets.
  • Understanding the concept of opportunity cost and its significance in decision-making.

Macroeconomics Essay Topics

  • Analyzing the determinants of economic growth in a country or region.
  • The role of fiscal policy in managing aggregate demand and stabilizing the economy.
  • Examining the impact of international trade on the balance of payments and exchange rates.
  • The economic consequences of government budget deficits and public debt.
  • Analyzing the relationship between inflation and unemployment (Phillips curve).
  • Understanding the role of central banks in controlling money supply and interest rates.
  • Exploring the causes and consequences of business cycles in the economy.
  • The impact of demographic changes on long-term economic growth and sustainability.
  • Analyzing the effectiveness of monetary policy in managing inflation and promoting economic stability.
  • The role of international financial institutions (IMF, World Bank) in global economic governance.

Managerial Economics Essay Topics

  • Evaluating the cost-benefit analysis of business decisions in different industries.
  • The role of pricing strategies in maximizing firm profits and market competitiveness.
  • Analyzing the economic implications of mergers and acquisitions in the business world.
  • Understanding the concept of economies of scale and its impact on production costs.
  • Exploring the role of market research in informing business decision-making.
  • The economic consequences of outsourcing and offshoring in multinational corporations.
  • Examining the relationship between advertising and consumer behavior.
  • Analyzing the effects of government regulations on business operations and profitability.
  • The impact of technological advancements on production efficiency and innovation.
  • Understanding the concept of risk management and its application in business decision-making.

Consumerism Essay Topics

  • The economics of consumer behavior and decision-making, including factors that influence choices.
  • Analyzing the impact of advertising and marketing on consumer behavior and preferences.
  • Understanding the economics of consumer credit and the consequences of debt.
  • Evaluating the effectiveness of consumer protection laws and their impact on market outcomes.
  • The role of e-commerce and technology in changing consumer behavior and market competition.
  • Analyzing the impact of product differentiation on consumer choice and market competition.
  • Understanding the economics of brand loyalty and its impact on market outcomes.
  • Examining the relationship between income and consumption patterns in different socioeconomic groups.
  • Evaluating the role of social media in influencing consumer behavior and preferences.
  • The impact of globalization on consumerism and consumer culture in different parts of the world.

Economic History Essay Topics

  • The impact of the Industrial Revolution on economic and social changes in the 18th and 19th centuries.
  • Analyzing the causes and consequences of the Great Depression and its impact on global economies.
  • Understanding the economic consequences of World War I and World War II.
  • Examining the economic policies and reforms during the post-war era and their impact on economic growth.
  • The role of Colonization and Imperialism in shaping global economic systems.
  • Analyzing the economic impact of the Renaissance and the emergence of mercantilism.
  • Understanding the economic transformations during the Agricultural Revolution.
  • Evaluating the economic consequences of the Gold Standard and its eventual abandonment.
  • The impact of globalization on economic systems throughout history.
  • Analyzing the economic implications of major technological advancements throughout history.

Socio-Economics Essay Topics

  • Understanding the relationship between socioeconomic status and access to education.
  • Analyzing the impact of income inequality on social mobility and intergenerational economic disparities.
  • The Role of Gender and racial inequalities in shaping socioeconomic outcomes.
  • Evaluating the effectiveness of social welfare programs in reducing poverty and inequality.
  • Understanding the economics of discrimination and its consequences on labor market outcomes.
  • Analyzing the socioeconomic implications of urbanization and rural-urban migration.
  • The role of social capital in promoting economic development and community well-being.
  • Examining the impact of globalization on social and cultural dynamics.
  • Understanding the relationship between healthcare access, socioeconomic factors, and health outcomes.
  • Analyzing the economics of crime and its impact on socioeconomic conditions.

Health Economics Essay Topics

  • The role of healthcare financing systems in ensuring access to quality healthcare.
  • Analyzing the impact of health insurance coverage on healthcare utilization and outcomes.
  • Understanding the economics of healthcare delivery systems, such as public vs. private healthcare.
  • Evaluating the cost-effectiveness of healthcare interventions and technologies.
  • Analyzing the economic implications of population aging on healthcare systems.
  • The role of pharmaceutical pricing and its impact on affordability and access to medications.
  • Examining the economics of healthcare disparities and the factors contributing to inequities.
  • Understanding the economics of preventive healthcare and its impact on long-term costs.
  • The role of health economics in health policy decision-making and resource allocation.
  • Analyzing the impact of healthcare reforms on healthcare access, quality, and costs.

International Economics Essay Topics

  • Analyzing the impact of trade liberalization on developing economies.
  • Understanding the economics of multinational corporations and their role in global trade.
  • Examining the economic implications of regional economic integration, such as the European Union.
  • The role of foreign direct investment in promoting economic growth and development.
  • Evaluating the impact of protectionist trade policies on domestic industries and global trade.
  • Analyzing the economic consequences of currency exchange rate fluctuations.
  • Understanding the economics of international aid and its impact on recipient countries.
  • The role of international financial institutions, such as the World Bank and IMF, in global economic governance.
  • Analyzing the economic impact of global supply chains and outsourcing.
  • Understanding the economic challenges and opportunities of economic sanctions on countries.

Behavioral Economics Essay Topics

  • Exploring the role of cognitive biases in decision-making and their impact on economic outcomes.
  • Understanding the economics of consumer behavior and the influence of psychological factors.
  • Analyzing the impact of nudges and behavioral interventions on individual choices and societal outcomes.
  • The role of social norms and social preferences in shaping economic behavior.
  • Evaluating the effectiveness of behavioral interventions in promoting sustainable behaviors.
  • Examining the economics of addiction and the impact of behavioral factors on substance abuse.
  • Understanding the role of emotions and affective factors in economic decision-making.
  • Analyzing the impact of framing and context effects on economic choices.
  • The role of overconfidence and self-control in financial decision-making.
  • Understanding the economics of charitable giving and pro-social behavior.

Environmental Economics Essay Topics

  • Analyzing the economic implications of climate change and the costs of mitigation strategies.
  • Understanding the economics of renewable energy adoption and its impact on economic growth.
  • Evaluating the effectiveness of economic instruments, such as carbon pricing, in reducing emissions.
  • The role of ecosystem services in economic decision-making and sustainable development.
  • Analyzing the economics of natural resource depletion and strategies for resource management.
  • Examining the economic consequences of pollution and the costs of environmental degradation.
  • Understanding the economics of biodiversity conservation and the value of ecosystem preservation.
  • The role of market-based mechanisms in promoting environmental sustainability.
  • Analyzing the economic impact of environmental regulations on industries and employment.
  • Understanding the economics of sustainable agriculture and the costs and benefits of organic farming.

Agricultural Economics Essay Topics

  • Analyzing the impact of government agricultural subsidies on farm profitability and food prices.
  • Understanding the economics of food security and the challenges of feeding a growing global population.
  • Evaluating the role of agricultural trade policies in promoting or hindering international agricultural markets.
  • The impact of climate change on agricultural productivity and adaptive strategies for farmers.
  • Analyzing the economics of genetically modified organisms (GMOs) and their implications for agriculture.
  • Understanding the economic consequences of land tenure systems and their impact on agricultural development.
  • Examining the role of agricultural cooperatives in improving market access for small-scale farmers.
  • The economics of agricultural risk management and the role of insurance in mitigating crop losses.
  • Analyzing the economics of sustainable agriculture and the transition to more environmentally friendly practices.
  • Understanding the economics of agricultural value chains and the role of intermediaries in market transactions.

Financial Economics Essay Topics

  • Exploring the impact of financial innovations, such as cryptocurrencies, on traditional financial systems.
  • Understanding the role of central banks in regulating monetary policy and ensuring financial stability.
  • Analyzing the economics of stock market bubbles and their implications for investors and the economy.
  • Evaluating the impact of financial globalization on emerging markets and their vulnerability to financial crises.
  • The role of behavioral factors in financial decision-making and their impact on asset prices.
  • Examining the economics of banking regulation and its effectiveness in preventing financial crises.
  • Understanding the economic consequences of income inequality on financial markets and economic growth.
  • Analyzing the role of financial institutions in financing small and medium-sized enterprises (SMEs).
  • The impact of technological advancements, such as fintech and blockchain, on the financial sector.
  • Understanding the economics of financial derivatives and their role in managing risk in financial markets.

Tips to Select an Economics Essay Topic

When it comes to selecting an essay topic, the right choice can make a significant difference in the quality of your essay.

To help you navigate the process, here are some useful tips to consider when choosing an economics essay topic.

  • Identify your interests: Choose a topic that aligns with your personal interests within the field of economics. It will make the research and writing process more enjoyable and engaging.
  • Consider current events: Look for economic issues or trends that are currently relevant and have an impact on society. This will add relevance and significance to your essay.
  • Narrow down your focus: Narrow down your topic to a specific aspect or subfield that you find intriguing. It will allow you to delve deeper and provide a more focused analysis.
  • Brainstorm unique angles: Try to approach your topic from a unique angle or perspective. Look for gaps in the existing literature or unconventional viewpoints that can make your essay stand out.
  • Consider the scope and feasibility: Consider the length and requirements of your essay. Choose a topic that is manageable within the given constraints and time frame.

In conclusion, selecting a compelling economics essay topic is the first step towards crafting an outstanding piece of academic writing. 

However, if you're feeling overwhelmed or pressed for time, CollegeEssay.org is here to help. Our economics essay writing service offers expert assistance from experienced writers who have a deep understanding of the subject matter. 

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What Is Economics?

What Is Economics?

Introduction

Economics is about making choices. We make all kinds of choices every day. How much should I spend on gas? What’s the best route to work? Where should we go for dinner? Which job or career should I go for? What are the pros and cons of finishing college versus taking a job or inventing the next, best Internet startup? Which roommate should take care of washing the dishes? Can I get that dog as a pet? Should I get married, have children, and if so, when? Which politician should I vote for when they all claim they can improve the economy or make my life better? What is “the economy,” anyway? What if my personal or religious principles conflict with what people tell me is in my best economic interest?

Many people hear the word “economics” and think it is all about money. Economics is not just about money. It is about weighing different choices or alternatives. Some of those important choices involve money, but most do not. Most of your daily, monthly, or life choices have nothing to do with money, yet they are still the subject of economics. For example, your decisions about whether it should be you or your roommate who should be the one to clean up or do the dishes, whether you should spend an hour a week volunteering for a worthy charity or send them a little money via your cell phone, or whether you should take a job so you can help support your siblings or parents or save for your future are all economic decisions. In many cases, money is merely a helpful tool or just a veil, standing in for a partial way to evaluate some of the goals you really care about and how you make choices about those goals.

You might also think economics is all about “economizing” or being efficient–not making foolish or wasteful choices about how you spend or budget your time and money. That is certainly part of what economics is about. However, that’s just the tip of the iceberg. We all know that we can save money or time by being more efficient in our planning. A trip to the supermarket can be coordinated with a trip to take your child to school or to deposit a check at the bank across the street to save on gas. But we sometimes don’t choose the most efficient options. Why not? Economics is also about plumbing the depths of why we sometimes do and sometimes don’t make what seem like the most economizing or economical choices.

Is economics a science (like physics), or is it a social science, or even an art? What is the difference, and what do we know about what we can’t or don’t know for now? Can economic problems be solved by better government, more experts, bigger computers, more engineering, better education, less government, more dispersed knowledge, more markets? How can we make informed choices?

You’ve probably heard that economists disagree about a lot of things. Actually, what economists disagree about is politics or public policy, not economics. Exploring the interface between politics and economics is part of the fun.

On this page are some famous, standard definitions about what economics is all about.

Definitions and Basics

Economics is the study of given ends and scarce means. Lionel Robbins , biography, from the Concise Encyclopedia of Economics :

Robbins’ most famous book was An Essay on the Nature and Significance of Economic Science , one of the best-written prose pieces in economics. That book contains three main thoughts. First is Robbins’ famous all-encompassing definition of economics that is still used to define the subject today: “Economics is the science which studies human behavior as a relationship between given ends and scarce means which have alternative uses.”…

What is “political economy”? Chapter I, Principles of Economics , by Alfred Marshall.

Political Economy or Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing. Thus it is on the one side a study of wealth; and on the other, and more important side, a part of the study of man. For man’s character has been moulded by his every-day work, and the material resources which he thereby procures, more than by any other influence unless it be that of his religious ideals; and the two great forming agencies of the world’s history have been the religious and the economic. Here and there the ardour of the military or the artistic spirit has been for a while predominant: but religious and economic influences have nowhere been displaced from the front rank even for a time; and they have nearly always been more important than all others put together. Religious motives are more intense than economic, but their direct action seldom extends over so large a part of life. For the business by which a person earns his livelihood generally fills his thoughts during by far the greater part of those hours in which his mind is at its best; during them his character is being formed by the way in which he uses his faculties in his work, by the thoughts and the feelings which it suggests, and by his relations to his associates in work, his employers or his employees.

Isn’t economics nicknamed the “dismal science” because it is all about running out of resources and the inevitable decline of life as we know it? Who coined the phrase “the dismal science”? The Secret History of the Dismal Science: Economics, Religion, and Race in the 19th Century , by David M. Levy and Sandra J. Peart. Econlib, January 22, 2001.

Everyone knows that economics is the dismal science. And almost everyone knows that it was given this description by Thomas Carlyle, who was inspired to coin the phrase by T. R. Malthus’s gloomy prediction that population would always grow faster than food, dooming mankind to unending poverty and hardship. While this story is well-known, it is also wrong, so wrong that it is hard to imagine a story that is farther from the truth. At the most trivial level, Carlyle’s target was not Malthus, but economists such as John Stuart Mill, who argued that it was institutions, not race, that explained why some nations were rich and others poor….

Economics on One Foot , a LearnLiberty video.

Prof. Art Carden, in memory of Ayn Rand’s philosophy on one foot, presents economics on one foot.

In the News and Examples

Diane Coyle on the Soulful Science , EconTalk podcast.

Diane Coyle talks with host Russ Roberts about the ideas in her new book, The Soulful Science: What Economists Really Do and Why it Matters. The discussions starts with the issue of growth–measurement issues and what economists have learned and have yet to learn about why some nations grow faster than others and some don’t grow at all. Subsequent topics include happiness research, the politics and economics of inequality, the role of math in economics, and policy areas where economics has made the greatest contribution….

Isn’t economics all about supply and demand? Richard McKenzie on Prices , EconTalk podcast. June 23, 2008.

Richard McKenzie of the University California, Irvine and the author of Why Popcorn Costs So Much at the Movies and Other Pricing Puzzles, talks with EconTalk host Russ Roberts about a wide range of pricing puzzles. They discuss why Southern California experiences frequent water crises, why price falls after Christmas, why popcorn seems so expensive at the movies, and the economics of price discrimination….

Isn’t economics all about Adam Smith and the invisible hand? Adam Smith: The Invisible Hand , a LearnLiberty video.

Prof. James Otteson, using the ideas of Adam Smith, explains how the division of labor is a necessary and crucial element of wealthy nations.

Don’t all economists disagree? Henderson on Disagreeable Economists . EconTalk podcast, July 30, 2007.

David Henderson, editor of the Concise Encyclopedia of Economics and a research fellow at Stanford’s Hoover Institution, talks with EconTalk host Russ Roberts about when and why economists disagree. Harry Truman longed for a one-armed economist, one willing to go out on a limb and take an unequivocal position without adding “on the other hand…”. Truman’s view is often reflected in the public’s view that economic knowledge is inherently ambiguous and that economists never agree on anything. Henderson claims that this view is wrong–that there is substantial agreement among economists on many scientific questions–while Roberts wonders whether this consensus is getting a bit frayed around the edges. The conversation highlights the challenges the everyday person faces in trying to know when and what to believe when economists take policy positions based on research. Is it biased or science?

Humorous essay. Zero-sum games like income redistribution are more exciting than economic fundamentals like the gains from trade. Why is Economics So Boring? , by Donald Cox. Econlib, November 7, 2005.

Stan: Ollie, you know the worst part about being an economist? You meet someone at a cocktail party, you tell them you teach economics. Ollie: …and they say “Oh, yeah, I took that in college. I hated it. It was sooo boring!”… … getting the credit for Equation 14 is a zero sum game. And we care about zero sum games. There’s drama. There’s tension. There’s a loser for every winner. It makes for good TV, doesn’t it? But it’s not very common in reality. What common in reality is both sides are better off. The buyer and the seller of the car in the ad. That’s reality. No violence, no theft. Boring balloons. Boring happy people. Economics is boring….

Is economics just a fuss about language? The Economy: Metaphors We (Shouldn’t) Live By , by Max Borders.

“Argument is war.” That’s what cognitive linguists George Lakoff and Mark Johnson write in the opening chapter of their influential 1980 Metaphors We Live By. In that seminal book, Lakoff and Johnson offer a number of powerful lessons about figurative language: Metaphor is more than mere literary window dressing; metaphor is a fundamental aspect of human thought and language; and metaphors help us navigate the real world with a degree of efficiency that literal language can’t offer. It can even–for better or worse–change our perceptions of things….

A Little History: Primary Sources and References

Economics is sometimes called catallarchy or catallactics, meaning the science of exchanges. Where did this term first come from? Lecture I, Introductory Lectures on Political Economy , by Richard Whately.

It is with a view to put you on your guard against prejudices thus created, (and you will meet probably with many instances of persons influenced by them,) that I have stated my objections to the name of Political-Economy. It is now, I conceive, too late to think of changing it. A. Smith, indeed, has designated his work a treatise on the “Wealth of Nations;” but this supplies a name only for the subject-matter, not for the science itself. The name I should have preferred as the most descriptive, and on the whole least objectionable, is that of CATALLACTICS, or the “Science of Exchanges.”…

Advanced Resources

Is Economics All About Scarcity? , by Arnold Kling. Blog discussion on EconLog, January 17, 2007.

… I am two-handed on this issue. On the one hand, just because food, say, has become more abundant does not mean that we can ignore scarcity. At any moment in time, for a given state of know-how, the conventional definition of economics as dealing with the allocation of scarce resources among competing ends applies. On the other hand, some of the most interesting economic observations concern relative abundance. Look at our standard of living compared to 100 years ago. Look at South Korea compared with North Korea. Robert Lucas famously said that “The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them it is hard to think of anything else.”…

Related Topics

Is Economics a Science? Wellbeing and Welfare Scarcity Incentives Efficiency Cost-Benefit Analysis Division of Labor and Specialization Money Management and Budgeting Productive Resources Property Rights

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