Economics and Behavior Sample Essay.
1. correct the answer according to the feedback
2. re-write the misunderstanding chapter .
Question A: 10/20
(i) Satisfactory answer, showing an understanding of
the topic and of macroeconomic analysis. Showing
graphically the effect of the fiscal policy would have
improved your score in this section. (ii)Satisfactory
answer, using more references to substantiate your
reasoning would have improved your mark in this
section, also you should properly cite the literature,
writing “according to a research from x university” is
not how to properly cite a source.
The answers to question B are not up to standard.
Indeed, even if you correctly identified some of the
economic’ behaviors of niche markets, the analysis
would have needed more grounding on the literature.
Using the literature to substantiate your reasoning
would have been advisable to enrich your answer.
Moreover, the graph in question (i) does not present
any label on the axis, nor a figure description. Also,
you did not mention the source on the figure of
QUESTION C 15/30
(i) In this answer, even if providing different insights
on the NPV, you did not analyze any other appraisal
method in order to justify your choice. (ii)Your
discussion on the external costs and benefits of PV is
satisfactory, you should have expanded a bit more
your analysis of the external costs in order to score
higher in this section. (iii) The analyses you made
related to China, Germany and Japan are
satisfactory and show your understanding of the
PRESENTATION : 4/10
The paper presents a large number of inaccuracies
scattered throughout the text. All graphs and figure
presented in the paper are not correctly labelled and
in many cases the sources are not cited. More
attention should also be put on academic writing as,
in this case, it was unfortunately not up to standard.
DOC 1 : ESSAY
DOC 2: COMMENTS
DOC 3: ASSESSMENT BRIEF
Requirements: 1000 | .doc file
there are too many readings required for each week. I am not gonna upload it .
the final file is module guide, which included all readings’ name for each week.
Economics and Behavior
Economics and Behavior
SECTION A: Effects of Macroeconomic and Fiscal Policy
Effect of such fiscal policy on technology innovation and employment
Technology push policy lower risks associated with the upfront cost of new technologies. The technology push policy allows the government to develop new technology that promotes the development of a product (Hanusch, Chakraborty & Khurana, 2017). This pushed technology enables the government to capitalize on the benefits of new solutions. This allows the government not to rely on trial and error, which may be costly, and the technology may never span out.
Technology push policies help predict new opportunities and threats before they become mission-critical (Green et al., 2019). In a bid to push innovation, the government must consider how the technology will impact its operation. Also, the government will be proactive rather than reactive in taking the advantages that may present themselves in the form of opportunities.
Figure 1.0 Impact of Fiscal Policy on Innovation in the USA
(Hanusch, Chakraborty & Khurana, 2017)
Technology push policy helps the government develop new technology that reframes public sector challenges through a new lens. The technology push approaches enable the government organizations to identify opportunities that may never have been known for innovation (Hanusch, Chakraborty & Khurana, 2017). The discovered technologies may help the government solve the public sector problems without raising the alarm or further costs. The government strictly following the technology push policy enables it to surpass short-lived technologies. This helps the government avoid investing in such a high demanding project in which their technological effect is short.
The short-lived technologies are set up to provide a solution to a big project that may take a long to be completed. The technology may become obsolete by the time the project is implemented. So the technology push may allow the government to avoid investing in a total solution with a low technological span (Hanusch, Chakraborty & Khurana, 2017). The research and development expenses increased in the energy industry, especially the solar sector. The diagram below shows the trend in patent rights obtained from research and development.
Figure 2.0 Increase of PV energy patent between 1990 and 2008
(Feldman & Schwabe, 2018)
The figure shows that the number of patents in PV energy production increased over the period.
Increased government spending on the economy always increases the aggregate demand. The increased investment of $1.7 billion to the research sector of PV led to increased demand. The research project needed human resources, which increased employment to meet the labour demand (Feldman & Schwabe, 2018). The increased employment led to an increase in per capita income. This led to the increased purchasing power of employees. This increased purchasing power leads to increased demand in the economy. Due to increased demand, there will be increased pressure on the available products in the market. This will push the producers to increase production. The urge to increase production will lead to more labour to meet the fast-growing demand. This will lead to an increase in employment. The graph below shows the relationship between productivity and employment with technological advancement over the period.
Figure 3.0 Increase in labour productivity index in the USA
(Feldman & Schwabe, 2018)
The setting up of the research project will require resources and raw materials. The providers of these raw materials will acquire a market. New entrants to this field will also gain employment to meet the demand. The increased government spending on PV research projects had a positive supply-side impact on the economy. The PV project required raw materials. The suppliers of raw materials had an opportunity to sell their products to the government (Shubbak, 2019). The increased demand from the government project will lead to increased supply from the suppliers. Since the supplier is faced with unexpected demand from the government, they had to increase their labour to meet the demand. The additional labour will help to reduce the level of unemployment in the economy.
The implementation of the PV project meant that more human resources had to be trained to provide quality services. The provision of education and training increases labour productivity and enables higher long term economic growth (Zhang et al., 2017). If the training is successfully targeted, the government can train unemployed and unskilled individuals to provide the required skills to fill the required positions. This training will increase the labour productivity of the US hence increasing the employment rate.
The German government doles out $130 billion as subsidies to citizens to invest in solar energy (Jimenez et al., 2016). The project did not go as planned as the German government had to cut the subsidies sooner than planned. Solar energy is more costly than the energy produced by fossil fuels (Jimenez et al., 2016). The sun may be free, but the cost of installing solar panels is costly. Much of the energy is consumed at night, but this energy seems no beneficial.
EEG Act in Germany
Germany invested heavily in solar energy, but it only provides 0.3% of Germany’s total energy. The provision of the high subsidies in the PV energy with low returns made Germany pay high electricity in the developed world (Jimenez et al. 2016). The unproductive project made Germany opt to import much of its energy from France and the Czech Republic. This led to increased government expenditure on energy. The German government wanted to invest in PV energy to reduce the effects of global warming. The use of PV energy will have reduced Germany’s CO2 emissions by 8 million metric tons for the next 20 years. The German government is paying almost $1000 per ton of CO2 reduction. This price is much higher compared to the market price. The government is wasting $992 on every ton of CO2 reduced. This leads to the misallocation of resources. The additional amount would have been channelled to other areas to improve their production.
The payment of the subsidies to green energy has helped other parts of the European countries to emit more CO2 (Gul et al., 2016). Germany is part of the European Union Emissions Trading System. The use of solar energy has made work easier for other European Union countries to emit more CO2. In the long run, using solar energy in Germany will help reduce the effects resulting from CO2 emissions to the atmosphere.
The use of solar energy in Germany has helped the country to create green jobs for the citizen. The subsidies helped many people to venture into employment to meet the energy demand. However, each job created by green energy costs %175,000. This is of the high cost to any other job creation in the economy. Due to this, the German government is exporting more green jobs to the China economy (Gul et al., 2016). They are now helping to subsidize Chinese jobs with no CO2 reductions. Green energy in Germany is expensive, which limits technological advancement due to the high operation costs. The diagram below shows the solar PV production in Germany, and the graph indicates that production has increased since 2004. The country has been investing heavily in solar energy to reduce expenses paid for emitting carbon gases from the burning of fuels.
Figure 4.0 Solar PV production in Germany up to 2008
(Leiren & Reimer, 2020)
The cost of PV has declined by a factor of nearly 100. There was an increased demand for PV energy between 2003 and 2008 despite the low reduction in the cost of production (Leiren & Reimer, 2020). The high demand surpassed the production capacity. This led the German government to provide subsidies to increase power production. The increased subsidies led to a reduction in the production cost by 33%.
SECTION B: Effect on the Energy Market
Demand and Supply Curve of PV Niche Market in Japan
Japan’s PV energy niche market is a small segment of energy supply project that depends significantly on technological advancement (Oka, Mizutani, & Ashina, 2020). In this market segment, the demand and supply of this technological energy behave like a standard product. Below are the demand and supply curves of the market.
Demand and Supply Curves
Figure 5.0 Japan PV Energy Demand and Supply Curve
(Oka, Mizutani, & Ashina, 2020)
The effect of the PV energy on the main energy supply will reduce demand for the primary energy in the area. Since technology in Japan is advancing daily, the production of PV energy is becoming more efficient, the PV energy supply is increasing, and the price is falling (Oka, Mizutani, & Ashina, 2020). With the falling price for PV energy in a niche market, the primary energy supply is substituted with the PV energy because of the falling price and environmental friendly. The declining demand for the primary energy supply in the niche market leads to a fall in price to attract customers.
The fact that market experience improves performance and reduces prices is well known and widely exploited in technology-intensive industries but sparsely used in the analysis for energy technology policy. Knowledge of the experience effect can help in the design of efficient programs for deploying environment-friendly technologies.
- A transformation in the world’s PV market by Germany’s Renewable Energy Law affects the price of renewable energy in the market. The advancement in the PV energy market in Germany implies that the PV market is expanding. The niche market in Japan will experience some changes in the short run before it adapts. The PV market transformation leads to a fall in the price of the PV market in the world and high demand for PV energy. Energy transformation implies that technology is advancing and since PV energy mainly depends on technology, the power generated and supplied in the market increases. High supply leads to a fall in the price per unity supplied because supply will exceed demand. Therefore, the price will fall to demand the PV power in the world market to clear the market. The impact of this transformation on the niche PV market in Japan is that the demand for PV energy in Japan will fall as people seek PV energy from Germany. Because of the low price of the energy, the users of PV energy in Japan will substitute the PV energy in Japan with the PV energy from Germany. Substituting PV Japan energy with PV energy from Germany leads to low demand for Japanese PV energy, which leads to a further fall in the price of the energy in the niche market. The market share for Japanese PV solar energy reduced from 30% in 2004 to about 8% in 2008.
Figure 6.0 Japanese PV solar energy market share
(Tang et al., 2018)
- Technology diffusion and low costs of production of PV energy are essential factors that determine the market equilibrium of a product in the market. The use of advanced technology in the production of PV energy in China will significantly change the demand and supply curve of energy in the country. Technology advancement in the production of PV energy in China market leads to high energy production and supply. Therefore, the supply curve of PV energy shifts to the right (Tang et al., 2018). The high supply of PV energy in China leads to a fall in the price of energy. A fall in the price of PV energy in the market leads to high demand for the energy, and the quantity of PV energy demanded in the market increases. For instance, the low cost of production of PV energy in China implies that the energy supplied will be at a low price, leading to high demand for the energy in the market. Thus, the demand curve for the PV energy shifts to the right to meet shifting the market equilibrium to the right where quantity consumed is high, and the price is low.
SECTION C: Project Appraisal
Financial evaluation and analysis are essential for any project carried out in the community. Financial evaluation refers to assessing the profitability and viability of the project before it is carried out; the process is an essential aspect of the project because it helps the investors decide whether to invest in a project or not (Volden, 2018). The financial evaluation methods that can be used to evaluate the viability of using the PV solar energy is the net present value (NPV) technique, the Payback Period Method and the return on investment method.
Net Present Value
Net Present Value (NPV) refers to the method employed by investors to determine the profits of the future cash flows generated from the project. The project’s cash flows using Present Net Value include the initial project investment capital (Bellos, Tzivanidis & Torosian, 2018). The method shows the profitability of the project. The net present value is calculated as
NPV = ((Cash flows)/ (1+i) ^t) – Initial investment
Where the required returns and t is the number of periods.
The project will be profitable and viable if the net present value is more significant than one and if the net present value is less than one. The solar project is nonprofitable, and the project should not be taken.
Return on Investment
The accounting rates of return technique, or the ‘return on capital employed,’ estimates the projected growth in investment profit by reflecting the net accounting profit as part of the investment using standard accounting methods (Bellos, Tzivanidis & Torosian, 2018). The technique does not take into consideration the entire duration of the project.
Payback Period Method
The time it takes to match cash outflows from a capital expenditure project is the reimbursement period (Bellos, Tzivanidis & Torosian, 2018). It is often stated over the years. The technique acknowledges the return of initial money of investment. The cash inflows and expenditures of a project will be equal during the payback period.
External Costs and Benefits
The external costs are also referred to as externalities in the project. These are the uncompensated environmental effects caused by the carrying out of a project. The main external cost of the solar power projects is clearing vegetation because the solar project needs a large place without vegetation. The generation of solar energy depends on the availability of sunlight. Therefore, the project should be installed on an open surface for easy access to sunlight, which becomes a problem because habitats for animals are destroyed (Ram et al., 2018). Another problem with solar projects is light pollution; the solar panels used to generate power are very reflective and can damage people’s visual ability.
The Benefits of Solar Power Projects
Less water consumption – the solar power generation does not depend on the water like the energy generated from the burning of fossils that requires cooling generators, processing, fuel refining, and fuel transportation through pipes (Ram et al., 2018). Electricity generation through solar panels requires no water, thus reducing the consumption and pollution of water in society. Only rainwater is needed to clean the solar panels naturally.
Air pollution reduction – solar energy production does not pollute the air because no green gases are emitted because solar power generation mainly depends on sunlight. The air pollution from burning fossils to generate electricity releases harmful gases like carbon dioxide and methane gases; the gases lower air quality. Since people depend on air for breathing, they inhale low-quality air that results in health problems linked to air pollution like asthma, pneumonia and anxiety, and even cancers. Using solar power, sun-generated electricity produces no harmful gas and lowers the rate of health problems related to air pollution in society. In addition, transmission lines transport less power when PV energy is used; health risks like cancer caused by electromagnetic radiation are prevented.
Reduced reliance on the fossils – electricity production using PV solar requires no fossil burning, and massive energy can be harnessed using sunlight within one hour (Ram et al., 2018). The fossils are running out and will be exhausted in few years if the mining is not controlled. Therefore, the use of solar energy, which is unrestricted, helps in saving the fossils of the world that are important for the formation of valuable minerals.
Solar Energy is a cost-saving source of energy – the sunlight is free in the entire world. The only costs incurred are the initial costs of installing the solar panels and minimal maintenance costs (GreenMatch, 2021). Due to the low costs of solar energy production, electricity is low and affordable for the users. It is also important to note that PV energy projects do not involve the movement of parts that could lead to wearing and tearing. There is no need to change parts frequently. The only part that is changed is the inverter that takes about 5 to 10 years to be changed, and the remaining parts of the project need only maintenance for efficient energy generation.
No noise pollution – the solar electricity production process does involve any activities that release irritating sound. Solar electricity is generated in a quiet environment, and no health problems related to noise pollution will be experienced in society.
Water pollution – Solar energy does not release harmful wastes into the water compared to fossil fuel burning energy that releases wastes and uses water to clean and excellent generators (GreenMatch, 2021). With solar electricity, water habitat is not destroyed, and society has access to clean water.
Financial and Economic Risks
In the solar project of Japan in 1995 main financial and economic risks were initial capital and adoption of solar energy in the economy. The initial capital for the solar project in 1995 was high because the project was a new idea and implementation of the project is very expensive; the repayment of loans and interests were also financial risks the project faced (GreenMatch, 2021). The economic risk of the project is that people fail to adopt solar energy because they were not sure if it serves as any other source of energy for which they were used. The demand for PV energy was also prone to decline because it was a new invention in the economy, and people may not adopt the new technology.
In 2005, the German solar project’s financial risks were pricing risks and initial capital. The significant risk to the energy production companies is the falling prices of this product. The implementation and transformation of solar energy production by German-led to high supply of solar energy in the world, leading to a fall in the price of solar energy hence reduced profits from the project. Subsidy for the rooftops solar panels in the economy could subject the economy to slow growth because of increased expenditure, leading to falling GDP (Quitzow et al., 2017). The initial capital for the project was also high because it was a massive energy project. Currency risk was also a risk factor the German project faced because it supplied solar energy worldwide and incurred currency exchange rates.
PV project in 2015 in China was exposed to foreign exchange risks, transaction risks, and pricing risks. Importing foreign technology and skills requires high initial capital of buying the technology (Quitzow et al., 2017). Since different countries use different currencies, China exposed its capital to foreign exchange risks, and it may have bought the technology costly because of foreign exchange rates. The PV project may adopt an initial public offering as a source of raising capital for the project. The initial public offering is a strategy used by companies to raise capital by offering virtual units in terms of shares to the investors; the main disadvantage of an initial public offering is that the investors own the project and should receive dividends.
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