Category: Essential Economics for Business 7e and 6e
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? |
As Nicolas Sarkozy takes over as President of France, he faces a difficult economic situation. Poor economic growth, worsening international competitiveness and a worrying level of unemployment and social unrest mean that he has much to do. His approach will inevitably be controversial and the extent to which he is able to implement his promised reforms may depend on how well he can carry the main stakeholders with him.
Les misérables: France’s unhappy position BBC News Online (7/5/07)
Questions |
| 1. |
Explain the principal economic policies that Sarkozy has promised to implement. |
| 2. |
Discuss the economic problems faced by France. |
| 3. |
Analyse the economic constraints faced by Nicolas Sarkozy as he tries to implement his policies. |
| 4. |
Assess the likely success of the economic policies promised by Sarkozy. |
In the early days of monetary policy, money supply targeting was a core element of anti-inflation policy. This approach was slowly dropped during the 1990s, but the underlying growth of the money supply has remained an important issue for policy makers and recent growth in the money supply has led to concern from some commentators that higher inflationary pressures may yet emerge.
King sees money growth as danger sign Times Online (3/5/07)
Bank’s inflation controllers leave the NICE decade to enter the not-so-nice Guardian (3/5/07)
Should letter-writing be a thing of the past? Times Online (30/4/07)
Questions |
| 1. |
Explain the relationship between money supply growth and inflation. |
| 2. |
What were the main factors that led to money supply targeting being dropped as a core element of monetary policy? |
| 3. |
Assess the extent to which the MPC should pay more attention to the level of money supply growth. |
| 4. |
Should letter-writing be a thing of the past? |
The Office of Fair Trading (OFT) is to set up an investigation into the reality of ‘free banking’ to establish whether greater transparency in charging would benefit consumers. The articles linked to below consider the scope of this investigation and look at what some consider the ‘myth’ of free banking.
OFT probe into bank charges could mean end of ‘free banking’ The Scotsman (27/4/07)
‘Free’ banking could end as overdraft charges challenged Guardian (27/4/07)
Watchdog probes cost of banking BBC News Online (27/4/07)
Charges inquiry may spell end of free banking Telegraph (28/4/07)
OFT considers ending ‘free’ banking Times Online (27/4/07)
Q&A: Banking investigation and you BBC News Online (26/4/07)
Calling banks’ bluff BBC News Online – Robert Peston blog (26/4/07)
Free banking ‘myth’ to be probed Guardian (26/4/07)
Questions
| 1. |
Explain the reason why some people consider free banking to be a ‘myth’. |
| 2. |
Examine the likely impact of the market structure in the market for banking on the level of competition. |
| 3. |
Assess two policies that the government could implement to ensure that consumers get a fairer deal from their banks. |
In March 2007, the pound reached a record high against the dollar. This made it an excellent time for UK tourists to visit the USA with prices appearing relatively low thanks to the exchange rate. These exchange rate values also affected the balance of payments of both the USA and the UK and the article below looks at the economic impact of the high exchange rate against the dollar.
Why everything’s almost free in America (and why it won’t last) Guardian
(23/4/07)
Questions
| 1. |
Explain the principal reasons for the change that has taken place in the exchange rate in recent years. |
| 2. |
“On a PPP basis, a pound should buy $1.60”. Explain what is meant by this statement. |
| 3. |
“My bet is that within a year the rate will be closer to $1.60 than $2. Maybe a lot closer.” Assess the impact of this possible outcome on economic growth and inflation in the UK. |
| 4. |
Examine the likely impact of the high exchange rate on the balance of payments situation of (a) the USA and (b) the UK. |