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Energy costs (e.g - Leaving Cert Economics - Question 9 - 2007
Question 9
Energy costs (e.g. electricity) increased significantly in Ireland during 2006. Outline TWO economic reasons for the increase and TWO economic consequences of this s... show full transcript
Worked Solution & Example Answer:Energy costs (e.g - Leaving Cert Economics - Question 9 - 2007
Step 1
Outline TWO economic reasons for the increase (i)
Answer
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Increase in international oil prices: The rise in global oil prices, attributed to political instability and supply shortages, led to increased energy costs. This surge in oil prices directly affects the overall pricing of electricity as it becomes more expensive to generate power.
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Increase in wage costs within the industry: The energy sector faced significant wage increases, with workers demanding and receiving higher compensation. These costs were subsequently passed on to consumers as higher prices for energy.
Step 2
Outline TWO economic reasons for the increase (ii)
Answer
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Further regulation by government: The government instated additional regulations requiring energy providers to adhere to stricter public service obligations, which increased operational costs, thereby contributing to rising energy prices.
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Increased investment costs in the industry: Energy companies were prompted to invest significantly in future production capabilities to meet rising demand, leading to higher energy costs embedded in service pricing.
Step 3
Outline TWO economic consequences of this specific development for the Irish economy (i)
Answer
- Inflationary pressures / decrease in the standard of living: The increase in energy costs contributes to overall inflation, reducing the purchasing power of consumers, and consequently, the standard of living can decline as essential services become more expensive.
Step 4
Outline TWO economic consequences of this specific development for the Irish economy (ii)
Answer
- Job losses if industry closes or relocates: Higher operational costs may force energy companies or associated industries to downsize or relocate to cheaper regions, resulting in job losses within Ireland.