economic essay €“ linking theory to practice’

Economics

Question 1:
The profit motive is an essential ingredient of a market system. According to theory the price
mechanism in a free market economy is an efficient distributor of goods and services. In practice,
does the price mechanism always distribute goods and services to those who need them?
Establish the meaning of the term market failure. Investigate an instance of market failure in the
Australian economy. In your essay, identify the economic reasons for the market failure and also
recommend some strategies for dealing with these failures and turning the business around.

Criteria Q1
Introduction to chosen essay topic, adhering to word count, structure of the essay and APM cover page
Students should be able to provide definitions for the profit motive and the price mechanism.
Students should be able to demonstrate a working knowledge of how the price mechanism works in a
free economy.
Students should provide a valid explanation to support their answer to the question Does the price
mechanism always distribute goods and services to those who need them?
Introduce and link Adam Smith’s theory to this question. Can use examples to support this.
Definition of Market failure and externalities
Explain, using examples externalities and how it relates to this question (introduction of government
here)
Reference List and Appendix

Question 2:
Discuss and compare the four market structures covered in this unit. Include in your discussion
the issues of competitors, barriers to entry, pricing and output decisions for firms, price
determinations and price discrimination, economic profit in the short and long run, resource
allocations, profit maximisation and cartels. Included in your analysis, please discuss whether
OPEC is a form of cartel when it comes to regulating the world oil prices. What would be the
benefits to member of OPEC and identify whether there are any advantages of having an
organisation like OPEC in the interests of the consumers.

Criteria Q2
Introduction to chosen essay topic, adhering to word count, structure of the essay and APM cover page
Students should be able to identify and explain the four market structures.
Students should be able to explain for each market structure:
  competition
  barriers to entry
  pricing and output decisions
  resource allocations
  profit maximisation
  cartels
Students should be able to explain OPEC and identify whether this is an example of a cartel or not,
giving reasons to support their answer
Students need to identify the benefits to members of OPEC (if any), This must be discussed from the
role of the government, consumer and oil/energy business.

Question 3:
Do you agree with government intervention in the market to regulate prices? Discuss using
examples the various forms of government regulation in Australia and whether this intervention is
a positive or negative thing for the economy. (Please think of this situation wearing your
economics hats).

Criteria Q3
Introduction to chosen essay topic, adhering to word count, structure of the essay and APM cover page
Students need to answer the question Do you agree with government intervention in the market to
regulate prices? Support theory and examples need to be provided here.
Students need to identify the various forms of government regulation in Australia and state the effects
on the economy using examples.
Referencing and indexing

Question 4:
Critically analyse inflation and its consequences, including the meaning of real and nominal
inflation and how inflation is measured. The discussion should include reference to the Consumer
Price Index, what it is and how it relates to inflation, including any criticisms of the index. You can
base your essay on the inflation statistics for Australia over the last five years.

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Criteria Q4
Definitions and explanations for all types of inflation and consumer price index. Create a link between
both.
Role of the government in managing inflation
Relationship between interest rates and inflation
Criticisms of the CPI (Consumer Price Index)
Role of the GDP deflator and an explanation of what it is.
Explain the Fisher effect and the Quantum theory of money.

Guidance for writing essays

General Points

1. Identify the instruction words: e.g. Investigate/ Research/Explain
2. Identify key words in the question eg. price mechanism, consumer price index etc.
3. Identify any terms which need to be defined e.g. market, price discrimination.
4. Remember DEEDA alternatively DADA. This is a way to check you have covered all the main
requirements of the question.

Define €“ have you defined all essential terms?

Explain €“ is your explanation clear?

Example €“ is an example asked for in the question or would an example help your explanation?

Diagrams €“ are diagrams asked for in the question? Remember to use diagrams /graphs where
possible to help explain your argument.

Analyse €“ is your analysis clear and does it focus on the question
OR

(Define, Assumptions, Diagrams, Analysis)