Essay Plans AQA A-Level Economics
Spec 1
Assess the view that inequality is ‘good for all of us’
Intro —> inequality linking to income, wealth, health and social background
Causes —> some people have skills and others don’t, people have different MRP,
inheritance etc
Inequality is good
- Incentivises people to work and enterprise
- Trickle down effect: benefits to the rich and wealthy e.g. tax cuts, will eventually
benefit the rest of the economy e.g. they hire more people or invest in educating
workers
Inequality is poor
- Consequence of market faliure
- Result in a waste of human talent
- Contribute to asset price bubbles and macroeconomic instability
- Can have a poor impact on peoples wellbeing and social factors e.g. crime, lfie
expectancy and obesity
- BUT consequences may vary
- Consequences of different types of inequality may vary
Also
- Inequality may not be good for any of us
- Value judgements inc fairness and justice
How does anchoring and loss aversion work (15)
- Anchoring —> anchor a price in mind to make people think they are getting a
better deal than they are e.g. medium is £2 but ‘only 20p more for a large’
- Loss aversion —> people are more sensitive to losses and prefer to save their
money
- Anchoring affects spending decision making e.g. hence why adjusting to
different rents in a new country may take time
- Affects saving decision making e.g. impact of a significant change in interest
rates
- Loss aversion affect spending decision making e.g. after a period of falling house
prices people are reluctant to move bc they can risk a loss
, - Loss aversion affects saving decisions e.g. unwilling to sell their shares at a
lower price than they paid for them even if they could invest the money in shares
that are a better investment
Economic and Behavioural economical techniques to solve the market failure of
eating unhealthy foods
Intro —> behavioural economics assume people don’t have full rationality; allow people
to be ‘nudged’, traditional economics take a harsher approach
Cause —> asymmetric information, unhealthy foods as a demerit good
Behavioural economics
- E.g. choice architecture/ framing with healthy foods like salads at the front and
unhealthy at the back, stairs at the front and a lift at the back to encourage
people to walk, incentives like bonuses for exercise
- BUT expensive, not harsh enough and may not work, still seen as paternalistic
- Habitual behaviour cant be influences and may affect peoples choices
Policies
- Food labelling, publicity campaigns, advertising, restricting misleading
advertising
- Legally enforced restrictions e.g. level of salt contents
- Information campaigns
- BUT expensive and may not work, too paternalistic
Harsh policies
- Impose taxes on demerit goods, unhealthy foods BUT too paternalistic and may
cause firms to shut down BUT tax revenue
- TAX GRAPH
- Subside healthy foods BUT expensive and might not work, firms might not use it
towards producing new foods etc
- SUBSIDY GRAPH
- BUT maybe people are irrational and it wont impact food choices, unintended
consequences and government faliure
2018
Is wealth inequality more damaging than income inequality
Intro —> wealth =assets and money over a longer period of time (inheritance,
accumulated income, assets), income = money over a period of time (wages, rent,
interest, dividends)
Consequences of wealth inequality
Spec 1
Assess the view that inequality is ‘good for all of us’
Intro —> inequality linking to income, wealth, health and social background
Causes —> some people have skills and others don’t, people have different MRP,
inheritance etc
Inequality is good
- Incentivises people to work and enterprise
- Trickle down effect: benefits to the rich and wealthy e.g. tax cuts, will eventually
benefit the rest of the economy e.g. they hire more people or invest in educating
workers
Inequality is poor
- Consequence of market faliure
- Result in a waste of human talent
- Contribute to asset price bubbles and macroeconomic instability
- Can have a poor impact on peoples wellbeing and social factors e.g. crime, lfie
expectancy and obesity
- BUT consequences may vary
- Consequences of different types of inequality may vary
Also
- Inequality may not be good for any of us
- Value judgements inc fairness and justice
How does anchoring and loss aversion work (15)
- Anchoring —> anchor a price in mind to make people think they are getting a
better deal than they are e.g. medium is £2 but ‘only 20p more for a large’
- Loss aversion —> people are more sensitive to losses and prefer to save their
money
- Anchoring affects spending decision making e.g. hence why adjusting to
different rents in a new country may take time
- Affects saving decision making e.g. impact of a significant change in interest
rates
- Loss aversion affect spending decision making e.g. after a period of falling house
prices people are reluctant to move bc they can risk a loss
, - Loss aversion affects saving decisions e.g. unwilling to sell their shares at a
lower price than they paid for them even if they could invest the money in shares
that are a better investment
Economic and Behavioural economical techniques to solve the market failure of
eating unhealthy foods
Intro —> behavioural economics assume people don’t have full rationality; allow people
to be ‘nudged’, traditional economics take a harsher approach
Cause —> asymmetric information, unhealthy foods as a demerit good
Behavioural economics
- E.g. choice architecture/ framing with healthy foods like salads at the front and
unhealthy at the back, stairs at the front and a lift at the back to encourage
people to walk, incentives like bonuses for exercise
- BUT expensive, not harsh enough and may not work, still seen as paternalistic
- Habitual behaviour cant be influences and may affect peoples choices
Policies
- Food labelling, publicity campaigns, advertising, restricting misleading
advertising
- Legally enforced restrictions e.g. level of salt contents
- Information campaigns
- BUT expensive and may not work, too paternalistic
Harsh policies
- Impose taxes on demerit goods, unhealthy foods BUT too paternalistic and may
cause firms to shut down BUT tax revenue
- TAX GRAPH
- Subside healthy foods BUT expensive and might not work, firms might not use it
towards producing new foods etc
- SUBSIDY GRAPH
- BUT maybe people are irrational and it wont impact food choices, unintended
consequences and government faliure
2018
Is wealth inequality more damaging than income inequality
Intro —> wealth =assets and money over a longer period of time (inheritance,
accumulated income, assets), income = money over a period of time (wages, rent,
interest, dividends)
Consequences of wealth inequality
