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A level and O level ECONOMICS 

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Factors Leading to High Earnings for Economics Graduates

UK students often take jobs during their holidays and some save part of their income to pay their tuition fees. UK graduates earn, on average, £8500 a year more than non-graduates. Economics graduates had the second highest average earnings of all UK graduates in 2016. The top 10% of economics graduates earned £115 000 a year.

Analyse why economics graduates are well-paid.[6]

Category:

Labor Market and Income Distribution

[CIE O level November 2018]

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Answer

There are several reasons why economic graduates are often well paid. An economics degree is held in high esteem as a qualification. Graduates tend to be more skilled and tend to work in jobs with a lot of stress and responsibility. For example, data analysts and economists.

1.1 The diagram below shows the demand and supply of economics graduates and non-graduates.

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1.2 It can be seen that graduates have a high demand for their services.

This is because graduates may be more productive and work faster. Thus, the demand for graduates is more inelastic than non-graduates.

1.3 The supply for graduates is more inelastic than non-graduates.

This is because more training time and investment are required for graduates.

1.4 To conclude, economic graduates, are better paid than non-graduates due to the differences in elasticity of the demand and supply curves of labour.

It the diagram above, it can be seen that non-graduates earn a low wage of W since they have an elastic demand curve and an elastic supply curve. By contrast, economic graduates earn a much higher wage of W1 since they have an inelastic demand curve and an inelastic supply curve.

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Marking scheme
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Graduates are skilled / more knowledgeable (1) have high levels of qualifications/training/education (1) productive / efficient (1) demand for their services is high (1) demand is inelastic (1) supply is low (1) long period of training required (1) supply is inelastic (1). Graduates tend to work in jobs with high pay/position/responsibility/stress (1) example (1). An economics degree is held in high esteem as a qualification (1).

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