Category: Essential Economics for Business 7e and 6e
Global food prices have been rising significantly in recent months and this has led to food riots in a number of countries, rationing being reintroduced in Pakistan and price controls being introduced in Russia. What has caused these rapidly rising prices and to what extent will they slow the rate of economic development in the Third World?
UK farmers forced to ride income rollercoaster Guardian (26/2/08)
They’re going to need a lot more money to meet the same needs Guardian podcast (26/2/08)
Feed the world? We are fighting a losing battle, UN admits Guardian (26/2/08)
Record rise in fuel prices fuels inflation Guardian (12/2/08)
India’s farmers struggling to keep food on the table Times Online (29/2/08)
Questions
| 1. |
Using supply and demand diagrams as appropriate, illustrate the changes taking place recently in world food markets. |
| 2. |
Assess the main factors affecting the level of farmers’ incomes in the UK . |
| 3. |
Analyse the likely impact of rising world food prices on the rate of economic development in Third World countries. |
Shell have announced record profits of $27bn. This is the highest profit ever made by a European company and is only surpassed worldwide by the annual profits of another oil company ExxonMobil at $40bn. These high profits have led to calls for a windfall tax to be imposed on the oil companies and the articles below consider the likely impact of a tax of this nature.
Threat of windfall tax to energy companies is ‘legalised piracy’ Times Online (28/2/08)
Tax uncertainty a sure-fire killer Times Online (28/2/08)
Q&A: Windfall tax on Shell BBC News Online (31/1/08)
The great fuel folly Guardian (5/2/08)
Video
Windfall tax suggested for fuel profits BBC News Online (February 2008)
Questions
| 1. |
Using diagrams as appropriate, show the impact on the equilibrium level of price and output of Shell of a windfall tax being imposed on their profits. |
| 2. |
Discuss the extent to which the high level of profitability of oil companies is determined by the oil price. |
| 3. |
Analyse whether a windfall tax is an economically efficient form of taxation. What alternatives could a government consider that might be more efficient?
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The EU has imposed a record £680m fine on Microsoft for imposing unreasonable prices on their rivals for access to the Windows code that they required to be able to build complementary software. The record fine is a drop in the ocean for Microsoft, representing just two weeks cash flow, but they hope that this marks an end to the dispute with the EU. They argue that new working practices will help improve interoperability and that they have already begun to offer better access to code for their competitors.
Microsoft hit by 899m euro fine for failure to comply with EU ruling Times Online (28/2/08)
EU fines Microsoft record £680m ‘to close dark chapter’ in fight against monopoly Guardian (27/2/08)
The EU’s frustration with Microsoft Guardian (27/2/08)
Ten years of legal wrangling between Microsoft and EU Guardian (27/2/08)
Pity the big, bad wolf Guardian (27/2/08)
Questions
| 1. |
Explain why the EU Competition Commissioner has ruled that Microsoft has behaved anti-competitively. |
| 2. |
Describe the role of the EU’s Competition Commissioner in improving the competition in markets.
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| 3. |
Examine other options available to the EU’s Competition Commissioner to improve the competitive situation in European markets. |
China’s rate of inflation has hit an 11-year high, partly due to the cold winter weather destroying crops and pushing up food prices. However, inflationary pressure has been growing for some time with rapid economic growth and the resultant pressure on resources. This is despite six increases in interest rates in the past thirteen months.
Families feel pinch as inflation threatens economic miracle Guardian (25/2/08)
Chinese inflation soars to an 11-year high Times Online (20/2/08)
Chinese inflation hits 11 year high Times Online (19/2/08)
Questions
| 1. |
Explain the principal factors that have led to the increase in inflation in China. |
| 2. |
“Policymakers in China will likely try to tighten monetary policy further, with more reserve requirement ratio hikes, faster Chinese yuan appreciation, and more heavy handed controls over bank lending.” Discuss the likely effectiveness of these policy measures. |
| 3. |
Assess the extent to which changes in food prices will affect the overall level of aggregate demand in the Chinese economy. |
Widening levels of income distribution have led to increased anger, according to a poll carried out for the Guardian by ICM. The articles linked to below look at this issue from a range of perspectives and using a series of regional case studies.
Anger at gap between rich and poor – ICM poll Guardian (20/2/08)
Diamonds for rich inside M25; hard times for the rest Guardian (21/1/08)
What the Romans did for us: introduce a North-South divide Guardian (21/1/08)
Where Burberry, Bentleys and bling prevail Guardian (21/1/08)
Dark reality hidden behind the picturesque scenery Guardian (21/1/08)
Mills and mail order: end of Empire marks another stage of decline Guardian (21/1/08)
Mind the gap Guardian (21/1/08)
Questions
| 1. |
Define the terms ‘Lorenz curve’ and Gini coefficient’. |
| 2. |
Using diagrams as appropriate show the changes that have taken place in income distribution in the UK in the past decade. |
| 3. |
Assess the principal causes of the growing North-South divide. |
| 4. |
Evaluate two policy options available to the government to reduce the widening gap in income distribution. |