In the article below Tim Harford (the Undercover Economist) looks at rationality in the purchase of cigarettes. He consider whether healthy and happy smokers are the same thing and the extent to which smokers would be happier if cigarettes were more expensive.
Why smokers are happier when cigarettes cost more MSN Slate (17/5/08)
Questions
| 1. |
Identify the principal factors that determine the level of demand for cigarettes. |
| 2. |
Given the factors identified in part (a), discuss the likely value of the price elasticity of demand for cigarettes. |
| 3. |
Discuss the extent to which higher cigarette prices would make smokers happier. |
The market for rice has been in turmoil recently with shortages and rapid price rises. This crisis has led to Japan and the USA negotiating a deal to release the surplus rice held by Japan in silos. It is estimated that this deal would lead to around 1.5 million tonnes of rice being made available and this could help reduce the price of rice on global markets.
Japan’s silos key to relieving rice shortage Times Online (17/5/08)
Tokyo stockpiles rice while others go short Times Online (17/5/08)
Thai cartel idea outrages consumers Times Online (3/5/08)
Controlling crops goes against the grain Times Online (3/5/08)
Questions
| 1. |
Explain why Japan is holding surplus rice in silos. |
| 2. |
Assess the impact of this ‘distortion’ on the global rice market. |
| 3. |
With reference to the last two articles linked above, assess the likely impact of the cartel proposed by the Thai prime minister on the global market for rice. |
The Reverend Thomas Malthus argued that while population grows at a geometric rate, food supplies grow at an arithmetic rate. This led him to the controversial conclusion that if population grows unchecked society will run out of food. The article below argues that despite recent food price growth and food shortages, the ideas of the Reverend Malthus are as wrong as ever.
Malthus, the false prophet The Economist (15/5/08)
Questions
| 1. |
Explain the theory expounded by the Reverend Malthus in relation to population growth. |
| 2. |
Assess the principal factors that affect population growth.. |
| 3. |
Discuss whether the ideas of the Reverend Malthus have any relevance in a modern age. |
To try to help reduce inflation, the People’s Bank of China (the central bank of China) has ordered banks to hold a greater proportion of their assets as cash. These higher reserve requirements will limit the ability of the banks to create deposits and is a form of monetary policy intended to support the fight against inflation. However, how successful is this likely to be given the rapid economic growth being experienced by China?
China lifts reserve requirements for banks Times Online (12/5/08)
Questions
| 1. |
Explain how a higher reserve requirements helps reduce inflation. |
| 2. |
Evaluate two policies that the central bank could adopt, other than raising reserve requirements to help control inflation in China. |
| 3. |
“As underlying inflationary pressures remain undiminished, it is vital for the government to keep its tightening policy stance to anchor inflationary expectations.” Discuss the extent to which a tightening policy stance will influence inflationary and other expectations. |
In recent years Labour has taken what might be described as a light-touch on regulation of City firms and financial institutions. In the article below the economics editor of the Guardian, Larry Elliott, argues that this ‘pact with the devil’ might have come back to haunt Gordon Brown as the impact of the global credit crunch continues to dominate economic news.
Brown damned by his Faustian pact Guardian (12/5/08)
Questions
| 1. |
What form has regulation of the financial sector taken under the Labour government? |
| 2. |
Assess the extent to which this regulatory approach could be considered a ‘Faustian bargain’. |
| 3. |
Discuss the extent to which tighter regulation of financial markets might have helped the UK economy avoid the impact of the global credit crunch. |
