Category: Economics 10e

The combination of high global demand for milk and variable weather has led to a rapid rise in the price of milk. Cheese is made from milk (sorry to state the obvious!) and so cheese prices have risen to a new high in excess of £2000 per tonne and further price hikes are expected. One conclusion that could be drawn from this is that it is better to have a takeaway pizza now rather that in a month’s time, but what other effects is this price increase for milk likely to have?

Cheddar hits £2,000 a tonne as global milk demand soars Guardian (15/7/07)

Questions

1. Identify the key determinants of demand for cheese.
2. Using diagrams as appropriate, illustrate and explain the changes that have taken place in the market for cheese.
3. Assess the extent to which the price increase for milk can be passed on to consumers of associated products like yoghurt and cheese.

Reading the first article linked to below, you may be forgiven for thinking that farming has moved into the realms of science fiction. Dairy farming has moved determinedly into the era of technology and now benefits from extensive economies of scale with much higher productivity levels than even a decade ago. Yet 3000 dairy farmers are planning to leave the industry in the next two years and even the largest farms are struggling to make money. The processing sector has become significantly more concentrated and margins are being squeezed ever further by the power of the supermarkets, so has the market become unbalanced with too much power in the hands of supermarkets and processors?

Rising prices, failing farms. The strange story of milk Guardian (24/4/07)
Why British dairy farming is in crisis Guardian (24/5/07)

Questions

1. Describe the market structure of the milk industry.
2. Discuss the extent to which this market structure has changed the level of prices in the market for milk in recent years.
3. Evaluate possible measures that governments could implement to make the market for milk more competitive.

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.

The UK and global labour markets are changing significantly. In the UK we have faced a level of immigration of around 500 – 600 thousand people (the government does not know the exact figure), while in the global economy the International Monetary Fund (IMF) has estimated in its latest World Economic Outlook that the global labour force has quadrupled in the last quarter of a century. So what is the impact on the UK labour market? Many assume that the effect is negative, but as is always the way with these things, you will find plenty of economists who will argue the opposite. The article below from the Times Online looks at these national and global issues.

Workers count cost of a global labour flood Times Online (29/4/07)
Migrants create job market slack Times Online (20/5/07)


Questions
1. Using diagrams as appropriate assess the impact of recent immigration on the UK labour market.
2. Discuss the extent to which changes in the global labour force and UK immigration have affected the level of wages in the UK labour market.
3. Discuss the extent to which the global labour force is likely to change in the next decade.

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.