In behavioural economics, loss aversion refers to people’s preferences to avoid losing compared to gaining the equivalent amount. “losses loom larger than gains” (Kahneman & Tversky, 1979) For example, if somebody gave us a £300 bottle of wine, we may gain a small amount of happiness (utility). However, if we owned a £300 bottle of …
Question number 3 from What would Keynes do? – If I enjoy drinking beer. How much should I drink? Key quote “My only regret in life is that I did not drink more champagne.” John Maynard Keynes. If something is good to do – does it mean it is good to do it to excess? This …
A minimum price for alcohol means that alcoholic drink cannot be sold below a certain price. It is aimed at preventing the sale of very cheap alcohol by supermarkets. The hope is that a higher price will discourage binge drinking, improve health, and make people pay a price closer to the true social cost of …
What would be the impact of the US placing a tariff on the import of steel and aluminium into the US A tariff on imports of foreign steel would raise the price of imported steel and encourage US firms and consumers to buy domestically produced steel instead. At the moment, American producers find it cheaper …
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 …
Readers Question: Is the fiscal policy effective/the best policy to deal with unemployment? It is an interesting question and one that is likely to generate different views from within the ranks of economists. To give a very rough overview: Keynesians say yes, fiscal policy can be effective in reducing unemployment. In a recession, expansionary fiscal policy …
A progressive tax takes a higher percentage of tax from people with higher incomes. It means that the more a person earns, the higher his average rate of tax will be. In this case, the person earning £10,000 is paying 20% of their income in tax (total tax of £2,000) The person earning £20,000 is …
Distribution of income refers to the relative incomes that people have within an economy. For example, in the UK the poorest 10% of people have roughly only 2.5% of the nations total income. The richest 10% have approximately 35%. This suggests there is a degree of relative poverty because the richest have a bigger % …