Specific tax

specific-tax

A specific tax is a fixed amount of tax placed on a particular good. It is also referred to as a per-unit tax, and the tax will depend on the quantity sold (not price). Examples of specific taxes A tax of £0.40 on 500 ml sugary drinks. A tax of £3.92 per 20 pack of …

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Diagrams for Supply and Demand

rise-in-supply-fall-demand-arrows

This is a collection of diagrams for supply and demand. It is mainly for my benefit, so when creating a post, like the price of tea (or when I’m teaching online) I can easily find a suitable diagram to illustrate what is happening. Demand curve  A contraction on the demand curve is due to higher …

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NHS spending cuts

health care spending % GDP

To what extent has the UK seen cuts in spending to the NHS and health care spending in recent years? In short: Actual spending on the NHS has increased. Real spending per capita has been broadly flat in recent years. As a share of the nations wealth, it is falling and it is true to …

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Income Elasticity of Demand (YED)

normal-luxury-inferior-good

Income elasticity of demand (YED) measures the responsiveness of demand to a change in income. For example, if your income increase by 5% and your demand for mobile phones increased 20% then the YED of mobile phones = 20/5  = 4.0 Definition of Inferior Good This occurs when an increase in income leads to a …

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Shift in Demand and Movement along Demand Curve

shift-in-demand

A shift in demand means at the same price, consumers wish to buy more. A movement along the demand curve occurs following a change in price. Movement along the demand curve A change in price causes a movement along the demand curve. It can either be contraction (less demand) or expansion/extension. (more demand) Contraction in …

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Demand for money

The demand for money refers to how much assets individuals wish to hold in the form of money (as opposed to illiquid physical assets.) It is sometimes referred to as liquidity preference. The demand for money is related to income, interest rates and whether people prefer to hold cash(money) or illiquid assets like money. This …

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Impact of cutting government spending

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Readers Question: Discuss the impact of a decrease in government spending? If the UK government cut government spending, it would have a significant impact on both aggregate demand (AD) and the supply side of the economy – depending on which areas of public spending were cut. Firstly, government spending (G) is a component of Aggregate …

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Kinked demand curve

kinked-demand-curve

A kinked demand curve occurs when the demand curve is not a straight line but has a different elasticity for higher and lower prices. One example of a kinked demand curve is the model for an oligopoly. This model of oligopoly suggests that prices are rigid and that firms will face different effects for both …

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