Category: Economics for Business: Ch 24

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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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The bread basket that is left to grow weeds

Large areas of land in the former Soviet Union and Eastern Europe are lying uncultivated due to export barriers and tariffs. Given the recent rapid rise in food prices, this fallow land (estimated to be around 23 million hectares) could help to reduce upward pressure on food prices.

Bread basket that is left to grow weeds Times Online (12/3/08)

Questions

1. Identify three different forms of protectionism.
2. Explain why the land identified in the article has remained uncultivated.
3. Discuss the arguments for and against these countries reducing tariffs on food.
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Britain – the land of the $5 ice cream?

The fall in the dollar has continued with the value of sterling rising above $2.10 for the first time in 26 years. The articles below look at a range of issues related to the strong pound and there are also case studies of the impact on a guitar strings company and the manufacturer JCB.

Questions

1. Identify the main factors that have caused the fall in the value of the dollar. Use supply and demand to illustrate your answer as appropriate.
2. Assess the impact of the strong pound on UK exporters and importers.
3. Discuss whether intervention in the foreign exchange market may be appropriate to help UK exporters to remain more competitive in world markets.
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Is this the end of free trade as we know it?

In the article below, Irwin Stelzer argues that Congress has adopted a more protectionist stance towards trade policy. Not all would, however, agree. Why not have a look at the comments after the article to see some of the discussion that has taken place about the article?

The end of free trade as we know it Times Online (20/5/07)


Questions
1. Assess the extent to which the new trade agreements under discussion are likely to improve the position of workers globally.
2. Analyse two policies that the US administration could put in place to reduce the level or protectionism.
3. Discuss the extent to which the new trade agreements referred to in the article will represent a more protectionist approach to trade.
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Talk is cheap

The article linked to below is an extract (printed in the Guardian) from a new book by Dan Atkinson and Larry Elliott (economics editor for the Guardian). The introduction to the article summarises its theme quite effectively:
“We don’t manufacture anything any more. Most of the world won’t buy our records or watch our films. Only our gift of the gab is keeping Britain’s economy ticking over. But how long can the hot air last, ask Larry Elliott and Dan Atkinson “

Talk is cheap Guardian (18/5/07)


Questions
1. Explain the underlying trade performance of the UK in recent years for (a) trade in goods and (b) trade in services.
2. “Labour believes Britain is at the cutting edge of the knowledge economy and that Britain’s well-educated (sic), highly skilled (sic) and entrepreneurial (sic) workers are ready to kick German, American, Japanese and Chinese butt all round the global village.” Discuss the extent to which this is true.
3. Assess the extent to which the theory of comparative advantage can help explain the differences in trade performance outlined in the article.