Pros and cons of a cashless society

cash-less-society-pros-cons

In recent years, there has been a growing trend toward using electronic payments rather than physical cash. This trend to a cashless society is likely to be accelerated by the Coronavirus which gives an impetus to avoiding unnecessary physical transactions. There are several advantages of a cashless society, such as a lower risk of violent …

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Minimum Wage for 16-18 Year olds

The minimum wage for workers aged 16-18 is £4.55 (April 2020-21) For workers, aged 18-20 is currently £6.45 (April 2020-21) 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 …

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How do business know – Shall we put up our price?

profit-maximisation

There are a few different reasons firms may put up prices, but in each case, a business will weigh up the pros and cons. Potential reasons for increasing prices An increase in costs of production. A general increase in the price level (inflation) Competitors are increasing the price. Firms believe demand has become more price …

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Adjusting to oil price shocks

oil-prices

Oil prices tend to be volatile for a few reasons. Demand varies with the economic cycle. Changes in the price of oil can be magnified by speculators who buy forward contracts Supply is quite inelastic in the short-term. Therefore, a small change in demand can have a significant impact on the price. Firms and consumers …

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Degrowth – definition, examples and criticisms

de-growth

Degrowth is a political and economic theory which emphasises changing priorities of society from economic growth and production to a society based on sustainability, well-being, concern for environment and co-operation. The motives for pursuing degrowth include the need to provide environmental sustainability for the long-term and improve quality of life. Critics argue degrowth is a …

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Historical UK national debt

uk-national-debt-since-1727-annotated

Click to enlarge National debt (public sector debt) is the total amount of liabilities the government owe to the private sector (plus liabilities held by Central Bank). National debt is typically bought by domestic private sector (banks, insurance funds, pension funds) and foreign investors (foreign banks) History of UK national debt In 1694, the first …

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How quickly can an economy adjust?

Indian economy

Economies face many events that cause firms and consumers to adjust their behaviour. New technology, demand-side shock, supply-side shock all cause a change in the priorities of the economy. In theory, the price mechanism will lead to a smooth reallocation of resources as capital and labour are deployed from unproductive areas to new areas. Some …

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Should the government intervene in the economy?

functions-of-a-government

One of the main issues in economics is the extent to which the government should intervene in the economy. Free market economists argue that government intervention should be strictly limited as government intervention tends to cause an inefficient allocation of resources. However, others argue there is a strong case for government intervention in different fields, such as externalities, public goods and monopoly power.

hoover-dam
Hoover Dam built in the 1930s with government funds

This is a summary of whether should the government intervene in the economy.

Arguments for government intervention

functions-of-a-government

  1. Greater equality – redistribute income and wealth to improve equality of opportunity and equality of outcome.
  2. Overcome market failure – Markets fail to take into account externalities and are likely to under-produce public/merit goods. For example, governments can subsidise or provide goods with positive externalities.
  3. Macroeconomic intervention. – intervention to overcome prolonged recessions and reduce unemployment.
  4. Disaster relief – only government can solve major health crisis such as pandemics.

Arguments against government intervention

  1. Governments liable to make the wrong decisions – influenced by political pressure groups, they spend on inefficient projects which lead to an inefficient outcome.
  2. Personal freedom. Government intervention is taking away individuals decision on how to spend and act. Economic intervention takes some personal freedom away.
  3. The market is most efficient at deciding how and when to produce.

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