Category: Essential Economics for Business: Ch 09
In its first report on the impact of bio-fuels, the United Nations (UN) has warned that such fuels may increase poverty in developing countries and have a wider environmental impact than has in the past been suggested. With oil prices at a record high and with climate change pressures, much of the developed world has adopted targets for bio-fuels, but environmentalists have warned that the rush to grow the raw materials for bio-fuels may be more damaging to the environment than the fossil fuels they will replace.
Global rush to energy crops threatens to bring food shortages and increase poverty, says UN Guardian (9/5/07)
UN warns on impacts of biofuels BBC News Online (9/5/07)
UN raises doubts on biofuels Guardian (9/5/07)
Questions |
1. |
What are the external costs and external benefits resulting from the use of bio-fuels as opposed to fossil fuels? |
2. |
Using diagrams as appropriate, show the impact of increased use of bio-fuels on the social equilibrium in the market for fuel. |
3. |
Assess policies that European governments could put in place to ensure that the move towards increased use of bio-fuels has a positive environmental impact. |
Passenger groups have reacted angrily to the raising of off-peak fares by South West Trains by around 20% on many journeys. The train company has increased unregulated fares significantly where there is little competition, but appears to have limited the increases on journeys where there is competition. Is this an abuse of their monopoly position?
Train firm accused of abusing monopoly Times Online (8/5/07)
Price hike angers train watchdog BBC News Online (8/5/07)
Questions |
1. |
Discuss the extent to which South West Trains has a monopoly on its rail journeys. |
2. |
Using diagrams as appropriate, show the reasons why South West Trains has chosen to increase off-peak prices by as much as 20%. |
3. |
Discuss the likely value of the price elasticity of demand for off-peak rail journeys. To what extent will this have influenced South West Trains’ pricing decision? |
You do perhaps need to check the date for this story, but once you have established that it wasn’t written on April 1st, you can start to take it a little more seriously. An alliance of an American oil company and food producer is to turn pig fat into diesel fuel. The fuel will apparently have the same chemical properties as diesel but a lower carbon dioxide content and zero sulphur, so should be beneficial for the environment the companies argue.
Pig fat to be turned into diesel BBC News Online (19/4/07)
Questions
1. |
Using diagrams as appropriate, compare and contrast the environmental impact of conventional diesel and the new pig fat bio-diesel. |
2. |
Discuss the extent to which the new pig fat diesel will be better for the environment than conventional diesel. |
3. |
Evaluate two policies that the government could implement to encourage the use of alternative fuels like the new pig fat bio-diesel. |
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. |
In a surprise move, the Tories have announced plans to tax air travel as part of their environmental policy. It was no surprise to hear the airlines criticise this, but disquiet about this policy has been expressed in traditional Tory circles and it amounts to a significant departure from the past for the party. Are they just flying a kite, or is this a serious policy initiative?
Tories reveal plans for green tax hike on air travel Guardian (11/3/07)
Tory plan for sky-high flight taxes Scotsman (11/3/07)
Airlines shoot down Tory ‘tax on fun’ Telegraph (12/3/07)
Green tax won’t help the planet or the Tories Telegraph (11/3/07)
Tories plan green tax on flights BBC News Online (11/3/07)
Questions
1. |
Why might a free market in air travel not result in an optimal number of flights. |
2. |
Discuss the likely effectiveness of the tax on flying for reducing the demand for air travel. (You should consider the likely value of the price elasticity of demand in your answer.) |
3. |
With the use of appropriate diagrams, assess the likely impact of the tax on flying on the equilibrium level of price and output in the market for air travel. |