Edexcel Economics Paper 3 Essay Plans Flashcards
Evaluate the microeconomic and macroeconomic effects of a depreciation of the pound. Refer to restaurants or other food delivery services in your answer. (25)
P1; higher cost of imports of food and therefore higher cost of production for hospitality sector, could lead to higher prices for imports for Chinese ingredients. They may have to switch to local ingredients. H- This make exports more competitive. Won’t affect restaurants however.
P2: Improves value of current acct deficit. 2.5% in Q3 2023. Since d for M fall, increases domestic demand. X looks cheaper to foreign countries. More injections into circular flow of income and less withdrawals leading to AD and multiplier effect. H- Marshall Lerner (Pedx + Pedm > 0). J-curve, shows time lag in an improvement in deficit.
With reference to Extract C, discuss the likely effects of increasing integration within the food delivery. market. (12)
Integration- involves joining of two firms at any stage of production.
P1: Lower prices charged to consumers. Horizontal means that integrated firms have synergy. Increase in output. EoS. Removes competition. Increases market share. H - Could lead to Deos, merger can lead to higher AC, delivery costs increases and less consumer surplus.
P2: Mergers can save a company from becoming bankrupt. Just Eat has bought out rivals e.g. merger between Just Eat and Takeaway.com
* Amazon has partially bought Deliveroo (16% so far) which may have saved it, and/or improved it on the tech side. The bought out company can use superior tech. H- Further mergers might be limited by the CMA
(b) Examine two demographic factors influencing development in Kenya.
P1; kenya may have change in population growth rate. Kenya’s population has doubled over the last 25 years, to about 40 million people (Fig 2), can strain resources, infrastructure. Leads to food insecurity, and inadequate healthcare and high u/e rates. However, will be higher working population.
P2; Urbanisation, more people move from rural towns to urban centers. Increased pressure on housing. creates opportunities for employment, need to build houses. Lowers u/e rate. H - Time lag.
Using the example of cut flowers (Extract F), discuss how the concept of absolute advantage may lead to growth in Kenya. Use numerical or diagrammatic analysis in your answer. (12)
Absolute advantage - country can produce a good with less resources compared with other countries.
p1; more flower with lower AC than another country. Weather works in their favour. High altitude with cool nights, proximity to equator and sunlight hours are ideal for Kenya. Enables larger exports and GDP.
H -If energy costs change, absolute advantage might be eroded.
p2; Creating more employment, means they can put out flowers faster, can benefit from eos as they produce more. Drawing an output table, kenya focuses on flowers instead of machinery, to make greater quantities. H- Monopsony may mean that supermarkets have a huge advantage and erode any benefits for Kenya.
Evaluate the microeconomic and macroeconomic effects of decreasing interest rates in Kenya, or another developing country of your choice. (25)
p1; Lower costs to business, so FC falls and increase competitiveness, stimulates consumption. Greater credit for businesses to expand in R&D, and gain dynamic efficiency. Can lead to job creation in labour market as a result of derived demand. Lower consumer surplus, lower prices. H -, decreases disposable Y,.
p2; lower saving (unlikely in the context) but easier to borrow, so consumption and investment increases; hence AD rises with multiplier effects. lower exchange rates - improvement in current account position of BOP, with effects on competitiveness and trade. impacts on LRAS/PPF over time if investment continues to grow
* lower cost of financing public deficit/debt may mean greater government spending elsewhere.
H - Depends on how much IR costs are as % of ovr costs
