Readers’ Question: Why does the cost of living keep rising? [See updated page Cost of living crisis 2022] This is due to inflation – the persistent increase in the average price level. In modern economies, inflation is a common feature. In fact, most Central Banks target a low rate of inflation of 2%. Central banks …
I recently watched a BBC documentary (No place to call home) about Britain’s housing crisis, focusing on a suburb of London (Dagenham). It was an insight into the desperate situation many find themselves in because of a shortage of housing, very high rents and a feeling the council / government is unable to help with …
Readers Question: Why do some firms prefer to remain small? In recent times, the tendency is for product markets to be dominated by large multinational corporations who can benefit from various economies of scale. However, despite this general trend, there are still advantages to being a small firm. Benefits of being a small firm Concentrate …
Readers Question: Between markets and concerted central banks intervention, e.g in currency and shares, which forces are likely to prevail? Market forces can be very strong in influencing the value of currency or shares (or bond yields). Governments and Central Banks can try and influence the value of the currency and bond yields. In certain …
Readers Question: Would a cap on house prices work? Despite the recession and credit crunch, UK house prices continue to rise. (See: Why are UK house prices so high?) This has caused record levels of house price to income multiples. For homebuyers in London, house prices are approaching a record seven times average earnings. Understandably …
Economics combines elements of both science and art. Economists try to develop analytical mathematical models which seek to explain economic behaviour in a way that can be theoretically proved. For example, working out the elasticity of demand through using calculus. In macroeconomic models, there are many models which seek to explain macro variables such as …
The lump of labour fallacy is the contention that the amount of work available in an economy is fixed. But, most economists argue this belief there is a fixed number of jobs (or fixed number of hours) is usually incorrect. In summary Fallacy – “Immigrants take jobs of native workers.” Why this is a fallacy …
