Economics help blog – Page 252

Why does greater wealth lead to less marriage?

1 February 202019 May 2008 by Tejvan Pettinger

There is a report in the Times today, suggesting that young people can’t afford marriage – Marriage too expensive But, on the face of it, it is absurd. When people were really poor 100 years ago, marriage rates were much higher. Despite what people may think, living standards have been gradually rising for the past …

The importance of productivity on the current account balance of payments

31 January 202016 May 2008 by Tejvan Pettinger

Readers Question: Using the data and your own economic knowledge, evaluate the importance of rising productivity in bringing about an improvement in the UK balance of payment on the current account. Productivity is defined as output per worker or output per input. Rising productivity implies that the economy is becoming more competitive and will be …

Understanding Rates of Change Statistics

14 May 2008 by Tejvan Pettinger

A Common question at AS and A2 Level is to understand economic graphs and statistics. Look at the graph below and explain what happens to GDP at current prices between 1974-1983? Many students will answer – In this period GDP is falling. However, this is wrong. What is happening is that the growth rate is …

UK Inflation Worsens Despite Slower Sales

14 May 2008 by Tejvan Pettinger

Despite a slowdown in retail sales during March (Sales fell 0.4% in the month) UK CPI inflation increased to 3%. Retail Price Index RPI (which includes more items) increased to 4.2%. This is at the upper limit of the Government’s inflation target. It is the highest UK inflation rate for quite a while. Last month, …

Question on Supply Side Reforms and Appreciation

15 January 202012 May 2008 by Tejvan Pettinger

Readers Question: Assess the view that supply-side reforms have enabled the UK economy to be ‘more successful in maintaining growth, despite an appreciation in the value of its currency’ (Extract 1, lines 5-6}. (From Edexcel unit 3)

An appreciation in the exchange rate would tend to reduce aggregate demand and lead to lower economic growth. An appreciation makes exports less competitive, decreasing quantity of exports. An appreciation also makes imports cheaper, increasing quantity of imports (and hence money leaving the economy). Therefore, the (X-M) component of AD will be lower. This will reduce Economic growth.

Turkey and Joining the EU

12 May 2008 by Tejvan Pettinger

There has been much debate about whether Turkey should be admitted to the European Union. These are some of the benefits and costs which Turkey is likely to face if it is successful in joining the EU.

Benefits to Turkey of Joining the European Union EU

If Turkey join the EU they have the potential to benefit from higher growth and investment.
Membership of the EU will reduce barriers to trade (tariff barriers and non tariiff barriers). Therefore, it is easier for Turkish firms to export to the large EU market (nearly 0.5 billion). Turkey may have a competitive advantage because of lower labour costs.
Furthermore, joining the EU will increase competitiveness. Domestic monopolies will face greater competition from EU rivals. This should help to reduce prices and increase efficiency.
Another benefit from joining is that successful firms can benefit from economies of scale. As they sell to a wider EU market they can expand production and get lower costs.
Membership may encourage inward investment. Western EU firms will be attracted to invest in Turkey because of the new potential markets and lower labour costs. This investment will help boost productivity and stimulate economic growth growth.

However, Many Turkish firms may struggle to compete in the single market and could lose business to more efficient western firms. However, this lose of business may be most acute in the short term; in the longer term the increased competition may act as a spur to increase competitiveness.
However, inward investment may not increase because Turkey’s infrastructure is insufficient.

6. Turkey may benefit from EU policies such as CAP, Regional Policy and Transport Funds. Turkey is one of the poorer areas in the EU and therefore is eligible to regional funds. Over time this could make a big improvement in the structure of the Turkish economy.Problems of Joining the EU

What is the Plural of Euro ?

12 May 2008 by Tejvan Pettinger

A reader left a comment on a post saying the plural of Euro is Euro. I was surprised to see this because according to the rules of English it should be Euros. On researching the issue I found, that the European Commission did adopt Euro as the the plural of Euro. However, rather bizarrely the …

Factors that affect Performance of Firms in UK Construction Industry

15 January 20209 May 2008 by Tejvan Pettinger

The economic performance of a UK Construction PLC will be affected by many factors, including the role of government, exchange rates and inflation. Discuss

The construction industry tends to be a quite volatile sector of the economy. Investment spending in construction has a strong correlation to the rate of economic growth and future prospects. When growth is high, demand for construction will be rising, when growth rates fall and the economy heads toward recession, firms invariably cut back on new construction projects and the industry can be hard hit by a slow down.

The exchange rate has a bearing on the exporting sector. If there is a depreciation in the exchange rate, exports become more competitive and the exporting sector will generally do better. This can lead to increased investment by industry.

However, a lower exchange rate tends to be only a short term boost and demand for UK exports is increasingly inelastic, meaning a depreciation doesn’t help much.