In 1981, the actress Jane Birkin boarded an Air France flight to London. She didn’t know it at the time, but Birkin had taken her seat next to Jean Louis Dumas, the chief executive of Hermes, a French maker of luxury goods. This chance encounter would lead to the creation of a product which would call into question a supposed ‘law’ that is one of the first things that budding economics students the world over are taught as gospel.
In this excellent Cautionary Tale, Tim Harford perfectly illustrates the versatility of a two by two grid to guide strategic decision making.
Essay 2 of the 2021 AQA Economics Paper 1 asked students to discuss the extent to which economic agents are entirely rational in their decision making. Here is a model answer to that question:
Section A of the 2022 AQA A level economics paper 1 was all about market concentration in the supermarket sector. The 25 mark question asked the extent to which this was serving customer interests well. Here is a model answer, with diagrams, showing how to address this type of question:
Many people assume that the study of economics is all about money, but it is actually more focussed on the choices that households, firms and governments make. There is significant debate over the motives behind the decision-making process. Are we truly rational creatures, or are we influenced by a broad range of biases?
Essay 1 on the 2022 AQA A level economics paper 1 questioned whether high speed internet connection should be provided, free of charge to all households. Here is a model answer which addresses this question:
The eight richest people on the planet hold as much wealth as the poorest half of the world’s population put together. The richest of these, Jeff Bezos, has a level of wealth that you wouldn’t match if you earned $180,000 every day from when Jesus was born up to the present day.
Aggregate demand is the total demand for all goods and services, made up of four different components:
Economics is traditionally based on the assumption that consumers always act rationally and with total self-interest, sometimes known as 'homo-economicus'. Behavioural economics challenges this assumption in a number of ways:
Monopolistic competition in the short run. Firms are price makers with a downward sloping demand curve. Supernormal profits may be earned at the profit maximising output MC=MR.
With Donald Trump's tariffs headline news, this Plant Money video is a great example of the unintended effects of protectionist policies.
The trade creation and trade diversion diagrams are some of the toughest in macroeconomics but mastering them can be a route to the top mark bands in essay questions about economic integration.
