Q&A - Markets
Q&A: What is hedging?
Hedging is the process of protecting oneself against risk.
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•AS Micro - •Economics Q&A - •Q&A - Markets - •Business Economics -
Tags: prices, price, risk, profit, oil, hedging
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Q&A: How the PFF might be used in assessing a country’s economic performance
A production possibility frontier (PPF) is a boundary which shows the combinations of two or more goods and services that can be produced whilst using all available factor resources efficiently.
read more...» •Q&A - Markets - •Introductory Economics -
Tags: q&a;revision
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Q&A: Why do cartels often collapse?
Recent business history both here in the UK and in international markets is littered with examples of cartel-behaviour by businesses that seem to have come unstuck. Just type price-fixing into Google news and see what comes up! Even on the day I am writing this blog answer, the FT reports that three cargo airlines have agreed to pay fines totalling $214m for their roles in a global conspiracy to fix prices for air freight. Bloomberg reports that a former sales executive at Hitachi Displays Ltd. has been charged with participating in a global conspiracy to fix prices for liquid crystal displays sold to Dell Inc. And in Ireland, a former director of a Dublin car company has been given a 15-month suspended prison sentence and fined €160,000 after pleading guilty to charges of price-fixing.
read more...» •AS Micro - •Economics Q&A - •Q&A - Market Failure - •Q&A - Markets - •Business Economics - •Monopoly - •Oligopoly - •Competition Policy - •Government Intervention - •Market Failure - •Market Equilibrium and Price - •Price Mechanism in Action -
Tags: competition, production, capacity, incentives, cartel, oft, collusion, price fixing
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Q&A: What is a scrappage subsidy and will it work in the UK?
A scrappage subsidy is a “pay-to-scrap” scheme where a government offers a financial incentive to car buyers if they scrap a car that has reached a specified age and in its place they are offered a payment towards the cost of a new vehicle. Germany and France both offer scrappage subsidies to consumers and there is a growing number of voices from inside the UK business community and motor vehicle industry clamouring for one to be launched in the UK. The Retail Motor Industry Federation and the Society of Motor Manufacturers and Traders (SMMT) are at the head of the queue lobbying for a scrappage scheme to be introduced as soon as possible.
read more...» •AS Micro - •Economics Q&A - •Q&A - Market Failure - •Q&A - Markets - •Cycles and Shocks - •Aggregate Demand - •Consumer Spending - •Government Intervention - •Subsidies - •Manufacturing Industry - •Market Equilibrium and Price - •Nature of Demand - •Transport Economics - •UK Economy -
Tags: demand, supply, costs, manufacturing, capacity, incentives, subsidy, scrappage, vehicles
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Q&A: Which indirect taxes give the government to most revenue?
Which indirect taxes give the government to most revenue?
For the UK government value added tax provides the biggest source of revenue. In November 2008, VAT was cut from 17.5% to 15% on a temporary basis in a move by the government designed to stimulate consumer spending – the decision was said to be worth around £12 billion of lost tax revenue for the UK Treasury.
There are many other indirect taxes and our chart below highlights six of them. As you can see the flow of tax revenue from indirect taxes on tobacco provides a very important source of money for the UK government. Together these six indirect taxes add nearly £20 billion annually into the government’s coffers.
In a recession where consumer spending is falling and where there is a chance of a period of persistent price deflation, the UK government will see a fall in revenue from indirect taxes.
More revision notes on indirect taxes can be found here
•Economics Q&A - •Q&A - Market Failure - •Q&A - Markets - •Government Intervention - •Indirect Taxes - •Market Equilibrium and Price - •Nature of Supply - •Fiscal Policy -
Tags: price, vat, indirect tax, duty
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Q&A: What is a positive sum game?
A positive sum game refers to the outcome of a decision or a policy or a negotiation involving at least one agent. And in this outcome a positive sum game occurs when no one wins at someone else’s expense - indeed the sum of positives and negatives (wins and losses) is positive.
A good example of this are the mutually beneficial gains from trade in goods and services between nations. If businesses or (more generally) countries can find a terms of trade in which both parties benefit then specialisation and trade can lead to an overall improvement in the economic welfare of both countries.
Many environmental campaigners believe that countries should do more to recognise the benefits of cooperation in designing policies and incentives to mitigate the impact of climate change. Surely there are positive sum games from agreement on strategies to lower C02 emissions for example by promoting innovation and the diffusion of technological change?
At a micro economic level positive sum games might be discussed in the context of negotiations between employees and employers or businesses in an oligopoly recognising their mutual interdependence and agreeing to cooperate in ways such as joint research projects (legal under EU competition law). Joint ventures are good examples of businesses understanding the power of collabborrative ventures.
A good recent example of this is the joint venture agreed by O2 and Vodafone to build and share new network sites together. They will share the masts, antennas, cabinets and power supply, as well as consolidate their existing G and 3G masts.
•Q&A - Macro - •Q&A - Market Failure - •Q&A - Markets -
Tags: supply, competition, trade, incentives, positive sum game, zero sum game
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Q&A: In what type of market does the iPod operate in?
Q&A: iPod and Market Structure: In what type of market does the iPod operate in?
In this answer I will assume that we are discussing the market for personal digital audio and video media players. Keep in mind that music can be downloaded (legally and illegally) in numerous ways such as the iPod, smart phones and standard laptops.
read more...» •AS Micro - •Economics Q&A - •Q&A - Markets - •Business Economics - •Monopoly - •Oligopoly - •GCSE Economics - •Market Equilibrium and Price - •Nature of Demand -
Tags: competition, price, investment, profit, innovation, apple, ipod
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