Category: Economics 10e

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.

Changes in house prices could be considered a national obsession in the UK and recent speculation about a property crash or a crash in the buy-to-let sector of the market has been no exception. Many commentators differ about the possible direction of house prices with average annual increases of around 10% continuing. So will the sector crash? Or won’t it? The articles below consider some of the issues on the supply side and the demand side of the market.

Head to Head: Will property prices crash? BBC News Online (13/03/07)
Five million new homes needed Guardian (16/03/07)
Past report of buy-to-let’s death have been exaggerated Guardian(21/02/07)
Britain likely to need 5m new homes by 2027 Guardian (17/03/07)

Questions

1. Describe the main factors determining the level of supply and demand in the housing market in the UK.
2. Using supply and demand diagrams as appropriate, illustrate recent changes in the UK housing market. Draw a further set of diagrams to illustrate the changes in the rented sector of the housing market.
3. Assess the most likely direction of house prices in the next three years and give reasons for your answer.

China, in a contentious new law, has given its people additional private property rights and protection of private assets. Many were worried that this eroded fundamental socialist principles, and it can be argued that this moves China further towards becoming a market economy.

China announces new property law BBC News Online (9/3/07)
China passes new law on property BBC News Online (16/3/07)

Questions

1. Examine the implications for the Chinese economy of the new additional property rights.
2. Discuss the advantages and disadvantages of the new law giving additional private property rights.
3. Assess the extent to which this moves China closer to being a free market economy.

Having secured the 2012 Olympics, we now have to work out how to pay for it. Recent news has indicated that the cost of hosting the Olympics has risen significantly from the original estimate. However, there is considerable debate in the media about what the real cost is. The figures given are massive, but what will we be left with after the games are over? How can we value these assets? The blog below from Evan Davis looks at some of these issues and discusses the real cost of hosting the Olympics.

Why do costs overrun? BBC News Online (16/3/07)
Real cost of 2012? BBC News Online – Evan Davis blog (15/3/07)

Questions

1. Identify five fixed and five variable costs of running the Olympics.
2. Discuss the value of the opportunity cost of hosting the Olympics.
3. List the direct and indirect benefits of hosting the 2012 Olympics in London.

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.