Q.
a) Explain two (2) types of unemployment. (8 marks)
b) Explain the use of national income data in economic system. (8 marks)
c) Describe the relationship between industry and production. (4 marks)
(20 marks, 2017 Q4)
A. (Appreciate DaniellePee for alerting this missing question. 7 Oct, 2018)
a) 2 types of unemployment.
Types of unemployment are many.
Cyclical unemployment
Cyclical unemployment exists when individuals lose their jobs as a result of a downturn in aggregate demand (AD). If the decline in aggregate demand is persistent, and the unemployment long-term, it is called either demand deficient,general, or Keynesian unemployment. For example, unemployment levels of 3 million were reached in the UK in the last two recessions, between 1980 and 1982, and between 1990 and 1992. In the most recent recession of 2008-2010, unemployment levels rose to 2.4m in the last quarter of 2009, and are likely to peak at over 2.5m during 2010.
Demand deficient unemployment
This is caused by a lack of aggregate demand, with insufficient demand to generate full employment.
Structural unemployment
Structural unemployment occurs when certain industries decline because of long term changes in market conditions. For example, over the last 20 years UK motor vehicle production has declined while car production in the Far East has increased, creating structurally unemployed car workers. Globalisation is an increasingly significant cause of structural unemployment in many countries.
Regional unemployment
When structural unemployment affects local areas of an economy, it is called ‘regional’ unemployment. For example, unemployed coal miners in South Wales and ship workers in the North East add to regional unemployment in these areas.
Classical unemployment
Classical unemployment is caused when wages are ‘too’ high. This explanation of unemployment dominated economic theory before the 1930s, when workers themselves were blamed for not accepting lower wages, or for asking for too high wages. Classical unemployment is also called real wage unemployment.
Seasonal unemployment
Seasonal unemployment exists because certain industries only produce or distribute their products at certain times of the year. Industries where seasonal unemployment is common include farming, tourism, and construction.
Frictional unemployment
Frictional unemployment, also called search unemployment, occurs when workers lose their current job and are in the process of finding another one. There may be little that can be done to reduce this type of unemployment, other than provide better information to reduce the search time. This suggests that full employment is impossible at any one time because some workers will always be in the process of changing jobs.
Voluntary unemployment
Voluntary unemployment is defined as a situation when workers choose not to work at the current equilibrium wage rate. For one reason or another, workers may elect not to participate in the labour market. There are several reasons for the existence of voluntary unemployment including excessively generous welfare benefits and high rates of income tax. Voluntary unemployment is likely to occur when the equilibrium wage rate is below the wage necessary to encourage individuals to supply their labour.
Ref:
b) Use of National Income Data in Economic System.
Uses of National Income Data:
1:National Income as a measure of economic growth - Estimates of national income at constant prices indicate economic growth of a country.
2:National Income as an indicator of success or failure of planning - If a country has adopted planning as a means of economic growth then national income data can help in assessing the achievements of planning.
3: Useful in estimating per capita income - Per capita income is obtained by dividing national income by total population of the country.
4:Useful in assessing the performance of different production sectors - Production units of a country are broadly classified into primary, secondary and tertiary sectors. These sectors generate factor incomes. The data on factor incomes generated by these sectors can be used to measure their relative contributions to national income.
5:Useful in measuring inequalities in the distribution of income - All individuals do not have the same income. It means national income is unequally distributed among people.The extent of inequality in a country can be measured from the national income data collected through the income distribution methods.
6:Useful in measuring standards of income - The expenditure method reveals consumption expenditure and investment expenditure. If the total consumption expenditure is divided by the total investment expenditure we get per capita consumption expenditure which indicates the average standard of living of the people of the country.
7:Makes international comparisons possible - We can compare the economies of any two countries on the basis of their national income data.
Various utilities of the national income estimates can be described as below:
1 National income estimates help us to know this performance of an economy during oneyear and over a period of years.
2 National income estimates also tell us about the economic welfare enjoyed by the people. We can know the per capital income by dividing national income by population.
3 on the basis of national income estimate comparison between various economics of the world may be made. National income figures for various countries provides us the rates of growth in different economies.
4 In an economy, inter-sector comparison can be made with the help of national income statistics.
5 national income figures are inevitable for an economy, which wants to develop with the help of economic planning.
6 National income accounts reflect the structural change in a growing economy.
c) Relationship between industry and production
This question can be interpreted two ways:
- Relationship of industry and industrial production.
- Relationship of industry and agricultural production.
I would provide both answers below.
Firstly - Industry and Agricultural Production.
Industries and agriculture are interdependent i.e. they depend upon each other. The source of raw materials for industries comes from agriculture. For example: sugarcane for sugar industry, animal skin for leather industry, etc. Dairy industries also require raw materials that come from agriculture. Oil industries cannot run without oil seeds like mustard, sunflower, soybean, etc. which are all agricultural products. Cigarette industry cannot run without tobacco and similarly textile industries require cotton and silk. So, it is fair to say that industries cannot run without agriculture.
Similarly, agriculture is dependent upon industries. The tools required for agriculture like spade, mattock, etc. are produced in industries. They make the work easier and less time consuming and result high production. Similarly, without agro based industries, the agricultural products will go as waste. Chemical fertilizers and insecticides that are required to protect and grow plants are produced from the industries. The modern tools like tractor, harvester, etc. are also produced from industries. Industries encourage the farmers to produce more. This will help to increase the income of the farmers as well as there will never be scarcity of raw materials for industries.
Ref:
https://www.kullabs.com/classes/subjects/units/lessons/notes/note-detail/278
Secondly, Industry and Industrial Production.
This is about industrialization and mass production using machines. This can be interpreted as "Industrialization". In simple manner, it is using machine to produce in large scale and set up an efficient management system of processes in production and manufacturing. Using steam engine and later on electricity to power the plant.
The first transformation to an industrial economy from an agricultural one, known as the Industrial Revolution, took place from the mid-18th to early 19th century in certain areas in Europe and North America; starting in Great Britain, followed by Belgium, Germany, and France.[3] Characteristics of this early industrialisation were technological progress, a shift from rural work to industrial labor, financial investments in new industrial structure, and early developments in class consciousness and theories related to this.[4] Later commentators have called this the First Industrial Revolution.[5]
The "Second Industrial Revolution" labels the later changes that came about in the mid-19th century after the refinement of the steam engine, the invention of the internal combustion engine, the harnessing of electricity and the construction of canals, railways and electric-power lines. The invention of the assembly line gave this phase a boost. Coal mines, steelworks, and textile factories replaced homes as the place of work. [6][7][8]
By the end of the 20th century, East Asia had become one of the most recently industrialised regions of the world.[9] The BRICS states (Brazil, Russia, India, China and South Africa) are undergoing the process of industrialisation.[10]
There is considerable literature on the factors facilitating industrial modernisation and enterprise development.
Ref:
Wikipedia search "industrialization", available at