Economics help blog – Page 250

Car Prices in UK and Europe

12 June 2008 by Tejvan Pettinger

A report by the European Union EU, found that on average UK car prices were 10% higher than in EU. In some cases, the difference in price could be much greater. Some people have taken advantage of this price difference to buy a new car on the continent. [BBC report]

OCR exam question: Discuss factors that might explain differences in Car Prices across Europe

1. Purchasing power of Pound. Quite a few goods tend to be more expensive in the UK than the continent.

2. Different Living Costs. Exchange rates don’t always reflect local purchasing power of currencies. For example, in Poland living costs are relatively low, reflecting lower wages and lower cost of renting. Garages in UK, have to charge higher prices to cover the cost of renting in the UK.

Should We Place Windfall Tax on The Banking Sector?

16 January 20209 June 2008 by Tejvan Pettinger

(b) Discuss whether high profits and the dominant market share in the banking sector suggests that there should be more government intervention – either through windfall taxes or regulation of prices. (30) British banks are highly profitable. They made a combined profit of £42 bn in 2007. Despite effects of credit crunch, banks have seen …

What is the impact of an increase in UK Tax Burden?

1 February 20208 June 2008 by Tejvan Pettinger

Readers Question: Tax changes in recent years have brought a significant increase in tax burden in the UK expressed as a percentage of GDP. Can you please assess the possible impact of such an increase? An increase in the burden of tax from say 35% of GDP to 38% of GDP could have the following …

Link Between International Competitiveness and Inflation

1 February 20208 June 2008 by Tejvan Pettinger

Readers Question: If British industry was to become uncompetitive it would have the following adverse effects on the economy: one of them is a higher level of inflation. How to explain that? If British industry becomes uncompetitive it means that basically, the UK’s cost of production is rising faster than our international competitors. For example, …

Exam Technique – Do I Have to Tell the Truth?

8 June 2008 by Tejvan Pettinger

Readers Question: I just apply the theory and I am not sure whether I have to tell the truth in the economics exams ? It is good to tell the truth, you can’t make things up. Especially when it comes to economic theory. However, often you might get asked questions where the answer is uncertain. …

Is China Communist?

16 January 20208 June 2008 by Tejvan Pettinger

Reader’s Question: for many years American referred to people’s republic of china as communist. Why would that label be misleading today? China is still contolled by the Chinese Communist Party, so we could say that politically China is Communist. However, economically, China is no longer being run by Communist economic ideology. Important ideas of Communist …

Question on Free Trade Between China and EU

16 January 20205 June 2008 by Tejvan Pettinger

Example of a AQA unit 4 question from June 2007. AQA paper available here

Note: Some of the data can’t be published online.

This is just a short guide to answer the question. I think it lacks – more use of data and more evaluation.

Explain why Free Trade is important to EU member countries

1:1 Exports are an important component of Aggregate Demand and therefore influence economic growth

1:2 Consumers rely on imports to enable higher living standards e.g cheap clothing imports from China and cars from the EU.

1:3 Free Trade is an important engine of growth

1:4 Free Trade increases competition and incentives to cut costs

1:5 Some countries have few natural resources therefore, trade is essential to enable them to have oil / petrol e.t.c

1:6 Trade helps technological innovation

Question on Immigration and the Black Market

8 July 20205 June 2008 by Tejvan Pettinger

Readers Question – what on earth is the black market and how does the immigrant have an impact on that?

The black market is a colloquial term that refers to economic activity that is not regulated by the government. It involves economic activity where people don’t declare tax returns or pay VAT e.t.c.

It is more generally referred to as the ‘underground economy’ or ‘hidden economy’. This underground economy may involve illegal activity such as drug dealing or it may involve typical jobs such as paying a builder in cash – this becomes non-legal activity. Note it is a legal requirement to declare income to the inland revenue. But, it can be hard to trace and track down.