‘Economics in the Real World’

1. ‘Economics in the Real World’ The Real World and Economic Theory

2. Economic Research It influences how governments intervene in the domestic economy It’s interesting It’s diverse It can help economies to plan It can lead to changes in government policy It’s fun It affects international political thinking and policy It can make people’s lives better (or worse) Sometimes, it can explain the unexplainable It helps us to understand consumer and firm behaviour It’s useful

3. It requires an understanding of basic Economic Principles

4. 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?

5. 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

6. 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

7. 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

8. 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