Economics!

Original post by mobbsy91

Haha, that's pretty good! My economics teacher always taught me PUBE:

Price level
Unemployment
Balance of payments
Economic growth

I like this thread though! I'll definitely keep watch :tongue:

(And if you did a degree in Economics, think how much more awesome this thread would be :tongue:

)

Aaw, thanks Mobbsy. I would have loved to study Economics further but sadly, without A-Level Maths, I'm pretty limited in my options!

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Reply 22

For and against free trade/ protectionism?

Reply 23

Tanqueray91

Haha fair enough. I won't take it personally :frown:

Reply 24

Original post by BirdIsWord

For and against free trade/ protectionism?

I'll do this for you when I get home. :biggrin:

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Reply 25

Are you home yet babe?
Missing u xxx

Reply 26

Original post by BirdIsWord

Are you home yet babe?
Missing u xxx

So sorry, my darling . . . :wink:

I have returned, with your required assistance!

ARGUMENTS FOR PROTECTIONISM / AGAINST FREE TRADE

1. Infant industries needs to grow and become more efficient to reach the minimum efficient scale, and this can only be done if they are protected as in perfect competition less efficient firms will be unable to compete.

2. Domestic employment will increase, evaluation point - inefficient labour deemed more important than higher rates of unemployment here.

3. Prevention of dumping, when other countries out-price competition at a loss before raising their prices.

4. Prevention of unfair competition, i.e. when other countries exploit workers and resources to produce more cheaply abroad.

ARGUMENTS AGAINST PROTECTIONISM / FOR FREE TRADE

1. Welfare loss - economic inefficiency as country is not specialising in goods with the lowest opportunity cost, something which free trade helps with.

2. Reduced choice of goods for consumers when industries are protected, free trade increases choice (protection reduces imports)

3. Inefficient suppliers and monopolies will be supported by protection, less competition therefore a higher price level and possible inflation

4. Unfair redistribution of income when there is protectionism, those not protected with subsidies etc likely to see a fall in demand and therefore a loss of profits and possibly jobs

Hope this helped! Sorry for taking so long! If anyone has any more requests, I will be sure to speed up next time!

Reply 27

Thanks mate
You should include the 'Race to the bottom' in point 4 of the 'for' argument, no?

Reply 28

Original post by BirdIsWord

Thanks mate
You should include the 'Race to the bottom' in point 4 of the 'for' argument, no?

I've never heard of that before! What exam board are you on?

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AQA. You?

Original post by BirdIsWord

AQA. You?

Me too! So what's 'race to the bottom'?

Reply 31

Basically government deregulation to attract business.
The best example probably being China's (and other countries) relaxed labour laws which allow for Primark and other firms to exploit child labour.

I havent revised much unit 4 though.
Could you go over the contestable market theory?

Reply 32

Original post by BirdIsWord

Interesting. Thanks for that! And I will go over it tomorrow (well, later now) - I actually will do it quickly this time! I've written a memo and everything!

Reply 33

Original post by BirdIsWord

Here we go!

CONTESTABLE MARKET THEORY

In a contestable market, there will be high levels of competition, with no single firm having a significant market share. There will be hit and run entry because of this, aided by the lack of barriers to entry and exit. Incumbent firms will be unable to exploit a large minimum efficient scale andthere are no sunk costs. Firms will seek to maximise short-run profits by producing where MC=MR.

By contrast, a monopoly firm can makenormal or supernormal profits in the long run, deterring new entrants. However, in a contestable market, firms will be forced to be efficient, as new firms will enter the market at the most efficient level of output, allowing them to price their goods more competitively. On top of this, firms in a contestable market produce homogenous or heterogeneous goods, and there is perfect information within the market. In short, firms will enter the market to quickly erode some of the supernormal profit, then exit.

There are some issues with the theory, however. It may be impossible to eliminate sunk costs in some industries, and incumbent firms may have an advantage as they have better knowledge of the industry, its technology etc. Barriers to entry can also be extremely difficult to remove. On top of this, the economies of scale may be unachievable for newcomers, and patents may prevent competition of various goods. There isalso the issue of limit pricing,where firms will lower their goods beyond the original level of competitiveness, pricing newcomers out.

Some benefits of contestable markets are that the threat of competition prevents firms from raising their prices too high, firms can benefits from economiesof scale without increasing their prices, and there is a reduced need forgovernment interference.

(edited 7 years ago)

Reply 34

Thanks.
Can you explain the difference between perfect competition and contestable markets? They seem so similar..

Reply 35

Original post by BirdIsWord

Thanks.
Can you explain the difference between perfect competition and contestable markets? They seem so similar..

I just checked this with my Economics teacher. There is some overlap. Contestable markets are purely to do with barriers to entry, so you can even have a contestable monopoly, for example. I hope this helps!

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Natural monopoly?

Original post by Speckle

Natural monopoly?

I will do this ASAP, I have a big exam tomorrow so I've been a bit busy!

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Reply 38

Vegan_

Do you need to learn any country case studies for your exam board? If so, which countries are you learning? :smile:

Reply 39