economics

The qualities of a good tax

The qualities of a good tax

There are different ways for the government to raise tax revenue. While tax is often unpopular, economists set criteria for what makes a ‘good’ and ‘fair’ tax. This includes – fairness, easy to collect, non-distortionary and increases social welfare. Principles of a good tax include Vertical equity – Fair. Vertical equity is concerned with setting tax proportionate to the ability to pay. If those on very low income paid the same tax burden as the wealthy – we would say this is…

average-size-underground-economy

Underground Economy – definition, problems and causes

Definition of the underground economy. The underground economy involves economic transactions not measured by government statistics and ignoring government regulations and laws. It includes Illegal criminal activity Non-market activity – e.g. growing your own vegetables Legal activity which is hidden from authorities (e.g. to avoid paying tax) The underground economy is also referred to as: ‘black market’ ‘shadow economy’, ‘parallel economy’. The underground economy includes activities, such as Criminal activity e.g. selling of drugs on the street, …

reasons-global-inequality

Why is there so much global inequality?

Living standards vary significantly across the globe. Wealthy economies, such as the US have an average GDP per head (at PPP) of $59,495 in the US (IMF 2017) This compares to an average annual income as low as $808 Burundi. (IMF 2017) There are many reasons for these divergences in income including – historical trends, the existence of natural resources, geographical location, economic system and levels of education. This map of GDP (PPP) Per capita illustrates areas of high and low-income are…

how-firms-compete

Non-Price Competition

Non-price competition involves ways that firms seek to increase sales and attract custom through methods other than price. Non-price competition can include quality of the product, unique selling point, superior location and after-sales service. Models of perfect competition suggest the most important issue in markets is the price. And for a homogenous product like potatoes, consumers will generally want to buy the cheapest potatoes. However, many markets do not fit this model of perfect competition. In many markets, the price is only one of many factors which influence which…

Challenges facing Chinese economy

Challenges facing Chinese economy

For the past 40 years, China has been one of the strongest performing economies – transforming itself from a developing economy to an unprecedented level of prosperity. However, in recent years, there have been concerns the rapid rate of growth in China is beginning to slow down and over the next few years, economic challenges could lead to a slowdown and even recession. What are the challenges that the Chinese economy faces? Demographic changes. As a result of its one-child family, China is facing a rapid change in its…

how-firms-compete

How firms compete

Competition is an essential element of market economies. Different firms have the freedom to attract customers based on price, quality, service and convenient. The type of competition will depend on the product and market structure. For example, in a market with many traders selling potatoes, price will be a key factor. Consumers will shop around to buy the cheapest. However, for a service like a restaurant meal – the price will be only one of many factors. In this case, firms will be seeking customers based on issues of…

environmental-sustainability

Environmental sustainability – definition and issues

Environmental sustainability is concerned with whether environmental resources will be protected and maintained for future generations. Environmental sustainability is concerned with issues such as: Long-term health of ecosystems. Protecting the long-term productivity and health of resources to meet future economic and social needs, e.g. protecting food supplies, farmland and fishing stocks. Intergenerational decision making. When taking economic decisions, we should focus on implications for future generations, and not just the present moment. For example, burning coal gives a short-term benefit of cheaper…

Facts about the UK economy

Facts about the UK economy

Some facts about the UK economy. GDP In 2018, UK GDP stood at $2,809 trillion (£2,217) According to IMF, the UK GDP ranked 5th in nominal terms. Behind Germany (4th) and ahead of India (6th) Measured according to Purchasing Power Parity (adjusted for living costs, the UK ranked 9th The Great Moderation. Between 1993 and 2007, the UK experienced 63 consecutive quarters of economic growth – it was the longest unbroken period of economic growth on record. The Great Moderation was followed by the recession of 2008/09, – a…