Unit 4 Econ: The European Union

The European Union is a political and an economic area that consists of 27 member states that are located primarily in Europe.

  • The UK joined the EU in 1973 after previously been part of the EFTA which was the European Free Trade Area. 

The EU institutional structure would be :

  • The Council of Ministers 
  • The Commission- this is the institution that represents of the EU as a whole and is responsible for the EU laws and policies are carried out.
  • The European Parliament 
  • The Court of Justice of the European Community
  • The European Central Bank- central bank for the single currency the Euro used by 16 of their member countries. 

The Single Market: This occurs when the member countries act as one single economic area with the free flow of goods, services, capital, labour. It came in operation in 1992. 

Benefits of the Single Market:

  • Economies of Scale – with the 480 million consumers in 27 countries it is possible for the countries to take advantage of higher output and also lower costs. This would lead to greater efficiency of the market in terms of allocation and productivity.
  • Increased Dynamic Efficiency– Due to greater competition between between different countries this has encouraged more innovation , reduction in monopoly market. Leading consumers having more choice. 
  • increased liberalisation ( less government regulation leading to more competition) – The allowing of cheaper airlines like Ryanair, Easyjet to form and they have had cheaper costs such as electricity due to the signle market.
  • Business there has been a significant reduction in export burreaucracy as open borders cut delivery times and reduce costs. Single Market is a domestic market for a European Business.
  • UK Citizens are allowed to work, retire in all other member states.


  • Some businesses might lose out due to the increase competition because they haven’t established in the market yet. Therefore they cannot compete with the existing firms and adversely causing a loss of jobs.
  • The Single Market is still a work in progress whereas there are gaps remaining in areas such as intellectual property rights, services, retail financial services.
  • Service sector has opened slower compared to goods even though there has been new goods. It has not increased competition to an extent. Additionally with some markets such as financial, transportation, utilities still holding a huge deal of monopoly power. 

Expansion of the EU

In 1993 it was agreed that the Central and Eastern European countries could join- 12 more countries mainly from Eastern side had joined. This was seen beneficial for UK as:

  • The single market has expanded and the UK has seen the increase of free market size is good as there be more trade.
  • These countries have low taxes which encourage economic development and are allies of the Anglo Saxon Neo Liberalism. 
  • France and Germany were seen to have a lot of power and these new countries could potentially counterract this power.

EU10( the 10 Eastern European Countries);How have they affected the EU?

  • The population had increased by 100 million
  • Only added 5% to the overall GDP
  • Lead to increased migration for countries without restriction, 
  • Lead to new constitution so decision making would not be made slower.




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