impacts of...

impacts of, advantages and disadvantages: economics igcse edexcel

pros of division of labour (workers)

• focusing on one task allows to increased skill

• high skill means higher pay

• more job satisfaction with higher skills

disadvantages of division of labour on workers

• boring and repetitive work

• work of unemployment

• can have health implications (ie joint wear)

• job dissatisfaction

advantages of division of labour on firms

• efficiency improved

• more specialist tools are possible

• production time reduced

• organization easier

disadvantages of division of labour on firms

• poor-quality work with unmotivated workers

• problems occurring at one stage affect the whole production line

• loss of flexibility in the workspace

impact of privatisation On consumers

firms now had the pressure to meet customer needs whilst returning profit, meaning that they became efficient, sold better quality products, grew, and charged reasonable prices

impact of privatization On workers

many workers become unemployed and had to increase productivity by working harder and for longer hours

impact of privatization On businesses

their objectives change, they increase investment, have mergers or takeovers (the act of gaining control over a company by buying over 50% of shares), diversification (increase the range of goods or services it provides)

impact of privatization On the government

revenue generation, expensive (due to advertising), hostile takeovers (takeover which the firm does not want or agree to) after privatisation common

impact of increase in production costs on supply curve

shifts inwards

impact of increase in indirect taxes on supply curve

shifts inwards

impact of increase in subsidies on supply curve

shifts outwards

impact of new technology on supply curve

shifts outwards

impact of natural disasters on supply curve

shifts inwards

monopoly advantages

• efficiency

• innovation

• economies of scale

monopoly disadvantages

• higher prices

• restricted choice

• lack of innovation

• inefficiency

disadvantages of large firms

• too bureaucratic

• coordination and control

• poor motivation

advantages of large firms

• can exploit economies of scale

• market domination

• large-scale contracts

advantages of small firms

• flexibility

• personal service

• lower wage costs

• better communication

• innovation

disadvantages of small firms

• higher costs

• lack of finance

• difficulty attracting quality staff

• vulnerability

disadvantages of competition for the economy

* immobile factors of production

advantages of competition for the economy

• resources allocated efficiently

• innovation

advantages of competition (consumers)

• lower prices

• more choice

• better quality

disadvantages of competition (consumers)

• market uncertainty

• lack of innovation

advantages of oligopolies for consumers

• choice

• quality

• economies of scale

• innovation

• price wars

disadvantages of oligopolies for consumers

• cartels

• no competition

limitations of gdp

• inflation

• population changes

• statistical errors

• value of home-produced goods

• the hidden economy

• living standards

• external costs

impacts of economic growth

• employment rises

• standards of living rise

• poverty falls

• productive potential increases

• inflation rises

• environmental damage

impacts of high inflation

• The purchasing power of money decreases

• Higher wage demands rise

• Prices of exports rise

• Unemployment falls

• Menu costs increase

• Shoe leather costs increase

• Business and consumer confidence decrease

• Investment decreases

impacts of unemployment

• output falls

• waste of scarce resources

• poverty increases

• government spending on benefits rises

• tax revenue falls

• consumer confidence falls

• business confidence falls

• spirit of communities worsens

• crime increases

• increased stress on citizens

impacts of a persistent and long-lasting current account deficit on the economy

• leakages from the economy

• inflation

• low demand for exports

• funding the deficit

impacts of supply-side policies

• productivity increases

• total output increases

impacts of supply-side policies on productivity

• improved flexibility

• increased training and education

impacts of supply-side policies on output

• PPC shifts outwards

• unemployment decreases

advantages of privatisation

• competitive pressure improves quality and reduces prices

• if the business doesn’t go well, then the government does not make a loss

• contracting out

disadvantages of privatization

• private monopolies can form, which could exploit consumers

• if the firm fails, then it is at a loss

advantages of education and training

• quality of human capital improves

• workers are more productive

disadvantages of education and training

• slow

• expensive

impact of infrastructure quality increases on the economy

productive potential of the economy increases

impacts of lower income taxes on employment

• high taxes reduce the incentive to work

• high taxes discourage people from setting up and developing businesses

impacts of lower income taxes on the economy

• economic growth increases when businesses invest more

• maintaining a stable economy and increasing the flow of investment funds can help investment increase in the private sector

impacts of lower business taxes on stimulating investment

• fewer taxes on profits

• offsetting costs of investment against tax

• tax incentives

impact of high interest rates on inflation (consumers)

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* discourage consumers and firms from borrowing, fall in consumption, investment, aggregate demand and economic growth, unemployment rises

impact of high interest rates on inflation (mortgage)

* higher mortgage payments, reducing spending power and aggregate demand, firms reduce capacity and lay off staff, unemployment rises

impact of high interest rates on inflation (firms on costs)

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* firms raise costs, reduce profits, invest less, reducing aggregate demand

impact of high interest rates on inflation (firms investing)

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* discourages firms from borrowing to invest in technology and expansion, reducing development and competitive edge

impact of high interest rates on inflation (exchange rates)

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* higher exchange rates, fewer exports, staff laid off, unemployment rises

impact of high interest rates on inflation (consumption)

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* consumption falls, demand falls, production falls, firms lay off workers

impact of high interest rates on inflation (government spending)

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* government spending reduces, services cut, civil servants laid off

impact of expansionary fiscal policy on economic growth and inflation

• lowering taxes, increasing government expenditure

• lower taxes, more disposable income, aggregate demand rises, more output, economy grows

• government spends more, more civil servants hired, more demand, output and economic growth

impact of expansionary monetary policy on economic growth and inflation

• lower interest rates

• people borrow more, spend more, aggregate demand rises, more output and economic growth

• firms borrow more, invest more, new products developed, driving economic growth

impact of quantitative easing on economic growth and inflation

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* increases money supply, aggregate demand, output and economic growth

negative impacts of expansionary fiscal/monetary policy and quantitative easing on growth and inflation

• overheated economy

  • firms cannot meet rising demand, prices rise, demand-pull inflation

• inflation

negative impacts of policies on economic growth and the environment

• more output

• more emissions

• more vehicles

• more congestion

• more pollution

• more land usage

positive impacts of policies on economic growth and the environment

• less poverty

• longer life expectancy

• lower infant mortality

• improved living standards

Impact of monetary policy on the current account, BoP and inflation

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* high interest rates, demand for domestic currency rises, exchange rate increases, exports become more expensive, and imports become cheaper, pressuring the current balance

Impact of high and persistant inflation on the current account, BoP and inflation

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* prices rise, export prices rise, reduces demand for exports, pressuring current account, imports rise

Impact of fiscal policy on the current account, BoP and inflation

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cutting spending raising taxes, demand falls, no effect on the exchange rate, exports and imports become stable, current account unaffected

positive impacts of supply-side policies on the current account, BoP and inflation

• do not change the exchange rate

• produce more output at lower prices

• boosts exports

• benefits current account

• less inflation

impact of globalisation on countries where MNCs are based

countries where multinationals are based benefit from increased wealth

impact of globalisation on countries where MNCs are set up in

countries where multinationals are set up in will benefit from higher GDP, extra output and employment, more economic growth, raised living standards, higher exports, higher current account balance, higher training and technical assistance

impact of globalisation on governments

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* increased tax, more government spending, more businesses

impact of globalisation on producers

• access to huge markets

• lower costs

• increased access to labour

• reduced taxation

impact of globalisation on consumers

• lower prices

• more choice

• more transport and communications

• more tourism

impact of globalisation on workers

• new jobs in developing countries

• local supplies can benefit from contracts from new business ventures

• more freedom of movement

• offshoring increases

impact of globalisation on the environment

• economic growth means environmental damage

• more cars purchased, more flights taken, non-renewable resources used up

advantages of MNCs and FDI

• job creation

• investment in infrastructure

• developing skills

• developing capital

• contributing to taxes

disadvantages of MNCs and FDI

• tax avoidance

• environmental damage

• repatriation

advantages of free trade

• lower prices

• increased choice

• lower input prices

• more specialisation

• wider markets for businesses

disadvantages of free trade

• competition for domestic businesses increases

• unemployment increases

• domestic industries threatened

• dependancy

advantages of tariffs

• reduces imports

• improves current account

• raises revenue for the government

disadvantages of tariffs

* raises prices

advantages of quotas

• domestic producers can increase supply

• limit supply of imports

disadvantages of quotas

• raises prices

• consumer choice falls

advantages of subsidies

• lower prices

• increase supply

• incentive for domestic firms to enter the market

• boosts exports

• increases employment

• improves current account balance

disadvantages of subsidies

• costs the government money

• high opportunity cost

advantages of trading blocs to member nations

• cheaper goods

• more consumer choice

• faster economic growth

• FDI invited

• cooperation

• reduced cross-border conflict

advantages of trading blocs to firms in member nations

• exploit economies of scale

• extra competition

• improves quality and innovation

disadvantages of trading blocs to member nations

• encourage regional trade instead of global trade

• financial cost to government and taxpayer

• firms within a bloc can merge

• formation of regional monopolies

• interdependence within the bloc

• possible changes in laws and customs

disadvantages of trading blocs to non-member nations

• common trade barriers faced

• less trade possible

criticisms of WTO

• undemocratic

• favours corporations over workers

• destroys the environment

• favours wealthy nations

• causes hardship for poor nations

impact of increase in supply of currency on supply curve

shifts outwards

impact of decrease in supply of currency on supply curve

shifts inwards

impact of increase in demand for currency on demand curve

shifts outwards

impact of decrease in demand for currency on demand curve

shifts inwards

impact of appreciation on export prices

rises

impact of appreciation on export demand

falls

impact of appreciation on import prices

falls

impact of appreciation on import demand

rises

impact of depreciation on export prices

falls

impact of depreciation on export demand

rises

impact of depreciation on import prices

rises

impact of depreciation on import demand

falls

impact of appreciation on current account

demand for exports falls, demand for imports rises, worsening a deficit

impact of depreciation on current account

demand for exports rises, demand for imports falls, lessening a deficit

impact of exchange rate changes for demand inelastic goods

little effect and no price change

impact of exchange rate changes for demand elastic goods

big change in demand, price change, increased demand for exports, lower current account deficit