Explain why training is said to generate positive externalities.

The productivity gain spreads to other firms and to output generally when trained workers move jobs, so social benefit exceeds private benefit and the market provides too little training.

On a diagram of marginal private and marginal social benefit, where does the under-provision of training appear?

The market settles where marginal private benefit meets marginal cost, to the left of the social optimum where marginal social benefit meets marginal cost, and the welfare loss is the triangle between the two points.

Name two government policies that raise the level of training in an economy.

A training levy or subsidy that makes employer-funded training cheaper, and state-funded apprenticeships and technical qualifications.

Edexcel A-Level Economics B 9EB0

Scarcity, Choice and Potential Conflicts

Topic overview Scarcity and the economic problem Choice, trade-offs and opportunity cost Profit maximisation, sales maximisation and satisficing Survival, market share and other business objectives Stakeholders and their objectives Stakeholder conflicts and corporate social responsibility

Enterprise, Business and the Economy

Topic overview The entrepreneur and creative destruction Adding value Entrepreneurial motives Factors of production Division of labour and specialisation The wider economic environment and the firm

Introducing the Market

Topic overview Consumer objectives and the demand curve Movements along and shifts of the demand curve Producer objectives and the supply curve Movements along and shifts of the supply curve Equilibrium price and quantity Excess demand, excess supply and market forces Shifts in demand and supply in real markets Limitations of the supply and demand model Functions of the price mechanism Mass markets, niche markets and market growth Market research and consumer insight Market segmentation Market mapping and competitive advantage Adding value, pricing decisions and dynamic markets

The Role of Credit in the Economy

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Market Failure and Government Intervention

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Revenue, Costs, Profits and Cash

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Business Growth and Competitive Advantage

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Productive Efficiency

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Introduction to Macroeconomic Policy

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Globalisation

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Economic Factors in Business Expansion

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Impact of Globalisation on Global Companies

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Impact of Globalisation on Local and National Economies

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Global Labour Markets

Topic overview Growth of the global labour force and structural change The demand for and supply of labour Skills, training and education Global competition, recession and redundancies Trade unions and professional bodies Minimum wage legislation, skill shortages and migration

Inequality and Re-Distribution

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Competition and Market Power

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Market Power and Market Failure

Topic overview Cartels, collusion and restrictive practices Monopsony, natural monopoly and power in the labour market The implications of market failure for firms, consumers and government Promoting competition: anti-competitive practices, mergers and privatisation Regulating natural monopolies and protecting consumers and employees The Competition and Markets Authority and EU competition policy The benefits and costs of regulation

Market Failure Across the Economy

Topic overview Merit and demerit goods Factor immobility and information failure Externalities and social costs and benefits Environmental externalities and environmental change Policies to correct market failure

Macroeconomic Policies and Impact on Firms and Individuals

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Risk and the Financial Sector

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Global Labour Markets

Skills, training and education

3 things to know
Papers 2 and 3

Overview

Education and potential output, general against firm-specific training, underinvestment in general training and its positive externalities on a diagram, government training policies, training length and labour supply elasticity, the return to education, skills mismatches, judging whether a training course is worthwhile, lifelong learning, and education quality and foreign investment.

What you need to know

Answer each one before you reveal it.

Your recallNot started

Key term

How does investment in education raise a country's potential output?

Key term

Distinguish general training from firm-specific training.

Key term

Why do firms tend to underinvest in general training?

Questions from this subtopic

Each one with the model answer underneath.

1
How does investment in education raise a country's potential output?
Model answer
A better-educated workforce produces more per hour, so long-run aggregate supply shifts to the right and the trend rate of growth rises.
2
Distinguish general training from firm-specific training.
Model answer
General training gives skills that are useful to many employers, while firm-specific training gives skills that have value only within the firm providing it.
3
Why do firms tend to underinvest in general training?
Model answer
Trained workers can be poached by rivals who pay nothing towards the training, so the firm cannot capture the full return on its spending.
4
Explain why training is said to generate positive externalities.
Model answer
The productivity gain spreads to other firms and to output generally when trained workers move jobs, so social benefit exceeds private benefit and the market provides too little training.
5
On a diagram of marginal private and marginal social benefit, where does the under-provision of training appear?
Model answer
The market settles where marginal private benefit meets marginal cost, to the left of the social optimum where marginal social benefit meets marginal cost, and the welfare loss is the triangle between the two points.
6
Name two government policies that raise the level of training in an economy.
Model answer
A training levy or subsidy that makes employer-funded training cheaper, and state-funded apprenticeships and technical qualifications.

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