Category: Economics: Ch 13
Britain’s recycling strategy is under risk following a collapse in waste paper prices. Three quarters of UK waste paper is exported to Far Eastern buyers, but demand from this region has collapsed in recent months. The price collapse has led to a surplus of recyclable paper and some local authorities have proposed using Ministry of Defence (MoD) sites to store the waste while there is no market or use for it.
Paper price collapse blows hole in Britain’s recycling strategy Guardian (11/11/08)
Recycled waste could be stored on MoD bases Guardian (16/11/08)
Questions
- Define the terms (i) private cost and (ii) external cost.
- What are the external costs resulting from disposing of waste paper and other recyclable products in landfill sites?
- Using diagrams as appropriate, illustrate the changes that have taken place in the market for waste paper.
- Evaluate two strategies that the government could adopt to increase the price of waste paper.
- Discuss the likely success of a policy of storing waste on MoD sites to await an upturn in the recycling market..
“The economic crisis is petty by comparison to the nature crunch. But they have the same cause.” This is how George Monbiot starts his article below. The comparison between the financial crisis may seem an unlikely one, but global warming and the resultant economic costs could also have a significant effect on the world economy.
This is what denial does Monbiot.com (14/10/08)
Green shoots of recovery Guardian (8/10/08)
Independence from the street up Guardian (23/9/08)
Questions
| 1. |
Define the terms (i) external cost (ii) private cost (iii) social costs. |
| 2. |
Using diagrams as appropriate show the reasons why the market economy may fail to allocate scarce resources appropriately. |
| 3. |
“If the global economy keeps growing at 3% a year (or 1700% a century) it too will hit the wall.”. Discuss possible policies that may help prevent this situation arising. |
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. |
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? |
The Civil Aviation Authority (CAA) – the regulatory body for Britain’s airports – has allowed the main airport operator BAA to increase substantially the landing charges it levies on airlines. The airlines have reacted angrily and argued that the higher charges will simply be passed on to passengers in the form of higher fares.
Q&A: Airport landing fees BBC News Online (11/3/08)
BAA to raise airport landing fees BBC News Online (11/3/08)
Fares will rise as fees cap is lifted Guardian (cartoon) (12/3/08)
Fares will rise as fees cap is lifted, airlines warn Guardian (12/3/08)
Video
BAA to raise landing fees BBC News Online
Questions
| 1. |
Explain the regulatory system in operation for the control of landing fees at UK airports . |
| 2. |
Explain why the CAA has increased the landing fees that BAA can charge for planes landing at UK airports. |
| 3. |
Is raising landing fees an efficient method of internalising the externalities associated with air travel? |
| 4. |
Evaluate the extent to which the higher landing fees will be passed on to airline passengers. Use diagrams as appropriate. You may also like to consider the relevance of the price elasticity of demand for air travel in determining the extent to which the higher landing fees can be passed on by the airlines. |