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Summary ESSAYS ON MICRO AND MACRO ECONOMICS
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Model AS Micro EssaysThese are some suggested AS Macro Economic essays. The essays are from
different exam boards, including WJEC, AQA, OCR and Edexcel. In practise the ask
similar questions and the syllabus includes the same topics.
There are different ways to answer questions. But, all these answers contain enough
material to get the top grade.
Whenever the question requires evaluation, the essay contains the necessary critical
distance.
Note: These essays are for revision purposes giving suggestions for how to answer
questions. Don’t try to pass them off as your own work.
For more macro economic help. See also the Macro Revision Guide available at
www.economicshelp.org/
Copyright: Tejvan Pettinger 2018 ©
(To distribute in schools, a network license must be purchased)
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,AS Micro essays
1.Evaluate the case for and against governments intervening to try to stabilise the
price of copper, for example, through setting up a buffer stock scheme.
2.Evaluate advantages and disadvantages of various methods of government
intervention to correct market failure arising from aircraft emissions.
3. Discuss the likely effects on the retail market for coffee if there is a large
increase in city centre rents.
4.In the UK, students face increasing tuition fees. Discuss the benefits and costs
to society of abolishing all tuition fees.
5.Discuss three policies to reduce the level of cigarette smoking amongst under
21s.
6.Discuss the extent to which governments should subsidise companies who are
developing cars which run on clean fuels such as hydrogen?
7.Discuss whether the government is mistaken to worry about monopoly power?
8.Discuss the advantages and disadvantages of the government intervening in
agricultural markets?
9.Discuss the effects on UK business of a rise in fuel prices.
10. Discuss whether the government should end free health care for people and
make them take out private health care insurance like in the US?
11. Discuss the role that pollution permits could play in reducing global warming
12. Discuss the case for implementing a congestion charge for driving into
Birmingham city centre.
13. Discuss the micro economic effects of finding and exploiting extensive oil
reserves in the Antarctic.
14. Discuss whether governments should subsidise food prices.
15. Assess whether environmental problems caused by rubbish disposal can best
be dealt with by market forces or government intervention.
16. Explain why poor housing conditions and homelessness can lead to negative
externalities and evaluate the role that governments could play in avoiding
market failure in the housing market.
17. Evaluate the view that the provision and maintenance of flood defences
should be paid for solely by the government.
18. Discuss whether the government should subsidise food prices?
19. Discuss whether a minimum price for alcohol would help to reduce
market failure in this particular market.
20. Evaluate the impact of a guaranteed minimum price in the beef market
on consumers and producers. Use an appropriate diagram in your
answer.
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,1. Evaluate the case for and against governments intervening to try to
stabilise the price of copper, for example, through setting up a buffer stock
scheme.
The price of copper can be volatile for various reasons. Firstly, in the short term, the
supply of copper is inelastic. Demand can change rapidly due to speculation causing
prices to rise or fall rapidly. A buffer stock scheme is a government policy which aims
to stabilise prices and therefore benefit both consumers and producers from excess
volatility in the price.
For example, if there was an unexpected increase in supply or a fall in demand, the
government could intervene to buy the excess supply and keep prices high. If the
government allowed prices to fall, then some producers would go out of business. It
is not desirable to allow firms to go out of business because of falling prices. It would
lead to unemployment and could lead to a shortage of supply in future years.
To maintain price at TP the government buy Q1 to Q2 * TP
Similarly, if prices increase significantly, then consumers will be faced with higher
prices, therefore, there will be a decline in consumer surplus. Also copper is an
important raw material for electric wiring. If the price of copper increases firms would
be faced with unexpected costs which can cause problems and decrease confidence
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, to invest. If the government bought copper, when prices were falling they could
increase supply when prices are rising. This greater stability of prices would be
beneficial for both producers and consumers.
However, governments tend to be more concerned about falling prices. Falling prices
could cause producers to go out of business leading to unemployment. Rising prices
create some discomfort for consumers, but it is not as damaging. Though, if the
product was a basic food necessity like rice, it may become important to prevent
price rises
However, there are problems with implementing buffer stocks.
Firstly, it can be difficult for a government to set up a buffer stock scheme for a
commodity produced in many countries. For example, several countries may try to
prevent prices falling, but, one or two countries may continue to increase supply
benefiting from higher prices. Therefore, if not all countries take part in the buffer
stock scheme, the price will remain low. The difficulty of stabilising prices of
commodities can be seen by the failure of OPEC to stabilise oil prices.
Buffer stocks can be expensive to implement. The government will need to buy
excess supply and there is no guarantee they will be able to sell for a profit;
especially if government intervention encourages more firms to enter the market.
Buffer stocks may distort market incentives. For example, if prices fall this may be an
indication of oversupply in the market. By buying this supply, it may encourage
oversupply even more. Therefore, it doesn't address the fundamental problem in the
industry. Also government intervention may encourage the firms to be inefficient
because they can rely on the government intervention to boost supply.
Finally, the government may have poor information about future prices and supply;
therefore, they may end up buying too much or too little.
In conclusion, a buffer stock scheme is fine in practice, but is often much more
difficult to practically implement. Also, for a commodity like copper, it requires
international co-operation, which is unlikely to exist.
--------------------------
2. Evaluate the advantages and disadvantages of various methods of
government intervention to correct market failure arising from aircraft
emissions.
Market failure occurs when there is an inefficient allocation of resources in a free
market. Aircraft emissions generate pollution which is a negative externality of flying.
In a free market the cost of flying will not include the external costs of emissions. The
external costs can include global warming, and worse air quality. Because the free
market doesn't take into account these external costs, there is likely to be
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