Outline the argument for and against smoking ban
Outline the main argument for and against creating a smoking ban in public areas. Is it good overall - justify your view Smoking is a de-merit good. This means that it is over-provided in a free market economy. The price mechanism has allocated too many resources than is socially desirable. Smoking is over consumed, as shown in the diagram below: The MSC (marginal social cost) and the MPC (marginal private cost) are not the same. They diverge. This is because society experiences a different cost from the good being consumed than the individual. The demand side is the same hence why MSB = MPB. The individual is happy when MPB = MPC, (10 a day). Therefore they consume where the red and green lines meet. Here their MPC = MSB so they are happy. Society is happy when MSB = MSC. So they want people to consume where the pink lines meets the green line. MSB = MSC (5 a day). Below 5 a day both the MSC and MPC are below MPB and MSB. So both society and the individual wants to consume the good. Above 10 a day the MSC and the MPC are above the MSB and the MPB so neither the individual or society wants more than 10 cigarettes a day. However in between 5 and 10 cigarettes a day, the MSC is above the MSB so society does not want to have that many cigarettes. The MPB is still above the MPC so the individual does want to have 6 to 10 cigarettes but society does not want them to. It can
Income and Price Elasticity of Demand
A guide for income elasticity of demand Income elasticity of demand measures the relationship between a change in quantity demanded and a change in income The formula IED = % Change in Quantity Demanded % Change in Income Levels The numbers If IED is LESS than 1 it is income INELASTIC. If IED is GREATER than 1 it is income ELASTIC. Higher the IED the more responsive demand is to a change in income. Lower the IED the less responsive demand is to a change in income. Plus or Minus Significance NEGATIVE - = INFERIOR GOOD POSITIVE + = NORMAL GOOD Inferior Good Inferior goods are when demand for a product falls, income levels rise. Normal Good Normal goods are when demand for a product rises, income levels rise. Necessities and luxuries are normal goods. Examples of necessity would be toilet roll. Examples of luxury goods are expensive cars and designer clothes. Between 0 and +1 is a normal necessity. Greater than +1 is a superior/luxury good. Example In this current climate people income decreased and started to buy more inferior goods. E.g. Before the recession people would have bought Andrex toilet roll, however in the recession they would have bought supermarkets own brand toilet roll which would be a lot cheaper. Usefulness Using the IED formula a business can work out the change in quantity demand if the income level changes. This way they can
The effect of Trade Unions on causing Labour Market Failure Today
Comment on The effect of trade unions on causing labour market failure today Labour Market Failure (LMF) occurs when the market forces of demand and supply do not results in an efficient allocation of labour resources. A major cause of LMF is the abuse of trade union. However as the market changes, this cause of LMF is losing significance. Trane Unions are organisations which act on behalf of workers to gain better rights and benefits through collective bargaining, they are attractive to workers as the bargaining power of a union is always more powerful than that of an individual. Trade union have, for many years been a major cause of LMF and to an extent, still are.since their inception, trade unions main aim has been to increase wage rate for workers. Whilst this is a great benefit for union memebers, it can cause signifigant market failure. The below diagram shows, that the new wage rate my cause market failure through unemployment. As the market forces of supply and demand settle on a wage rate of W1, the presense of a union increasing the rate to W2 will cause LMF by causing employment to drop from L1 to L3 This is despite their being L2 amount of labour supplied, the gap between potential labour force and the actual employment rate means there are unused resources. And thus the market is not efficient, meaning LMF. This effect is still present today. As the gov't
Discuss the strengths and weaknesses of demand-side policies (fiscal and monetary policy)
Discuss the strengths and weaknesses of demand-side policies (fiscal and monetary policy) [18] Demand-side policies are a government's attempts to influence the level of growth of aggregate demand and hence the levels of employment, real GDP, inflation, growth and balance of payments position. A government will do this by using fiscal and monetary policies. Fiscal policies involve the use of government spending, taxation and borrowing to influence both the pattern of economic activity and also the level and growth of aggregate demand, output and employment. Monetary policies involve the use of interest rates to control the level and rate of growth of aggregate demand in the economy. Different types of demand-side policies can be used depending on the position of inflation in an economy. Reflationary demand-side policies seek to increase aggregate demand and raise the level of planned expenditure at or near the level of potential GDP. Deflationary demand-side policies decrease aggregate demand in the event of aggregate demand running ahead of aggregate supply and posing inflationary risks or leading to an unsustainable deficit on the balance of payments. An example of when reflationary demand-side policies would be used is when aggregate demand is too low, so for instance when taxes are high and interest rates are high. The policies that would be used in order to shift
Asses the extent to which the internet has made markets more competitive
The internet, created for access by the world's population approximately twenty years ago, has evolved exponentially to improve market competition among firms and businesses. Its uniqueness has come from its ability for easy use and freedom of information, though with these fundamental principles, other characteristics have brought us closer to a sense of perfect competition than ever before. Indeed, the internet is rapidly becoming a necessity rather than the luxury it once was. In theory, the internet should mean that every market works perfectly. However, even the internet provides detrimental effects, often different to those of conventional means such as typical market failure. The internet has been used to widen the customer base of particular businesses, creating greater profit margins than could ever have been imagined. This has been accentuated through the tactic of pricing internet-ordered goods and services cheaper than those on the high street. Consumers who may be disadvantaged due to disabilities, age, time constraints and so on are those who use the internet the most to buy. Previously, these people would have found it difficult to buy, but with the internet comes these frequent buyers. Even people who would have normally bought from high street shops would have the option of buying from the internet. Usually, a lot of people go out and buy things to socialise
Discuss the merits of road pricing (25)
Discuss the merits of road pricing (25) 4 L1. Road Pricing - a direct charge for the use of road space Negative externality - these exists where social costs of an activity is greater than the private cost, congestion is an example of a negative externality L2. For example, The London Congestion Charge - a flat rate indirect tax levied on all vehicles entering a designated charging zone between 7 am & 6 pm, Monday-Friday. It was introduced in Feb 2003 at the rate of £5 per day. It was ? to £8 per day in July 2005. In Feb 2007, the charging zone was doubled in size to cover a substantial zone in London. This is an example of hypothecation (a situation where revenue from tax is directly allocated to some other purpose) as most of the new revenue has been used to improve bus services Another example of road pricing is in Singapore you must buy a car permit for 10 years, which costs up to £75,000. L3. Road Pricing is beneficial to an economy as it is a way of internalising the external costs of congestion and makes the polluter pay. The fact that the 'polluter' now has to pay for the negative externalities exerted by the congestion they cause, means that they will be less likely to use their cars as often, to avoid the charge, or use alternative (more economical) means of transport such as the train or tube, or they may simply think twice about using their car if
Is the existence of a monopoly against The public interest?
Intro to Economic Analysis essay 2 Spring Term Alastair Snook Is the existence of a monopoly against The public interest? Using diagrams explain the conditions under which this might be true and also the conditions under which this may not be true. A monopoly is defined as the sole supplier of a good or service with no close substitutes in a given price range. A pure monopoly will therefore have a 100% market share i.e. the firm is the industry. They exist and can only remain as monopolies if there are high barriers to entry to the industry. In the case of a natural monopoly, economies of scale are so large that any new entrant would find it impossible to match the costs and prices of the established firm in the industry. Other barriers to entry include legal barriers such as patents, natural cost advantages such as ownership of all key sites in the industry, marketing barriers such as advertising, and restrictive practises designed to force any competition to leave the market. In this market structure it is also assumed profits are maximised and there is consumer rationality. Traditionally monopoly is thought to be a potentially harmful market structure with unwelcome consequences for the consumer and the economy. Competition has always therefore been seen to be desirable. It could be said therefore to be against the public interest. However there are
income distribution
Explain Why the Distribution of Income is Unequal in the UK. Income is a flow of earnings generated and received over a given time period. It can be gained from employment, pension funds or ownership of wealth. Between 1979 and 1990, the UK economy experienced a marked increase in income inequality. However, since 1997 when labour came into power, their social reforms such as tax credits and national minimum wage has narrowed that gap slightly. Although the gap still exists from a series of factors. A rise in earnings inequality can cause income inequality. This is due to a fall in demand for unskilled and semi-skilled labour and a rise in demand for skilled labour because of deindustrialisation, where resources have been shifted from secondary to the tertiary and quaternary sectors, so thus, skilled labour is needed. In the UK this happened as we lost our wage and price competitiveness to developing countries, causing structural unemployment in the secondary sector industry. Therefore the income gap widens as skilled labour productivity widens, and thus, so do wages. Over the years there has also been a rise in workless households where there is no income earner and are thus living off welfare benefits. Unemployment of unskilled and semi-skilled labour and generally being unemployable has caused this. Another reason is due to the benefit culture where the income into the
Discuss the economic consequences of unemployment
Discuss the economic consequences of unemployment As the level of Unemployment is at a new high, the consequence this is having is becoming more and more obvious. Having a huge workforce willing to work without making good use of them is a waste of resources. This has an impact on factories and manufactures because by not using the labour force they are limiting their ability to produce more goods and provide more services. This would make living standards higher; however these unemployed workers are not being put to work. By not employing workers the government has to pay a state benefit to these people, which is reducing their overall profit. By reducing the government's profit, we are preventing them from spending the profit on improving education, care, transport or health. This effectively limits our standard of living and prevents it from improving. In order for the government to actually prevent themselves from actually losing money they would have to raise taxes to afford to pay for all of the unemployed. Higher taxes rates will reduce people's disposable income and their spending power. A rise in government borrowing may push up the rate of interest, which in turn will also reduce their spending power. As the government has to pay benefits to those unemployed, principally job seeker's allowance it has to reduce spending on health services such as NHS and education.
Market Economies- characteristics and examples.
Market Economy Market Economy- is an economy in which the decision of individuals, firms and the pricing of goods and services are guided solely by aggregate interaction of a country's citizen. In contrast within this system all goods and service a part from pure public goods are provided via the market mechanism. The consumer decided what is to be produced this is done according to consumer sovereignty, their spending/purchasing votes tell producers which goods and service are wanted at a given price and which are not. The mode of production (how goods and service are provided) will be determined via market mechanism. This is simple saying the producers will be anxious to attain the least cost means of production available to them. The key point in production of goods and services is that the buyers and sellers interact in the market on prices and its system. For example if milk is has an short supply but has a high demand towards then adversely it will have a high price attached to it. The price in this case and the demand of the product from people determines decision of what is to be produced or taken. The price in this case acts to indicate the market value of resources. The government has a very restricted part to play in that it should control national defence, act against monopolies, issue money, raise taxes and protecting the rights of the private sector. Examples
