Since the great financial crash of 2007, the UK economy has struggled. Although the past 15 years have been challenging from a global perspective, compared to many international competitors, the UK has slipped behind. Economic growth before global financial crisis of 2007-09 was 2.7%, the new normal is now closer to just 1.5% and with …
Trickle down economics is a term used to describe the belief that if high-income earners gain an increase in salary, then everyone in the economy will benefit as their increased income and wealth filter through to all sections in society. How the trickle-down effect may work in theory If the richest gain an increase in …
The unadjusted labour share is usually calculated as the ratio of total compensation of employees – wages and salaries before taxes, plus employers’ social contributions – over GDP (national product/income) (Luebker, 2007). There are different methodologies for calculating labour share – e.g. should executive pay and share options be included? Greater insight would be gained …
GDP is gross domestic product – it is a measure of the total value of what is produced in an economy GNP is gross national product – a measure of the total income that stays in an economy. The difference is that GNP takes into account the net income flows (e.g. dividends) that are sent …
In the past two decades, the UK has experienced a steady flow of net migrants into the economy. The 2016 Brexit vote has led to a sharp fall in net EU migration, but to a large extent this has been offset by a rise in non-EU migration. This net migration has had a wide-ranging impact …
Readers Question: ‘Society may come to the view that too much inequality is unacceptable or undesirable’ Assess whether inequality can cause economic problems, such as market failure. What are the advantages and disadvantages of inequality? Inequality means there is a gap between the highest income earners and the lowest income earners. (inequality can also relate …
The catch-up effect (or convergence theory) suggests that poorer countries will experience a higher rate of economic growth and, over time, get closer to the income levels of the developed world. In other words, there will be a reduction in the gap between the rich and the poor because low-income countries have more opportunities to …
An assumption in classical economics is that firms seek to maximise profits. Profit = Total Revenue (TR) – Total Costs (TC). Therefore, profit maximisation occurs at the biggest gap between total revenue and total costs. A firm can maximise profits if it produces at an output where marginal revenue (MR) = marginal cost (MC) Diagram …