TMA 03 The assignment

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Important: These pages provide guidance on how to write your assignment. Please ensure you read all of this information right through until the checklist at the end.

Before you start work on this assignment, please ensure that you have read the Assessment Guidance specific to this module and are familiar with the advice in  Social Sciences Assessment Information. These sources contain support and guidance that you may need in writing your TMA including, for example, advice on plagiarism,  referencing and the  marking system. Note that failure to comply with relevant guidance could result in the loss of marks or other penalties.

There are two parts to this TMA. Answer all parts, noting the word limits. On the following pages you will find guidance on how to complete each of the different parts of this assignment.

Part A (40% of the marks)

1. Draw an Edgeworth box for two goods, essentials and luxuries exchanged by two producers, Ali and Belle. Show the production contract curve and explain its economic significance. (10 marks)
2. Suppose Ali and Belle can trade essentials and luxuries. Draw and explain an Edgeworth box showing an excess demand for luxuries at a given price constraint. Explain what must happen to the price of luxuries relative to the price of essentials for equilibrium to be established and show this on your diagram. (13 marks)
3. State and explain the first and second welfare theorems. (7 marks)
4. Using an appropriate formula and diagram, state and explain the conditions for general equilibrium in a model where Ali and Belle can exchange and produce essentials and luxuries. (10 marks)

Word limit:  800 words

  

Part B (60% of the marks)

‘Where the conditions for market efficiency fail, government intervention is essential.’ Using economic theory discussed in Block 3, write an essay indicating the extent to which you agree with this proposition.

Word limit:  1500 words

In the following pages, you will find:

• learning outcomes addressed by this assignment
• student notes for each part of this assignment
• a checklist to ensure you have done everything required for this assignment.

Learning  outcomes

This assignment gives you the opportunity to demonstrate the following learning outcomes:

Knowledge and understanding

You should demonstrate a sound knowledge and understanding of:

• the microeconomic theory of production, consumption and exchange at post-introductory level with applications
• the main features, strengths and weaknesses of standard neoclassical microeconomic theory and alternative theoretical approaches
• key ideas, theories and debates in microeconomic theory with applications to current issues in various areas, such as consumption, households, production, firms, exchange, policy, environment, finance and labour.

  

 Cognitive skills

You should demonstrate the ability to:

• define and use key terms and concepts in economics
• construct effective arguments in analysing economic questions
• apply economic theories and models to analyse economic problems and events
• evaluate economic statements and theories
• use diagrams with verbal explanations of economic issues
• interpret qualitative and quantitative evidence, such as case studies and articles, and the results of regression analysis.

Key skills

Communication

You should demonstrate the ability to:

• communicate effectively complex information and arguments in writing, using appropriate academic conventions
• reference sources following appropriate academic conventions.

Use of numbers

You should demonstrate the ability to:

• use diagrams to analyse economic issues.

Practical  and/or professional skills

You should demonstrate the ability to:

• evaluate competing explanations and theories in relation to evidence
• analyse economic problems and issues.

  

Student notes

Always use clearly and fully labelled diagrams in your answers to all questions. This means that if you draw a line or a point it should be explained somewhere, preferably on the diagram itself or in a key below if space does not permit.

Part A of this TMA aims to help you to consolidate and demonstrate your understanding of key aspects of general equilibrium analysis, drawing on your study of Chapter 8. You may also find it helpful to look back at the explanation of indifference maps in Chapter 2, Section 2.

The following section references are to Chapter 8. Question 1 concerns the conditions for efficiency in production and relates to material in Section 2. Question 2 is about the importance of price adjustment for the achievement of market equilibrium particularly in exchange and relates to material in Section

4. Question 3 invites you to state and write short notes about the first and second welfare theorems. Your discussion could take in the conditions that give rise to these conditions and/or their possible consequences for economic policy. You should use your own words to demonstrate your own understanding. Question 4 concerns the conditions for equilibrium in an economy with production and exchange which are discussed and illustrated in Section 5.

Part B requires you to write an essay demonstrating an understanding of arguments for and against government intervention. There are many issues that you could draw on, though those towards the end of Chapter 8 and Chapter 10 are of primary relevance here. There is a great deal you might write about on this topic, and you are not expected to cover all possible aspects. Instead, ensure that your essay is well argued, with support from economic theory, and considers possible counter-arguments to the claims you are making or supporting. It is important to discuss the limitations of government interventions; for example, Chapter 10 discusses issues of free- riding and rent-seeking. Note that the emphasis in your essay should be on theory and argument, so be careful to put your arguments in your own words

– and clearly reference any sources used.

Reflections on the assignment (not marked)

The purpose of this section is to enhance the dialogue you have with your tutor. You will receive better feedback and guidance if your tutor is well informed about your experience with the module materials. Here are some prompts that will help your dialogue about this TMA:

• Look back at the feedback you received for your first assignment. What advice was particularly useful? What other advice or type of support would have helped you further?
• What were the main challenges you encountered while working on the questions in the two parts of the TMA?
• Did you find any part particularly difficult?
• To what extent did you overcome the challenges you met?
• What helped you to overcome the challenges, and what other support could have helped you?