In recent years, airlines have become adept at charging customers for ‘extra services’. These extra services include: Seats with more leg room. Choosing a seat earlier Paying a penalty to check in at airport (budget airlines) Priority boarding Checked in luggage (budget airlines) Meals debit /credit card surcharges (Ryanair) Economic concepts involved Price discrimination/ price targeting …
Definition of knowledge economy The sector of the economy which is increasingly based on knowledge-intensive activities, creating a greater reliance on intellectual capital rather than physical inputs. The OECD state the knowledge economy is associated with: High-tech manufacturing (computer, electronics, aerospace), Service sector industries, such as education healthcare and software design Business services such as …
The credit crunch refers to a sudden shortage of funds for lending, leading to a decline in loans available. A credit crunch can occur for various reasons: Sudden increase in interest rates (e.g. in 1992, UK government increased rates to 15%) Direct money controls by the government (rarely used by Western Governments these days) A …
Readers comment on Government debt under Labour. “Labour halved our manufacture and invested in bankers.” Manufacturing as a % of GDP UK manufacturing has been in relative decline since the 1960s. Manufacturing as a share of real GDP has fallen from 30% in 1970 to 12% in 2010. This shows that manufacturing as a share …
Readers Question: Who lends the government money? Government debt is primarily sold to banks, pension funds, private investors and overseas investors. These financial institutions and individuals effectively lend the government money in return for gaining a safe investment (bond) with a guaranteed interest payment. Approx 27% is ‘lent’ by overseas investors. Investors do not see …
A budget surplus occurs when government tax receipts are greater than government spending. It means the government can either save money or pay off existing national debt. It is worth noting, that budget surpluses are quite rare in the past 120 years. Politicians have sometimes attempted to enshrine budget surplus into law but what are …
Economic growth per capita looks at the average increase in real GDP per person. We could have economic growth of 3% a year. But, if population growth is also 3%, then average incomes – Real GDP per capita will remain the same. If the population declines by 2% a year, but real GDP increases 1% …
Readers Question: Interest Rates are increased by the governments to bring down inflation rates, this makes exports price competitive as well, as a result, exports increase. However, an increase in interest rates can lead to an appreciation of the currency as demand for the currency increases. So this again increases the price of exports as …