laffer-curve-2018

The Laffer Curve

The Laffer Curve states that if tax rates are increased above a certain level, then tax revenues can actually fall because higher tax rates discourage people from working. Equally, the Laffer Curve states that cutting taxes could, in theory, lead to higher tax revenues. It starts from the premise that if tax rates are 0% – then the government gets zero revenue. Equally, if tax rates are 100% – then the government would also get zero revenue – because there is no point in working. If tax rates are very…

cost-push-inflation-2018-actual-cpi

What are the effects of a rise in the inflation rate?

The inflation rate measures the annual percentage rise in the cost of living. (CPI) A rise in the inflation rate – means prices are rising at a faster rate. Summary In the short-run, it is more likely the Central bank will increase interest rates to moderate the inflation rate. Savers who have fixed income may become relatively worse off. Borrowers, by contrast, are likely to find it easier to pay back their debts. A higher inflation rate could cause greater uncertainty amongst business leading to lower investment.  Inflation may also cause a…

wealth-effect

The wealth effect

The wealth effect examines how a change in personal wealth influences consumer spending and economic growth. Rising wealth has a positive impact on consumer spending. Wealth is a stock concept. At a particular time, your wealth is fixed. Wealth is comprised of savings, bonds, property and assets. A major form of wealth in the UK is the value of your house. If house prices, increase, then it tends to cause a positive wealth effect. Similarly, a fall in the value of wealth…

deliveroo

The gig economy

The gig economy refers to the segment of the labour market which concentrates on short-term / temporary jobs and contracts. Often these workers can have more than one job, e.g taxi driver who works both for a traditional taxi company and Uber. Like a musician who goes from one gig to the next, the gig economy refers to a growing range of workers who don’t have typical stable employment but work as self-employed and temporary contractors. The number of people who work for…

us-economic-growth-1930-2017

How long do economic cycles last?

The economic trade cycle shows how economic growth can fluctuate within different phases, for example: Boom (A period of high economic growth usually causing inflation) Peak (top of the trade cycle, where growth rates may start to fall) Economic downturn/recession (where the growth rate falls and may become negative – leading to a fall in national output) Economic recovery (economic growth becomes positive and growth rates pick up.)   The economic cycle can also be referred to as the ‘trade…

importance-of-profit

The Role of Profit in an Economy

Profit is the surplus revenue after a firm has paid all its costs. Profit can be seen as the monetary reward to shareholders and owners of a business. In a capitalist economy, profit plays an important role in creating incentives for business and entrepreneurs. For an incumbent firm, the reward of higher profit will encourage them to try and cut costs and develop new products. If an industry is profitable, it will encourage new firms to enter. If a firm becomes unprofitable, it will either have to adapt and…

Benefits and costs of Sainsbury – Asda meger

Benefits and costs of Sainsbury – Asda meger

Sainsburys and Asda have announced a plan for a merger. They argue it will lead to lower prices for customers, no job losses and is necessary to deal with the threat of new discounters like Lidl and Aldi and the impending arrival of Amazon. Others are more cautious arguing that the new firm will have 31% of market share – effectively creating a powerful duopoly with Tesco that has around 30% of market share. In 2003, the Competition authorities in the UK blocked the takeover of Safeway by Asda and Sainsbury’s…

Minimum Wage for 16-18 Year olds

Minimum Wage for 16-18 Year olds

The minimum wage for workers aged 16-18 is £4.05 (April 2018-2019) For workers, aged 18-20 is currently £5.90 (April 2018/2019) Readers Question: What are the minimum wage rates for 16, 17 and 18-year-olds. Should the minimum wage be increased?  Should there be a minimum wage rate for children under 16? Minimum Wage Rates from April 2018 £7.83  –  25 and over £7.38 – Age 21-24 £5.90 – Age 18-20 £4.20 – Under 18 £3.70 – Apprentice rate. (An apprentice means the firm has to devote a certain time to training the…