Elizabeth Jones

‘Economics in the Real World’

The Real World and Economic Theory

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Economic Research

It’s diverse

It can lead to changes in government policy

It’s interestingIt influences how governments intervene in the domestic economy

Sometimes, it can explain the unexplainable

It’s funIt affects international political thinking and policy

It can help economies to plan

It helps us to understand consumer and firm behaviour

It can make people’s lives better (or worse)

It’s useful

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It requires an understanding of basicEconomic Principles

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The core concepts of the research

The causes and consequences of poverty The importance of income

The income effect Opportunity cost, choice and trade-offs

Who faces the highest opportunity cost?

Government intervention Education: a link to wages?

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The core concepts of the research

Human capital and physical capital – what are they? How can they be increased?

Opportunity cost Productivity and Output

The demand-side and supply-side factors

Investment for long run output growth Externalities

Network effects

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The core concepts of the research

Employment and unemployment The model of demand and supply Applying the model to the labour market

Which factors affect the demand and supply of labour?

Wage differentials Migrant workers as substitutes

What’s the effect? Globalisation: the effect on inequality

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The core concepts of the research What is human capital? Which factors boost a worker’s marginal

product? What is the impact of this in the labour

market? Economic rent

Demand, supply and equilibrium Opportunity cost

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The Real World and Economic Theory

All research relies on understanding and being able to apply the basic principles of economics

To explain data To explain phenomena where data

doesn’t exist Research can be used to test existing theories

and to inform policy-making If you don’t understand the core principles

(learnt at A Level), research is impossible