Tag: price elasticity

Posted on

Somali pirates and the tuna catch

Somali pirates have been much in the news recently with their high profile captures of oil tankers and other ships. The impact on shipping in the area is clear and this has disrupted trade in the region, but an unforeseen impact has been on the total worldwide catch of tuna. The Indian Ocean is one of the richest sources of tuna in the world and the pirate activity has led to a fall of around 30% in the total tuna catch.

Somali piracy ‘reduces tuna haul’ BBC News Online (22/1/09)

Questions

  1. Using diagrams as appropriate, show the impact of Somali pirate activity on the market for tuna.
  2. Suggest likely values for the price elasticity of demand and supply of tuna. Analyse the extent to which these values are likely to affect the price rise in the market for tuna.
  3. What substitutes are available for tuna? Assess the extent to which the availability of substitutes will affect the rise in the price of tuna.
Posted on

Britain’s widening trade gap

The November 2008 trade statistics have just been released and they show that the UK had the largest nominal trade deficit on record at £8.3 billion (up from 7.6 billion in October). This represents nearly 7 per cent of GDP, the highest since 1974.

Trade gap widens despite pound’s slump Independent (14/1/09)
UK trade deficit hits a record as weak pound fails to help Telegraph (13/1/09)
Britain’s trade deficit widens to new record Guardian (13/1/09)
UK Trade, November 2008 National Statistics (13/1/09)

Questions

  1. Why has the UK’s trade gap widened?
  2. How can the concepts of income and price elasticity of demand be used in analysing the causes of the widening deficit?
  3. Explain how these elasticity values are likely to differ in the short and long run.
  4. Explain the factors that will determine whether the trade gap will widen or narrow over the coming months.