Category: Economics for Business: Ch 22

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Nationalisation, but not as we know it?

Nationalisation has been seen by most people as something very much of the past. However, the financial crisis has changed all that and the recent nationalisation of banks in Iceland and part-nationalisation of UK banks has brought the concept under the economic microscope once again.

Iceland struggles for control as it nationalises Kaupthing Times Online (10/10/08)
Brown and Darling have bitten the bullet – and set the world an example Guardian (9/10/08)
G7 ministers forced to think the unthinkable Guardian (11/10/08)

Questions

1. Define the term ‘nationalsation’.
2. Assess why the Icelandic government felt that the nationalisation of Kaupthing was the best solution to their financial situation.
3. Discuss the extent to which other countries may be obliged to nationalise their banks.
4. Discuss whether the current tranche of nationalisation is likely to be extended beyond the finance industry.
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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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The cost of dead PCs

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)

Questions

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.
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Guzzling gas just got more expensive

One of the key Budget measures was a change in the car tax regime. The Chancellor, Alistair Darling, introduced a new banded system annual vehicle excise duty (VED) based on the level of emissions of the vehicle. The cars with the lowest levels of emissions will be exempt from VED, but at the other end of the spectrum, the highest polluting vehicles will face an annual VED of around £440. However, this will be substantially higher in the year of purchase of the vehicle and this so-called ‘showroom tax’ will raise the tax level to £950 in the first year of purchase.


Gas guzzlers hit with higher taxes Guardian (12/03/08)
New taxes on gas-guzzlers will raise an extra £1.2bn Guardian (13/03/08)
Spared at the pumps – but hit in the showroom Guardian (16/03/08)
Q&A: Showroom tax BBC News Online (12/03/08)
Gas guzzlers set to face £950 tax BBC News Online (12/03/08)

Questions

1. Explain how the highest polluting vehicles affect the socially optimal equilibrium in the market for car travel.
2. Using supply and demand diagrams as appropriate, illustrate the likely impact of the new car tax regime in 2009-10 on the equilibrium in the market for car travel. What is the significance of the concepts of price elasticity of demand and consumer surplus in your analysis?
3. Discuss the likely effectiveness of the new banded car tax regime at reducing the average level of emissions from cars. Would raising the tax on petrol and diesel be a more efficient method of achieving the same goal?
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Plastic bags – not so plastic fantastic after all?

2008 may yet come to be seen as the year that marks the death of the single-use plastic bag. Many countries around the world, including China, have banned their use and February 2008 has seen Marks and Spencer announcing a 5p charge per plastic bag in an attempt to reduce their usage. Even government departments have faced criticism over their use as promotional tools. For more details on plastic bag bans and policies relating to limiting their usage, see our 2007/8 podcast on The economics of plastic bags elsewhere on the site.

M&S hopes to cut plastic bag use with 5p levy Guardian (28/2/08)
Brown may legislate against free plastic bags Guardian (29/2/08)
Q&A: Plastic bags Guardian (28/2/08)
M&S to charge 5p for carrier bags BBC News Online (28/2/08)
Brown threatens supermarkets over plastic bag reduction Times Online (29/2/08)
Government accused over plastic bag waste Guardian (29/2/08)
Agency scraps use of plastic bags for Whitehall promotions Guardian (1/3/08)
Plastic bag bans around the world BBC News Online (28/2/08)

Videos
M&S to charge for carrier bags BBC News Online (February 2008)
M&S boss on plastic bags BBC News Online (February 2008)
M&S to start charging for plastic bags BBC News Online (February 2008)

Questions

1. What are the social costs and benefits resulting from the use of single-use plastic
bags?
2. Using diagrams as appropriate, show how the equilibrium price and quantity of plastic bags differs from the social optimum.
3. Evaluate two possible policies that the government could use to reduce the use of plastic bags.