Aspects of Microeconomics and Macroeconomics


The main aspect of microeconomics is the deterioration of air quality in London, which has been a matter of concern for everyone. However, the present restrictions on different modes of transportation due to lockdown owing to the global pandemic situation certainty have a positive impact on improving the air quality (Centre for Cities, 2020). In this regard, it is being considered how this positive impact on the air quality can be maintained even after the restrictions due to the lockdown is lifted. It is also to be seen how such measures in order to maintain the appropriate air quality in London will have an impact on the different industries and businesses which plays a significant role in contributing to the deterioration of the air quality.


Theoretical knowledge and Application of Cost-Benefit Model

The cost-benefit analysis generally comes to use in such situations in order to analyze the strengths and weakness of the alternatives and to ascertain which alternative is going to be the best in order to maintain the enhanced air quality in London while keeping in mind about the cost-effectiveness of the approach that can be implemented. The cost-benefit analysis is going to determine whether a particular decision to improve the air quality is appropriate or not, and also evaluate by how much the benefits of the decision exceeds its costs (Nesticò and Maselli, 2020). This is quite important to understand the cost-effectiveness of the decision that is to be taken to improve the air quality in London. In this respect, to reduce air pollutants in order to enhance the air quality in London, the first and foremost approach is to identify the factors that contribute to the maximum chunk of air pollution in the city. Hence, this happens to be the major industries and factories operating in the suburbs of the city of London which happens to meet with most of the demands of the citizens of the city.


Analysis of the conventional factors affecting pollution

Another major contributing factor to air pollution in the city has been increasing transportation on the roads of London. Now if the government takes an approach that puts certain curbs and regulations on these industries, factories, and transport systems it will eventually have an overall impact on the economy of the nation (, 2020). Regulations on factories and industries in order to reduce air pollution means putting implications on their production which will indirectly reduce the supply of the essential commodities in the market as a result the price will begin to surge and this is considered as one of the externalities as per the cost-benefit analysis (Markanday et al. 2019). On the other hand, demands for such goods will gradually increase and will eventually create an imbalance between the supply and the demand. The government in such cases can intervene in order to provide subsidies to the industry and factories in order to keep the prices of the commodities and goods under control.


Evaluation of the measures and efficiencies

Further, measures to use renewable forms of fuels in order to reduce vehicular pollution on the roads of London will surely help to enhance the air quality of London as well as in sustainable development, but as per the cost-benefit analysis the costs of the benefit will increase many folds for the government as the vehicles running on cleaner fuel tends to be quite costly. The industries and factories producing such vehicles can increase their production if the demand increases or else; in such cases, the prices need to be reduced by providing government subsidies and reducing the indirect taxes on such vehicles (Willis, 2019). London can follow the example of Milan where an ambitious decision to reallocate the street space for cyclists and pedestrians which were earlier used by cars in order to reduce the dependence on private vehicles to reduce air pollution (Laker, 2020). This is because Milan is considered one of the most polluted cities in the whole of Europe.


Therefore, based on the overview and understanding of the scenario, it can be recognized that cost-benefit analysis is useful when new alternatives are being considered to be implemented for the benefit of a larger mass. Cost-benefit analysis on a potential alternative helps to visualize the implications as well as the impact of the course of action. However, cost-benefit analysis to correctly interpret the benefit of a particular alternative when it is taken for a bigger decision having a longer time horizon, as it fails to analyze the factors that have a positive impact on short-term goals but the impact on long term goals are unknown.

Category 2: Macroeconomics

Scenario: 2B


Trade has always been the main driving force in enhancing the growth of the economy of a country. It has been observed that the recent trend of protectionism in international trade in order to protect the domestic trade from foreign competition has brought about a radical change in the field of a trade by limiting the choice of products and goods for the consumers in the market (, 2020). Many countries have walked in the path of implementing protectionist policies in terms of trade, despite many economists across the world believe that there is no replacement to free trade policies as it positively promotes the economy of a country. nk010

Impact on consumers

The protectionism in trade is reappearing as one of the disputed schemes employed by key policymakers and learned economists towards improving the economic well-being of a country. According to Charette and d’Astous (2020), protectionism in trade has been used on many occasions in order to help the economy of a country to recover from an economic decline. On the contrary, Hearn (2020), argued that on several occasions, stringent use of protectionism in trade has produced an opposite negative impact on the economy of one or more countries leading to economic depression or an economic recession. In this respect, it is quite crucial in order to comprehend the need for protectionism in trade and to analyze its consequences on the economy of a country. Due to trade protectionism, consumers have limited choice while purchasing a product or commodity and need to pay more for that due to the implications on the goods and commodities being imported.

Domestic producers

The protectionism in trade is generally employed by the government to protect the interests of domestic producers. Bown et al. (2020), stated that the domestic producers in the developing countries do not have adequate resources, financial support, technological support, or the technical expertise to compete with the already established and dominant firms. So in order to have a competitive advantage and better market share for the domestic producers especially those who are new in the market need conservative policies in order to sustain the competition. On the contrary, Fajgelbaum et al. (2020), has argued that in providing protection to the domestic consumers against foreign competition, the government needs to spend a considerable amount of finance in order to enforce protectionism in trade but somehow it also reduces the prospects of growth for the domestic producers.

Exporters and Governments

According to Ernst et al. (2019), trade protectionism leads to a serious problem between the governments of different nations when they are unable to sell their product and commodities in the nations where they could earlier sell and this often leads to retaliation between the different governments. On such occasions, it does not matter if the confliction nations are political ormilitary allies. Gachet and Hunziker (2020), stated that trade protectionism also has a severe impact on exports of commodities and goods, and the exporters see a gradual decline in the demand which leads to lesser output and the possible layoff of employees. Anderson (2020), commented that the GDP of a nation falls with increased trade protectionism due to a significant rise in the tariffs and a considerable fall in labor productivity. This generally has a huge impact on the added value which has been generated by the economy.

Economic Agent

According to Morseletto (2020), the circular economy refers to a concept that involves the optimal use of resources across their life cycle by using efficient strategies in order to optimize its consumption due to economic growth. The transition to a circular economy involves approaches that may lead to reduced rates of utilization and consumption of resources. The circular economy reduces the pressure on the supply chain networks and creates new opportunities in the domains of employment and economy. Busu and Trica (2019), stated that trade protectionism leads to increased tariffs and duties which generally increases the cost of the products as a result the optimal utilization of the products becomes a barrier in the circular economy. It also has an impact on the supply chain network and leads to more waste generation and in turn, affects the sustainable growth of the economy.

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It can be inferred at the end of how trade protectionism ensures to protect the domestic producers who have limited resources and expertise from foreign competition and helps them trade in an efficient manner. Again, on the other hand, it is seen that trade protectionism is a major cause of trade wars between various nations across the world. This in turn causes turmoil in the economy of the conflicting nations. Trade protectionism is also a cause of limiting the choices of products and commodities for the consumers due to several implications on the import policies.

Take a deeper dive into Appropriate role of the state in a capitalist society: Keynes and Hayek with our additional resources.


Anderson, K., 2020. Trade protectionism in Australia: its growth and dismantling. Busu, M., and Trica, C.L., 2019. Sustainability of circular economy indicators and their impact on the economic growth of the European Union. Sustainability, 11(19), p.5481. Bown, C., Conconi, P., Erbahar, A., and Trimarchi, L., 2020. Trade protection along supply chains. Discussion paper, Mimeo.

Centre for Cities. 2020. Air Quality In Cities: Now Is The Time To Take A Step Forward, Not Back - Centre For Cities. [online] Available at: [Accessed 5 September 2020]. 2020. Unit 9 The Labour Market: Wages, Profits, And Unemployment. [online] Available at: [Accessed 5 September 2020].

Charette, F., and d’Astous, A., 2020. Country Image Effects in the Era of Protectionism. Journal of International Consumer Marketing, pp.1-16.

Ernst, E., Merola, R., and Samaan, D., 2019. Trade wars and their labor market effects (No. 995045193502676). International Labour Organization.

Fajgelbaum, P.D., Goldberg, P.K., Kennedy, P.J. and Khandelwal, A.K., 2020. The return to protectionism. The Quarterly Journal of Economics, 135(1), pp.1-55. Gachet, E. and Hunziker, T., 2020. Export hurdles in practice. Aussenwirtschaft, 70(01), pp.61-90.

Hearn, E., 2020. Buying Globalization: Consumer Orientation and Perceptions about Trade. Politics & Policy, 48(1), pp.168-190.

Laker, L., 2020. Milan Announces Ambitious Scheme To Reduce Car Use After Lockdown. [online] the Guardian. Available at: [Accessed 5 September 2020].

Markanday, A., Galarraga, I., and Markandya, A., 2019. A critical review of cost-benefit analysis for climate change adaptation in cities. Climate Change Economics, 10(04), p.1950014.

Morseletto, P., 2020. Targets for a circular economy. Resources, Conservation and Recycling, 153, p.104553.

Nesticò, A., and Maselli, G., 2020, May. Cost-Benefit Analysis and Ecological Discounting. In INTERNATIONAL SYMPOSIUM: New Metropolitan Perspectives (pp. 440-450). Springer, Cham.

Willis, K., 2019. Environmental economics and cost-benefit analysis. In The Routledge Companion to Environmental Planning (pp. 382-393). Routledge.

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