On day 2 of the Year 13 recap we continue a review of the different costs that producers face by specifically looking at marginal and average costs.
Our Year 13 Recap kicks off with a review of some of the main production costs that producers incur over time and why they matter for a business.
This Year 12 Recap video covers the basics around the topic of supply side policies.
Supply side policies are policies designed to try and help increase the productive capacity of the economy over time. This can be achieved via policy initiatives aimed at improving the quality and/or quality of an economy's factors of production over time. These policies can be instigated by the government's spending plans as an indirect effect of fiscal policy or via the drive of the free market to capture higher profits. This is a prominent discussion point within exams as the UK has experienced a 'lost decade' of productivity since the financial crisis. The discussion around supply side policies and the effectiveness of them can provide an extremely useful talking point when looking at the productivity of an economy over time.
This Year 12 Recap video covers the basics around fiscal policy.
The government of any country has a responsibility and vested interest to ensure that the level of public infrastructure across the economy remains functional and competitive with the rest of the world. Fiscal policy reflects the means by which a government adjusts its spending levels to fulfill the infrastructure requirements of the country. However, this can only be done by raising revenue from levying taxes on the wider economy. The government must strike the right balance between catering for the instant needs of the current generation, without lumbering an infinite number of future generations with high taxes and debt levels. Fiscal policy is a topical issue in economics exam papers as the debate over austerity has gripped many European nations, as a result of the lingering shadow of the 2008 financial crisis.
This Year 12 Recap video covers the basics around the main economic policy used by central banks - monetary policy.
For any economy, macroeconomic stability is vital to ensure that economic activity and confidence levels across the economy remain high. One aspect of macroeconomic stability is maintaining price stability. The central bank's sole responsibility is to ensure that prices grow at a steady and sustainable pace to protect people's real incomes and living standards. The conventional approach used by the central bank is the manipulation of interest rates to keep inflation in line with their CPI target. In most macroeconomics exam papers, a question regarding the central bank's role of controlling inflation via a monetary policy is used and therefore students need to be well-prepared with the basic knowledge requirements of this conventional policy area to use alongside a relevant AD/AS diagram.
This Year 12 Recap video covers the basics around the topic of trade.
The trade balance of a country provides an important indicator of how competitive a country is with the rest of the world. In many economics exam papers, there will be an essay question testing students knowledge of the trading relationship between countries and how a change in this relationship will affect the relative performance of the economies. Therefore students need to be confident with the terminology surrounding trade and the factors which cause a country to run either a surplus or a deficit.
This Year 12 Recap video covers the basics around the topic of the balance of payments.
The balance of payments is a collection of individual trading accounts which measure how dependent an economy is on the rest of the world to satisfy its needs and wants. The accounts can be used to assess the external competitiveness of a country with the rest of the world. In an exam situation, students need to understand the basic structure of the balance of payments accounts to be able to appreciate that there is an inverse link between the performance on the current account and the financial account. By understanding the basic principles of this trading account, a student can start to analyse in more detail the impact of an exchange rate, interest rate and inflation rate change on the performance n competitiveness of an economy.
This Year 12 Recap video covers the basics around the topic of unemployment.
Unemployment is the measure of the number of people of working age who are out of work but are making active strides to get back into work. The number of people who are currently unemployed provides a key indicator of the underlying health of an economy. However, economists are always wary of drawing too many concrete conclusions from this metric as it does not include those who are not part of the labour force. In macro exam style questions, the disruption of the macroeconomic equilibrium and its direct impact on unemployment is a basic analysis tool which can provide students with the kickstart for their evaluation points.
This Year 12 Recap video covers the basics around the topic of deflation.
Many would perceive that falling prices would boost an economy as the real incomes of consumers will surge. However, the interesting debating point amongst economists is that if a country experiences protracted spells of deflation then it may negatively hit spending and growth as consumers delay their purchases in anticipation of further price cuts. Therefore, students need to be armed with both sides of the deflation argument when going into an exam question surrounding inflation/deflation, as this represents an opportunistic moment to earn crucial evaluation marks.
This Year 12 Recap video covers the basics around the topic of inflation.
Inflation is an important economic concept for students to be comfortable with as it has crucial spill-over effects on the long-term growth potential of an economy. Policymakers and central banks are keen to keep inflation low and stable to create stability in individual's purchasing power and ensure growth is not crowded out at the expense of escalating inflation. In many macro essay questions, inflation is a good topic to discuss at great length because it not only affects the strength of the domestic economy but also affects the long-term competitiveness of an economy with its main international trading partners.
This Year 12 Recap video covers the topic of the macroeconomic objectives.
In many macroeconomic essay questions, students will have to be able to draw upon their knowledge of AD/AS diagrams to apply to real-world examples the impact of policy changes on the growth prospects of a country. In the analysis stage of their answer, they will need to assess the impact of the relative curve shift on the economy's main macroeconomic objectives. This is a key skill in macro essay questions as it gives students the breathing space to evaluate the winners and losers of an economic change.
We continue our Year 12 Recap on the theory of the business cycle.
The business cycle highlights the cyclical nature of any economy. It shows that an economy fluctuates between periods of growth culminating in a boom, followed by periods of slower/negative growth culminating in a bust. The academic importance of this is it emphasises that economies will eventually return to growth after a recession due to changes in economic fundamentals such as interest rates, exchange rates, and confidence.
This Year 12 Recap video covers the basics around the topic of economic growth.
In many macroeconomic essay questions, students will have to be able to draw upon their knowledge of AD/AS diagrams to apply to real-world examples the impact of policy changes on the growth prospects of a country. Therefore, it is important for students to be confident with representing both short-run and long-run growth on an AD/AS diagram.
This Year 12 Recap video covers the basics around the Long-Run Aggregate Supply Curve.
The LRAS curve provides economists with a graphical depiction of how the output of an economy changes in the long-run. The curve is vertically fixed at the full employment output level, to indicate that an economy cannot sustainably produce above capacity unless there is a change in the quality and/or quality of the economy's stock of factors of production. Being able to understand the distinction between a movement and shift in this curve is important because AD/AS diagrams represent the core bedrock of many macroeconomic essay questions.
Next up on our Year 12 Recap videos are Short-Run Aggregate Supply Curves.
Short-run aggregate supply curves provide economists with a graphical way of representing the aggregated supply of an economy's goods and services produced at any given point in time. Being able to understand the basic upward shape of SRAS curves and the distinction between a movement along the SRAS curve and a shift is a crucial skill amongst economists.
Today's Year 12 Recap is looking at the topic of Aggregate Demand Curves.
Aggregate demand curves provide economists with a graphical way of representing the total expenditure on an economy's goods and services produced at any given point in time. Being able to understand the basic downward shape of aggregate demand curves and the distinction between a movement along the aggregate demand curve and a shift is a crucial skill amongst economists.
The first of our Year 12 Recap videos for macroeconomics looks at Aggregate Demand.
Aggregate Demand curves provide economists with a graphical way of representing the total expenditure on an economy's goods and services produced at any given point in time. Being able to understand the main components of aggregate demand is a crucial skill amongst economists. This is because AD/AS diagrams represent the core bedrock of many macroeconomic essay questions.
The final Micro Year 12 Recap covers the topic of price controls.
Governments have a duty to protect the welfare of all economic agents across the economy and to prevent agents from being exploited by the forces of the market. One of the policy approaches a government can take is to impose a price control on the market, to ensure consumers are not exploited, and producers get a fair price for their production efforts.
This Year 12 Recap video centers around the topic of some of the additional forms of government intervention such as state provision and regulation.
Governments and policymakers have to remain vigilant and alert to intervene in a market when there is a misallocation of resources away from the social optimum. These policy tools help influence the outcome in the market and help nudge the equilibrium closer to the social optimum. The knowledge of this concept is crucial, as when discussing potential remedies for markets that fail to allocate scarce resources effectively, these simple but effective policy tools can be discussed in great detail.
This Year 12 Recap video centers around the topic of Producer Subsidies.
Subsidies are one of the central policy tools which can be used by a government to influence the outcome in the market to help nudge the equilibrium closer to the social optimum. The knowledge of this concept is crucial, as when discussing potential remedies for markets that fail to allocate scarce resources effectively, this simple but effective policy tool can be discussed.