Economics help blog – Page 118

Is it rational to put money in an honesty box?

7 January 201823 June 2017 by Tejvan Pettinger

Following on from yesterday’s post. Is it rational to pay £1 for a bottle of water? This photo was taken at Stanstead Airport. You could easily take a bottle without paying. No-one would notice at all. It’s not even clear it would be a crime. Therefore, is it rational to pay? One logic is to …

Relative decline in UK manufacturing

24 July 202322 June 2017 by Tejvan Pettinger

Readers comment on Government debt under Labour. “Labour halved our manufacture and invested in bankers.”

Manufacturing as a % of GDP

UK manufacturing has been in relative decline since the 1960s. Manufacturing as a share of real GDP has fallen from 30% in 1970 to 12% in 2010.

This shows that manufacturing as a share of GDP has fallen from over 32% of GDP in 1970 to 12% we see today.

Manufacturing real output

Real industrial output increased over 40% between 1970 and 2000. In June 2010 manufacturing in the United Kingdom accounted for 8.2% of the workforce and 12% of the country’s national output

Source: PWC

In 2008, the UK was still the 6th largest manufacturer by the output (source: UN Council for Trade and Development) 25% of UK manufacturing exports are high tech goods. (see what does UK produce?) In some industries, such as car production, aerospace and nuclear technology, the UK has shown strong growth in recent years. In other sectors, such as clothing and textiles, the UK has seen a sharp fall in output.

Rational economic man – Homo Economicus

29 December 202022 June 2017 by Tejvan Pettinger

Homo Economicus is a hypothetical concept that humans are: Self-interested Know what they want Make rational choices to maximise their utility. These choices are based on the concept of marginal utility. This concept of a rational economic man is an important cornerstone of neo-classical economic theory. It creates a framework to model how consumers and …

Productive vs allocative efficiency

7 December 201921 June 2017 by Tejvan Pettinger

Summary: Productive efficiency is concerned with the optimal method of producing goods; producing goods at the lowest cost. Allocative efficiency is concerned with the optimal distribution of goods and services. Example: An economy could be productively efficient in producing large numbers of boots – but if they were all for the left foot, it would …

Cost and benefits of EU in perspective

20 April 201820 June 2017 by Tejvan Pettinger

I wrote a while back that I was a rather unenthusiastic supporter of remaining in Europe, and perhaps it wasn’t that important. In recent weeks, I have become more committed to staying in Europe, and feeling leaving the EU would be a regressive step. Bigger perspective The EU was formed out of the Second World …

Who lends the government money?

23 December 201715 June 2017 by Tejvan Pettinger

Readers Question: Who lends the government money? Government debt is primarily sold to banks, pension funds, private investors and overseas investors. These financial institutions and individuals effectively lend the government money in return for gaining a safe investment (bond) with a guaranteed interest payment. Approx 27% is ‘lent’ by overseas investors. Investors do not see …

Optimal name of companies and search engine positions

30 January 201815 June 2017 by Tejvan Pettinger

I saw this skip for hire and it made me nostalgic for a pre-internet era? Why. Before the internet, most people would order a skip by looking through the Yellow Pages (a telephone directory for companies) – ordered by type of business. For something like ‘skip hire’ – It’s the kind of business where you …

Declining Terms of Trade

14 March 201814 June 2017 by Tejvan Pettinger

The Terms of trade refer to the relative price of exports/imports. A decline in the terms of trade means the price of exports falls relative to imports. Imports become more expensive. Typically a country will have lower living standards and less ability to import. Impact of decline in terms of trade on a developing economy …