It is interesting to note that Ken Livingstone has introduced a higher rate of the London congestion charge for cars which have high levels of fuel consumption (band G vehicles, which emit more than 225g of carbon dioxide per km) These are said to make up 15% of cars. It is clear that the policy is aimed at targeting the ‘chelsea tractors’ and encouraging people to buy energy efficient cars.I agree with this step, as I have always found that large SUVs 4WD to be unnecessary in London. They take up more space, are more dangerous (to pedestrians and cyclists) and contribute to higher levels of pollution. Therefore, it is good step to introduce a higher tax on these cars to take into account their higher social cost.
Tejvan Pettinger
What is Most Serious Economic Problem Facing the UK 2008?
I asked my Economics students to conduct a questionnaire, asking people in the street various questions about Economics. One Question was:
What do You consider to be the Most Serious economic problem Facing the UK at the moment. These are the most popular responses to far.
- House Prices (50% of responses)
- Government Debt
- Ignorance because of fear
- no response
- No Problems
What I would consider the most serious Economic Problem:
- High levels of consumer debt / bankruptcy
Merger of Yahoo and Microsoft
An interesting development is Microsoft’s bid to buy Yahoo. This would be one of the biggest mergers, and change the nature of the internet.
It is rather ironic that Google, have filed a complaint on the ground the new firm would have too much market power. It is interesting because it was Microsoft who was once seen as dominating the computer industry. But, it seems increasingly the case that it is Google which is looked upto as the dominating firm in the industry. The reason for the shift is simply that Google are dominating the biggest areas of growth – which is online advertising.
Microsoft has monopoly power in software like Microsoft Word, but, it is expected that people will increasingly choose software that can be downloaded online. Google’s dominance of search engines and online advertising mean that they will be in a position to benefit from this.
Policies to Increase Equilibrium National Output
Equilibrium national income occurs where aggregate supply equals aggregate demand. An increase in equilibrium national income requires an increase in long-run aggregate supply and aggregate demand. Equilibrium national income and Keynesian Consumption function We can also show equilibrium national income using a Keynesian consumption function. In this case, an increase in domestic aggregate demand (C+I+G) …
Readers Questions II
You are welcome to ask questions on Economics. I will post the answer on this blog, for everyone to benefit from. I shall try to answer the economics question and / or point to other resources but please bear in mind. The replies will be guidance and not for duplication. Your essays should always be …
GDP and Economic Development
Readers Question: If there is a increase in GDP why is development often unseen? Higher GDP means an increase in National Output and National Income but it doesn’t necessarily lead to economic development this is for the following reasons: Investment takes Time. It takes time for improvements in statistics like education and literacy rates. Higher …
Are House Prices Set to Fall? (2008)
Graph showing Ratio of House prices to Incomes
This graph shows an interesting increase in the ratio of house prices to income. It is well know that UK house prices have increased significantly since 1993. In some areas the house price increase has been at least 300%, since the early 1990s. However, since 1998, house prices have been increasing at a much faster rate than incomes, meaning that the ratio of house prices to average disposable income is reaching an all time high of 6.
Note disposable income means the income after taxes have been paid.
Why House Prices are Set to Fall
- The effect of this is that house prices are increasingly unaffordable for many first time buyers. People are simply being priced out of the market and so demand is likely to fall. Other reasons why prices may fall.
Subprime Crisis and the Global Financial Markets
Readers Question: To what extent can the subprime crisis affect the global financial market?
The subprime crisis refers to the rising number of defaults on US subprime mortgages. Basically, US mortgage companies sold a lot of inappropriate mortgages to people on low income and poor credit histories. Rising interest rates, and falling house prices are causing many of these mortgage owners to struggle with repayments. Therefore, many mortgage companies have lost significant amounts of money. Some of the leading US subprime mortgage firms have gone under and bankrupt. If it was just mortgage companies who went bankrupt, it wouldn’t be so much of a problem.
However, many of these mortgages were financed through securitization. Basically, the mortgage companies would lend the money to homeowners but would finance the mortgage loan by selling ‘mortgage bundles’ to other financial institutions. Basically, mortgage loans were financed by many different financial companies, not just the mortgage companies.
In the US, upto 70-80% of mortgage loans were financed by securitisation. In the UK, the rate is much lower about 21%. The only British bank to get into trouble was the Northern Rock. The Northern Rock, unsurprisingly had the highest rate of 61%.