Evaluation is an important component of an advanced essay. It requires the ability to look at facts, arguments and analysis, with a degree of critical distance. Evaluation involves: Looking at what other factors may affect the outcome. Time lags involved. How it might depend on other issues, e.g. elasticity of demand Why the original statement …
Social benefit is the total benefit to society from producing or consuming a good/service. Social benefit includes all the private benefits plus any external benefits of production/consumption. If a good has significant external benefits, then the social benefit will be greater than the private benefit. Examples of social benefit If we cycle to work, the …
Definition of social cost – Social cost is the total cost to society. It includes private costs plus any external costs. Example of driving to work Costs of paying for petrol (personal cost) Costs of increased congestion (external cost) Pollution and worse air quality (external cost) The social cost includes all the above. (Petrol + …
Readers question: what are the advantages and disadvantages of devaluation? Devaluation is the decision to reduce the value of a currency in a fixed exchange rate. A devaluation means that the value of the currency falls. Domestic residents will find imports and foreign travel more expensive. However domestic exports will benefit from their exports becoming …
Economic growth means an increase in national income/national output. If we have a slower rate of economic growth – living standards will increase at a slower rate. For example, in the post-war period, western economies grew at 2.5% to 4.% per year. However, since the early 2000s, growth rates have slowed down. This process of …
Different models of economic growth stress alternative causes of economic growth. The principal theories of economic growth include: Mercantilism – Wealth of a nation determined by the accumulation of gold and running trade surplus Classical theory – Adam Smith placed emphasis on the role of increasing returns to scale (economies of scale/specialisation) Neo-classical-theory – Growth …
Definition of social efficiency. This is the optimal distribution of resources in society, taking into account all external costs and benefits as well as the internal costs and benefits. Social efficiency occurs at an output where Marginal Social Benefit (MSB) = Marginal Social Cost (MSC). Social efficiency is closely related to the concept of Pareto …
An explanation of how the rate of interest influences the level of investment in the economy. Typically, higher interest rates reduce investment, because higher rates increase the cost of borrowing and require investment to have a higher rate of return to be profitable. Private investment is an increase in the capital stock such as buying …