Below is a macroeconomic 12 mark essay I did (without time constraints) and received full marks.

Pleas understand this is my work and I would appreciate that you do not exploit it by claiming it is your work.

Tackling Multiple Choice Questions

In this video I thank all my supporters for supporting me as it keeps me motivated! Thank you all!

have been asked to share some of my tips for writing data response economic questions. I hope this helps! 🙂

1) Know how many mark question they are e.g. I know in my Jan exam for the Data response there are 4 question and the marks they hold (4, 12,  8 and 16 marks)

2) Know how the marks are split e.g. in unit three except for the 4 mark one they tend to be 50% analysis and 50% evaluation.

3) Know how to split that further so if evaluation is worth 6 marks know that you can discuss two factors worth 3 marks each or 3 factors worth 2 marks each.

4) Once you know this all you need to do is write down you points whether analysis or evaluation to marks you allocated above.

5) It is good to know this structure off by heart, memorise it and use it for planning big questions in exams

6) In terms of analysis, you are defining key terms, applying economic theories such as theory of PED to the question and drawing diagrams.

7) In evaluation all you are doing is saying whether this is different in the long-run, is this an actual realistic thing, other factors that affect what you said in evaluation, ceteris paribus (is it assumed that all factors are equal), prioritising and justifying points, if for example you are talking at tax or subsidy then you can discuss that it depends on the size of the tax for the effects to happen etc.

Price Elasticity of Demand (PED) can look like one of the three graphs shown below:

So what is the diagram above?

The diagram above shows the three different shapes you may expect to see a demand curve – remember that a demand curve can look like anything though. As I say in my theory of demand video, theoretically demand could even be upward sloping if for example we are looking at an antique painting or designer handbag where as price increases so does the demand.

What different PEDs do the demand curves represent?

D0 – This represents the standard demand that most products have which is that demand falls from the highest prices the curve is elastic. This is because when prices fall more people are able to afford it (income effect). Then as we go to that bendy bit in the middle (sorry to write in such an informal manner) we see unitary elasticity where the percentage changes in demand are equal to the percentage changes in prices. The last vertical but shows inelasticity. When prices are low to begin with there is a limit to how much demand can increase when prices fall further. Compare the difference when a price falls from £20 to £10 and that of £2.50 to £1.25.

D1 – This is an absolutely inelastic demand curve. No matter how much price changes demand is not affected. This is a more theoretical concept than one that exists in real life. An example of a good which has almost zero elasticity like this curve is the class A drug Heroin. No matter how much price increases demand is not likely to be affected because people are addicted and are prepared to pay the premium. However, even the demand for heroin is not absolutely inelastic simply because the price will affect the demand from those who want to try the drug for the first time. [Please note I am not trying to encourage drug abuse – I’m simply using it to prove a point]

D2 – This is the opposite to D1. This is an infinitely elastic demand curve. What this means is that any changes in price will kill all the demand as demand is only present for that particular price. Again this is a more theoretical abstract concept than one that actually exists in real life. For example, a good may be valued at £5 and any increase even £5.01 will kill demand 100% because people are not prepared to pay even a pence more. It is the same if the price were to fall to £4.99. The demand is absolutely elastic meaning that it is 100% affected by changes in price.

The Circular Flow of Income is an economic model which depicts how an economy on a most basic level functions.

Starting point…

We start by observing that two economic agents exist in any economy:

(i) Households- so they own factors of production such as land, labour capital and enterprise and demand goods and services

(ii) Firms – They use factors of production and turn them into goods and services because they seek rewards – which is not only money but recognition etc.

Before we go on, you may be wondering what about government? Other countries we trade with? They are all valid economic agents but the whole point of economics is formulate simple models which allow us to experiment. So the Circular Flow of Income model is based on 3 assumptions;

(1) The economy operates with closed trade which means no international trade exists

(2) No government exists

(3) No economic agent saves, any money received will be spent.

We will see in a short while what actually happens when these assumptions are removed. But for now let me explain how the two economic agents (firms and households) are engaged in this model.

What happens is household they own factors of production which firms demand in order to produce goods and services. So a trade takes place, households sell land for rent; labour for a wage; capital for interests, profits and dividends and finally; enterprise (by which I mean entrepreneurial skill) for recognition and a salary. This is demonstrated by the two arrows shown on the diagram.

On the other end firms sell these goods and services to households in return for a payment which if provides sufficient revenue not only encourages a firm to keep on producing but attracts more firms into the industry.

It is important to note two things. In some place this model is depicted with four stops in the circle firms, households, market for goods and service and market for factors of production. These markets simply denote that a trade is taking place between some form of money and goods and services/factors of production.

The second thing to note is that these arrows are incredibly important when we look at more serious models of the Circular Flow of Income. For example, the goods and services one can denote national output and rent/wage/profit one can denote national income.

So now to make the model more realistic. In reality we know that the three assumptions (no government, international trade and savings) are incorrect albeit at different levels and powers in different countries. But we do know they exist and they come under what we term in economics as leakages and injections. Leakages and Injections are external sources which either bring money in or out an economy.

So injections are external sources whereby money is gained in an economy and there are three of these which can be remembered by the abbreviation GXI – Government Spending, Exports (foreign money) and Investment. Leakages conversely are SMT (senior management team) Savings, Imports and Taxation. They are merely opposites and we can add an additional arrow to show these and make the model more realistic.