Reading Material - Unit 4

How does the budget filter down into the economy? The Nut Graph features an article by Tony Pua on the likely impact that the credit card tax will have on consumer spending in Malaysia. The Edge presents a differing view.

Reading Material - Unit 1 & 3

Is snail mail dead? This article from the Economist discusses the factors leading to the rapid fall in demand for traditional postal services across the world, and how service providers are evolving in response to this trend.

Unit 1 students, are you able to "Identify three factors contributing to the decline in postal services demand"?

Unit 3 students, are you able to "Evaluate two strategies that postal services providers could pursue to maintain their profitability"?

Reading Material - Unit 2

This article presents the limitations of GDP as a measure of economic growth - there are some useful points as well as evaluations in here. Stiglitz raises an interesting point - is there a trade off between GDP growth and the protection of the environment (i.e. do we choose to increase one at the expense of the other)? Or should GDP actually begin to reflect the fact that choices made to protect the environment can actually be good for the economy, and conversely, choices made that destroy the environment can reduce GDP in the long run? This article is also useful for Unit 4.

See related article from the Economist on the relationship between GDP and the environment in developing countries, and also a handy GDP Q&A by the BBC.

Reading Material - Unit 1

A brilliant (and doomed) template for healthcare reform

In this article, Tim Harford provides an entertaining discussion of some of the main weaknesses of the NHS and the US healthcare system. Check out his blog as well for many articles that are relevant to the A-Levels syllabus.

Reading Material - Unit 4

Africa's Population: The Baby Bonanza

This interesting article from the Economist provides useful insight on the demographic transition and the demographic dividend that Africa is undergoing. It explains how current population trends are both a blessing and a curse for the continent.

Sample Notes (Unit 1 - Competitive Markets)

Unit 1 (previously Unit 2) - Market Failure - Externalities

Externalities (Spillover Effects)

• Externalities arise when private costs/benefits are different from social costs/benefit
• Basically, this occurs when an economic transaction affects a third party, separate from the consumer and the producer
• There are positive and negative externalities

Negative Externalities

Example: A factory producing shoes pollutes the river. The cost of shoe production is paid by the factory, but there is also the cost to the villagers who can no longer the water to wash, fish, bathe and have to source water elsewhere. These villagers are affected by a negative externality.

Private cost (PC) – cost of an activity to an individual economic unit, e.g. consumer/firm

Social cost (SC) – cost of an activity not just to the economic unit which creates the cost, but to the rest of society as well

If SC > PC à there is a negative externality (external cost)

SC = EC + PC

Positive Externalities

E.g. I am infected with H1N1. By seeking early medical treatment and then quarantining myself, I benefit a) myself; but also b) all the other people that I do not infect, as a result of my precautionary action.

Private benefit (PB) – benefit of an activity to an individual economic unit

Social benefit – benefit of an activity not just to the economic unit creating the benefit, but to the rest of society too

If SB > PB à there is a positive externality (external benefit)

SB = EB + PB

Markets do not account for these externalities; they are not included in the prices we pay.

The price mechanism only reflects private costs/benefits.

This is a form of market failure.

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