Category: Economics for Business: Ch 18

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Economic downturn – prime crime-time?

The article linked below looks at the extent to which economic downturn and rising inequality are likely to affect crime levels in the UK. Traditionally the view has been that an economic downturn will raise crime, but is it necessarily the downturn that is causing the increased crime?

Consumed by crime Guardian (24/9/08)

Questions

1. Explain why an economic downturn may lead to increased levels of crime.
2. Discuss the extent to which deregulation of markets may have exaggerated the relationship between crime and the level of economic growth.
3. Assess the view espoused in the article that “a culture obsessed with material goods” and “competitive individualism” have led to stronger link between crime and economic growth.
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Making the poor poorer?

In Gordon Brown’s last budget as Chancellor he scrapped the 10p starting rate of taxation and this change came into effect for the 2008/9 tax year starting April 6th 2008. The move has been criticised by many Labour MPs and by poverty campaign groups as they argue that the scrapping of the rate will make some poor people worse off. They also argue that it will make it more difficult to meet the targets the government has set for reducing child poverty

Chancellor accused of widening poverty trap for poorer workers Times Online (14/03/08)
Benefit move to cut child poverty BBC News Online (12/03/08)

Questions

1. Explain what is meant by the poverty trap.
2. Explain how the abolition of the 10p starting rate of tax is likely to increase inequality.
3. Analyse two policies that are likely to reduce poverty. Then assess the extent to which these policies will also help reduce child poverty.
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Diamonds inside the M25; hard times outside

Widening levels of income distribution have led to increased anger, according to a poll carried out for the Guardian by ICM. The articles linked to below look at this issue from a range of perspectives and using a series of regional case studies.

Anger at gap between rich and poor – ICM poll Guardian (20/2/08)
Diamonds for rich inside M25; hard times for the rest Guardian (21/1/08)
What the Romans did for us: introduce a North-South divide Guardian (21/1/08)
Where Burberry, Bentleys and bling prevail Guardian (21/1/08)
Dark reality hidden behind the picturesque scenery Guardian (21/1/08)
Mills and mail order: end of Empire marks another stage of decline Guardian (21/1/08)
Mind the gap Guardian (21/1/08)

Questions

1. Define the terms ‘Lorenz curve’ and Gini coefficient’.
2. Using diagrams as appropriate show the changes that have taken place in income distribution in the UK in the past decade.
3. Assess the principal causes of the growing North-South divide.
4. Evaluate two policy options available to the government to reduce the widening gap in income distribution.
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The new (improved) Gilded age

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.
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Milk – is the price the white one?

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.