You are welcome to ask questions on Economics. Though you might also like to try google custom search (top right) to see if the topic has been covered before.
I am looking to explain economic principles / ideas/ recent developments in economics. I can’t promise to answer, but will try if it meets the criteria below.
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- I aim to try and simplify economics; as a rough guide I would aim at an understanding similar to a good British A Level student.
- I am looking to explain economic principles / ideas/ recent developments in economics.
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I studied PPE at Lady Margaret Hall college, Oxford University, and currently work as an Economics A Level teacher. I have also examined several different economic units for Edexcel AS and A2.
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In connection with this, what are some examples of perfect elastic demand? Explain how they are made as examples.
In connection with this, what are some examples of perfect elastic demand?
If a firm finds that its marginal cost of production is $30 and its marginal revenue is $25, explain what would be the appropriate response if the firm’s goal is to maximize profits. Use marginal analysis in your answer
A firm finds the following about its costs: AVC = $10, ATC = $15, MC = $12. The firm sells its product in a competitive market for $12/unit. The owner asks you for a recommendation on whether to continue to stay in business. What is your recommendation to the owner? Be sure to give economic justifications for your recommendations
Does the bank own the property after the loan is defaulted upon? Where does the money to buy the property come from? e.g from a deposit of 20000, a bank creates a loan of 400000, now if the property is defaulted upon, the bank owns the 400000 property, effectively gains 380000, from 20000 real money. Is this correct? The bank effectively did not ‘pay’ for the property at all.
A bank is just like any other business . It is concerned
with the surplus of income over expenditure over time.
In the example that you state.
The bank has the expenditure of the interest it pays on
the deposit. It also has overheads- the same as any business
The only income is its interest on the loan.
When a default occurs it has no income on the loan –It is
just left with all expenditure.
In relation to this transaction it is losing money .It s large overheads have to be paid.
That continues for the whole time that the empty house is un- sold.
People typically abandon homes when the mortgage is much higher than the current market price.
If this practice were to continue for significant amount of the banks business then it would simply become illiquid.
The bank is in trouble even though it has a book asset of unsold homes.
The benefit to the bank as a consequence of it creating imaginary money ,is also imaginary when loans do not get paid back
When a house increases in market price it is not the value of the property that increases-it is the value of the land that the property sits on. That value is a consequence of the 3 regular factors –Location –Location –Location.
A desirable location can quickly become highly un- desirable if all around comprises boarded up un sold houses.
The circumstance of a house buyer abandoning their home will never occur in a stable market. If the property loses its value it is possibly because the property itself has lost value. The land value could devalue over time. The property is unlikely to be abandoned if benefit goes to the bank.
The loan will typically be repaid or the property will be sold.
The occupier needs somewhere to live.
The circumstance that has recently occurred ,given its nationwide impact, is a consequence of a failure of monetary policy. Nothing else.
Are We going to bridge the gap of poverty by 2030?
Is it better to sell more services/products with less profit, than sell less with high profits?
What are the pros and cons to the employer, worker, and customer?
i.e high revenue low profit, vs low revenue high profit.
Do central bank losses matter? What are the consequences of writing of its losses and start off with a new balance sheet? Essentially they are buying assets e.g property, shares etc at no cost ( printing money )
Can you explain how fractional reserve banking is harmful to the bank? With loans is it true that the banks effectively increase their assets by 8-9 times by creating a mortgage? If this is true, does this mean if 10% if their asset based is called, i.e mortgage default, the bank would collapse?
Fractional reserve banking is the only way that a modern bank can operate. It is also the only method by which the population of a country can large scale purchase property ,cars etc.
For that reason building societies, who cannot leverage deposits , chose to become banks.
The process does not harm a bank . Unpaid loans for whatever reason will harm the bank.
When this occurs and depositors get wind of these negative developments a run on the bank is likely to occur. The UK government guarantees 85000 pounds to each depositor. If you have say 200000 pounds in a bank then you may decide to join the queue.
If 10% of a bank’s liquid asset base was called over a very short period of time then I suspect that they will survive.10% is not dramatic-in fact it is almost normal on a day to day basis. Money goes out –money comes in
It is when closer to 100% of their liquid asset base is called, then the
problems occur. What has changed? What has caused the panic?
The answers to these questions are somewhat irrelevant . For certain the bank is in trouble. Time to give the bank of England a call.
Note: a mortgage default and a call on the bank by depositors are not the same . The former can cause the latter.
Should Greece pull out of the euro ? They are in the fifth year of recession despite EU bailouts it seems like pouring money down a black hole.
The Greek public apparently want to keep the euro but they dont want to pay for it.
Wouldn’t it just be easier to default on their debts and reinstate the drachma at a lower value than the euro ? This would boost exports and invite Tourism though im not sure what manufacturing Greece has to export.
If they defaulted could they be made to repay their debts at some point anyway or could they just declare themselves bankrupt like an individual and pay back little or nothing ? How does it work ?
If an individual goes bankrupt they generally cant have a bank account or credit for years but surely that wouldn’t apply to a nation.
I here of large withdrawals of euro by Greeks from their banks in panic but whats the point in that if they are not actually going to leave Greece ? They would still have to convert to drachma anyway.
If they are afraid the banks will run out of money they are themselves hastening it.
can i get the disadvantages of minimum wage law. additionally, if i can get it with reference to the current Liberian minimum wage law before the national legislature.
What are the disadvantages of minimum wage law?
https://www.economicshelp.org/labour-markets/disadvantages-minimum-wages.html
What is the revision of tax brackets to prevent workers from paying more taxes due to inflation?
As an investor, is it better value to buy a listed company that has more or less number of shares? On one hand if a company makes profits, its worth more per share in a company with less shares, but if it loses money, the losses per share are increased also, compared to a company with more shares, assuming their assets are the same.
I don’t think it makes too much difference. Less number of shares, will just mean individual shares are worth more. E.g. you might buy £10,000 of shares in ICI. If they cost £1000 per share, you will just have 10. If they cost £1 per share, you will have 10,000. But, it’s the same value
Hi Tejvan
What is the impact of debt on the housing market in the UK? If the UK is in such a debt crisis, what impact has this had on the houisng market.
Regards
Abu