IB Economics—internal assessment summary portfolio coversheet

School code Name of school

002691 New School

Candidate number Candidatename

002691-00xx

Commentary Date articleDate

Different andSection of the

Number ofcommentary syllabus the articlenumber

publishedappropriate source words

written relates to

1 14.11.13 29.11.13 The Lamron Microeconomics 748

2 17.04.14 28.04.14 CBC News Macroeconomics 743

3 26.09.13 02.10.13 OnePakistan

International Econonomics 748

IB Economics—internal assessment coversheet

School code Name of school

002691 New School

Candidate name

Candidate number 002691-00xx

Teacher Ms. Annie Levasseur-Barys

Title of the article Pollution rapidly contributing to China’s cancer crisis

Source of the article"Pollution Rapidly Contributing to China's Cancer Crisis - The

Lamron." The Lamron Pollution Rapidly Contributing to Chinas Cancer Crisis Comments. N.p., n.d. Web. 28 Apr. 2014.

Date the article was published 14.11.13

Date the commentary was written

29.11.14

Word count (750 words maximum)

748

Section of the syllabus the article relates to (please tick the one that is most relevant)

X Section 1: Microeconomics Section 2: Macroeconomics Section 3: International economics Section 4: Development economics

Pollution rapidly contributing to China’s cancer crisis

By Maddy Smith on November 14, 2013 in Opinion

For those who cannot grasp the extent to which pollution can actually cause harm, how about this:

an 8-year-old with lung cancer.

Breaking the record as China’s youngest lung cancer patient, the child’s case brings to the forefront

the high costs and risks of rapid economic development without carbon emission regulation. She

was exposed to tiny atmospheric particulate matter from human activity that was dense around her

roadside home, including transportation and industrial operations.

Frightening, but not unique: According to the World Health Organization, more than half of

pollution-caused lung cancer deaths occur in East Asia, and officials at the China Ministry of Health

report that lung cancer deaths in China have increased fourfold in 30 years.

The case is indicative of the deterioration to which China’s cities are vulnerable and the lack of

oversight that caused the child’s cancer. It should provide insight into the need for global interjection

to ensure that environmental regulation plays a key role in developing countries’ growth plans.

The world did not confront China’s lack of energy regulation or recognize potential consequences.

When China enacted the $586 billion stimulus package in 2008 that allowed it to soar economically

through the global recession, it became the largest exporter in the world, and has averaged a 10

percent growth in gross domestic product for the past 30 years.

But that growth comes with negative externalities. According to a 2013 report by the Netherlands

Environmental Assessment Agency, China contributes 29 percent – compared to the United States at

15 percent – to total global carbon emissions. While the U.S. and the European Union found a

decrease in carbon emissions from 2011-2012, China continued to increase, albeit at a “slower” rate

of 3 percent.

If we delve deeper than the nationwide measurements, of the 20 most polluted cities in the world, 16

of them are in China.

In allowing massive urban growth spurred by similar pushes like China’s stimulus packages in 2008,

the country has cost itself too much in both the health of its people and its efficiency.

According to a Massachusetts Institute of Technology study in 2012 that analyzed the costs of health

impacts from particulate matter, pollution came with a quantified cost to the Chinese economy of

$112 billion in 2005 alone. Compare that to a $22 billion cost in 1975.

The study found two main causes for the increase in pollution costs: growing urbanization and

higher incomes that increased cost of both labor lost and leisure. In other words, growth; in

historical examinations, we see growth and economic development always noted with population

shifts to cities and higher wages for citizens.

But when this growth happens very quickly, things get dirty – literally. Urban Chinese citizens

across the country suffer daily on their commutes to work; on some days, public transportation is

pointless because drivers cannot see. Especially in northern China, where central heating is set to

operate for the duration of winter, grey smog is likely to remain and cause further complications.

Recent attempts to curb intense industrial city pollution are entering the discussion too late. China

has recently implemented various measures that include more transparency, a reduction of emissions

and emergency response plans for heavy pollution.

But before, or even a little bit after, the nation started to grow at an exponential rate, China should

have adopted and explored alternative energy solutions to ensure long-term sustainability and safety

for its citizens. In regulation through raising the production cost to industries for carbon-emissions,

it could have protected itself and avoided what is now a dark and smog-ridden reality.

Course: Economics HL

School Name: New School

Commentary Number: 1

Candidate Name:

Date commentary was written: 29.11.14

Section of syllabus to which the commentary relates: Section 1 – Microeconomics

Word Count: 748

Source of extract:  "Pollution Rapidly Contributing to China's Cancer Crisis - The Lamron." The Lamron

Pollution Rapidly Contributing to Chinas Cancer Crisis Comments. N.p., n.d. Web. 28

Apr. 2014.

The article connects the effects of the $586 billion stimulus packet that was injected to China’s

economy and the resulting negative effects of the economic growth. The Chinese economy has been

booming. Production and consumption have been increasing, thus waste also increased. Within the

years of 1975 to 2005, the costs of health impacts due to pollution resulted with an increase from

$22 billion to $112 billion. These health impacts are a high concern, as attention has been brought to

the youngest case of lung cancer in an 8 year old.

These negative consequences are referred to as negative externalities of either consumption or

production. A negative externality of production refers to the negative on a thirds party that occur

due to the production of a certain good or service. This commentary will focus on negative

externalities of production, as the article mentions the factors of industrial operations.

The diagram “Negative Externalities of Production of Chinese Industries” explains further. The

marginal social cost (MSC) curve represents the total cost to society for the production of one

additional unit and marginal private cost (MPC) curve represents the total cost for the private

producer when producing one additional unit. The marginal social benefit (MSB) curve refers to the

social benefit when one additional unit of a good or service is consumed. Benefits and costs, in this

case, are referring to the positive or negative externalities.

The Chinese industries supply curve is represented by MPC whereas Chinese society has a supply

curve of MSC. MPC is greater than MSC, because MSC is MPC plus external costs. Meaning

Chinese industries are currently producing a quantity of Q1, because it is most beneficial to the

producers. However, socially most efficient level of production would be Q2, where MSC=MSB.

This creates a dead weight burden, as shown by the gray area of A, which represents a misallocation

of world’s resources. Resources could be used more efficiently in China through improved facilities

or even allocated within the health industry. The Chinese industry is producing at a level where it is

not efficient for the overall wellbeing of the country. The increase from decrease from P1 to P2

refers to the $22 billion to $112 billion dollar increase of health costs over the years. Industries have

benefitted from the lack of legal restraints against pollution and thus have been able to reduce their

costs of production at cost of social welfare and health during the economic growths.

The government has the power of creating barriers for such occurrences. By placing tariffs, legal

carbon emissions standards, and subsidies for low carbon emissions, the government is able to

hinder such pollution.

The diagram “Tax on Negative Externalities” shows that by the placing of a tax (in this case the

government’s estimate was not exact, because it is hard to estimate the actual costs of pollution.) the

MPC curve will shift upwards, closer to the point of social efficiency, where the firm now pays a

price of P2 for quantity Q2. The welfare loss is shown by the black triangle, which has decreased

from the previous loss of the black triangle plus the grey triangle. The benefit of the tax is not only

that firms pay to even out the social costs, but that governments can also earn revenue from it, which

can be used to benefit the economy in other ways. However, the problem with taxes on negative

externalities is that 1) it will not necessarily reduce the level of pollution, 2) it increases costs of

production for firms which may be balanced out by reducing labor; increase unemployment rates,

and 3) depending on the price elasticity of supply and demand, taxes may not have a changed effect

on the amount of consumption or production. If demand or supply is inelastic, the tax will have no

significant effect on reducing the consumption or production.

In conclusion, industrial growth will lead often lead to greater output, however also greater negative

externalities. There are many ways to combat these types of externalities, especially with newer and

cleaner technologies being produced. However these production changes will increase the costs of

production, and as a result firm’s may chose to reduce their labor capital. The role of a government’s

responsibility to balance the importance of labor and economic activity and population health and

environmental protection is a delicate one. All solutions may have an opportunity cost; however not

regulating these types of pollution, as they occur in China, is not a solution.

IB Economics—internal assessment coversheet

School code Name of school

002691 New School

Candidate name

Candidate number 002691-00xx

Teacher Ms. Annie Levasseur-Barys

Title of the article Inflation rate in Canada ticks up to 1.5%

Source of the article News, CBC. "Inflation Rate in Canada Ticks up to 1.5%." CBCnews. CBC/Radio Canada, 17 Apr. 2014. Web. 28 Apr. 2014.

Date the article was published 17.04.14

Date the commentary was written

28.04.14

Word count (750 words maximum)

743

Section of the syllabus the article relates to (please tick the one that is most relevant)

Section 1: MicroeconomicsX Section 2: Macroeconomics Section 3: International economics Section 4: Development economics

Inflation rate in Canada ticks up to 1.5%

CBC News Posted: Apr 17, 2014 8:39 AM ET Last Updated: Apr 17, 2014 8:58 AM ET

Consumer prices in Canada increased by 1.5 per cent in March compared to where they were a year

ago. (Dave Chidley/Canadian Press)

Consumer prices increased at an annual rate of 1.5 per cent in March, an uptick from February's

level but still well within the range the Bank of Canada likes to see the inflation rate.It's also tied for

the highest the rate has been since April 2012.

Statistics Canada reported Thursday that the consumer price index was driven up by energy prices,

which were 4.6 per cent higher in March. Within that, natural gas prices jumped significantly, up by

almost 18 per cent in March compared to the same month last year.

Although it was a jump, it was in line with what economists had been expecting. The large

increase in natural gas prices seen this winter has been making yearly comparisons look larger for

several months now.

"With gasoline prices headed for about another three per cent rise this month," BMO economist

Doug Porter said, "headline CPI will take another step higher in next month’s report, possibly finally

touching the two per cent target."

"Perhaps the Bank of Canada can stop fretting so much about the downside risks to inflation."

Regionally, the biggest jump in inflation occurred in Alberta, where natural gas prices skyrocketed

81.5 per cent over last year's levels and 49.6 per cent over February. The province's annual inflation

rate shot up to 3.9 per cent in March from 2.4 in February.

In its latest interest rate decision on Wednesday, the Bank of Canada said it expects inflation to

steadily climb to near the desired two per cent target over the next few months, largely due to energy

price gains.

Outside of energy, food prices were 1.5 per cent higher in March than they were a year ago. although

fresh fruit was 8.8 per cent higher, fresh vegetables cost 5.3 per cent more and meat was up 3.4 per

cent.

Another major jump came from the price of tobacco, which was up 7.6 per cent largely because of a

new round of excise taxes announced in the recent federal budget.

Course: Economics HL

School Name: New School

Commentary Number: 2

Candidate Name:

Date commentary was written: 28.04.14

Section of syllabus to which the commentary relates: Section 2 – Macroeconomics

Word Count: 743

Source of extract:  News, CBC. "Inflation Rate in Canada Ticks up to 1.5%." CBCnews. CBC/Radio

Canada, 17 Apr. 2014. Web. 28 Apr. 2014.

The chosen article talks about the increase in inflation by 1.5 % in Canada. The level of inflation is

said to have been driven up by energy prices. Inflation is a persistent increase in the average price

level in the economy. It is usually measured through the calculation of consumer price index (CPI).

The CPI is a theoretical basket of goods that represent the spending habits of average households in

a country, i.e. Canada, and to measure how the price of the basket changes over time.

The article states that inflation increases may have been caused by the increase in energy prices,

specifically that of natural gas, which increased by 18%. Energy is a vital part for any type of

production for the supply of any good or service. This means, if there is an increase in energy prices,

there will be an increase in the production costs for all industries within the country. The increase in

production costs will result in higher prices for the consumer, i.e. inflation. This resulted, as the

article states, in products such as meats, fresh vegetables and fruit to increase by 3.4%, 5.3 % and

8.8 % respectably.

Assuming that the increase of the CPI is determined by the increase in production costs, the thus

resulting inflation can be explained further using the "Cost Push" diagram. The vertical axis

represents average price levels and the horizontal axis represents the real output of the Canadian

economy in the diagram. The aggregate demand (AD) curve represents the total demand for goods

and services within the Canadian economy at a given time and a price level. The short-run aggregate

supply (SRAS) represents the total planned output of goods and services, when prices within an

economy can change, however all other factors of production are held constant.

The increase in the costs of energy have increased production costs. This results in the decrease and

a shift to the left of the SRAS curve from SRAS1 to SRAS2. This will cause the inflation, which the

Canadian economy is experiencing, as the average price levels of the economy shift from P1 to P2.

The increase from P1 to P2 represents the 1.5% increase in inflation. It also results in the decrease of

the economic output from Y1 to Y2.

Since the inflation occurring in Canada is most likely to be Cost-push, supply side policies that

attempt to increase productivity and shift AS to the right, would be appropriate. The aim is to reduce

the costs of production for Canadian producers. These can be done by interventionist or market-

based supply side policies.

Interventionist policies include policies such as investment in human capital, research &

development, or infrastructure by the government. These policies attempt to reduce the costs of

production by providing or improving the quality of the factors of production. Governments play a

fundamental role in actively encouraging productive growth. The problem with interventionist

policies is that all these options create an opportunity cost. It is unclear where the government

investment would be the most useful.

Market-based policies refer to policies that allow markets to operate more freely without

government intervention. These include the reduction of corporate taxes, labor market reforms, or

deregulation. All policies reduce the costs of production in different ways. The big problem with

market-based policies is that they are highly unpopular. Government laws and regulations are there

for a reason; to protect workers, the environment and so on.

The goal is to increase the productivity of aggregate supply, and this can be shown by the diagram "good

deflation". In the diagram, the shift from AS1 to AS2 is shown. This results in the average price levels to

decrease from P1 to P2 and economic output in increase from Y1 to Y2. The deflation is good, as it

increases real output and reduces the inflationary pressures. By the increase in real output, it can be

assumed that the level of employment increased, which is another good aspect of this type of deflation.

Good deflation can be achieved by the interventionist and market-based policies listed earlier.

In conclusion, the government has several opportunities to reduce the costs of production of firms in

order to increase aggregate supply. It would be a recommendation to use a mixture of both

interventionist and market-based supply side solutions, instead of using one or the other. These

would allow for the Canadian government to insure their macroeconomic objective of maintaining a

low and stable rate of inflation.

IB Economics—internal assessment coversheet

School code Name of school

002691 New School

Candidate name

Candidate number 002691-00xx

Teacher Ms. Annie Levasseur-Barys

Title of the article Many industrial units were closed after 57 per cent increase inelectricity tariff in August

Source of the article"Tanners Criticise Power Tariff Hike - Thenews.com.pk." The News

International, Pakistan. N.p., 26 Sept. 2013. Web. 04 Oct. 2013.

Date the article was published 26.09.13

Date the commentary was written

02.10.13

Word count (750 words maximum)

748

Section of the syllabus the article relates to (please tick the one that is most relevant)

Section 1: Microeconomics Section 2: MacroeconomicsX Section 3: International economics Section 4: Development economics

Many industries closed after 57% power tariff hike

Lahore :  Many industrial units were closed after 57% increase is electricity tariff in August. Federal

government is again planning to increase power tariff by 30 percent. The decision may result into

disaster and many more units will be closed causing serious unemployment in the country. The

revenue minded government has focused all its abilities for collection of revenue and no attention is

paid for industrial growth and to boost exports.

This was stated by the Chairman Pakistan Tanners Association (Central) Agha Saiddain. He further

added that present government had failed to introduce export friendly policies which might cause

serious setback to the country as value of Rupee had already slipped by more than 8.50 percent in

last three months.

“With present policies the balance of payments would be badly disturbed and country may need

more borrowings in future years. There is every possibility that we as a country will be caught in

serious debt trap and unending vicious circle.”

Agha said it was beyond our understanding that how policy makers could think that industry could

survive even after so much increase in electricity bills. He said that most of the industry was either

running in loss or operating at a very thin margins.

He said that recent increase in electricity tariff would force industrialists to shut down their

operations. “Many people have stopped their industrial activity and have started real estate business.

Some of the units have shifted their operations to other countries. The trend is disastrous and may

cause serious unemployment in the country.”

He further added that government might set priorities and engage think tanks to suggest prudent

policies in the best interest of country at long run. “Most of the present policies are short sighted and

pragnant with serious repercussions. The previous government had appointed the Senior Federal

Minister for Commerce but the present government has given additional charge to the Minister of

State. This shows the difference of vision and mind set.

He said for last few months, TDAP was without its CEO and many matters were pending due his

vacant position. He urged government to immediately withdraw decision of increase in electricity

tariff to avoid nationwide strike as suggested by many trade bodies and chambers all over the

country.

Course: Economics HL

School Name: New School

Commentary Number: 3

Candidate Name:

Date commentary was written: 02.10.13

Section of syllabus to which the commentary relates: Section 3 – International Economics

Word Count: 748

Source of extract:  "Tanners Criticise Power Tariff Hike - Thenews.com.pk." The News

International, Pakistan. N.p., 26 Sept. 2013. Web. 04 Oct. 2013.

The article talks about the potential 30% increase on the power tariff that will be placed by the

Pakistani government and how this may lead to many industrialists to shut down operations, as

previously in August, when many industrial units were closed after a 57 percent increase in

electricity tariff. A tariff is a tax placed upon imported goods and services by the government of the

country importing the certain goods and services. Tariffs may be placed as a method for

protectionism. Protectionist measures restrict goods and services to move freely between countries

and are mostly against policies set by the World Trade Organization. The WTO is an organization

that aims to increase international trade by lowering trade barriers and providing a forum for

negotiation. The Pakistani government has focused all of its attention to the collection of revenue;

no attention is paid for industrial growth and to boost exports and they have not considered the

effects of the tariff on many aspects such as industrial growth, unemployment, and balance of

payments.

Electricity is a vital resource that all industries need in order to do day to day operations. It is

necessary for any process within all parts of a business and industry. It is a large part of production

costs for an industry. Increasing the price of electricity by a small amount will affect all businesses.

The increased costs may in the short run force industries to cut back either on production or on

labor, as capital has decreased. Capital is the amount of assets a business needs to ensure that the

company stays solvent. This will result with a decrease in industry growth and a decrease in

exports.

Electricity is imported to Pakistan. The diagram " Tariff Diagram on Electricity Imports" consists of

three supply curves and one demand curve. S(Domestic) indicates the supply of electricity by the

domestic Pakistani producers. S(world) demonstrates the supply of electricity by foreign producers

abroad. S(Domestic) and the D curve (indicating the demand of consumers in Pakistan) represent a

market without any free trade occurring, with price Pe at quantity Qe. From the article it is evident

that there are some levels of free trade occurring, thus S(world) represents the supply by foreign

producers. Now total amount demanded is from 0 to Q2 at a price of Pw. From this, 0 to Q1 is

domestic production and Q1 to Q2 is supplied by foreign producers. Prices have decreased and it is

cheaper for consumers, in this case the industrialists in Pakistan, once foreign producers are

importing electricity.

However the government has placed a tariff, which in the diagram is represented as S(world+30%

tariff). Now domestic production increases to 0Q3 at a price of P(w+t) and foreign imports decrease

from Q3 to Q4. For consumers, prices have increased P(w) to P(w+30% tariff). With the tariff, the

government may have aimed to protect the domestic Pakistani production of electricity, which

evidently is not as efficient as the world production and thus is more expensive. The graph also

shows the revenue the government is making, fields d+e, which is reflected in the article when stated

that the government is focusing on collecting revenue.

The government is risking that the balance of payments will be “badly disturbed” and that the

country may need more borrowings, adding to the risk of the country being caught in a debt trap.

Balance of payments is a record of all transactions made between one particular country and all

other countries during a specified period of time. Any transaction that leads to money entering the

country from abroad is known as a credit item; it has a positive value. Any transaction leading to

money leaving the country to go abroad is known s a debit item; it has a negative value. Credit and

debit are exports and imports respectively.

Pakistan will thus have decreased its credit item unintentionally as the export from the industries

will decrease, because they are not able to afford the new costs for electricity to support production.

Industries will shut down, and unemployment will increase, resulting in no economic growth and

more debt for the country.

In conclusion, the government has not looked at the big picture of the impacts the tariff may have,

and rather were focused on revenue collection. They should really reconsider placing the tariff, and

possibly thinking about other sources of gaining revenue, such as placing tariff on imported demerit

goods, such as cigarettes and alcohol.

Tariff Diagram on Electricity Imports