Discuss whether it is desirable for a country to specialise in the production and export of a single good.
Discuss whether it is desirable for a country to specialise in the production and export of a single good. (6) Specialization refers to an individual, firm or nation that concentrate on producing a single good and service which they have an advantage. This has many benefits as it allows expansion in output when countries produce what they have comparative advantage of. Countries can then exchange the surplus produced for other goods. This is because firms to achieve economies of scale as cost of production can be lowered. Workers may be more productive if they were to focus on producing one product. This would also allow workers to adopt specialist skills more quickly and save time as they do not need to move about or constantly change tasks. An expansion in trade would allow countries to produce what they are best at hence would lead to a massive expansion in the world living standards. zl However, if a country does chooses to produce a single good, there are certain disadvantages. For example, the country may be dependent on the export revenue of that good alone which may be insufficient, or risky as it is vulnerable to changes in price. If consumer’s demand of the good decreases due to change in taste or income, this may have a direct and major impact on the country’s economy. Also, it is possible for worker’s specialist skills and accumulated experience to become
Discuss whether the formation of regional trading groups, such as ASEAN and NAFTA, is desirable
Oct/Nov 2008 Section B Q4 (b) : Discuss whether the formation of regional trading groups, such as ASEAN and NAFTA, is desirable. (12) The formation of regional trading blocs can provide both advantages and disadvantages for the members and for countries outside the blocs. There are three main types of trading bloc. The least integrated one is a free trade area. Members of a free trade area agree to remove trade restrictions on each other's exports. A customs union goes a stage further, requiring member countries not only to remove trade restrictions between each other but also to impose the same tariffs on non-members. The most integrated trade bloc is an economic union. In this case, there is usually free movement not only of products but also of labour and capital and there is some harmonisation of economic policies. Members of trading blocs may benefit from the free trade within the group. Removing trade restrictions can raise output and employment, lower prices and increase choice and so result in higher living standards. Trade creation may occur with trading blocs promoting greater specialisation and trade. The diagram below shows that if before membership a country had imposed a tariff on another member, the removal of the tariff will lower prices and lead to a net welfare gain. Domestic output was initially a, domestic consumption was
Toray Textiles in to Mansfield
Economic TORAY TEXTILES INTO MANSFIELD Case Study of * What is Toray? * Why Mansfield? * How does it benefit local community? * The multiplier effect. * Factors involving the choice of a work site Toray Textiles - Key facts : * Established in Japan in 1926. * Owns over 60 branch plants - Asia, North America, Europe, making company name recognised worldwide. * Plants include: Italian artificial suede manufacturer, French carbon fibre manufacturer. * Sales offices located in Milan and Frankfurt. Why Britain? * Close link with Marks & Spencer - provides a good product outlet and can supply new designs at short notice. * Turnover expected to be over 80 million pounds from new plant in Mansfield. * Japan has become too expensive as a manufacturing base for a product so technically unadvanced. * E.C. rules state that, unless 60% of any product is made in E.C. by E.C. registered employees, then the product is subject to import duty in the form of money or commission, or by limiting the amount of the product sold (tariffs/quotas). * Productivity higher than in Japan and U.S.A. * Automation higher than in Japan and U.S.A. * Less training required. * High unemployment rates. * Longer working week. * No minimum wage or legal paid holiday. Why Mansfield? * Mainline inter-city rail link to London and Birmingham making big cities more accessible -
Compare and Contrast labour market deregulation and labour market programs as 2 approaches to reducing the level of unemployment.
Compare and Contrast labour market deregulation and labour market programs as 2 approaches to reducing the level of unemployment. To prevent an increase in the natural rate of employment and subsequently to reduce the level of unemployment, combinations of supply side and/or demand side policies are used. One approach, which is often associated with the incentive approach (where unemployed are forced to actively seek work or leave the labour force), is labour market deregulation. It favours decentralized wage bargaining, the removal of minimum wages and conditions, and reductions in the regulations over employment. However, supporters of the deregulations approach point to the continued existence of awards and use of safety net wage increase for lower paid workers and reduce access to long term unemployed vacancies. Critics of this approach argue that it has a narrow focus on wages, often ignoring skills and the importance of productivity generation. It is a smokescreen for diluting employment conditions and does little to generate jobs. A second supply side approach is labour market programs that attempt to improve the matching within the labour market. Such policies would include: * Training and education programs * Work experience programs * Direct job creation programs The labour government introduced its 'Working Nation' program in 1994 as an attempt to reduce
Discuss whether planning has any role to play in the allocation of resources in a modern mixed economic system
Discuss whether planning has any role to play in the allocation of resources in a modern mixed economic system(12) ZLA mixed economy comprises of a market economy and a command economy. It has elements of both public and private sectors to ensure the economic growth of a country. Both sectors share the limited resources in the country. The private sector would mainly produce goods according to the price mechanism as they adopt a profit maximizing behaviour. When the demand for a product is high, the price increase would act as a signal to firms to produce more of the product as they would obtain more profit. Factors that may influence demand of a product to increase includes income, interest rates, price of substitutes. If consumer’s income increases, the demand will increase. However, if interest rates increases, consumers would save more, hence the demand would decrease, producers may then switch to produce other products with higher demand and prices. Public Sector would also be influenced by the change in supply. When cost of production increases, firms tend to spend less on producing that product. In a private sector, resources are allocated in three ways. Producers will have to choose what to produce, for whom to produce and how best to produce. This is due to economic problem of scarce resources in relation to unlimited wants. However, the public sector’s role
Explain why inflation is an important macroeconomic
Economics ) Explain why inflation is an important macroeconomic Macroeconomics is concerned with issues, objectives and policies that affect the whole economy. Inflation measures the annual rate of change of the general price level in the economy. Inflation is a sustained increase in the average price level. Inflation is an important macroeconomic because if it is too high then the value of money falls negating any increase in living standards. Inflation directly affects the international competitiveness. If the UK's prices rise faster than Germany's, overseas buyers (as well as all UK buyers) will buy German goods instead of UK goods and services, which would create a substitute effect. If buyers from both the UK and overseas turn away from british goods because of the higher inflation in the UK- this means that employment in the UK will fall, economic growth will also fall and the UK will import more which could undermine the balance of payments. Furthermore, with higher unemployment and lower growth, government tax revenues are lower- thereby undermining the balanced budget objective. Inflation is also an important objective because it erodes purchasing power. This means that for a given income, say £300 per week, inflation means that people can buy less, unless their income rises to compensate for it. Some sections of society are considered to be more vulnerable
Evaluate the use of supply side policies in raising the level of real output in an economy which is near to full employment
Question: Evaluate the use of supply side policies in raising the level of real output in an economy which is near to full employment. Answer A supply side policy is one which attempts to improve incentives and productivity in an economy (so increasing the productive potential of the economy) thereby shifting the LRAS to the right. An example of a supply side policy would be to lower certain taxes (for example high income tax leads to less people working and high corporation tax can reduce incentives of firms to make profits) to raise the LRAS. Improved education and training is another supply side policy as it raises the level of human capital, therefore resulting in a rise in LRAS. Privatisation gives firms a profit incentive, which increases efficiency, also shifting LRAS to the right. All these policies will result in an increase of LRAS from LRAS1 to LRAS2. This will increase the real output from RO1 to RO2 and will decrease the price level from Pl1 to Pl2. The economy here is at Full Employment as the level of aggregate demand is at the level where the LRAS curve is vertical. The increase in LRAS has a favourable effect on inflation as price level decreases. However, improved education and training involves an opportunity cost as the money could be spent elsewhere. Also, there is a time lag before the full effects are seen, and there is no guarantee that the
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Explain the difficulties in measuring inflation accurately [8 marks] (18 minutes)
Transfer-Encoding: chunked Explain the difficulties of measuring inflation accurately. [8] The term inflation refers to a sustained increase in the general price level of goods and services within an economy over a given period of time. The annual inflation rate is calculated using either the consumer price index (CPI) or retail price index (RPI), in relation to a base year; in this base year, a relevant basked of commonly consumed goods and services are chosen and their price levels are recorded, then, their relative weights are determined depending on their relevance within basket. Once all of the prices have been adjusted for their respective weights, the price level within the base year is determined and is assigned the value of 100. In the following years, a similar process of finding a weighted average of the prices of relevant goods and services is carried out, then, the difference between the price level in the current year and the base year is divided by the original price level in the base year, thus measuring the annual inflation rate. Due to the nature of the process required for the measurement of inflation, several potential inaccuracies arise. One such inaccuracy results from the need of basket of products to be regularly and thoroughly updated. Due to advancements in manufacturing technology, improved training, discovery of new technologies, changes in
Unemployment and its implications
a) b) Define what is meant by the term unemployment. (8) Unemployment is when people who are registered as able, available and willing to work at the going wage rate in a suitable job but cannot find paid employment despite actively seeking work. Unemployment falls when more people leave the jobless register, when they find work or leave the labour market, than sign on each month. Unemployment is generally measure in two separate methods. The first one is the claimant count. The claimant count measure of unemployment counts only those people who are eligible to claim the Job Seeker's Allowance. The Job Seeker's Allowance was introduced in October 1996 replacing unemployment benefit. Claimants who satisfy the criteria receive the Job Seeker's Allowance for six months before moving onto special employment measures. In April 1998, the government published an alternative measure of unemployment based on the Labour Force Survey. This covers those who have looked for work in the past month and are able to start work in the next two weeks. b) Explain the causes of unemployment. (16) c) What are the Economic implications of unemployment on an economy? (16) Unemployment is politically, socially and economically undesirable. Unemployment is a waste of scarce resources leading to a loss in potential output of an economy.
The Causes that Affect the Consumption of High and Low Income People.
The Causes that Affect the Consumption of High and Low Income People. Interest Rates . Higher prices discourage the borrowing used to finance some types of consumption expenditures (such as automobiles and furniture) and it improves the return on earnings diverted as saving into the markets. As such, consumption reduces and saving improves. Lower prices work in the other way. Consumer Confidence . If people have more assurance about the state of the economy, they are more likely to boost their investing. However, because this additional investing is not the result of additional money, it must come from savings. As such, consumption improves and saving reduces. A drop in customer assurance works in the other way. Wealth . Prosperity affects consumption in one of two ways. A rise in financial wealth (including stocks, bonds, and especially money) encourages the family industry to improve consumption and reduce saving. Consumption improves and saving reduces. Alternatively, an improve in physical wealth (including cars, furnishings, and appliances) reduces the need to buy these goods and thus encourages the family industry to reduce consumption and improve saving. Taxes . Government collects taxation to pay for presidency activities. These taxation come from family earnings, specifically non reusable earnings. A rise in taxation means a decrease in non reusable earnings,
