Category: Essentials of Economics: Ch 02
Oil prices have seen a relentless rise in recent weeks with much speculation that they will go over $100 a barrel in the near future. The high oil price has seen the average price of petrol go over £1 per litre in the UK, shortages and rationing in Tehran and violence in Yemen. So what is causing oil prices to rise and what impact is this likely to have on the global economy?
Tempests, truckers and tribesmen – another week in the oil market Guardian (10/11/07)
Steep decline in oil production brings risk of war and unrest, says new study Guardian (22/10/07)
The high oil price may begin to take its toll Times Online (12/11/07)
What is driving oil prices so high? BBC News Online (6/11/07)
OPEC: the oil cartel in profile BBC News Online (18/10/07)
Oil price rises after OPEC summit BBC News Online (19/11/07)
Oil markets explained BBC News Online (18/10/07)
Oil prices BBC News Online – Evan Davis blog (10/11/07)
Super-spiked The Economist (1/11/07)
Video
The OPEC statement on oil prices BBC News Online – video link (19/11/07)
Questions
| 1. |
Using supply and demand analysis, show the reasons why oil prices are rising. |
| 2. |
Using diagrams as appropriate, assess the likely impact of rising oil prices on the level of economic growth in the UK. |
| 3. |
Discuss the extent to which OPEC has been the main cause of the rise in oil prices. |
22nd November marks the day when Americans celebrate Thanksgiving Day. However, the cost of this celebration has increased by 11% in the last year according to figures from the American Farm Bureau Federation. One of the main causes of this is the rise in turkey prices but other factors were important as well.
Thanksgiving dinner cost ‘up 11%’ BBC News Online (16/11/07)
Questions
| 1. |
Using supply and demand analysis, illustrate the price changes for turkeys identified in the article. |
| 2. |
Consider possible factors that may have led to the price changes for turkeys identified in the article. |
| 3. |
Discuss the likely change in the quantity of turkeys demanded as a result of the price rise. |
| 4. |
What is the likely approximate value of the cross elasticity of demand for cranberry sauce with respect to the price of turkeys? |
Bolivia may have the second largest gas reserves in Latin America but it also has an acute shortage of diesel. People have blamed a variety of causes: smugglers, the government and nationalisation. In truth, the cause may be a combination of all these factors, but whatever the cause, the diesel shortage is acting as a significant constraint on further economic development and is an ongoing headache for the President Evo Morales.
Fuelling Bolivia’s crisis BBC News Online (8/11/07)
Questions
| 1. |
Use supply and demand analysis to illustrate the reasons for the shortages in diesel in Bolivia. |
| 2. |
Explain the impact that fuel subsidies may have had in causing the shortages of diesel. Use supply and demand analysis to illustrate your answer where appropriate. |
| 3. |
Discuss the underlying factors that may be leading to the shortages in diesel. |
Al Gore’s contribution to the global climate change debate is not in question and he has, along with the IPCC, been awarded the 2007 Nobel Peace Prize for his work in raising awareness. If you haven’t seen his film “An inconvenient truth” then do get hold of the DVD – it may just be the most interesting PowerPoint presentation you will ever see! However, does he really understand the nature of the debate? The article below suggests that he has not yet taken account of the most fundamental trade-off in dealing with climate change – the trade-off between our own quality of life and that of our descendants in the future.
Save the earth in six hard questions MSN Slate (22/10/07)
Questions
| 1. |
Explain what is mean by a trade-off “between the quality of our own lives and the quality of our descendants’ [lives]”. |
| 2. |
What is meant by the term ‘risk-averse’ and how is this relevant in the climate change debate? |
| 3. |
Consider the questions raised by the article. Discuss how relevant the conclusion reached is in the light of these questions. |
Independent school fees have generally risen faster than inflation and a relatively inelastic value of the price elasticity of demand seems to have led to their revenues increasing. Demand has stayed high despite the above-inflation fee increases. However, a recent report suggests that fees have risen relative to average earnings and that independent schools have become less affordable. This may, the report argues, make some schools relatively more vulnerable to a fall in the number of places demanded.
Public school fees ‘risk pricing parents out’ Guardian (18/9/2007)
Questions
| 1. |
Identify the main factors affecting the value of the price elasticity of demand for places at independent schools. |
| 2. |
Discuss the extent to which the value of the price elasticity of demand for places at independent schools is likely to change as fees increase relative to average earnings. |
| 3. |
Assess the extent to which competition in the market for independent schools affects the level of fees (the market price) and the value of the price elasticity of demand for places. |