Category: Economics for Business: Ch 24

The surprise winner of the Nobel prize for economics this year was Paul Krugman: academic, writer and columnist for the New York Times. He is an economist with a gift for explaining economic principles and concepts in clear and simple terms. However, the award was given, not for his writing skills, but for his work on international trade theory and economic geography.

In praise of ….Paul Krugman Guardian (14/10/08)
Hotdog economics Guardian (13/10/08)
Nobel economics prize: And the winner is ….. Guardian (13/10/08)
Academic and columnist Paul Krugman wins Nobel Prize for Economics Times Online (13/10/08)
Bold strokes The Economist (16/10/08)


1. Write a brief paragraph summarising Krugman’s work on trade patterns.
2. Define the term ‘economies of scale’. Explain why this concept was important to Krugman’s work on trade patterns.
3. Assess the extent to which Krugman’s work has helped to explain the impact of free trade and globalisation.

A recent report from the World Bank has suggested that developing countries need to grow significantly if they are to avoid high levels of poverty. The report suggested that without rapid and sustained growth up to 4 billion people could be living in abject poverty by 2050.

‘Choose growth or accept poverty for billions’ Guardian (22/5/08)
The Doha dilemma The Economist (29/5/08)


1. Summarise the main findings of the World Bank report.
2. Is rapid economic growth (a) a necessary condition and/or (b) a sufficient condition for alleviating poverty in developing countries.
3. Evaluate two policies that a developing country could adopt to raise levels of economic growth.

The market for rice has been in turmoil recently with shortages and rapid price rises. This crisis has led to Japan and the USA negotiating a deal to release the surplus rice held by Japan in silos. It is estimated that this deal would lead to around 1.5 million tonnes of rice being made available and this could help reduce the price of rice on global markets.

Japan’s silos key to relieving rice shortage Times Online (17/5/08)
Tokyo stockpiles rice while others go short Times Online (17/5/08)
Thai cartel idea outrages consumers Times Online (3/5/08)
Controlling crops goes against the grain Times Online (3/5/08)


1. Explain why Japan is holding surplus rice in silos.
2. Assess the impact of this ‘distortion’ on the global rice market.
3. With reference to the last two articles linked above, assess the likely impact of the cartel proposed by the Thai prime minister on the global market for rice.

A significant illegal trade in ‘e-waste’ has developed with thousands of discarded computers arriving every day in the ports of West Africa. Once there, children are often used to dismantle them and extract metals . However, this has resulted in huge toxic dumps and serious health problems for resident in the surrounding area.

Breeding toxins from dead PCs Guardian (6/5/08)


1. Identify the principal external costs resulting from this illegal trade in e-waste.
2. Using diagrams as appropriate, show the impact of this market failure on the market for new computers.
3. Evaluate two policies that the international community could adopt to reduce this illegal trade in e-waste.

Large areas of land in the former Soviet Union and Eastern Europe are lying uncultivated due to export barriers and tariffs. Given the recent rapid rise in food prices, this fallow land (estimated to be around 23 million hectares) could help to reduce upward pressure on food prices.

Bread basket that is left to grow weeds Times Online (12/3/08)


1. Identify three different forms of protectionism.
2. Explain why the land identified in the article has remained uncultivated.
3. Discuss the arguments for and against these countries reducing tariffs on food.