According to most conventional measures, income inequality in the developed world has been rising. This trend has been argued to be particularly prevalent in the UK and USA, but the article below from The Economist argues that conventional measures may be mis-representing the differences between the better off and the less well off. Instead of looking at income inequality, it looks at consumption inequality.
The new (improved) Gilded age The Economist (19/12/07)
Questions
| 1. |
Define the terms (a) income inequality and (b) consumption inequality. |
| 2. |
Assess the extent to which income represents a good measure of economic wellbeing. |
| 3. |
Discuss two policies that could be used to reduce (a) income inequality and (b) consumption inequality. |
A number of UK supermarkets, including Sainsbury’s, Asda and Safeway, have been fined £116m by the Office of Fair Trading (OFT) for price fixing. The OFT is still investigating other supermarkets, including Tesco which denies that it was involved in the price collusion. The collusion is estimated to have cost consumers around £270m in higher prices.
Supermarkets fined £116m for price fixing Guardian (8/12/07)
OFT hands out £116m in fines for milk price fixing Guardian (7/12/07)
Supermarkets admit milk price fix BBC News Online (7/12/07)
Videos
Farmers reaction to price fixing claims BBC News Online
Questions
| 1. |
Explain how Sainsbury’s and the other supermarkets colluded to fix milk prices. |
| 2. |
Assess the market conditions most likely to lead to price collusion in a market. |
| 3. |
Examine the role of the OFT in reducing uncompetitive and restrictive practices in markets. |
The article linked to below from Evan Davis’s blog starts with the following multiple choice question:
“What effect do you think it has, if a British bus company employs a bus driver from overseas?
a) it takes away the job of a British bus driver?
b) it increases the number of bus drivers we have?
c) it undercuts the wages of British bus drivers?
d) it reduces bus fares for British passengers?”
What is your answer?
On the buses BBC News Online (5/11/07)
Questions
| 1. |
Explain what is meant by the phrase “lump of labour fallacy”. |
| 2. |
Assess the extent to which the most appropriate answer to the multiple choice question is “(e) all of the above”. |
| 3. |
Discuss the extent to which the answer to the above multiple choice question may differ in a perfectly competitive and imperfect labour market. |
The rapid growth in the use of overseas and agency staff for many lower paid jobs has been a contentious issue for many in the trade union movement. Unions have demanded the same rights for agency staff as for permanent staff, but the government is reluctant to do this, arguing that the use of agency staff encourages flexibility in the workforce.
Underpaid, easy to sack: UK’s second class workforce Guardian (24/9/07)
Questions
| 1. |
Explain the impact that the use of agency staff has on the supply curve for labour. (N.B. You should consider both the position and shape of the curve in your answer.) |
| 2. |
Discuss the government’s view that “the flexibility provided by agency workers has been a vital part of Britain’s economic success“. |
| 3. |
Discuss the impact on the UK labour market of giving agency staff the same employment rights as permanent staff. |
Globalisation has reduced the bargaining power of unskilled workers and pushed up inequality in many western countries, the OECD said, urging governments to improve their social safety nets.” With the gap between rich and poor widening once again, the media have been considering the impact of widening income and wealth distribution. The articles below look at this widening gap and also at the ways in which the rich are using their money.
Gap between rich and poor widens Guardian (20/6/07)
For the super-rich it’s all give and take – at record levels Guardian (20/6/07)
Looking after the super-rich BBC News Online (Evan Davis blog) (9/8/07)
Questions
| 1. |
Define what is meant by the terms (i) Lorenz curve and (ii) Gini coefficient. |
| 2. |
Using illustrations as appropriate, show how the Lorenz curve and the value of the Gini coefficient have changed in the past decade. |
| 3. |
Assess the likely impact on the major macroeconomic targets of growing income inequality. |
| 4. |
Discuss policies that the government could put in place to try to reduce the level of income inequality. |