Category: Economics for Business: Ch 04
Times of economic uncertainty often lead to people seeking what they consider as ‘safe havens’ for their money. Traditionally gold has been one of these safe havens. This financial crisis has been no exception and the price of gold has risen, but there has also been a rapid growth in demand for gold bullion and gold coins and dealers have found themselves besieged by people looking to protect their savings. ATS Bullion, a London gold bullion dealer, has even seen queues: something quite unprecedented for them.
There’s gold in them thar’ shops: the rush is on Guardian (2/10/08)
Austria witnesses new gold rush BBC News Online (12/10/08)
Gold rush as investors pile into bars Financial Times (3/10/08)
Market turmoil sparks gold rush to specialist funds Times Online (13/10/08)
Questions
| 1. |
What the main determinants of demand for gold coins and gold bullion? |
| 2. |
Using diagrams as appropriate, show the changes that have taken place in the market for gold coins in recent months. |
| 3. |
Discuss the extent to which the supply of gold bullion is likely to keep up with the rapid growth in demand. |
Hayek, through his book the ‘Road to Serfdom’ became one of the founding fathers of the market economic system that we have adopted as the principal method of organising economic activity. However, like all neo-liberal economists, his views and recommendations have come under increasing scrutiny in the current financial crisis.
Faith. Belief. Trust. This economic orthodoxy was built on superstition Guardian (6/10/08)
Dangers of worshipping false god of self-regulating markets Irishtimes.com (3/10/08)
Questions
| 1. |
Write a short paragraph setting out the key arguments in Hayek’s book ‘The Road to Serfdom’. |
| 2. |
Assess the importance of confidence in an economic system. To what extent is a lack of confidence a ‘self-fulfilling prophecy’? |
| 3. |
Discuss the extent to which Hayek’s work influenced the adoption of neo-liberal economic policies. |
Increased demand for milk and milk-based products has led to the EU agreeing to increase milk quotas by 2% from April. The move was backed by most countries but Germany and Austria opposed the move on the basis that increased quotas would push milk prices down and therefore hit many farmers.
EU farmers to produce more milk BBC News Online (17/3/08)
Questions
| 1. |
Using diagrams as appropriate, show how EU milk quotas affect the equilibrium price and level of output in the market for milk. |
| 2. |
Analyse the likely impact of a 2% increase in quotas on the equilibrium price and level of output in the market for milk. (n.b. as part of your answer you may like to consider the likely value of the price elasticity of demand for milk and the impact this is likely to have on the market price.) |
| 3. |
Discuss the effectiveness of using milk quotas in maintaining income levels for dairy farmers. |
Global food prices have been rising significantly in recent months and this has led to food riots in a number of countries, rationing being reintroduced in Pakistan and price controls being introduced in Russia. What has caused these rapidly rising prices and to what extent will they slow the rate of economic development in the Third World?
UK farmers forced to ride income rollercoaster Guardian (26/2/08)
They’re going to need a lot more money to meet the same needs Guardian podcast (26/2/08)
Feed the world? We are fighting a losing battle, UN admits Guardian (26/2/08)
Record rise in fuel prices fuels inflation Guardian (12/2/08)
India’s farmers struggling to keep food on the table Times Online (29/2/08)
Questions
| 1. |
Using supply and demand diagrams as appropriate, illustrate the changes taking place recently in world food markets. |
| 2. |
Assess the main factors affecting the level of farmers’ incomes in the UK . |
| 3. |
Analyse the likely impact of rising world food prices on the rate of economic development in Third World countries. |
With oil prices over $100 a barrel and petrol prices over £1 per litre, it is difficult to imagine a county where the entire tank of a 4×4 can be filled for 42p, but Venezuela is just such a country. Not surprisingly, Venezuelans are resisting any attempt to change the level of subsidy that creates this situation.
Cheap and cheerful: Venezuelans cling for right to petrol at 42p a tank Guardian (18/1/08)
Questions
| 1. |
Using supply and demand diagrams as appropriate, show the impact of the Venezuelan fuel subsidy on the equilibrium price of petrol. |
| 2. |
Assess the impact on economic efficiency of a subsidy on this scale. |
| 3. |
Discuss the impact on the socially optimal equilibrium level of output of the Venezuelan fuel subsidy. |