Category: Essentials of Economics: Ch 02
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. |
The combination of high global demand for milk and variable weather has led to a rapid rise in the price of milk. Cheese is made from milk (sorry to state the obvious!) and so cheese prices have risen to a new high in excess of £2000 per tonne and further price hikes are expected. One conclusion that could be drawn from this is that it is better to have a takeaway pizza now rather that in a month’s time, but what other effects is this price increase for milk likely to have?
Cheddar hits £2,000 a tonne as global milk demand soars Guardian (15/7/07)
Questions
| 1. |
Identify the key determinants of demand for cheese. |
| 2. |
Using diagrams as appropriate, illustrate and explain the changes that have taken place in the market for cheese. |
| 3. |
Assess the extent to which the price increase for milk can be passed on to consumers of associated products like yoghurt and cheese. |