You are employed as a government economist to provide a briefing to the
minister. The government plan to increase the degree of competition in markets
for goods and services in the economy. Your task is to explain the likely
consequences of this policy on the economy (output, inflation, unemployment,
real wage and interest rate) in 1000 words to a minister. As part of the task, you
have to clarify your answer by using the model that you have studied.
The task is broken down into sections as follows, the breakdown of each section’s
contribution to the final mark is in brackets. Please do not copy and paste the
following criteria into your work and try to answer one by one. You have to be
creative and choose a style that appropriate for the reports / essay.
a. Using the labour market model, draw a diagram to show how an increase in
the degree of competition would be expected to affect the relevant curves.
Briefly explain each curve in your diagram. (15 marks)
b. Compare the new with the old equilibrium and create a table like bellow, fill in
the table by writing higher, lower, or unchanged in each cell (e.g. if you think
the Unemployment rate is higher in the new equilibrium, write ‘higher’ in the
first cell) (15