Wednesday, January 30, 2008

Unit 2: Demerit goods and sucessful government action: Raising the age you can buy cigarettes

The BBC reorts that nearly 165,000 people in England gave up smoking with the help of the NHS last summer, when lighting up was banned in enclosed public spaces.

a) Why is smoking a demerit good?
b) Why does it represent an example of market failure?
c) How has the government action reduced the market failure?

Sunday, January 27, 2008

Unit 2: Market failure and Government action

The BBC reports that the EU has announced tough new targets for all member states to combat climate change within the next decade.

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a) Using the handout on pros/cons of different government actions to combat market failure, assess the likely success of the package of measures outlined in the clip; ie legislation and a tradable/pollution permit system. Make sure you relate the theory to the EU actions outlined and don't just repeat the theory

Unit 2: Information failure; food labelling

The BBC reports a new government strategy to tackle obesity in England which will target food labelling.
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Another article suggests most customers have no idea of the calories involved when they drink a cup of coffee

a) What is the problem for the consumer in the free market shown by these 2 articles?
b) What negative externalities are associated with this market failure?
c) What do you believe that the Government could do to alleviate this failure in the food market?
d) To what extent do you believe the Government can correct the market failure ?

Unit 2: Information failure; childrens toys

The BBC reports that new regulations governing toy safety are due to be unveiled by the European Commission.
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a) What type of market failure is the toy market?
b) How would the toy market fail if left to the free market?
c) What actions is the EU taking to reduce this market failure?
d) Draw a diagram to show the effect of the EU action on the market

Unit 2: Income inequality in the UK

From Geoff Riley's blog comes this interesting article about the super rich and rising inequality in the UK and the effect of the UK tax system

a) Does the UK tax system apear to be progressive or not?

Saturday, January 26, 2008

Unit 2: Negative externalities associated with cheap road surfaces

The Telegraph has an interesting article about local authorities resurfacing roads cheaply;jsessionid=4QBBDPHEMP4KVQFIQMGSFFOAVCBQWIV0?xml=/motoring/2008/01/26/mfgrip126.xml

a) Who are the 2 parties involved in the economic transaction?
b) Who are the 3rd parties effected by the negative externalities?
c) What are the negative externalities?
d) How does the market fail?
e) What actions could the local authorities take to reduce the market failure

Unit 2: Allocative efficiency and the retail market

The Telegraph reports changes in the way we buy our shoes;jsessionid=MK3YG3WDIVW4ZQFIQMGSFFOAVCBQWIV0?xml=/money/2008/01/26/cnshoes126.xml

a) Allocative efficiency means resources....................Complete the sentence
b) How does what is happening in the shoe market illustrate this concept?

Unit 1: Falling demand for Harley Davidson motorcycles

The Telegraph reports falling demand for HD motorbikes;jsessionid=MK3YG3WDIVW4ZQFIQMGSFFOAVCBQWIV0?xml=/money/2008/01/26/cnharley126.xml

a) Using the determinants of demand, explain this fall in sales

Unit 1: The demand for doughnuts

This article from the Times says Dunkin Donuts is expanding in to China

a) Using the determinants of demand, explain why demand for doughnuts in China may be increasing
b) Show this effect on a demand diagram

Unit 2: Tradable permits: How carbon trading works in the EU

From the Guardian comes a brief summary of the latest EU actions to combat global warming. The top section on tradable permits is especially good

Unit 1: The price of gold

The price of gold has set another record high, reaching $923 an ounce, reports the BBC

a) Using a S&D diagram and the article, explain why the price of gold has risen and looks likely to continue to rise. Make sure you identify which determinants of demand and supply have changed

Unit 2: Cost Benefit Analysis and the Isle of Lewis wind farm project

Plans to build one of Europe's biggest wind farms on the Isle of Lewis are set to be turned down, BBC Scotland reports

a) What is the purpose of a CBA?
b) Using the article and your general knowledge, outline 2 private costs, private benefits, external costs and external benefits asociated with the project
c) If the project is to be rejected by the Scottish government, to what extent do you believe the decision to be based on economic factors?

Thursday, January 24, 2008

Unit 3: Economic growth in China

The BBC reports that China's growth reaches a 13-year high: The Chinese economy has expanded by 11.4% over the past year, reaching its fastest growth rate in 13 years, officials have announced.

a) Using an AD/AS diagram, explain the effect on the Chinese economy of this economic growth
b) From the article it would appear that Chinese officials are woried about rising inflation. Explain why this might be occuring and what action the Chinese govt could take to reduce the inflation problem

Tuesday, January 22, 2008

Unit 2: Income inequality in the UK

The Guardian had a series of articles, including a leader comment, yesterday highlighting the unequal nature of income distribution in the UK:,,2244030,00.html

Unit 2: Cost Benefit Analysis and the Severn barrage project

The BBC announces that the Government is to launch a CBA into the Severn barrage project

a) What is the purpose of a CBA?
b) How would this CBA be conducted?
c) What difficulties can you envisage in conducting this CBA?

Unit 3: Monetary policy: How interest rates work

A really brilliant entry in Evan Davis' blog on how changes in interst rates effect the economy

Sunday, January 20, 2008

Unit 3: Economic growth and policies to counter a recession in the USA

Two video clips from the BBC; the first explaining that the USA is slowing down and may be heading for a recession, the second Bush explaining his policy to try and avoid the recession

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a) Define what is meant by an economic slowdown
b) What reasons are given for the slowdown? Link these to the components of aggregate demand
c) What type of economic policy is Bush suggesting should be used to revitalise the economy?
d) How would his proposals effect the components of aggregate demand
c) Using an aggregate demand/aggregate supply diagram, explain what is likely to happen to the US economy as a result of this policy
d) Evaluate the likely success of his proposed solution

Unit 1: Price Elasicity od Demand: Hospital car parking charges

An interesting item from the BBC about car parking charges

a) Would demand for hospital car parking be likely to be elastic or inelastic? Explain your reasoning
b) What would happen to the hospitals revenue from car parking if they are forced to reduce their charges?

Monday, January 14, 2008

Unit 2: Demerit goods: Sunbeds

The BBC video clip and associated report calls for sunbed restrictions. Scottish ministers have given their backing to raise the age limit for using sunbeds to 18.

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a) Explain what is meant by a demerit good
b) To what extent are sunbeds a demerit good?
c) Evaluate the extent to which the proposed ban would be successful in reducing the market failure

Unit 2: Negative externalities: Biofuels

This BBC clip and associated article says the EU is rethinking its biofuel strategy as Europe's environment chief has admitted that the EU's policy on biofuels has had a negative impact.

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a) Explain what is meant by a negative externality
b) Identify the negative externalities from the clip and article that are associated with biofuel production and identify the third parties effected by the negative spillover effect?

Wednesday, January 09, 2008

Unit 3: Supply side policy: Changes to benefits

From the Guardian come these proposals regarding the unemployed who claim benefits,,2236887,00.html

a) List the proposals
b) Explain why these proposals are supply side policies
c) If implemented, what effect do you believe they would have on the UK macro economy?
d) Draw an AD/AS diagram to show this effect

Unit 1: External economies of scale

From the Guardian comes this article clearly showing an example of an external economy of scale,,2236597,00.html

a) Explain what is meant by external economy of scale
b) Why does this course represent an external economy of scale to casino firms?

Wednesday, January 02, 2008

Unit 3: Supply side policy: Cash to encourage the young to train

This Guardian article explains a government "Carrot and Stick" approach to improve the skills of the unemployed young

a) Explain what supply side policies are
b) Explain why the proposed plan could be clasified as a supply side policy
c) Why do you think both the "carrot" and "stick" are needed as part of the policy

Unit 2: Market Failure: Demerit goods and government action: Fast food advertising ban

The BBC reports that a government ban on advertising fast food to under 16's has come in to force

a) Define a demerit good
b) Why is fast food classed as a demerit good?
c) How should the advertising ban reduce the market failure?
c) To what extent do you think the advertising ban will be successful in reducing the market failure?