In behavioural economics, studies have suggested individuals value the concept of reciprocity. If people are kind to us, we have a greater tendency to respond in kind – behaving more altruistically than self-interest theory suggests. Reciprocity can also work in a negative sense, with agents willing to ‘punish’ those who abuse the ‘rules of the …
Definition of ceteris paribus Ceteris paribus is a Latin phrase meaning ‘all other things remaining equal’ The concept of ceteris paribus is important in economics because in the real world it is usually hard to isolate all the different variables. Assuming ceteris paribus allows us to simplify economics – we can understand how something like …
An economic evaluation of the Labour Manifesto. Most significant elements of Jeremey Corbyn’s Labour Party manifesto include Higher income tax on top 10% of earners Rail re-nationalisation Freezing pension retirement age. Abolition of tuition fees Promise of 30 hours’ free childcare, 10,000 more police officers Brexit – may or may not stay in Single Market. …
In 1979, the election of Mrs Thatcher’s Conservative party led to the introduction of new supply-side policies, which challenged the post-war consensus and tried to implement free-market reforms into the UK. Intellectual support for supply-side economics Mrs Thatcher was impressed with right-wing intellectuals such as Milton Friedman and F. Hayek. They were critical of social …
Inflation means a sustained increase in the cost of living. It means the value of money will decrease. If you owe someone £1,000, inflation will make this relatively easier to pay off. Assume that if prices go up by 10% a year wages also increase by 10% a year. This means each year you …
Readers Question: Can anyone explain the reasons why the Banking Crisis may have brought about increased unemployment? A banking crisis implies major banks run short of money (liquidity). In a severe banking crisis (e.g. Great Depression 1929-32), some banks may go out of business. If banks do face liquidity shortages or worse, it will have …
Readers Question: Could you differentiate between micro economics and macro economics? Microeconomics is the study of particular markets, and segments of the economy. It looks at issues such as consumer behaviour, individual labour markets, and the theory of firms. Macro economics is the study of the whole economy. It looks at ‘aggregate’ variables, such as …
After keeping interest rates at close to zero for several years, the US Federal Reserve has moved to finally increase interest rates. This increase in interest rates is more significant than usual because it marks an end to the unique circumstance of ultra-low interest rates. The Federal Reserve has also indicated they expect to raise …