Economics Essay Examples

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Ace Your Essay With Our Economics Essay Examples

Published on: Jun 6, 2023

Last updated on: Jan 31, 2024

economics essay examples

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Are you struggling to understand economics essays and how to write your own?

It can be challenging to grasp the complexities of economic concepts without practical examples.

But don’t worry! 

We’ve got the solution you've been looking for. Explore quality examples that bridge the gap between theory and real-world applications. In addition, get insightful tips for writing economics essays.

So, if you're a student aiming for academic success, this blog is your go-to resource for mastering economics essays.

Let’s dive in and get started!

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What is an Economics Essay?

An economics essay is a written piece that explores economic theories, concepts, and their real-world applications. It involves analyzing economic issues, presenting arguments, and providing evidence to support ideas. 

The goal of an economics essay is to demonstrate an understanding of economic principles and the ability to critically evaluate economic topics.

Why Write an Economics Essay?

Writing an economics essay serves multiple purposes:

  • Demonstrate Understanding: Showcasing your comprehension of economic concepts and their practical applications.
  • Develop Critical Thinking: Cultivating analytical skills to evaluate economic issues from different perspectives.
  • Apply Theory to Real-World Contexts: Bridging the gap between economic theory and real-life scenarios.
  • Enhance Research and Analysis Skills: Improving abilities to gather and interpret economic data.
  • Prepare for Academic and Professional Pursuits: Building a foundation for success in future economics-related endeavors.

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If you’re wondering, ‘how do I write an economics essay?’, consulting an example essay might be a good option for you. Here are some economics essay examples:

Short Essay About Economics

A Level Economics Essay Examples

Here is an essay on economics a level structure:

Band 6 Economics Essay Examples

Here are some downloadable economics essays:

Economics essay pdf

Economics essay introduction

Economics Extended Essay Examples

In an economics extended essay, students have the opportunity to delve into a specific economic topic of interest. They are required to conduct an in-depth analysis of this topic and compile a lengthy essay. 

Here are some potential economics extended essay question examples:

  • How does foreign direct investment impact economic growth in developing countries?
  • What are the factors influencing consumer behavior and their effects on market demand for sustainable products?
  • To what extent does government intervention in the form of minimum wage policies affect employment levels and income inequality?
  • What are the economic consequences of implementing a carbon tax to combat climate change?
  • How does globalization influence income distribution and the wage gap in developed economies?

IB Economics Extended Essay Examples 

IB Economics Extended Essay Examples

Economics Extended Essay Topic Examples

Extended Essay Research Question Examples Economics

Tips for Writing an Economics Essay

Writing an economics essay requires specific expertise and skills. So, it's important to have some tips up your sleeve to make sure your essay is of high quality:

  • Start with a Clear Thesis Statement: It defines your essay's focus and argument. This statement should be concise, to the point, and present the crux of your essay.
  • Conduct Research and Gather Data: Collect facts and figures from reliable sources such as academic journals, government reports, and reputable news outlets. Use this data to support your arguments and analysis and compile a literature review.
  • Use Economic Theories and Models: These help you to support your arguments and provide a framework for your analysis. Make sure to clearly explain these theories and models so that the reader can follow your reasoning.
  • Analyze the Micro and Macro Aspects: Consider all angles of the topic. This means examining how the issue affects individuals, businesses, and the economy as a whole.
  • Use Real-World Examples: Practical examples and case studies help to illustrate your points. This can make your arguments more relatable and understandable.
  • Consider the Policy Implications: Take into account the impacts of your analysis. What are the potential solutions to the problem you're examining? How might different policies affect the outcomes you're discussing?
  • Use Graphs and Charts: These help to illustrate your data and analysis. These visual aids can help make your arguments more compelling and easier to understand.
  • Proofread and Edit: Make sure to proofread your essay carefully for grammar and spelling errors. In economics, precision and accuracy are essential, so errors can undermine the credibility of your analysis.

These tips can help make your essay writing journey a breeze. Tailor them to your topic to make sure you end with a well-researched and accurate economics essay.

To wrap it up , writing an economics essay requires a combination of solid research, analytical thinking, and effective communication. 

You can craft a compelling piece of work by taking our examples as a guide and following the tips.

However, if you are still questioning "how do I write an economics essay?", it's time to get professional help from the best essay writing service -  CollegeEssay.org.

Our economics essay writing service is always ready to help students like you. Our experienced economics essay writers are dedicated to delivering high-quality, custom-written essays that are 100% plagiarism free.

Also try out our AI essay writer and get your quality economics essay now!

Barbara P (Literature)

Barbara is a highly educated and qualified author with a Ph.D. in public health from an Ivy League university. She has spent a significant amount of time working in the medical field, conducting a thorough study on a variety of health issues. Her work has been published in several major publications.

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How to Write a Good Economics Essay

Last Updated: March 7, 2023 References

This article was co-authored by Emily Listmann, MA . Emily Listmann is a private tutor in San Carlos, California. 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. This article has been viewed 126,406 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. [7] X Research source
  • 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. [10] X Research source

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. [12] 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. [13] 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.

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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
  • ↑ http://homes.chass.utoronto.ca/~mcmillan/writing.pdf
  • ↑ 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 Essay Topics: 162 Practical Ideas & Useful Tips

economic essay in english

Essay writing is an inherent part of the economics studying process. Nevertheless, it is quite a challenging task. Are you a high school or college student who is struggling with an economic essay topic choice? Or maybe you are unsure about your writing skills?

We know how to help you .

The following article will guide you in choosing the best topic for your essay on economics. Here, you can find a variety of ideas for high school or college. The economic essay topics are divided into several categories that will help you with your research. And a pleasant bonus from our team! We have created a great guide on how to write an economics essay.

So, don’t miss your chance to write an outstanding economic paper! Check out our essay ideas, read our tips carefully, and be ready to receive your grade A!

  • ⭐ Best Economic Topics
  • 🤝 Socio-Economic
  • 🗺️ International Economics
  • 🛠️ Labor Economics
  • 🌆 Urban Economics
  • ⚽ Sports Economics
  • 💉 Health Economics
  • 💼 Business Economics
  • 🏤 Globalization
  • 🧮 Economic History
  • 💫 How to Write?

⭐ 15 Best Economic Essay Topics

  • 2008 Economic Crisis.
  • Socio-economic policy.
  • Economic systems – Singapore.
  • Racial pay gap.
  • Economic globalization.
  • History of online trading.
  • Child labor policies.
  • The Economic Naturalist.
  • Foundations of economic theory.
  • Impact of unemployment.
  • Universal Basic Income.
  • The role of consumerism.
  • Healthcare economics – Canada’s Medicare.
  • Reasons for recession.
  • Cryptocurrency & environmental issues.

✨ Excellent Economic Essay Topics

Has economics always been a subject of meticulous research? The question is quite controversial, right? There is no specific time when economics started its rapid progress. Generally, economics remains the topic of interest since the establishment of capitalism in the Western world.

Nowadays, the economy is the main engine that moves our world forward. The way we do business determines the geopolitical situation in the world. Moreover, it influences many other parts of our lives.

The skills developed through studying economics are incredibly versatile.

Economics studying is of utmost importance nowadays. It helps to gain a better understanding of processes that put everything in motion.

Economics is quite broad, so it has a great variety of subfields. And this is a fantastic opportunity for us to generate as many essay ideas as possible. Here, you will find great economic topics for your paper. As mentioned before, we have divided them into several sections to ease your selection process. There’s a wide selection of free college essays samples on economics in our database, too. So be sure to check that out.

🤝 Socio-Economic Essay Topics

  • The economic impact of racial segregation in America in the 1950s.
  • Designing a just socio-economic system.
  • Socio-economic status of Hong Kong in modern-day China. Explain how the city of Hong Kong gained a special status in China. Why did it emerge as one of the most important cities in its economy? Comment on the significance of Hong Kong in the international economic arena.
  • Economic growth in the United States in the post-World War 2 period.
  • Mobile banking in Saudi Arabia: towards understanding the factors that affect the sector.
  • The importance of Dior’s bar suit to the women’s fashion industry.
  • Economic problems in the 1980’s Soviet Union. Talk about the significant problems with the economy the USSR had in the 1980s. What role did they play in its collapse?
  • What socio-economic problems did segregation in South Africa cause?
  • History of economic development in the UAE. Discuss the economic miracle in the UAE and Dubai. Explain how the government could turn the city of Dubai into one of the most famous tourist destinations. What strategies were applied?
  • Gender inequality and socio-economic development .
  • The problem of poverty in Venezuela.
  • How the socio-economic and political position of women changed between 1880 and 1940.
  • The economic impact of COVID-19 on global trade.

World trade is expected to fall due to the Coronavirus pandemic.

  • How do the three main economic groups interact with each other? There are three critical economic groups: – Consumers – Producers – Government Analyze the interaction of these groups with each other.
  • Extended essay: how the study of economic data helped our society to advance?
  • Western industrialization socio-economic impacts.
  • Inequality at the top: not all billionaires have the same powers. Analyze billionaires’ net worth, liquidity, political power, and wealth security. Explain why they have unequal social status. What factors determine the influence of billionaires?
  • An analysis of systems that help us measure agricultural development in a country.
  • Is social media a useful tool for brand promotion?
  • The phenomenon of dualism in economic development.

🗺️ International Economics Essay Topics

  • Globalization and its impact on international economic relations. Define the term globalization. What role does globalization play in international economic relations? Provide specific examples of globalization’s impact on the global political economy.
  • The lack of justice for the cheap international labor market. Discuss the issue of cheap labor in various countries. Why do some workers often lack fundamental human rights while others abuse moral norms? Analyze the causes and effects of inequality in the workplace.
  • Japan macroeconomics: problems and possible solutions.
  • The issue of mercantilism in the history of Great Britain. Analyze the rise and development of mercantilism in the history of Great Britain. To solidify your ideas, provide persuasive arguments, and appropriate examples of mercantilism.
  • Why does the problem of environmental protection remain unresolved among global economies?
  • Nissan Motor company’s international business.
  • International environmental concerns in economics: the case of China .
  • The issue of international criminal justice in industry. Explain why international businesses often avoid criminal justice after wrongdoings. Select one case of unethical behavior of a company’s CEO or regular employee. Briefly introduce the problem. What were the causes and effects? How was the issue resolved? Express your own opinion regarding the lack of criminal justice in business.
  • The economy of Singapore and its role in international trade.
  • International microeconomics trade dispute case study: US-China dispute on the exportation of raw materials.
  • The phenomenon of the “gig economy” and its impact on the global economy.
  • The effect of population growth in the international economy.
  • International economics in the context of globalization.

Technological and political changes have chipped away at the barriers separating nations.

  • How does Brexit affect the economy of the European Union? Analyze the immediate impact of Brexit on the EU’s economy. Predict future advantages and disadvantages of Brexit for both: Great Britain and the EU.
  • South Africa: international agribusiness, trade, and financing.
  • Historical essay: the economy of the Dutch East India company.
  • The issue of Mozambique’s economy and possible solutions. Investigate the issue of extreme poverty in Mozambique. What are some possible solutions to the problem of poverty? Base your suggestions on the country’s cultural, historical, and geographical aspects.
  • Imbalances in the global economy. Discuss the imbalances between trading countries on the scale of the global economy. What solutions would you suggest to deal with this issue?
  • How will global economies adapt to China’s growing power?
  • Etihad Airways company managerial economics.

🛠️ Labor Economics Essay Topics

  • Ford Motor company’s labor economics.
  • Labor economics: child labor.
  • The UPS firm perspective: the labor market.
  • Gender inequality of wage rate in modern business. Research how and why gender inequality is still an issue in the modern world of economics. What are some ways to deal with the problem? Present your ideas accurately and effectively. Provide solid arguments and appropriate examples to prove your position.
  • What are the best ways to increase labor productivity in business?
  • Labor unions adverse effects on economics.
  • The decrease of the labor force in modern industries. Talk about the rising rates of robotization in the majority of industries. How will it affect the traditional labor force? Comment on the problem of unemployment caused by labor automatization.
  • Violations of labor rights of workers.
  • Modern labor essay: how can an entrepreneur guarantee the minimum wage to their workers?
  • How can labor geography help develop a special economic zone? Talk about labor geography and its effects on developing an exclusive economic zone. How does the geopolitical location of a particular country influence its level of economic development?
  • Entrepreneurship in the organic cosmetics sphere.
  • Gender-oriented labor trade unions. A case study. Discuss the gender-oriented trade unions and analyze their impact on our society.
  • Child labor in the Turkish cotton industry.

The Syrian refugee crisis increased the risks of child labor in Turkey.

  • The connection between economic growth and demography. Analyze the connection between economic growth and its demographic context. Investigate both sides: – The issue of overpopulation – The problem of low birth rate. From an economic perspective, what problem is more dangerous?
  • The issue of sex discrimination in the workplace.
  • The effects of Landrum-Griffin Labor Act. Explore the labor Act of Landrum-Griffin that was passed in the US Congress in 1959. Discuss its implications and consequences. Discuss its implications and consequences.

🌆 Urban Economics Essay Topics

  • Cities and their role in aggregate economics.
  • Urbanization in Hong Kong and its effects on citizens.
  • The urban planning of the city of New York: a critical analysis. Analyze the urban history of NY. How has the city been developing? Discuss revolutionary solutions to the past and problems of modern times.
  • The impact of a city’s design on the local traffic.
  • Dubai’s spatial planning: creative solutions for building a city in the desert.
  • Globalization, urban political economy, and economic restructuring.
  • How do urban areas affect local wildlife? Comment on how modern production technologies in urban areas impact the natural diversity of wildlife. What impact does the rapid economic progress have on the environment? Suggest possible solutions.
  • Urban sociology: does the city make us better people?
  • Why should people be more careful about investing in real estate? Discuss the issues of overinvestment into real estate. Consider the economic crisis of 2008 as an example.
  • How can regional authorities help improve a city?
  • Urban life and its effects on education.
  • The economic development of a city’s metropolitan area: challenges and solutions.
  • Main factors for the emergence of cities in the Middle Ages.
  • The ethics of relocation: is it justified? Talk about the case of relocating locals when building projects of great magnitude. To what extent can it be justified? Mention its economic and ethical side.
  • The difficulties behind the construction of “green” buildings. Discuss the relatively new phenomenon of environmentally friendly buildings. Analyze both sides: the pros and cons. What obstacles lie behind the “green” building? What opportunities do the “green” buildings offer? Elaborate on your ideas by providing clear arguments or counterarguments.
  • What factors play a critical role in the success of retail productivity in cities?

⚽ Sports Economics Essay Topics

  • Do teams with higher budgets perform better on the field?
  • Corruption in European football leagues: a critical analysis. Investigate the corruption issue in the European football leagues. State reasons and solutions for the problem.
  • The managerial catastrophe of Arsenal F.C.

Discuss the football club of Arsenal.

  • The NextG sports company’s communication planning.
  • Roger D. Blair’s Sports Economics literary review. Write a literary analysis of Sports Economics by Roger D. Blair. Discuss his opinion on the economy of sports. Do you agree or disagree with his position? Provide compelling supportive arguments or strong counterarguments.
  • How significant is the impact factor of a local team on a city’s economy?
  • Kinsmen Sports Centre: marketing metrics innovation.
  • What role does statistical data play in sports? Analyze the part of economic statistical data in different sports organizations. How can statistics help to develop an effective financing plan? Comment on the impact of financing on the performance of a sports club.
  • Sports and energy drinks marketing analysis.
  • Is there a connection between the lack of money and any contemporary issues in a sports team?
  • Performance-enhancing drugs in sports.
  • The business of FIFA: a financial analysis. Investigate the finances of FIFA. What economic factors make them so influential in the modern world of football?
  • The global sports retail industry.
  • The Olympics: logistics and economy. Discuss the logistics behind the Olympics Games event. How the Olympic Games impact the economy of the host country?

💉 Health Economics Essay Topics

  • Is bioprinting the new future of medicine? Analyze the new market of organ printing and discuss its challenges. Investigate bioprinting from an economic perspective. Will the outputs cover the inputs? How will bioprinting impact the financial aspect of the health care sector?
  • Cost-effectiveness of pharmaceutical products in the United States. Comment on the immense cost-effectiveness of pharmaceuticals. What do you think is the price of pharmaceutical products reasonable? Is it ethical to set extremely high prices on the medicals?
  • An economic evaluation of the antibiotics market.
  • Health economics-SIC and NAICS.
  • The financial side of cancer treatment: is it too expensive? Analyze the market for cancer treatment programs in various countries. Explore its costs and complications. What are some possible ways to reduce the price of cancer treatment and make it more affordable?
  • The issue of fast food consumption: a multibillion-dollar market . Fast food has always been one of the notable causes of obesity, diabetes, and other illnesses. Investigate the economic aspect of the issue. Are high profits from fast food production worth peoples’ health conditions?
  • History and evolution of healthcare economics.

Health has become a dominant economic and political issue over the past years.

  • The financial management of a hospital: a case study.
  • The issue of public healthcare in the USA. Write about the long-standing issue of medical sector operation in the USA. Analyze its history, financial, and social aspects.
  • Demand in healthcare economics.
  • What are the economic outcomes of a global pandemic? Taking the COVID-19 outbreak as an example, conduct research on the effects of a pandemic on the economy. How does it affect local economies? What impact does the quarantine have on the international economy? Provide appropriate examples to support your ideas.

💼 Business Economics Essay Topics

  • When does an advertising campaign become unnecessary?
  • Sustainable development of a nation’s economic stability. Discuss how a country can create a sustainable economy. Provide bright examples to solidify your position.
  • How can a small business compete with monopolies?
  • What are the limitations of the Lewis Model?
  • The phenomenon of inflation: inevitable liability or a land of opportunity for our economies? Explore the process of inflation in modern economies. Does it only have adverse effects on the countries’ economies? Are there any advantages of inflation? Analyze it from a positive perspective.
  • Economics, business, and sugar in the UK.
  • The shadow economy of the finance sector. Dive into the backstage of the finance sector and research various “grey” areas where business can be done.
  • Chinese and Japanese business systems comparison.
  • Oil demand and its changes in the XXI century: a critical analysis. Analyze the oil sector and write about its fluctuation in the XXI century. How did the changes in oil demand affect the global economy?
  • The social and economic impact of mass emigration.

🌠 40 More Good Economic Essay Topics

Scrolled through our ideas, but can’t find a suitable topic for yourself? No worries! We have more issues to share with you.

So, don’t stress out. Take a look at our list of economical essay topics. Here are 40 more ideas focusing on globalization and the history of economics.

🏤 Economic Globalization Essay Topics

  • The impact of globalization on the tourist industry in the Caribbean . Analyze both: the positive and negative effects of globalization on the Caribbean. To make your paper well-structured, explore two advantages and two disadvantages. Don’t forget to improve your essay with strong evidence and appropriate examples!
  • Toyota Motor Corporation: impacts of globalization.
  • What are the effects of globalization on developing countries? To what extent do developing countries profit from globalization? Research the subject by comparing various examples.
  • Defining globalization and its effects on current trade.
  • Economic growth as a result of globalization: proper financial strategies. How can a country successfully achieve prosperity with globalization? Discuss proper economic strategies.
  • The socio-political significance of the IT industry’s globalization.
  • Human trafficking in developing nations as a result of globalization.

Modern-day trafficking of humans has become more rewarding for traffickers due to globalization.

  • Globalization and criminal justice policy.
  • What are the advantages and disadvantages of globalization?
  • Globalization challenges and countermeasures.
  • The effect of globalization on worldwide trade and employment rates.
  • Economic integration within the European Union: a critical analysis. Talk about the history of economic integration within the EU. What are the negative and positive outcomes of economic integration?
  • Globalization and food in Japan.
  • Does globalization bring negative effects to cultural heritage and identity?
  • The Industrial Revolution as the first step towards globalization. Focus on the Industrial Revolution in Europe. Discuss its precursors and consequences. Why is the revolution considered to be a starting point of globalization? Provide specific examples of globalization processes that occurred in the economic sector after the Industrial revolution.
  • Globalization 2.0 an analysis of a book by David Rieff.
  • Globalization effects on fundamentalism growth.
  • Does direct investment by foreign businesses come with strings attached? Dive into the shady area of globalization and discuss how to direct foreign investment can bring problems of geopolitical scale.
  • Effects of globalization on sexuality.
  • Alibaba’s globalization strategy: an economic analysis.

🧮 Economic History Essay Topics

  • The rapid economic growth of Europe during the Age of Discovery. Analyze the factors that brought economic growth to Europe during the Age of Discovery. What factors contributed to the dynamic economic progress of that time?
  • Brazil’s economic history.
  • History of capitalism: from the Renaissance to the United States of America. Discuss the origins of capitalism and its centuries-long path towards XXth century America. How the establishment of capitalism impacted the economy of the USA?
  • Max Weber: economic history, the theory of bureaucracy, and politics as a vocation.
  • 2008 Economic Crisis: origins and fallout. Talk about the 2008 Financial Crisis. Discuss its causes and outcomes. What should have been done differently to avoid the global crisis? Comment on the economic strategies countries used to recover from it.
  • The economic marvel of Communist China: from rags to riches.
  • What made world economic growth of the Renaissance possible?

Renaissance Europe had a very diverse economy.

  • The economic history of Canada: how did the settlers facilitate economic growth?
  • What did the major powers of the XIXth century base their economies on?
  • The Rothschilds: political and financial role in the Industrial Revolution. Research the dynasty of Rothschilds and how they came to power. What was their role in Europe’s Industrial Revolution?
  • The link between the “oil curse” and the economic history of Latin America.
  • Roman Empire’s monetary policy: a socio-economic analysis.
  • How did the demand for different goods change their value in the 2000s years? Analyze the demand for goods in the 2000s years and their change in value. Why do these fluctuations in demand for products and services occur?
  • The history of economic thought.
  • Soviet Union’s economic timeline: from the new Economic Policy to Reformation. Discuss the economic issues of the Soviet Union from the historical perspective. Why did the Soviet Union collapse? What improvements in the financial sector should have been done?
  • History of France economics over the past 20 years.
  • The history of economic analysis.
  • The concept of serfdom and slavery as the main economic engine of the past. Dive into the idea of feudalism and serfdom. Discuss its social and economic aspects.
  • The World Bank’s structure, history, activities.
  • The history of Islamic banking: concepts and ideas.

💫 How to Write an Economics Essay?

Generally, essay writing on economics has the same structure as any other essay. However, there are some distinctive features of economic papers. Thus, it is essential to figure them out from the very beginning of your work.

You might be wondering what those aspects of the economic paper are. Well, we have an answer.

An economic essay usually relies on the common essay structure.

Below, you will find a detailed plan that explains the fundamental concepts of the essay writing process. So, don’t hesitate to use our tips! They are indeed helpful.

Pick a topic and dissect it. Picking the right topic is the very basis of writing a successful essay. Think of something that you will be interested in and make sure you understand the issue clearly. Also, don’t forget to check our ultimate economics essay topics and samples list!

Research it. After selecting the right idea from our economical essay topics, research your subject thoroughly. Try to find every fascinating and intriguing detail about it. Remember that you can always ask your fellow students, friends, or a teacher for help.

Come up with a thesis statement. A thesis statement is an essential element of your essay. It will determine your focus and guide the readers throughout your paper. Make your thesis secure and try to catch the reader’s attention using context and word choice.

Outline your essay. Never underestimate the power of a well-structured outline! Creating an essay outline can significantly help you to determine your general plan. Evaluate which economic framework you will be using to address the issue. State the main points of your thesis and antithesis. Make sure that they answer the central question of your work.

Write your introduction. First and foremost, a practical introduction should capture the readers’ attention and state the essay’s key topic. So, put enough effort to develop an outstanding introduction. It will create the first impression of your paper.

Moreover, an introduction should include a thesis statement. As we have mentioned above, a thesis plays a crucial role. Thus, make sure it is clearly stated.

Another significant feature of the introduction is its coherence with the body of your essay. Consequently, the introductory paragraph’s last statement has to present the subject of the next section, generically. Also, keep in mind that no more than three key points can be discussed in a paper, even if it is an extended essay.

Thoroughly work on the body paragraphs. Usually, the body of the essay contains several paragraphs. The number of these paragraphs will depend on the nature of your question. Be sure to create one section for every critical point that you make. This will make your paper properly-structured, and the reader will quickly get your ideas. For your convenience, we created a plan to develop your ideas in each paragraph, So, use it and make your writing process easier!

  • Argument. Present your argument in the topic sentence of the paragraph in a way that directly answers the question. A hint: the most effective way to introduce the critical point is to place the topic sentence at the beginning of the paragraph. This will help the readers to concentrate their attention on a specific idea.
  • Comment and discussion. Explain the meaning of your argument and provide an economic analysis. Present clear evidence and persuasive arguments to solidify your position.
  • Connection. Link your comments with the vital point of the paragraph. Demonstrate the coherence of your evidence with the point.
  • Diagrams, tables, charts. If necessary, provide the reader with visual aids. Sometimes, an appropriate diagram or a suitable chart can say more than words. Besides, your paper will look more professional if you use any kind of visual aids.

Conclude your essay. In your conclusion, summarize and synthesize your work by restating your thesis. Also, it is crucial to strengthen it by mentioning the practical value of your findings. Remember to make your essay readable by choosing appropriate wording and avoiding too complex grammar constructions.

Create a reference list at the bottom of your economic essay if you referred to sources.

Thank you for visiting our page! Did you enjoy our article and learned something new? We are glad to help you. Don’t forget to leave a comment and share the article with others!

🔗 References

  • High School Economics Topics: Econlib, The Library of Economics and Liberty
  • Guide to Writing an Economics Essay: The Economics Tutor
  • How to Write the Introduction of Your Development Economics Paper: David Evans, Center For Global Development
  • Senior Essay: Department of Economics, Yale University
  • Developing A Thesis: Maxine Rodburg and The Tutors of the Writing Center at Harvard University
  • Academic Essay Writing, Some Guidelines: Department of Economics, Carleton University
  • The Writing Process: Writing Centre Resource Guide, LibGuides at Dalhousie University
  • Research Papers: KU Writing Center, the University of Kansas
  • Unpacking the Topic: University of Southern Queensland
  • Economic Issues: PIIE, Peterson Institute for International Economics
  • Areas of Research: EPI, Economic Policy Institute
  • Top 100 Economics Blogs Of 2023: Prateek Agarwal, Intelligent Economist
  • Current Environmental Economic Topics, Environmental Economics: US EPA, United States Environmental Protection Agency
  • Hot Topics in the U.S. Economy: The Balance
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Economics Help

Tips for writing economics essays

Some tips for writing economics essays  Includes how to answer the question, including right diagrams and evaluation – primarily designed for A Level students.

1. Understand the question

Make sure you understand the essential point of the question. If appropriate, you could try and rephrase the question into a simpler version.

For example:

Q. Examine the macroeconomic implications of a significant fall in UK House prices, combined with a simultaneous loosening of Monetary Policy.

In plain English.

  • Discuss the effect of falling house prices on the economy
  • Discuss the effect of falling interest rates (loose monetary policy) on economy

In effect, there are two distinct parts to this question. It is a valid response, to deal with each separately, before considering both together.

It helps to keep reminding yourself of the question as you answer. Sometimes candidates start off well, but towards the end forget what the question was. Bear in mind, failure to answer the question can lead to a very low mark.

2. Write in simple sentences

For clarity of thought, it is usually best for students to write short sentences. The main thing is to avoid combining too many ideas into one sentence. If you write in short sentences, it may sound a little stilted; but it is worth remembering that there are no extra marks for a Shakespearian grasp of English. (at least in Economics Exams)

Look at this response to a question:

Q. What is the impact of higher interest rates?

Higher interest rates increase the cost of borrowing. As a result, those with mortgages will have lower disposable income. Also, consumers have less incentive to borrow and spend on credit cards. Therefore consumption will be lower. This fall in consumption will cause a fall in Aggregate Demand and therefore lead to lower economic growth. A fall in AD will also reduce inflation.

fall-in-ad-arrow-ad-as

I could have combined 1 or 2 sentences together, but here I wanted to show that short sentences can aid clarity of thought. Nothing is wasted in the above example.

Simple sentences help you to focus on one thing at once, which is another important tip.

3. Answer the question

Quite frequently, when marking economic essays, you see a candidate who has a reasonable knowledge of economics, but unfortunately does not answer the question. Therefore, as a result, they can get zero for a question. It may seem harsh, but if you don’t answer the question, the examiner can’t give any marks.

At the end of each paragraph you can ask yourself; how does this paragraph answer the question? If necessary, you can write a one-sentence summary, which directly answers the question. Don’t wait until the end of the essay to realise you have answered a different question.

Discuss the impact of Euro membership on UK fiscal and monetary policy?

Most students will have revised a question on: “The benefits and costs of the Euro. Therefore, as soon as they see the Euro in the title, they put down all their notes on the benefits and costs of the Euro. However, this question is quite specific; it only wishes to know the impact on fiscal and monetary policy.

The “joke” goes, put 10 economists in a room and you will get 11 different answers. Why? you may ask. The nature of economics is that quite often there is no “right” answer. It is important that we always consider other points of view, and discuss various different, potential outcomes. This is what we mean by evaluation.

Macro-evaluation

  • Depends on the state of the economy – full capacity or recession?
  • Time lags – it may take 18 months for interest rates to have an effect
  • Depends on other variables in the economy . Higher investment could be offset by fall in consumer spending.
  • The significance of factors . A fall in exports to the US is only a small proportion of UK AD. However, a recession in Europe is more significant because 50% of UK exports go to EU.
  • Consider the impact on all macroeconomic objectives . For example, higher interest rates may reduce inflation, but what about economic growth, unemployment, current account and balance of payments?
  • Consider both the supply and demand side . For example, expansionary fiscal policy can help to reduce demand-deficient unemployment, however, it will be ineffective in solving demand-side unemployment (e.g. structural unemployment)

Example question :

The effect of raising interest rates will reduce consumer spending.

  • However , if confidence is high, higher interest rates may not actually discourage consumer spending.

fall-in-ad-depending-spare-capacity-full

If the economy is close to full capacity a rise in interest rates may reduce inflation but not reduce growth. (AD falls from AD1 to AD2)

  • However , if there is already a slowdown in the economy, rising interest rates may cause a recession. (AD3 to AD3)

Micro-evaluation

1. The impact depends on elasticity of demand

tax-depends-elasticity

In both diagrams, we place the same tax on the good, causing supply to shift to the left.

  • When demand is price inelastic, the tax causes only a small fall in demand.
  • If demand is price elastic, the tax causes a bigger percentage fall in demand.

2. Time lag

In the short term, demand for petrol is likely to be price inelastic. However, over time, consumers may find alternatives, e.g. they buy electric cars. In the short-term, investment will not increase capacity, but over time, it may help to increase a firms profitability. Time lags.

3. Depends on market structure

If markets are competitive, then we can expect prices to remain low. However, if a firm has monopoly power, then we can expect higher prices.

4. Depends on business objectives

If a firm is seeking to maximise profits, we can expect prices to rise. However, if a firm is seeking to maximise market share, it may seek to cut prices – even if it means less profit.

5. Behavioural economics

In economics, we usually assume individuals are rational and seeking to maximise their utility. However, in the real world, people are subject to bias and may not meet expectations of classical economic theory. For example, the present-bias suggest consumers will give much higher weighting to present levels of happiness and ignore future costs. This may explain over-consumption of demerit goods and under-consumption of merit goods. See: behavioural economics

Exam-Tips

Exam tips for economics – Comprehensive e-book guide for just £5

8 thoughts on “Tips for writing economics essays”

I really want to know the difference between discussion questions and analysis questions and how to answer them in a correct way to get good credit in Economics

Analysis just involves one sided answers while Discussion questions involve using two points of view

This is a great lesson learnd by me

how can I actually manage my time

The evaluation points in this article are really useful! The thing I struggle with is analysis and application. I have all the knowledge and I have learnt the evaluation points like J-curve analysis and marshall learner condition, but my chains of reasoning are not good enough. I will try the shorter sentences recommended in this article.

What kind of method for costing analysis is most suitable for a craft brewery, in order to analyze the cost of production of different types of beer_

Really useful!Especially for the CIE exam papers

Does anyone know how to evaluate in those advantages/disadvantages essay questions where you would basically analyse the benefits of something and then evaluate? Struggling because wouldn’t the evaluation just be the disadvantages ?? Like how would you evaluate without just stating the disadvantage?

Leave a comment Cancel reply

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economic essay in english

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...

economic essay in english

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

economic essay in english

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.

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.

economic essay in english

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 hear more from me and get the PDF version of the guide complete with additional diagrams and tables, click here !

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Alex Loustau

Alex Loustau

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  • Writing the Economics Essay

An academic rhetoric (or organisation) is important to convince a reader that you understand the topic well – poor organisation can signal muddled thinking.

Thesis – Justification – Support

This is the rhetoric used by Bray et al.

Thesis – the main concept or idea that you are proposing

Justification – the reasons why your thesis is valid

Support – evidence that backs up your justification

Essay structure – your introduction, main body, and conclusion

Box: An example

The Thesis – Justification – Support rhetoric can be applied to an individual paragraph of an essay, or on an entire essay. For example, take the essay question:

‘The accumulation of capital is sufficient for ensuring sustainable growth in per capita living standards’. Discuss.

One possible answer would be:

Thesis: if we define capital as physical capital, the accumulation of capital will lead to diminishing returns

Justification: Demonstration of the Solow model : capital accumulation can result in higher levels of income but after a certain level not higher levels of consumption per capita (due to diminishing marginal returns).

Support: examples, such as India’s heavy investment drive in the 1950s, 1960s which was associated with low levels of ‘Hindu growth’; or econometric evidence, such as that from Mankiw, Romer and Weil (1992), which supports some of the conclusions of the Solow model (but also suggests improvements, see below).

The next section of the essay would play with the assumptions of the Solow model – for example by expanding our definition of capital to include human capital (and, if you’re really trying to impress, social capital and ‘natural’ capital as well).

You might also want to discuss if technological progress (the source of per capita income growth in the Solow model) is related to capital accumulation, for example through ‘ learning by doing ‘ (Arrow, 1962)

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economic essay in english

How to Write a Good Economics Essay (IB & JC A Level Economics)?

Governor November 28, 2019 Real World Applications 3 Comments

Many students ask “How to write a good economics essay?” This Guide to Writing an Economics Essay is applicable to both the IB economics as well as the Singapore JC/A Level H2 economics examinations.

This guide contains tips for writing economics essays and is also applicable to large-mark case study questions . Thus, it is actually also applicable to H1 Economics students.

5 Steps to Writing a Good Economics Essay (& even Large-mark Case Study Questions)

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 Mr Hong’s econs 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, whether two sides are needed or one side is sufficient. Below are some common examples found in economics questions:

Command Words                                      Action Required

Account for                                                 Explain why lah!

Analyse                                                        Break it down into step-by-step explanations lor!

Assess                                                          For & Against. Consider other factors.

Compare                                                      Identify Similarities & Differences

Distinguish                                                    Point out differences

Discuss                                                        Talk cock lah! And cover both( back )sides

Describe Increasing / Decreasing? Large? Negative?

Evaluate                                                       Talk more cock! Good and Bad.

Explain                                                          Say why lah! Use examples/illustrations

Explain whether                                            Cover both sides/possibilities & Judgment

Examine                                                        Look closely. Sure or not? How so and how not so?

Comment                                                      Give your opinion. Better cover both( back )sides!

Suggest                                                          Give possible reason

To What Extent                                              Well…..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). If no context is given, any 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 

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: How to write an economics 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

In the body , there will be several paragraphs. 

The number of points/paragraphs depends on the question. It is common to require about three main points for each 10 mark essay and about 5 for 15 mark essay questions. 

Use one paragraph for each main 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 , I use my self-devised, extended or advanced 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 – Draw an appropriate diagram with correct labelling and refer to it in your answer. This is crucial to show economic reasoning.

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

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

Mere statements and claims. No economic rigour.

Step 5: CONCLUDING SECTION

Earn 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!

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, are certain policies better fit for specific 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.

However, there is no way to really memorise evaluation points as every question and context is different. Of course right?! You are tested on higher-order thinking…

There are other tips that Mr Hong’s 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 Mr Hong’s weekly IB & JC / A Level economics tuition online lessons come in and that is why students are often asked questions in class, trained to think on their feet and as Xue Min from YJC noted, Mr Hong does not just spoon-feeds the students but mentors them in their thinking to arrive at the answers.

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 and accurate diagrammatic analyses.

*(Check in class with Mr Hong on which types of questions this applies)

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

For our model essays books 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 Publication. Click here to order .

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

its good knowledgeable post regarding ib economics commentaries. i just wanted to admin can i use your blog as reference to my students .

Go ahead. We are all for helping students learn economics well.

Thank you, A lot of info!

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  • Essay on Indian Economy

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Introduction to Essay on Indian Economy

Indian Economy is a concept which deals with the system which manages all Economic activities of a country. It covers different sectors like agriculture, industry, and services along with their sub-segments.

Importance of Indian Economy:

The Indian Economy is important to study because it is the seventh-largest in terms of purchasing power parity and the third largest in terms of nominal GDP. Inflation in the Indian Economy is a major concern. The growth and development sector of the Indian Economy is an important area of focus. The Foreign exchange reserves of India are also an important aspect to study. Employment generation is an important area of focus for the Indian Economy.

Investment is another major concern when it comes to the Indian Economy. The balance in trade and budget deficit are other aspects that need attention from people studying the Indian Economy. Every year, a lot of research papers on India's Economy are written by various students all over India.

Some Tips to help You write Your Own Essay on the Indian Economy:

First Step: Collecting Information/ Data:

You must collect as much information related to your topic as possible. If necessary, ask experts or professionals who work in that particular field and get their opinions too if required. This would give you more authentic data rather than just reading out general stuff available online or through books.

Second Step: Sorting Information/ Data:

In this step, you must sort out all your collected data and information into separate sections. For example, if the essay is on the Indian Economy then divide it into different parts like Agriculture, Industry, or Services sector, etc. You can also use sub-heads for each of these main divisions to make things easier for yourself while writing down the final draft of your work.

Third Step: Analysis & Research Plan:  

In this part, start by researching a particular topic thoroughly so that you have a clear idea as to how to proceed with it in detail before actually starting off with the actual writing process itself. This way there would be no loose ends left at the end of the whole thing and your essay would be complete and well-structured.

Fourth Step: Drafting the Essay:

Start by writing an introduction to your topic, explaining what it is all about in detail. After that, start discussing different points one by one with proper evidence backing up everything you say. Make sure each paragraph flows smoothly into the other so that the reader does not lose focus at any point while reading through it. The conclusion should summarize all your findings and leave a lasting impression on the mind of the reader.

Fifth Step: Editing & Proofreading:

This is an important step where you must check for grammar mistakes, punctuation errors, etc. Also, make sure that the structure of your essay is perfect and there are no loose ends left at the end of it. It is better to ask someone else to proofread your work too if you are not very confident about yours.

Sixth Step: Finalizing & Presenting Your Work in the Form of an Essay/ Paperwork etc.:

Finally, present your paper with proper references and bibliography so that every statement made in the essay has a source backing it up. Make sure everything looks neat and clean before actually sending off this final piece for assessment or assignment purposes.

Conclusion: So these were some tips on how one can write their own essay on Indian Economy which would be useful for students studying it or anyone interested in knowing more about India's Economy.

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FAQs on Essay on Indian Economy

1. How much time does it take to write an essay on the Indian Economy? How long should my essay be?

It totally depends on the length of your topic and how much information you have collected for writing it. Usually, an essay takes around four to six hours to complete depending upon its size.

2. Where can I get authentic data regarding the Indian Economy?

There are various websites like IMF (International Monetary Fund), World Bank, etc which provide useful data on the Indian Economy.

3. Is there a specific thesis statement that I should focus on when writing my essay?

Yes, there should be a clear thesis statement that you must mention at the beginning of your essay. It can also follow throughout the entire course of it so as to maintain a good flow and structure in your work.

4. Who is my audience? How do I write an authentic essay for them?

Your audience would mostly comprise students and researchers who are interested in knowing more about the Indian Economy. So make sure your language and tone are appropriate for them, and all the information you provide is accurate and backed up by authentic sources.

5. What are some good transition words that I can use to connect my ideas?

There are many transition words that can be used. For example, you could start off with "firstly", "next" or even use phrases like "in the second place" to make your sentence flow smoothly into another one.

6. How will I know if my essay is well-structured? What does it need?

Your essay should be well-structured and organized according to the points you are discussing. Each paragraph must flow smoothly into another one, starting with a topic sentence that summarizes the main point of that particular section in your work. After every point is discussed there needs to be some sort of conclusion at the end which sums up all your findings.

7. What are large-scale industries?

The industries with large capital requirements engaging strong manpower. These organizations have a fixed asset worth more than 10 crore rupees and are considered to be large-scale industries. In India, the large-scale industries are those industries that have a fixed asset which is more than one hundred million rupees or Rs. 10 crores.

8. In India which place is known as the Industrial Hub?

Tamil Nadu is the state with the largest number of factories situated overall in India. Tamil Nadu is the capital city Chennai with the largest industrial and commercial centre in the whole of South India. India has 13 minor industrial regions located in 15 industrial districts.

9. How is the Indian Economy in recent times?

India's GDP was estimated at Rs. 33.14 trillion in the year 2011 and 2012, US$452.74 billion for the second quarter of the FY2020-21, against Rs. 35.84 trillion US$489.62 billion in the second quarter of FY2019-20.

Essay on Indian Economy

India’s economy is described as huge, complex and growing. It is one of the most exciting and emerging markets in the world. Since 1951, India has grown as a planned economy. The first few plans focused on growth with the strengthening of the manufacturing sector, emphasising heavy industries to form the backbone of the economy. Other principal areas of planning were agriculture and social development. During the post-independence period and the period of the “Five-year plans”, efforts were focused on identifying the needs of the economy. Further, the economic reforms in the early 90s opened a new chapter in India’s economic history. It gave India an opportunity to shake off the shackles of its past and emerge on the world stage as a progressive nation. This essay on the Indian Economy will help students know about the Indian economy in detail.

Students can go through the list of CBSE Essays on different topics. It will help them to improve their writing skills and also increase their scores on the English exam. Moreover, they can participate in different essay writing competitions which are conducted at the school level.

500+ Words Essay on the Indian Economy

India is on the high road to economic growth. Since 2020, the world economy has declined due to the COVID-19 pandemic. Repeated waves of infection, supply-chain disruptions and inflation have created challenging times. Faced with these challenges, the Government of India has taken immediate action so that it has the least impact on the Indian economy.

The Indian economy has been staging a sustained recovery since the second half of 2020-21. However, the second wave of the pandemic in April-June 2021 was more severe from a health perspective. The national lockdown has affected small businesses, common people and everyone in India. Due to this, the Indian economy has gone down. But now, it is slowly rising up and taking its form.

Role of Agriculture in the Indian Economy

Agriculture is one of the most important sectors of the Indian economy. It supplies food and raw materials in the country. At the time of independence, more than 70% of India’s population depended on agriculture to earn a livelihood. Accordingly, the share of agriculture in the national product/income was as high as 56.6% in 1950-51. However, with the development of industries and the service sector, the percentage of the population depending on agriculture, as well as the share of agriculture in the national product, has come down. Agriculture is the source of food supply. Agriculture is also a major source of foreign exchange earnings through export. The share of agriculture in India’s export in the year 2011-12 was 12.3%. The major items of export include tea, sugar, tobacco, spices, cotton, rice, fruits and vegetables, etc.

Role of Industry in India’s Economy

Industry is the secondary sector of the economy and is another important area of economic activity. After independence, the Government of India emphasised the role of industrialisation in the country’s economic development in the long run. Initially, the public sector contributed the maximum to economic growth. In the early 1990s, it was found that the public sector undertakings were not performing up to expectations. So, in 1991, the Indian Government decided to encourage the role of the private sector in industrial development. This step was taken to strengthen the process of industrialisation in India.

The progress of the Indian economy after independence was impressive indeed. India became self-sufficient in food production due to the green revolution, and industries became far more diversified. However, we still have to go a long way to become a 5 trillion economy by 2025. But, with government effort and the right policymakers, it can be achieved.

Students must have found this essay on the Indian Economy useful for improving their essay-writing skills. They can get the study material and the latest update on CBSE/ICSE/State Board/Competitive Exams at BYJU’S.

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Essay on Economic Growth: Top 13 Essays | Economics

economic essay in english

Here is a compilation of essays on ‘Economic Growth’ for class 9, 10, 11 and 12. Find paragraphs, long and short essays on ‘Economic Growth’ especially written for school and college students.

Essay on Economic Growth

Essay Contents:

  • The New (Endogenous) Economic Growth Theory

Essay # 1. Introduction to Economic Growth:

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Various theories, viewpoints and models have been presented from time to time to account for the sources of economic growth and the determinants of economic development. To most peo­ple, a theory is a contention that is impractical and has no factual support.

For the economist, however, a theory is a systematic explanation of interrelationships among economic variables and its purpose is to explain causal relationships among these variables. Usually a theory is used not only to understand the world better but also to provide a basis for policy. This essay discusses a few of the major theories of economic development, from which emerged alterna­tive approaches to economic development.

The earliest students of development economics were the mercantilists. Mercantilists were a group of traders. They believed that exports were always good for a country because exports implied inflow of precious metals (such as gold and silver). By contrast, imports were harmful for a country because imports implied outflow of precious metals. So, in their view, growth and development of a nation depended on its accumulation of precious metals.

Essay # 2. Adam Smith and Economic Growth :

The mercantilist view was challenged by Adam Smith (1723-1790), the Father of Economics, in 1776. Smith, in his Wealth of Nations, pointed out that the mercantilist view contained a major fallacy. International trade is just like a two-person zero-sum game in which one coun­try’s gains is the other country’s loss. So two trading nations cannot have trade surplus (or favourable balance of trade) at the same time. In the late 18th century Smith argued that the true wealth of a nation is not its accumulated gold and silver hut its labour power— the human factor of production.

And the wealth of nation depended on two main factors:

(i) The productivity of labour, and

(ii) The proportion of productive labour in the total labour force (i.e., the labour force participation rate).

Smith believed that division of labour, specialisation, and exchange were the true springs of economic growth.

Smith argued that in a market-based (competitive) economy, with no collusion, cartel or monopoly, each individual, by acting in his (her) own interest, promoted the public interest. A producer who charges more than others will not find buyers, a worker who asks more than the going wages will not get job, and an employer who pays less than the market wage (i.e., the wages competitors pay) will not find anyone to work.

It was as if an invisible hand were behind the self-interest of capitalists, merchants, landlords and workers, directing their actions toward maximum economic growth. So Smith advocated a laissez-faire (non-interference of govern­ment in economic matters) and free trade policy as two growth-promoting measures.

Essay # 3. The Classical Theory of Economic Stagnation :

The classical theory, based on the work of David Ricardo (1772-1823), had a pessimistic view about the possibility of sustained economic growth. For Ricardo, who assumed little continu­ing technical progress, growth was limited by scarcity of land. A major tenet of Ricardo was the law of diminishing returns.

For him, diminishing returns due to population growth and a fixed supply of land threatened economic growth. Since Ricardo believed that technical change or improved production techniques could only temporarily avert the operation of the law of di­minishing returns, increasing capital was seen as the only way to offset this long-run threat.

However, any fall in the rate of capital accumulation would lead to eventual stagnation. Ricardian stagnation might result in a Marxian scenario, in which wages and investment would be maintained only if property were confiscated by society and payments to private capitalists and landlords stopped.

Essay # 4. Marx’s Theory of Economic Development :

Marx (1818-83) predicted that the capitalist system would in the initial stage grow due to increased profit (surplus value which was the result of exploitation of labour) and would pro­vide funds for accumulation. But since wages were pegged at the subsistence level, due to the existence of a huge reserve army of unemployed, the capitalists would suffer from a realisation crisis. They would not be able to realise the profits embodied in already produced goods. And, according to Marx, the under consumption of the masses is the root cause of all crises.

Marx, in fact, made certain predictions about the growth, maturity and stagnation of capital­ism. He predicted that the capitalist system would ultimately collapse for want of markets and would yield place to socialism.

Unfortunately, history has not obliged Marx. The year 1989 saw the collapse of socialism (especially in erstwhile USSR and its satellite countries) and with it the abandonment of the centralised planning system and the emergence of newborn post-socialist countries.

All these countries have embraced the market system which is now thought to be a more efficient mecha­nism for solving society’s economic problems, promoting faster economic growth and improv­ing the living standards of the people.

Essay # 5. Rostow’s Stages of Economic Grow th:

By criticizing Marx’s stages of growth, viz, feudalism, capitalism and socialism, Walter W. Rostow sets forth a new historical synthesis about the beginnings of modern economic growth on six continents.

His economic stages are:

(i) The traditional society,

(ii) The preconditions for takeoff,

(iii) The takeoff,

(iv) The drive to maturity, and

(v) The age of high mass consumption.

The most important stage is the third one, i.e., the takeoff stage. In order to reach that stage a country must save and invest at least 10 -12% of its national income. Many Western countries had already reached the stage when Rostow’s book appeared. Many underdeveloped countries reached the stage later (mainly under the influence of planning).

Essay # 6. Vicious Circle Theory of Economic Growth :

The vicious circle theory presented by Ragnar Nurkse in his book- The Problems of Capital Formation in Underdeveloped Countries, 1953) indicates that poverty perpetuates itself in mutually reinforcing vicious circles on both the supply and demand sides. In fact, low per capita income is both the cause and the effect of poverty.

A. Supply Side :

At low levels of income, people cannot save much. Shortage of capital leads to low productiv­ity of labour, which perpetuates low levels of income. Thus the circle is complete, as shown in Fig. 1. A country is poor because it was previously so poor that it could not save and invest. Or, as Jeffrey Sachs (2005) explains the poverty trap: ‘Poverty itself is the cause of economic stagnation.’

The Vicious Circle of Poverty

In short, various obstacles to development are self-enforcing. Low levels of income prevent saving, retard capital growth, hinder productivity growth and keep income low. Successful development may require taking steps to break the chain at various points. By contrast, as countries get richer they save more, creating a virtuous circle in which high sayings rates lead to faster growth. A country is rich because it was rich in the past. Or a rich country is likely to become richer in the future.

B. Demand Side:

In addition, due to the narrow size of the domestic market for light consumer goods (such as shoes, textiles, radio, etc.) there is hardly any incentives for potential entrepreneurs to investment. Lack of invest means low factor productivity and continued low income. A country is poor because it was so poor in the past that it could not provide the market to spur investment.

Essay # 7. Balanced Vs. Unbalanced Economic Growth :

A major debate in the areas of development economics from the 1940s through the 1960s concerned balanced growth versus unbalanced growth. The term balanced growth has been used in different senses. The meaning of the term may vary from the absurd requirement that all sectors grow at the same rate to the more sensible plan that a minimum attention has to be given to all major sectors—industry, agriculture, and services.

Balanced Growth :

The main advocate of the doctrine of balanced growth was Nurkse. To him, balanced growth means the synchronized application of capital to a wide range of different industries. Nurkse considers this strategy as the only escape route from the vicious circle of poverty (under­development).

Big Push Thesis :

The advocates of the Nurkseian doctrine support the big push thesis, arguing that a strategy of gradualism is bound to fail. A substantial effort is needed to overcome the inertia inherent in a stagnant economy. According to Paul N. Rosenstein-Rodan (1943), the factors that contribute to economic growth—such as demand and investment in infrastructure—do not increase smoothly but are subject to sizable jumps or indivisibilities. These indivisibilies result from flows created in the investment market by external economies (positive externalities), that is, cost advantages en­joyed by one firm due to output expansion by another firm.

These benefits spillover to society as a whole, or to some members of it, rather than to the investor concerned. This means that the social profitability of this investment exceeds its private profitability. Furthermore, unless the government intervenes, total private investment will be grossly inadequate compared to soci­ety’s needs.

Indivisibility in Infrastructure :

For Rosenstein-Rodan, a major indivisibility is in infrastructure, such as power, transport and communications. This basic social capital reduces costs to other industries.

Indivisibility in Demand :

The indivisibility arises from the interdependence of investment decisions; that is, a prospec­tive investor is uncertain whether the output from his investment projects will find a market. This problem can be solved if a number of industries are set up so that new producers become each other’s customers and create additional markets through increased incomes. Complemen­tary demand reduces the risk of not finding a market. Reducing interdependent risks increases the incentive to invest.

Hirschman’s Strategy of Unbalanced Growth:

A. O. Hirschman develops (1958) the idea of unbalanced investment to complement existing imbalances. In his view, deliberately unbalancing the economy, in line with a predesigned strategy, is the best path for economic growth. He argues that the big push theory cannot be applied to less developed countries (LDCs) because they do not have the skills needed to launch such a massive effort. The scarcest resource in LDCs is the decision-making input, i.e., entrepreneurship, not capital. Economic development is held in check not by shortage of savings, but by that of risk-takers and decision-makers.

In Hischman’s view, low-income countries need a development strategy that spurs invest­ment decisions. He suggests that since physical resources and managerial skills and abilities are scarce in LDCs, a big push is sensible only in strategically selected industries within the economy. Growth is then likely to spread from one sector to another (similar to Rostow’s concept of leading and lagging sectors).

However, it is not in the Tightness of things to leave investment decisions solely to indi­vidual entrepreneurs in the market. The reason is that the profitability of different investment projects may depend on the order in which they are undertaken. For example, the return from a car factory may be 12%, and that from a steel plant 10%. However, if the car factory is set up first, its return is likely to be low due to shortage of steel.

However, if the steel plant is set up, the returns to the car factory may increase in the next period from 12 to 15%. This means that society would be better off investing in the steel plant first and the car factory next, rather than making independent decisions based on the market. So planners and policy-makers need to consider the interdependence of one investment project with another so that they maximise overall social profitability.

They need to make that investment which promotes the maximum investment. Investment should be concentrated in those industries which have the strongest linkages—both backward (to enterprises that sell inputs to the industry) and forward (to units that buy output from the industry).

The steel industry, for instance, may be accorded the maxi­mum priority by the planners because it has backward linkages with coal and iron ore indus­tries, and forward linkages with car and engineering industries. So there is need for making public investment in steel industry which has a strong investment potential in the sense that it is likely to spur private investment. Similarly, public investment in power and transport will in­crease productivity and thus encourage investment in various other industries.

Critique of Unbalanced Growth :

One main drawback of unbalanced growth approach is that it fails to stress the importance of agricultural investments. According to Hirschman, agriculture does not stimulate linkage for­mation so directly as other industries.

However, empirical studies indicate that agriculture has substantial linkages to other sectors. Moreover, as Johnston and Mellor have pointed out, agri­cultural growth makes vital contributions to the non-agricultural sector through increased food supplies, added foreign exchange, labour supply, capital transfer and wider markets.

The truth is that there is no conflict between these two strategies of development. An opti­mum strategy must combine some elements of balance as well as imbalance. As E. Wayne Nafziger has opined- ‘What constitutes the proper investment balance among sectors requires careful analysis. In some instances, imbalances may be essential for compensating for existing imbalances. By contrast, Hirschman’s unbalanced growth should have some kind of balance as an ultimate aim.’

Essay # 8. Underdevelopment as Coordination Failure :

To some modern economists underdevelopment is result of coordination failure. This is why the theory of big push or critical minimum effort or balanced growth has been put forward. The coordination failure problem leads to multiple equilibria, as has been suggested by M. P. Todaro.

The basic point is that benefits an economic agent receives from taking an action depends positively on how many other agents are expected to take the same action or the extent of these actions. For example, price a farmer can expect to receive for his output depends on the number of intermediaries who are active in channel of distribution which, in turn, depends on number of other farmers who specialise in the same product.

Likewise, fertility decision need in effect to be coordinated across families. All are better if average fertility rate declines. But any one family may be worse off by being only one to have fewer children. The reason is that in rural areas children are a source of labour power for agricultural families. So if only one family adopts the small family norm it will have to hire workers from the external labour market by paying higher wages.

In Fig. 2 the S-shaped privately rational decision function YY first increase at a increasing rate and the at a decreasing rate.

Multiple Equilibria

This shape reflects typical nature of complementariness. For example, some economic agents may take complementary action such investing even if others in the economy do not, particu­larly when interactions are expected through foreigners, say, through exporting. If in this case one or a few agents take action, each agent may be isolated from others. So spillovers may be minimum.

Thus the curve YY does not rise quickly at first as more agents take the decision to invest. But after enough invest there may be a cumulative effect, in which most agents begin to provide external benefits to neighbouring agents and the curve rises at a much faster rate. Finally, after most potential investors have been seriously affected and most important gains have been realised the curve starts to rise at a decreasing rate.

In Fig. 2 function YY cuts the 45° line three times. Thus there is possibility of multiple equilibria. Of these D 1 and D 3 are stable equilibria. The reason is that if expectations were slightly changed to a little above or below these-levels economic agents (investors) would adjust their behaviour in such a way as to bring the economy back to equilibrium levels. In each case YY function cuts 45° line from above. This is the hallmark of a stable equilibrium.

The intermediate equilibrium at D 2 cuts YY function from below. So it is unstable. This is because if a few less entrepreneurs were expected to invest equilibrium would be D 1 and if a few more, equilibrium would shift to D 3 .

Therefore, D 2 may be treated as chance equilibrium, i.e., it could be an equilibrium only by chance. Thus in practice we can think of an unstable equilibrium such as a D 2 as ways of dividing ranges of expectations over which a higher or lower stable equilibrium will hold sway.

Thus there is need for coordinating investment decisions when the value (rate of relation) of one investment depends on the presence or the extent of other investments. All are better off with more investors or higher rate of investment.

But this cannot be achieved only through market system. So there is need for government intervention. It is possible to achieve the de­sired outcome only under the influence of certain types of government policies. Difficulties of investment coordination give rise to government-led strategies for industrialisation.

Technology Spillover :

The investment coordination perspective explains the nature and extent of problems posed when technology has spread effects, i.e., development of technology by one firm has favour­able effects on other firms, i.e., positive externality.

Now suppose we show average rate of investment expected of other key firms or in the economy as a whole on the horizontal axis or profitable rate of investment for a particular firm on the vertical axis, given what other firms are expected to invest on average. In this case points where the YY the curve crosses 45° line in Fig. 2 depict equilibrium investment rates.

Then due to direct relation between investment and growth, the economy may get struck in a low growth rate largely because its expected rate of investment is likely to be low. Changing expectations may not be sufficient if it is more profitable for a firm to wait for others to invest rather than to take the lead and become a ‘pioneer’ investor. In that case there is need for government policy in addition to a change of expectation of investors.

This is why attention to the presence of multiple equilibria is so important. Market forces can bring us to one of these equilibria but they are not sufficient to ensure that no equilibrium will be achieved and they offer no mechanism to move from a bad equilibrium to a good one.

In general when jointly profitable investment may not be made without coordination multi­ple equilibria may exist in which the same individuals with access to same resources and tech­nologies could find themselves in either a good or bad situation. For example, the extent of effort of each firm in a developing region puts to increase the rate of technological transfer depends on effort put by other firms.

No doubt bring in modern technology from abroad often has spillover effects for other firms. But the presence of multiple equilibria subject to making better technology available is a necessary but not a sufficient condition to achieve faster economic growth and consequent improvement in the living standards of the people.

Multiple Equilibria in a Different Setting

Essay # 9. The Lewis Model of Economic Growth :

In the Lewis model, economic growth occurs due to an increase in the size of the industrial sector, which accumulates capital, relative to the subsistence agricultural sector, which does not accumulate any capital. The source of capital in the industrial sector is profits from the low wages paid in unlimited supply of surplus labour from traditional agriculture. An unlimited supply of labour available to the industrial sector facilitates capital accumulation and economic growth.

Urban industrialists increase their labour supply by attracting workers from agriculture who migrate to urban areas when wages there exceed rural wages. Lewis elaborates this point while explaining labour transfer from agricultural to industry in a newly industrializing country. Industrial expansion would come to a halt when labour shortages develop in rural areas.

The significance of the Lewis model is that growth takes place as a result of structural change. An economy consisting mainly of a subsistence agricultural sector (which does not save) is transformed into one predominantly in the modern capitalist sector (which alone saves). As the relative size of the capitalist sector grows, the ratio of profits and other surplus to na­tional income grows.

Essay # 10. The Fei-Ranis Modification of Lewis Model of Economic Growth :

In John Fei and Gustav Ranis, in their modification of the Lewis model, contend that the agri­cultural sector must grow, through technical progress, for output to grow as fast as population; technical change increases output per hectare to compensate for the growing pressure of labour on land, which is a fixed resource. As with the Lewis model, the advent of fully commercialized agriculture and industry ends industrial growth (or what Fei-Ranis calls the take-off into self-sustained growth).

Essay # 11. Baran’s Neo-Marxist Thesis :

Paul A. Baran incorporated Lenin’s concepts of imperialism and international class conflict into his theory of economic growth and stagnation. For Baran LDCs were unlikely to achieve growth and development because of Western economic and political domination, especially in the colonial period.

Capitalism arose not through the growth of small competitive firms at home but through the transfer from abroad of advanced monopolistic business. Baran felt that as capitalism took hold, the bourgeoisie (business and middle classes) in LDCs, lacking the strength to spearhead thorough institutional change for major capital accumulation, would have to seek allies among other classes.

From Marxian perspective Baran writes:

What is decisive is that economic development in underdeveloped countries is profoundly inimical to the dominant interests in the advanced capitalist countries. The backward world has always represented the indispensable hinterland of the highly developed capitalist West.

The only way out of the impasse may be worker and peasant revolution, expropriating land and capital, and establishing a new regime based on collective effort and the creed of the pre­dominance of interests of society over the interests of a selected few.

Essay # 12. Dependency Theory of Economic Growth :

According to A. G. Frank, a major dependency theorist, underdevelopment is not simply non-development, but is a unique type of socioeconomic structure that results from the depend­ency of the underdeveloped country on advanced capitalist countries.

This results from foreign capital removing a surplus from the dependent economy to the advanced country by structur­ing the underdeveloped economy in an ‘external orientation’ that includes the export of pri­mary products, the import of manufactures, and dependent industrialisation. As Frank states- ‘It is capitalism, world and national, which produced under development in the past and still generates underdevelopment in the present.’

Frank’s dependency approach maintains that countries become underdeveloped through integration into, not isolation from, the international capitalist system. However, despite some evidence supporting Frank, he does not give adequately demonstration that withdrawing from the capitalist system results in faster economic development.

Unequal Exchange :

According to dependency theorists, the same process of capitalism that brought development to the presently advanced capitalists countries resulted in the underdevelopment of the depend­ent periphery. The global system is such that the development of part of the system occurs at the expense of other parts. Underdevelopment of the periphery is the Siamese twin of develop­ment of the centre.

Centre-periphery trade is characterised by unequal exchange. This may refer to deteriora­tion in the peripheral country’s terms of trade. It may also refer to unequal bargaining power in investment, transfer of technology, taxation, and relations with multinational corporations. According to S. Amin, unequal exchange means the exchange of products whose production involves wage differentials greater than those of productivity.

The Neoclassical Counterrevolution :

The neoclassical counterrevolution to Marxian and dependency theory emphasised reliance on the market, private initiative, and deregulation in LDCs. Neoclassical growth theory empha­sised the importance of increased saving and capital formation for economic development and for empirical measures of sources of growth. The neoclassical model predicts that incomes per capita between rich and poor countries will converge. But empirical studies do not support this prediction.

This is why N. G. Mankiw and others propose an augmented Solow neoclassical model which includes human capital as an additional explanatory variable to physical capital and labour. The Washington institutions of the World Bank, IMF, and US Government have applied neoclassical analysis in their policy-based lending to LDCs.

Essay # 13. The New (Endogenous) Economic Growth Theory :

The new (endogenous) growth theory developed by Paul Romer arose from concerns that neo­classical economists neglected the explanations of technical change and accepted the unrealis­tic assumption of perfect competition. For Mankiw, Romer, and Weil, human capital and for Romer, endogenous (originating internally) technology, when added to physical capital and labour in neoclassical growth theory, are important factors contributing to economic growth.

One reason is that although there are diminishing returns to physical capital, there are constant returns to all (human and physical) capital. The new growth theory, however, does no better than an enhanced neoclassical model in measuring the sources of economic growth.

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Essay on Indian Economy for Students and Children

500+ words essay on indian economy.

India is mainly an agricultural economy . Agricultural activities contribute about 50% of the economy. Agriculture involves growing and selling of crops, poultry, fishing, cattle rearing, and animal husbandry. People in India earn their livelihood by involving themselves in many of these activities. These activities are vital to our economy. The Indian economy has seen major growth in the last few decades. The credit for this boom largely goes to the service sector. Agriculture and associated activities have also been improvised to match the global standards and the export of various food products has seen an upward trend thereby adding to the economic growth. The industrial sector does not lag behind a bit. A number of new large scale, as well as small scale industries, have been set up in recent times and these have also proved to have a positive impact on the Indian economy.

essay on indian economy

Government’s Role in Economic Growth

Majority of the working Indian population was and is still engaged in the agriculture sector. Growing crops, fishing, poultry and animal husbandry were among the tasks undertaken by them. They manufactured handicraft items that were losing their charm with the introduction of the industrial goods. The demand for these goods began to decline. The agricultural activities also did not pay enough.

The government identified these problems as hindering the economic growth of the country and established policies to curb them. Promotion of cottage industry, providing fair wages to the laborers and providing enough means of livelihood to the people were some of the policies laid by the government for the country’s economic growth.

Get the huge list of more than 500 Essay Topics and Ideas

The Rise of the Industrial Sector

The government of India also promoted the growth of small scale and large scale industry as it understood that agriculture alone would not be able to help in the country’s economic growth. Many industries have been set up since independence. A large number of people shifted from the agricultural sector to the industrial sector in an attempt to earn better.

Today, we have numerous industries manufacturing a large amount of raw material as well as finished goods. The pharmaceutical industry, iron and steel industry , chemical industry, textile industry, automotive industry, timber industry, jute, and paper industry are among some of the industries which have contributed a great deal in our economic growth.

The Growth in Service Sector

The service sector has also helped in the growth of our country. This sector has seen growth in the last few decades. The privatization of the banking and telecom sectors has a positive impact on the service sector. The tourism and hotel industries are also seeing a gradual growth. As per a recent survey, the service sector is contributing to more than 50% of the country’s economy.

Indian Economy after Demonetization

The worst affected were the people in the rural areas who did not have access to internet and plastic money. This affects many big and small businesses in the country very badly. Several of them were shut down as a result of this. While the short term effects of demonetization were devastating, this decision did have a brighter side when looked at from long term perspective.

The positive impact of demonetization on the Indian economy is a breakdown of black money, the decline in fake currency notes, increase in bank deposits, demonetization stopped the flow of black money in the real estate sector to ensure a fair play, increase in digital transactions, cutting monetary support for terrorist activities.

Many of our industries are cash-driven and sudden demonetization left all these industries starving. Also, many of our small scale, as well as large scale manufacturing industries, suffered huge losses thereby impacting the economy of the country negatively. Many factories and shops had to be shut down. This did not only impact the businesses but also the workers employed there. Several people, especially the laborers, lost their jobs.

The Indian economy undergoes several positive changes since independence. It is growing at a good pace. However, the rural regions of our country are still under-developed. The government must make efforts to improve the economic condition of these areas.

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  • 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)

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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