Economics help blog – Page 84

Free Rider Problem

30 April 202022 May 2019 by Tejvan Pettinger

Definition of the Free Rider Problem This occurs when people can benefit from a good/service without paying anything towards it. It also occurs, if people can get away with making only a token contribution (Something less than their overall benefit) If enough people can enjoy a good without paying for the cost – then there …

Benefits of being a multinational company

21 May 201921 May 2019 by Tejvan Pettinger

A multinational company is a global operation with the production and distribution of its goods located in numerous countries. Typically multinationals have different stages of the supply chain located in different countries. This enables the firm to specialise production in countries where it has a comparative advantage. The firm gains many benefits of being global …

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

24 December 201917 May 2019 by Tejvan Pettinger

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 of higher inflation In the short-run, it is more likely the Central bank will increase interest rates to moderate the inflation rate. Savers who have …

Confidence Fairy Explained

18 January 202017 May 2019 by Tejvan Pettinger

The confidence fairy refers to the criticism that cutting government spending will lead to renewed confidence and economic recovery. In response to the economic crisis of 2008, many economies faced large budget deficits – due to cyclical factors (e.g. falling tax revenue in recession) and also underlying structural deficits (e.g. growing welfare bills). Some countries …

Private Sector vs Public Sector

21 December 201914 May 2019 by Tejvan Pettinger

Readers Question: Does job creation come from public or private sector? The public sector is government (national and local). Public sector jobs include doctors, police, teachers and civil servants. The private sector is private enterprises – retail, manufacturing, local services. Public sector jobs as a share of total employment UK 23.5% (2013) US 14.6% (2008) …

Inequality in the UK

20 March 202514 May 2019 by Tejvan Pettinger

In the nineteenth century, the UK was characterised by high levels of income inequality. However, from the start of the twentieth century until 1978, there was a steady fall in inequality and reduction in poverty (both relative and absolute). However, the 1980s saw a sharp rise in inequality which has not been reversed in the 1990s and 2000s.

Reasons for post-war fall in inequality

Welfare state – benefits for the unemployed, sick
Higher income taxes on high earners
Period of full employment
Rising wages for the working class.
Erosion of class privileges
Improvement in universal education and universal health care.
See also: post-war economic boom

Difference between SRAS and LRAS

9 December 201913 May 2019 by Tejvan Pettinger

Readers Question: What is the difference between short run aggregate supply (SRAS) and Long run aggregate supply (LRAS)? Essentially, the SRAS assumes that the level of capital is fixed. (i.e. in the short run you can’t build a new factory) However, in the short run you can increase the utilisation of existing factors of production, …

Effect of US tariffs on Chinese imports

10 May 2019 by Tejvan Pettinger

The US has recently placed tariffs on Chinese imports and is threatening to further increase tariffs in the next few weeks. The effect of these tariffs is to increase domestic prices, provide some benefits to domestic producers, but also cause costs to US exporters. There is a strong risk that these tariffs will cause loss …