economics

run-on-the-banks

Bank Runs

Bank run definition A bank run occurs when there is a sudden demand to withdraw money from a bank, that the commercial bank struggles to meet. The first signs of ‘bank panic’ will encourage other depositors to also try and withdraw their savings, causing a further ‘run on the bank.’ In a bank run, investors are trying to get back their deposits before the bank goes out of business and depositors can no longer access their deposits. A bank run occurs when savers become concerned about the liquidity of a bank and…

Dynamic Pricing

Dynamic Pricing

Dynamic pricing is a method firms use to constantly adjust the price of goods/services depending on demand. For example, if there is a surge in demand, firms respond to the market data by increasing price. New technology has increased the scope for more variable dynamic pricing, and it is increasingly used by companies, such as airlines, taxi companies and hotels. Dynamic pricing enables a firm to set multiple different prices and maximise total revenue. Dynamic pricing requiresA degree of market power in setting prices Consumers with different elasticities of…

placeholder

The cost of free tv licenses for over-75 year olds

Funding free licence fees for over-75s cost the government £608m in 2013-14 – about a fifth of the BBC’s budget. By 2021/22 funding free license fees for the over-75s would cost £745m. Under the new scheme, pensioners receiving pension credit will be eligible for a free license, but the rest of pensioners over 75 will have to pay. Free tv licenses for over 75-year olds were introduced in 2000 by the Labour government who wished to reduce ‘pensioner poverty’. However, the government no longer wishes to maintain that subsidy. In 2015,…

eu-labour-market-slack

Labour market slack

What does it mean to talk of labour market slack? And how is it measured? Essentially labour market slack is the shortfall between the volume of work desired by workers and the actual volume of work available. Labour market slack also determines the difficulty or ease of employing more workers. When there is labour market slackness, there will be many applications for available jobs and firms will have no difficulty filling labour market vacancies. When labour market slack is reduced and the labour market ‘tightens’ – firms can face difficulties filling vacancies…

trends-in-productivity-wages-hi-countries

Reasons for the slow growth of wages

In recent years, many advanced (high-income) economies have seen a marked fall in unemployment but only very slow or even negative real wage growth. This phenomenon of slow wage growth, despite falling unemployment, is marked in countries such as the UK, Japan and the US. Reasons to explain this slow growth of wages includeLow productivity growth Hidden slack in the labour market Uncertain economic outlook A decline in union bargaining power Growth of monopsony power of employers Change in labour market with more part-time, temporary and zero hour…

Does it matter if the UK car industry closes down after Brexit?

Does it matter if the UK car industry closes down after Brexit?

In the run-up to the 2016 referendum, Brexit supporting economist Professor Minford wrote: “Over time, if we left the EU , it seems likely that we would mostly eliminate manufacturing , leaving mainly industries such as design, marketing and hi-tech. But this shouldn’t scare us.”(Source) In 2012 Mr Minford said “It’s perfectly true that if you remove protections, the sort that have been given to the car industry and to other manufacturing industries inside the protection wall, you’re going to have a change in the situation in…

Economic costs of No-deal Brexit

Economic costs of No-deal Brexit

A ‘no deal Brexit’ would involve a departure from the EU, the single market and the EU Customs union. Brexiteers have suggested the UK would adopt WTO rules for trade. This means, in the absence of any trade deal, it would lead to higher export tariffs and trade disruption from non-tariff barriers – the WTO makes no provision for common acceptance of regulations, licensing and trademarks. A study by BFNA suggests that in the event of a No Deal Brexit, by the year 2030, the UK economy could…

minimum-price-encouraging-extra-supply

Subsidies vs Minimum Prices for farmers

Readers question: Are subsidies more effective than minimum prices when supporting farmers? Subsidies involve governments giving money direct to farmers. A minimum price is when the government ensures a legal price that prices cannot fall below that level. Minimum prices will increase incomes for farmers. Farming can see volatile prices because supply can vary and demand is price inelastic. This means that one season could lead to an increase in supply and falling prices. This could risk putting farmers out of business because low prices lead to low incomes. In…