economics

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Economics of the Fire Service

Readers Question: Why the fire service is a public domain and how is the fire service a merit good I think you mean why is the Fire Service a public good? A public good has 2 aspects. Non rivalry – Once consumed doesn’t reduce the amount available to others Non excludability – Once it is provided you can’t stop anybody using from it. In a free market public goods are often not provided because there is difficulty getting everyone to pay for it due to the free rider problem The fire service shares some aspects…

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Can Tax Cuts avoid a recession?

About £77 billion was wiped from the value of leading FTSE 100 companies over fears of a US recession. The FTSE 100 index is now down to its lowest level in 19 months. In particular, stock markets were unimpressed by President Bush’s plan for tax cuts. In American politics tax cuts are often seen as the ‘solution’ to many economic ills. Reagan, Bush and many other politicians have hoped tax cuts both increases labour productivity and boosts demand. Some have even gone so far as to suggest that tax…

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AD and Vertical LRAS

Readers Question 2. Imports. What if the extra J of 30 (that is supposed to boost AD to the right) is met completely by imports, when the AS is vertical (LRAS). you cant produce any more, so imagine the extra demand is supplied by importers. equilibrium cant go beyond LRAS, and prices shouldnt go up, because demand has been met externally, not domestically. AD hasnt moved, it cant move! Yet more is going round the circular flow than before! There is a difference between a nominal increase in AD and a real increase in…

Why is UK Debt Rising?

Why is UK Debt Rising?

The graph below show that UK debt is rising as a % of GDP    Net Debt refers to the total amount of money the Government owes to the private sector. If the Government spends more than it receives in tax then it runs an annual budget deficit; this means it has to borrow from the private sector, by selling bonds and gilts. The National Debt is the cumulative amount of debt the government has. Since 2003, the UK economy has been growing at 2.5%…

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Problems with US Economy

I wrote a lengthy essay on the US economy and why it is facing many economic problems. What went wrong with the US Economy? The Main Problems with the US Economy are Twin Deficits – Current account deficit and budget deficit Housing Market Crisis Rising Inequality Falling Dollar and falling confidence Impending Recession High Levels of Debt and Growing debt default Another Problem with the US economy might be: The economics of the Presidential Candidates  My Other Blog Economics Essays I use for writing longer essay, it is updated perhaps once a day. If you find…

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Monopoly Suppliers of Milk and Electricity

IS THE PUBLIC INTEREST BETTER SERVED BY A MONOPOLY OR BY SIGNIFICANT COMPETITION BETWEEN SUPPLIERS? 1. If a supplier has monopoly power then it will be able to charge higher prices to the seller (retailer). For example, in the case of electricity, the supply is dominated by the firm who run the national grid. Therefore, they are able to set higher prices to the retailers of electricity. 2. However, the supply of electricity is a natural monopoly. This means the most efficient number of firms is one due to very high…

Average Incomes in UK

Average Incomes in UK

There are different ways of measuring average incomes in the UK. Average Household Incomes – combined income of a family. This may include 2 or 3 salaries Average Individual Incomes – average income of individual earner. Gross Income – Original income before tax and benefits Disposable Income – Final income after subtracting tax and adding benefits. Median Average Incomes Mean Average Incomes Graph Showing Inequality in Average Income The graph below shows the distribution of average incomes. The top 20% households earn 16 times more than the bottom 20%, although this is significantly lessened by the impact…

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Economics of Fear and Hysteria

I wrote an article here about the economics of fear. Basically, it looks at how economic decisions are often based on factors other than rational decision making. Quite often in economics we see behaviour known as ‘herding’. What this involves is people making decisions dependent on what other people are doing. Therefore, when economic confidence falls this can have far reaching implications as the negative attitudes affect many people. There are a lot of economic decisions taken where people seek to avoid the worst outcome, basically this is the…