In a recent post, we looked at food inflation and noted how prices were often volatile. Primary products like food and oil tend to be volatile because: Supply is inelastic in short run. (Supply is unresponsive to temporary shortages of food) Supply can vary due to the weather/geopolitical events. Demand is price inelastic – a …
Boom and bust economic cycles involve: Rapid economic growth and inflation (a boom), followed by: A period of economic contraction / recession (falling GDP, rising unemployment) Causes of boom and bust cycles 1. Loose Monetary Policy If monetary policy is too loose, it means real interest rates are too low given the state of the …
One potential benefit of leaving the EU is the opportunity to radically change how we spend agricultural subsidies. The Common Agricultural Policy CAP is one of the great mistakes of the EU. Given the share of EU spending on agriculture, it is their flagship policy, yet the CAP has given a very poor return regarding …
Neoliberalism is a term commonly used to describe free-market economics. Neoliberalism involves policies associated with free trade, privatisation, price deregulation, a reduced size of government and flexible labour markets. Recently, neoliberalism has been associated with the policies of austerity and attempts to reduce budget deficits – usually by cutting government spending on social programmes. Neo-liberalism …
An examination of consumer and producer sovereignty. Also, an evaluation of which is stronger – who drives markets – is it, consumers or producers? Definition consumer sovereignty The ability and freedom of consumers to choose from a range of different goods and services. It means that ultimately it is consumers who will decide what is …
Definition of creative destruction This refers to the process of how capitalism leads to a constantly changing structure of the economy. Old industries and firms, which are no longer profitable, close down enabling the resources (capital and labour) to move into more productive processes. Creative destruction means that the company closures and job losses are good …
Q. How does the Bank of England decide and set interest rates? The Bank of England set the repo rate. This is sometimes known as the ‘base rate’. It is the interest rate at which commercial banks (like Lloyds and Natwest) borrow from the Bank of England. The Bank of England can control liquidity and …
Herding behaviour refers to how individual decisions are influenced by group behaviour. It stems from the observation that if a herd of animals starts moving in one direction, all the animals want to follow the herd. Why herding behaviour occurs Following the crowd. In economics, we can see a similar behaviour. For example, if individuals …