Economics Unit 2 Edexcel - Managing the UK economy Tuesday 19th May 2015 (PM)

Privatisation is a supply side policy that involves selling state owned assets to the private sector. It is argued that the private sector is more efficient in running businesses because they have a profit motive to reduce costs and develop better services.

So im guessing a couple EVA points could be that it could potentially lead to monoplies,inequality etc......

Can anyone explain in detail about the effects/consequences of deflation?

I know that profits will fall and it will be hard to recover and keep the economy growing.

But I want explicit detail and more points. Thanks ^^

What are the economics effects of the sterling apprecaiting against the euro?

What are the economics effects of the sterling apprecaiting against the euro?

30 marker on ways to improve standard of living? Or maybe something on the effects of immigration? :/ what does everyone think

Can anyone explain in detail about the effects/consequences of deflation?

I know that profits will fall and it will be hard to recover and keep the economy growing.

But I want explicit detail and more points. Thanks ^^

Any idea as to why UK Competitiveness will increase productivity? I understand that if markets have more competition, then there is an incentive to be more efficient and productive. But the revision guide implies that If a firm is more internationally competitive, they will produce more/be more productive.

Anyone know the reason for this?

Hello all,
My name is Mark Gavin and I am currently the Economics head examiner at Edexcel. I was recently notified I am soon to be laid off so I decided to get my own back and give all of you a treat! I shall give you the 30 markers of the two options.
1. Assess the impact on unemployment of an increase in the tax rate on earnings above £150,000
2. Evaluate the consequences on economic growth of a deflationary spiral
The mark scheme is tough this year as well so you really need to know your stuff!

Consumers could end up saving more, since they will think that prices will fall in the future, so hold out for a better deal. This decreases consumption, a component of AD, so AD decreases.

As a result, GDP decreases, which means economic growth is lower. Then talk about elasticity and where the equilibrium point is on the AS curve, which will affect the magnitude of the outcome.

You could also argue that investment would decrease since confidence is lower, which would have the same effects.

1. People tend to save their money, as they are postponing purchases, waiting for goods to become even cheaper (As prices are falling) reducing consumption, therefore AD
2. Businesses may leave the country, reducing national output and reducing employment.
3. It suggests the economy is doing badly (More of a political concern)
4. Just like Inflation, if the deflation is rapid, there will be administrative costs, such as menu costs, whereby businesses have to update their price tags, their computer systems and so on to keep up with the changing prices. This is an increased production cost, as it often requires labour to do it all.

Wait, what??

what exactly is PED of exports and imports and what effects them

General evaluation techniques you can use, which apply to pretty much all questions, especially 30 markers:

- Short run and Long run - in the short run, X policy e.g increased spending on education will be costly, but in the long run the benefits could outweigh the costs.

- Time Lags - e.g increased spending on education will not show benefits immediately, it will take years (of education and training) for the benefits to be implemented.

- Magnitude - i.e if it is only a small scale impact, e.g only a small shift in AD/AS, the consequences probably won't be felt.

- Location of Equilibrium - if the equilibrium point is on the Keynesian part of the AS curve, then a shift in AD will only affect GDP and not price, similarly if it's on the classical part of the curve GDP will be unaffected and the average price level won't.

- Elasticity - strictly a micro topic, but you can speak briefly about how the elasticity of the curves will affect the outcome of a shift in one or the other.

- Other factors - a lot to write about here. Other factors of AD, or that affect whatever the question is regarding.

- Specific evaluation of question - there will usually be a specific evaluation point where you need to apply your knowledge and the information given to you. Easy way to pick up marks if you can identify it.

Well PED of exports/imports is the responsiveness of demand to a change in price of exports/imports.

The UK is a net importer, meaning it's demand for imports is relatively inelastic. This is because we need oil and other raw materials for the manufacturing process which we can only obtain via importing.

Well PED of exports/imports is the responsiveness of demand to a change in price of exports/imports.

The UK is a net importer, meaning it's demand for imports is relatively inelastic. This is because we need oil and other raw materials for the manufacturing process which we can only obtain via importing.