Category: Economics for Business: Ch 20
In what is being heralded as a historic deal, the EU has reached agreement with the USA on what is termed an ‘open skies’ deal. This will allow EU-based airlines to fly from anywhere in Europe to anywhere in the USA and US carriers can operate to any European destination. So what will this deal mean for travellers, the environment and the airlines. The articles below look at the issues and also at the detail of the agreement, which still maintains many of the previous limitations on airlines and their ownership.
EU backing for ‘open skies’ deal BBC News Online (22/3/07)
Q&A: Open skies BBC News Online (22/3/07)
EU agrees open skies deal Guardian (22/3/07)
Open skies: Q&A Guardian (22/3/07)
Transatlantic fares set to tumble after ‘open skies’ deal Times Online(22/3/07)
Questions
| 1. |
What criteria should be used to assess the success of the ‘open skies’ deal? |
| 2. |
Assess the extent to which the ‘open skies’ deal will increase the level of competition in the transatlantic market for air travel. |
| 3. |
Discuss the options available to the EU to increase competition further in the market for air travel. |
March 2007 has seen a lot of activity in government circles relating to the environment and environmental legislation. The EU has agreed a renewable energy target for all members while the UK government has released its own climate change bill. The Carbon Trust has then released a one-year pilot of a carbon labelling scheme, with Walkers Crisps being the first brand to bear the carbon labels. The aim is to increase consumers’ awareness of the carbon footprint of the goods they are buying. The articles linked below look at all these issues.
EU agrees renewable energy target BBC News Online (9/3/07)
EU seeks converts to eco-stoicism BBC News Online (9/3/07)
Navarra embraces green energy BBC News Online (9/3/07)
How Europe can save the world Guardian (11/3/07)
Carbon labelling scheme launched BBC News Online (15/3/07)
Labels reveal goods’ carbon cost BBC News Online (16/3/07)
New law in the climate jungle BBC News Online (13/3/07)
Questions
| 1. |
Explain the difference between private costs and external costs. Identify five external costs that arise from the generation of electricity by conventional means. |
| 2. |
Using diagrams as appropriate, show the impact on the market for energy of increased use of energy generated from renewable sources. |
| 3. |
Evaluate the likely effectiveness of the carbon labelling scheme introduced by the Carbon Trust. |
In a surprise move, the Tories have announced plans to tax air travel as part of their environmental policy. It was no surprise to hear the airlines criticise this, but disquiet about this policy has been expressed in traditional Tory circles and it amounts to a significant departure from the past for the party. Are they just flying a kite, or is this a serious policy initiative?
Tories reveal plans for green tax hike on air travel Guardian (11/3/07)
Tory plan for sky-high flight taxes Scotsman (11/3/07)
Airlines shoot down Tory ‘tax on fun’ Telegraph (12/3/07)
Green tax won’t help the planet or the Tories Telegraph (11/3/07)
Tories plan green tax on flights BBC News Online (11/3/07)
Questions
| 1. |
Why might a free market in air travel not result in an optimal number of flights. |
| 2. |
Discuss the likely effectiveness of the tax on flying for reducing the demand for air travel. (You should consider the likely value of the price elasticity of demand in your answer.) |
| 3. |
With the use of appropriate diagrams, assess the likely impact of the tax on flying on the equilibrium level of price and output in the market for air travel. |
A recent report from the Office of Fair Trading has argued that the NHS may be paying up to £500m too much for branded medicines for drugs companies and has recommended reforms to the system. The Pharmaceutical Price Regulation Scheme (PPRS) sets a cap on the profits that any drug company can earn on branded medicines from the NHS and the OFT is recommending changes to the system. They argued that there are “a number of drugs where prices are significantly out of line with patient benefits”.
NHS ‘spending £500m a year too much on drugs’ Guardian (20/2/07)
NHS paying too much for drugs BBC News Online (20/2/07)
Drugs giants to be told to ‘cut prices for NHS’ Times Online (20/2/07)
NHS ‘overspending by millions’ on drugs Telegraph (20/2/07)
Drugs price fixing scheme costs health service millions, says OFT Guardian (20/2/07)
Drugs buddies Guardian – comment is free blog (20/2/07)
Prescribing prices BBC News Online – Robert Peston blog (20/2/07)
Questions
| 1. |
Explain the way in which prices for branded drugs are determined. |
| 2. |
Assess the extent to which the PPRS represents a price-fixing scheme. |
| 3. |
Discuss the policies that the government could put in place to implement the OFT recommendations. |
Did you buy red roses for Valentine’s Day? If so – where did they come from? Africa or Europe? You may have taken a conscious environmental decision to buy from European sources as the flowers do not have to travel so far and therefore involve fewer air miles, but according to International Development Secretary, Hilary Benn, this may be mistaken and it may be ‘greener’ to buy red from Africa.
Buy African flowers – UK Minister BBC News Online (13/2/07)
Buy African flowers for Valentine’s Day, minister says Guardian (13/2/07)
Questions
| 1. |
Compare and contrast the social costs and social benefits (including both private and external costs) of buying red roses produced in Europe and those produced in Africa. |
| 2. |
Assess which are the most environmentally beneficial presents to give on Valentine’s Day. Give reasons to justify your answer. |
| 3. |
Evaluate two policy options available to the government to reduce the environmental impact of Valentine’s Day. |