In the face of a Labour backbench rebellion over the abolition of the 10p tax rate in the most recent Budget, the Chancellor, Alistair Darling, introduced what has been described as a mini-budget this month. In this mini-budget he significantly increased tax allowances to try to alleviate the impact of the removal of the 10p tax rate on some of the poorest families.
Darling’s solution could prove costly, say economists Guardian (14/5/08)
FAQ: Formula that bought off the Labour rebels Guardian (14/5/08)
Brown risks £2.7bn tax cut to end revolt Guardian (14/5/08)
Mini-budget will put money in pockets of 22 million voters Guardian (13/5/08)
Darling’s statement in full Guardian (13/5/08)
Institute for Fiscal Studies highlights Chancellor’s dilemma after emergency tax cut Times Online (21/5/08)
Q&A on the Government’s ‘Golden Rule’ Times Online (15/5/08)
Basic rate taxpayers to get £120 BBC News Online (13/5/08)
Q&A: Tax changes BBC News Online (13/5/08)
Full statement: Tax changes BBC News Online (13/5/08)
Questions
| 1. |
What was the effect of the abolition of the10p tax rate on income distribution (before the min-budget measures)? |
| 2. |
Assess the extent to which these changes will alleviate the impact of removing the 10p tax rate on the poorest families. |
| 3. |
Discuss the likely impact of this change in the government’s fiscal stance on the main UK macroeconomic targets. |
Behavioural economics looks at the way in which people behave when making economic decisions about spending. It looks essentially and what people buy and why they buy it. Research in behavioural economics has started to question some of the traditional economic assumptions of rationality and argues that habits and other psychological factors may be more important than conventionally assumed.
Why we buy what we buy Guardian (20/5/08)
Questions
| 1. |
Explain what is meant by ‘behavioural economics’. |
| 2. |
Evaluate the principal factors that people take into account when choosing to buy a consumer good. |
| 3. |
“….. average people are all far more irrational and more human than economists allow”. Discuss the extent to which this might be true. |
The Governor of the Bank of England, Mervyn King, recently talked about the end of the ‘nice’ decade. He was not using this in its normal sense, but was taking about a ‘non-inflationary, consistently expansionary’ decade of economic growth. Economists and journalists have been busy suggesting other acronyms for the situation that we face now including VILE (‘volatile inflation, less expansionary’) and the less generous CRAP (close to recession, absent a policy’). So are we facing a new more inflationary and less stable period of economic development? Is the ‘nice’ period really over?
Recession alert as Brown fights back Guardian (15/5/08)
‘It’s things outside the Bank’s control that are going up’ Guardian (14/5/08) (Podcast)
Nasty truth behind those nice headlines Times Online (19/5/08)
Inflation prospects will make a master letter writer out of Mervyn King Times Online (13/5/08)
Which way from the edge of the abyss? Guardian (25/4/08)
Questions
| 1. |
Explain the main factors that have led to the past decade being a ‘NICE’ one. |
| 2. |
Assess the extent to which we are moving into a ‘VILE’ period . |
| 3. |
Evaluate two policies that the government could adopt to try to avoid the UK economy moving into a VILE period. |
In the article below Tim Harford (the Undercover Economist) looks at rationality in the purchase of cigarettes. He consider whether healthy and happy smokers are the same thing and the extent to which smokers would be happier if cigarettes were more expensive.
Why smokers are happier when cigarettes cost more MSN Slate (17/5/08)
Questions
| 1. |
Identify the principal factors that determine the level of demand for cigarettes. |
| 2. |
Given the factors identified in part (a), discuss the likely value of the price elasticity of demand for cigarettes. |
| 3. |
Discuss the extent to which higher cigarette prices would make smokers happier. |
The market for rice has been in turmoil recently with shortages and rapid price rises. This crisis has led to Japan and the USA negotiating a deal to release the surplus rice held by Japan in silos. It is estimated that this deal would lead to around 1.5 million tonnes of rice being made available and this could help reduce the price of rice on global markets.
Japan’s silos key to relieving rice shortage Times Online (17/5/08)
Tokyo stockpiles rice while others go short Times Online (17/5/08)
Thai cartel idea outrages consumers Times Online (3/5/08)
Controlling crops goes against the grain Times Online (3/5/08)
Questions
| 1. |
Explain why Japan is holding surplus rice in silos. |
| 2. |
Assess the impact of this ‘distortion’ on the global rice market. |
| 3. |
With reference to the last two articles linked above, assess the likely impact of the cartel proposed by the Thai prime minister on the global market for rice. |