Carbon Tax – Pros and Cons


A carbon tax aims to make individuals and firms pay the full social cost of carbon pollution. In theory, the tax will reduce pollution and encourage more environmentally friendly alternatives. However, critics argue a tax on carbon will increase costs for business and reduce levels of investment and economic growth. The purpose of a carbon …

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Effect of Government Subsidies


Readers Question: What happens when the government subsidizes a product?  A subsidy means the government pays part of the cost. For example, the government may give farmers a subsidy of £10 for every kilo of potatoes. The effect is to shift the supply curve to the right, leading to lower price and higher quantity demanded Diagram …

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Efficiency vs Equity

A big issue in economics is the tradeoff between efficiency and equity. Efficiency is concerned with the optimal production and allocation of resources given existing factors of production. For example, producing at the lowest cost. See: Different types of efficiency Equity is concerned with how resources are distributed throughout society. Vertical equity is concerned with …

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Was austerity necessary in 2010?


Readers Question If one looked at the UK’s Historical Debt to GDP ratio; at the time austerity was introduced; the Debt to GDP ratio was last at this 2010 level in 1966. Having lived in 1966 there was no massive economc requirement to reduce public spending at that time ie everything was fine. So was …

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When did the recovery from the 2009 recession occur?


Readers Question: At the time of the Economic collapse 2007/ 2008 or near the end of that period in 2010 the Labour administration had actually started to pull out of recession – True or False? The recovery began towards the end of 2009 (Q4). Q2 growth in 2010 was quite high at 1% (annualised 4%) …

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The problem with printing money


Readers Comment. Why doesn’t the Bank of England just print the money instead of borrowing the money? Printing more money doesn’t increase economic output –  it only increases the amount of cash circulating in the economy. If more money is printed, consumers are able to demand more goods, but if firms have still the same …

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Factors that affect foreign direct investment (FDI)


Readers Question: why some countries are more successful in attracting Foreign Direct Investment than others? Foreign direct investment (FDI) means companies purchase capital and invest in a foreign country. For example, if a US multinational, such as Nike built a factory for making trainers in Pakistan; this would count as foreign direct investment. In summary, …

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Factors affecting supply and demand of housing


A look at factors affecting the demand and supply of housing. In summary. Demand-side factors 1. Affordability. Rising incomes mean that people are able to afford to spend more on housing. During periods of economic growth, demand for houses tends to rise. Also, demand for housing tends to be a luxury good. So a rise …

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