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Economics Assignment: Microeconomic And Macroeconomic Implications In UK


Task: Using appropriately labeled diagrams with clear annotations, prepare the economic assignment discussing the possible microeconomic and macroeconomic implications for the UK economy.


The readings used to prepare this economics assignment clarifies that UK has recently changed their immigration policy for foreign students studying in UK. The UK government has recently announced that the foreign students taking overseas study decisions in UK will be able to get two years post study visa. The new policy decision has replaced the 2012 policy that made foreign students leave UK within four months after finishing their higher studies (Scmp 2019). This new immigration policy decision taken will have various economic impacts both on microeconomic and macroeconomic level. The paper on economics assignment analyzes the macroeconomic and microeconomic impact of this new immigration policy decision in UK.

Foreign students entering UK has reduced drastically over the years due to the tight immigration policy taken by the government in 2012. The foreign students were not getting any monetary benefit on taking higher education in UK universities. Moreover, deteriorating number of foreign students in UK was having huge impact on the economy on various perspective, as international students are seen to make contribution to both cultural and economic aspects of the country (Scmp 2019). Thus, this decision will have effective macro and microeconomic impact on the country.

Microeconomic Impacts
On the microeconomic grounds it is seen that the revision and ease of immigration policy for the foreign students will have positive impact on the demand of higher education. These education institutions do rely on international student and aims to be benefitted from it. From the diagram provided in the below section of economics assignment it is seen that revision and ease of immigration policy for foreign students will have most positive impact on one sector of the economy that is higher education (Mac 2019). With rising immigration it is seen that demand for higher education in the economy will increase from Q to Q1, as demand curve shifts from D to D1 because more foreign students will prefer to come to UK and take higher education with the aim to gain monetary benefit from it.

Economics assignment

Figure 1- Demand for Higher Education 
Source- Author’s creation

In addition to the demand effect it will be seen that the new policy will also have impact on the education market, which is a highly competitive sector. Education industry will experience a positive growth over the years as more and more students come to the economy for education and add up to their finances and profit. Education sector being competitive sectors, the universities offering higher education in it will gain increased benefits. This in turn will lead to development and increase of number of institutions offering higher education to the students and add up to the economic benefit, as more and more institutions enter the industry (Mac 2019). The diagram below shows the way the revision in visa policy has led to the increase in the supply of institution providing higher education, as the supply curve shifts from S to S1. This leads to an increase in supply of higher education institution from Q to Q1.

Aggregate Demand and Real GDP

Economics assignment

Figure 2- Supply for Higher Education Institution
Source- Author’s creation

Macroeconomic Impacts
In addition to the microeconomic impact, the new immigration policy will also have macroeconomic impact on UK economy. This means that the impact will take place on a larger scale (Duttgupta 2019). There will be impact on various areas of the economy on a macro scale such as increase in labor force, increase in aggregate demand, increased employment rate, welfare benefits.

Labor Force
With the ease in immigration policy it is seen that the migrants will mostly be of working age. Thus net immigration leads to increase in labor supply and a significant decline in dependency ratio. In UK as well foreign students allowed for 2 years visa extension after their higher studies will help add to the labor force. It is seen from the figure that as the foreign students migrate to UK with respect to easy visa policy the supply of labor will increase and there will be a shift in labor supply curve from Ls to Ls1. However, the findings obtained in the context of this economics assignment signifies that this will push the wage rate downward to W2 from W1. With such an increase in labor supply and working population, the dependency ratio will fall in the economy.

Economics assignment

Figure 3- Labor market response to an extension in visa policy in UK
Source- Author’s creation

The new visa policy will cause more inflow of people in the economy and this will lead to an increase in aggregate demand, as the immigrant will demand different items during their stay in the economy. Further, the demand from the immigrants will lead to an increase in total spending in the UK economy, adding up to their real GDP. Further, it is seen that as labor supply will increase with more foreign student coming to UK to study, will lead to an increase and labor demand. This will increase the purchasing power of those immigrants and increased spending in UK. This shows that impact of net immigrant will help look economic growth stronger in UK in the coming years.

Increased employment
Net Migration is always consistent with falling unemployment in the UK because it cause increase in labor supply along with higher demand for labor as the wages are push down. This will be the instance in this case also where visa extension policy for foreign students will help reduce unemployment in UK with the rise in labor demand. This is evident from Figure (3) where the labor demand is seen to shift from Ld to Ld1 with increase in working migrants.

Welfare Benefits
The economy will also receive welfare benefits in the form of fiscal contribution as immigrant students will work now and contribute some part to the taxation of the country. Thus, the economy of UK will receive welfare benefit as well with increase in fiscal surplus in the coming years.

It can be concluded by analyzing the above segments of economics assignment that the economy of UK will face a positive economic impacts on both macroeconomic and microeconomic scale with the visa extension policy for the foreign students. Even in the situation of uncertainty it can be seen from previous experience of UK that the economy will benefit with this new policy.

Duttgupta, I. (2019). Economics assignment Reintroduction of UK post study work visa for international students welcomed. [online] Harvard Business Review. Available at: [Accessed 3 Dec. 2019].

Mac. (2019). Impact of international students in the UK. [online] Harvard Business Review. Available at: [Accessed 3 Dec. 2019].

Scmp. (2019). UK extending education visas to boost number of overseas students after brexit. [online] Harvard Business Review. Available at: economics assignment [Accessed 6 Dec. 2019].


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