Readers Question: This one is about flexibility in the labour market. I am wondering why globalisation has made a contribution to the increase in flexibility. Is it because firms face fierce competition so they have to hire workers only when they need them? Increased competition is certainly one factor. If a firm has a domestic …
Readers Question: why is political stability needed to attract FDI?
FDI = Foreign Direct investment. For example, if BP invested in Venezuela or Iraq to produce oil. This would be an example of foreign direct investment into Venezuela and Iraq.
Clearly for countries like this, the political situation is going to be important for determining whether investing in these countries is a good idea.
Investing in Iraq may have high potential returns. But BP maybe dissuaded from investing there because:
Risk of terrorist action. Cost of equipment, cost in terms of lives. Difficulty of getting workers to go and live in Iraq.
Readers Question: Discuss the likely economic impact on absolute and relative poverty of China’s rapid economic growth? It is an interesting question because even the Chinese government have been concerned that China’s rapid economic growth has not helped large sections of the population, especially in the north. Absolute poverty is defined as the minimum level …
Readers question: Should the Government intervene to deal with the problem of Oil Shortages or is it better to leave it to a free market?
As oil runs out, supply will shift to the left and the price will increase. Because demand is inelastic, oil firms will make increased profits. This creates an incentive for oil companies to discover new oil supplies. This research is often expensive, so the higher profits is beneficial for encouraging investment. There are many oil reserves which are difficult to access, e.g. oil in the Antarctic and Siberia. Therefore, the cost of production maybe $100 a barrel. Therefore, now oil prices have risen over $100, it has become profitable. Therefore, the market can respond to the changing market signals and try and increase supply. Also, firms have an incentive to develop and promote alternatives to oil, such as solar panel cars; the more expensive oil becomes the more attractive these options are.
In theory, the free market should respond to shortages and rising prices through increasing supply or developing alternatives. However, the free market may not be able to deal with the oil shortages in a timely manner.
Firstly, demand is rising very rapidly because of economic expansion in Asia (China and India). Therefore, prices are rising rapidly, even though supply is still increasing. If we had a combination of falling supply and rising demand, prices could skyrocket. Investing in new supplies or alternatives to oil could take several years. By the time the free market has provided alternatives to oil, the world economy may have suffered several years of very high oil prices.
Readers Question: ‘Outline two reasons why the UK’s housing market represents a barrier to the UK’s membership of the euro’.
Joining the Euro involves a common monetary policy. This means that UK interest rates will be set by the ECB. Therefore, if the ECB has to increase interest rates it will increase UK rates and therefore increase the cost for UK homeowners. If interest rates increase at the wrong time it could cause economic hardship for homeowners.
1. Mortgages are a high % of consumer’s disposable income and therefore are sensitive to changes in interest rates. UK House prices are a high ratio of average incomes. Many homeowners have had to take out mortgages 4-5 average incomes to get on the property ladder. This means mortgage payments are a high % of disposable income. If interest rates increase, it could make mortgages unaffordable.
Readers Question ‘Evaluate two policies which the government might adopt to reduce the male inactivity rate’
Main Reasons for Inactivity in Labour Market
Inactivity rates imply that people have left the labour market and are not able or are unwilling to seek employment. According to the ONS, inactivity rates can be caused by:
1. Make It more difficult to gain sickness / long term disability benefits. It is argued that it has become too easy for the long term unemployed to be given sickness benefits. The government could introduce a scheme where those on benefits are revaluated every 12 months and given the option to take on light work. This could help reintegrate them into the labour market.
It is easy to forget, but, only 5 years ago people were talking about the Euro as if it was doomed to fail. 1 Euro got you 86 cents. 5 years later and 1 Euro is worth $1.48 and people are suggesting the Euro is set to be the next global reserve currency. The Euro’s …
Readers Question: It’s not a good question, but I’ll ask it. Could you explain the differences between Research and Development and innovation? Research and Development involves investment in discovering new technology and increasing capacity of a firm. It could involve technological innovation or improvements in human capital. It usually requires a willingness to forego current …
