HERIOT-WATT UNIVERSITY
ECONOMICS FOR BUSINESS – DECEMBER 2021
Section I
Essay Questions
1.
2.
3.
Demand
• Range from elastic to inelastic.
• Factors contributing to elasticity.
• Actions to change elasticity – price, income and substitution effect.
• Implications of price changes on revenue with different elasticities.
• Government knowledge of elasticities (e.g. tobacco, alcohol) and how it affects
policymaking.
Supply
• What will businesses do depending on how elastic supply is?
o E.g. hold stocks, produce alternative products, work overtime, and buy more
machinery.
• The elasticity itself will depend on various factors – discuss these.
• Tends to be more elastic if firms can get hold of raw materials or workers more
easily.
• More elastic if firms have spare production capacity.
• The time period concerned will have an impact – e.g. immediate, short run, long
run.
• Application to relevant business examples.
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Description of different market structures: perfect competition, monopoly.
Can discuss also oligopoly, monopolistic competition.
Barriers to entry and other factors determining the market structure.
Implications for business behaviour of different market structures.
Production/pricing decisions for a price-setting firm and a price-taking firm.
Advantages and disadvantages of own organisation.
•
Main elements of monetary policy, mentioning current targets of inflation, and
unemployment – can also expand to GDP growth.
Challenge of achieving high employment while controlling rising prices.
Aggregate demand.
Money supply and interest rates – the role of the central bank.
More advanced answers may discuss quantitative easing and cryptocurrencies;
and compare to fiscal and supply-side policies.
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1
4.
Advantages
• The concept of comparative advantage means that more free trade around the
world should raise living standards.
• The rise of globalisation should bring the world closer together.
• Shared experiences should allow people to understand different cultures and
points of view.
Disadvantages
• Powerful multi-national corporations (MNCs) are largely based in the higherincome countries. They often exploit their position by paying low wages in world
markets.
• MNCs put pressure on governments to comply with their wishes.
• The domination by MNCs such as Starbucks and McDonalds make the world a
more standard place, reinforcing the argument that the world should celebrate
cultural diversity.
2
Each essay is marked according to the following criteria:
Marking Schedule
Potential
Score
Clear understanding of the concepts, the key issues
involved, and the nature and extent of their significance
7
Application of knowledge to given business scenarios
5
Choice and justification of examples
5
Quality and comprehensiveness of analysis with
appropriate conclusions drawn
5
Ability to express ideas clearly and logically
3
Result
25
© Heriot-Watt University, December 2021
3
Actual
Score