Ask an Economic Question

You are welcome to ask any questions on Economics. Though you might also like to try google custom search (top right) to see if the topic has been covered before.

I am looking to explain economic principles / ideas/ recent developments in economics. I can’t promise to answer, but will try if it meets the criteria below.

  • Please don’t ask me to do your coursework / assignment e.t.c. (I can usually tell if it is a homework question!)
  • Please don’t ask any maths calculations.
  • The question and answer will be published here where everyone can see it (including your teacher!)
  • I aim to try and simplify economics; as a rough guide I would aim at an understanding similar to a good British A Level student.
  • I am looking to explain economic principles / ideas/ recent developments in economics.
  •  I will answer as a new post, if you leave email address, I’ll usually send quick email. Check home page of blog for new post. With question and answers

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By on January 13th, 2015

1,922 thoughts on “Ask an Economic Question

    1. Mainly it depend whether it is a developed or a developing country as developing country has low gdp per head because mainly it is working in agriculture which has low demand low skilled workers so productivity may fall but as for developed country it has higher gdp per head working in tertiary or secondary sector also there are other reasons as for wage differentials is within a country so maybe old will earn different from young or whether there are employed on public or private sector… Etc

  1. It is an mcq question. It says a country wants to ncrease its free trade witg other countries so what can be done to achieve this
    Higher quota on imported cars or embargo on cars from other countries or subsidies to car producers domestically answer is first one but I don’t know why could u please help me thanks in advance

    1. Ooh, interesting ! By higher quota it must mean allowing more cars in. This will please the WTO is it is effectively a reduction in trade barriers. So that’s why it is the right answer.

  2. If the GDP of a country in a year is ~ 1 ,000, its NDP is ~ 950 and the expenditures on
    machinery and equipment, and construction are { 150 and { 100 respectively, then what
    would be its Net Fixed Capital Formation in the year?

    1. less protectionism = more free trade = ability to exploit comparative advantage leading to more output.
      more protectionism = expenditure switching away from imports = more profit for domestic producers

    1. Yes if it keeps their costs down to help their exports (cost push lowflation) representing a rise in real GDP
      No if it represents a lack of AD (demand pull lowflation) because this means a fall in real GDP

  3. Hi, I had an interesting thought. The area above the labour demand curve and below the wage rate is economic rent (essentially the produce surplus of the economic agent supplying labour). The area above the wage rate is basically the profit to the employer from demanding labour (excess of MRP over cost) but what is it called? does it even have a name?

  4. How would you draw a lorenz curve where half of the population has no income and the other half have all the same income? And what would the gini coefficient be?

    1. assume there are 10 people

      1, 2, 3, 4, 5 = $0
      6, 7, 8, 9 ,10 = $20 each
      total income = $100
      so 1st to 5th = 0% each
      6th to 10th = 20% each

      cumulative graph
      1st 10% of people = 0% of income
      1st 20% of people = 0%
      1st 30% of people = 0%
      1st 40% of people = 0%
      1st 50% of people = 0%
      1st 60% of people = 20%
      1st 70% of people = 40%
      1st 80% of people = 60%
      1st 90% of people = 80%
      1st 100% of people = 100%

      try plotting that!

      by my rough calculation that gives a Gini of 0.48

  5. Hi. I’m an A-Level Economics Student doing the AQA spec.

    I’m well aware of the fact that in 25 markers you have to analyse and evaluate within the question but I’m completely lost as to how many points for analysing and evaluation I should be making. Should I place more emphasis on evaluating or analysis?

    1. You need to do 3 points in 25 marker. At the end you must include a conclusion. In the 3 points you must evaluate and analyse. In your analysis you should use at least 3-5 chains of analysis as well as a diagram to support the analysis. In your evaluation you need to question the theory you have wrote. Eg “the extent to which this is true….”

    2. I do IAL Edexcel and I also have 25 marker.
      My teacher told me if I’m not mistaken that I have to do 4 analysis and 3 evaluation,
      You can check Econplusdal youtube videos on 25 marker questions I believe he has AQA videos.

  6. Australia is an exporter of natural rubber. Initially, the world price of natural rubber is $3 per kg. The transportation cost of exporting is $1 per kg. So Australia natural rubber producers only receive $2 per kg after they pay transportation cost.
    Now, government subsidies domestic producers $1 for every kg of natural rubber they export and does not pay any money for natural rubber sold in Australia.
    * How does it affect the price of natural rubber in Australia ? What are the effects of producer surplus, producer surplus and government revenue ?

  7. How does the relationship between average cost and marginal cost determine a firms cost curves in diminishing marginal productivity

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