Covid raises many problems for society and offers quite a few examples of market failure. These include: Externalities. A young person catching Covid may face few personal costs, but there is an external cost because they may transmit to more vulnerable people. Information asymmetries. There is a lot of misinformation about Covid and vaccines. This …
Since April 2019, London has imposed a charge on diesel cars with high emissions driving into the centre of London. In October the charging area (Ultra Low emission zone ULEZ) will expand to include more of the city. The idea is to place a financial cost on those vehicles which cause air pollution. It provides …
At the start of the academic year, I always feel a little pressure to justify the study of economics. Students come up asking things like, should they do economics or history? It’s hard to know what to say, but to get people excited about economics it’s good to try and think how economics can be …
Investment is expenditure on capital goods – for example, new machines, offices, new technology. Investment is a component of Aggregate Demand (AD) and also influences the capital stock and productive capacity of the economy (long-run aggregate supply) Summary – Investment levels are influenced by: Interest rates (the cost of borrowing) Economic growth (changes in demand) Confidence/expectations …
Money illusion is the belief that money has a fixed value and the effects of inflation are ignored. Because of money illusion, during inflation, individuals may perceive an increase in nominal income as higher welfare – when this is actually an illusion and their real spending power has not changed because prices have risen at …
Economic growth means an increase in real output (real GDP). Therefore, with increased output and consumption we are likely to see costs imposed on the environment. The environmental impact of economic growth includes the increased consumption of non-renewable resources, higher levels of pollution, global warming and the potential loss of environmental habitats. However, not all …
There are many areas of economics where respected economists may take up contrary opinions. Some of the main macroeconomic controversies include Keynesian vs Monetarist views on managing the economic cycle (role of fiscal policy) Real business cycle theories – the argument the economic cycle comes from supply, not demand. Whether there is a trade-off between …
In the UK, house prices have shrugged off both the credit crunch and the longest recession on record. After a blip in 2007-08, house prices are at record levels. It means that UK house prices are relatively very expensive; UK house price to earning ratios are amongst the highest in the developed world. Unfortunately, there …