Author: Tejvan Pettinger


Automation – benefits and costs

Definition of automation Automation refers to the process of automatically producing goods through the use of robots, control systems and other appliances with a minimal direct human operation. Within manufacturing industries, automation has led to increased labour productivity as fewer workers are needed to produce the same number of manufactured goods. A perceived downside of automation is that it leads to jobs being displaced in traditional areas of work – in particular, ’blue-collar’ manufacturing jobs. Less visible is how the process of automation leads to the creation of new jobs in…


The effect of tax cuts

Lower income tax rates increase the spending power of consumers and can increase aggregate demand, leading to higher economic growth (and possibly inflation). On the supply side, income tax cuts may also increase incentives to work – leading to higher productivity. However, the effect of tax cuts depends on how the tax cut is financed, the state of the economy and whether low tax rates actually increase productivity and the willingness to work. The effects of reducing income tax rateIncreased spending. Workers will see an increase in their


How will robots affect living standards?

Readers Question: This is hypothetical, but I wondered what would happen if we developed robots resembling humans who could perform any task a human could perform, but more effectively and essentially for free? More specifically, how would this development affect employment and real per capita GDP, and what would the pros and cons be? What regulation, if any would be necessary? Robots (and increased technology) have the capacity to improve living standards. The full extent will depend on how these productivity gains are distributed. In a way, the development of robots…

Pros and cons of government intervention

Pros and cons of government intervention

A key economic debate is the extent to which should governments intervene in the economy?At one extreme, free-market economists/libertarians, argue that government intervention should be limited to all but the most basic services, such as the protection of private property and the maintenance of law and order. At the other extreme, Marxist economists argue that the government should intervene in all areas of the economy to ensure the most efficient and equitable distribution of resources.In between, most economists believe it is a question of balance, with the government…

Can the UK ever pay off its debts?

Can the UK ever pay off its debts?

When people talk of UK debt, they usually are referring to government debt. This is debt the government has borrowed to finance budget deficits (when government spending is greater than taxation revenue) There is also external debt, which is the net amount the UK (private and public sector) owe abroad. This external debt is high (2011, £6,114bn over 400% of GDP) Though external debt is balanced by external assets. Most of UK government debt is held by the domestic private sector investors (approx 70%). So when we talk about…

Dealing with problems – before or after

Dealing with problems – before or after

There are certain problems you can deal with after the event, there are other problems which need foresight, planning and unpopular decision made before the problem becomes critical.Free market economics tends to respond to events – you can say that they deal with problems after they have occurred. Economists who favour government intervention argue it is a mistake to always wait for the market to respond to change and there are some problems which need to be dealt with before they become very serious. After the event, it…


What do firms do with profit?

Profit is the net difference between revenue and costs. The main way that firms use profit is to:Pay dividends to shareholders. Invest in increasing capacity or expanding into new markets. Invest in research and development. Pay for new advertising and marketing strategies. Save profit as part of cash reserves, to use as savings. Tax. A government levy a corporation tax on the percentage of firm profits. (e.g. UK 20%)Dividends For public limited companies, shares are listed on the stock market. Investors will buy shares in part to gain annual…


Pricing strategies during a recession

How does a recession/economic downturn influence how firms will set the price of goods and services?A recession is a period of negative economic growth – falling real incomes and rising unemployment. In a recession, consumers are likely to have lower income and be more sensitive to prices. There is also the threat of unemployment which will make consumers more reluctant to spend. In an economic downturn, firms are likely to see a fall in demand and unsold goods. This creates an incentive to cut prices.