Government legislation week
In time for the start of term, there is lots of legislation coming into force this week. There’s the third rise in petrol duty in nine months, starting today, with the return of VAT to 17.5% at the end of year to come – is this the price of going green, or the price of a budget deficit?
read more...»Barak sees mileage in fuel efficiency targets
Here is a good example of government intervention through regulation
“Under the proposed new standards, manufacturers must reach an average of 39 miles per gallon for passenger cars by 2016, and 30 miles per gallon for light lorries...The increase in mileage is to be introduced gradually, and is expected to add $1,300 to the cost of a vehicle by the time it is fully implemented in 2016.”
In a similar vein, the EU has progressively cut the maximum Co2 emissions per km for all passenger cars.
1. Think about how this type of regulation will affect producers both in the short and the long term.
2. How will this affect consumers? Is it (a) effective (b) does it promote efficiency? (c) Is it equitable?
3. What are some of the possible macroeconomic effects of such an intervention?
Regulation is an alternative to taxation and/or subsidy ... or should we regard it as a complement? Part of a mix of policies needed to address environmental issues and targets?
Causes of the Crunch
What links the following?
China
The liquidity bubble
Search for yield
Sub-prime lending
Leverage
Originate and distribute
Alan Greenspan
The Democrats
The Republicans
Regulators
Credit rating agencies
Financial Services Authority
Greedy bankers
Consumers/housebuyers
Margaret Thatcher
Moral hazard
Gordon Brown
Mark-to-market accounting
Basel 2
Estate agents
According to Sean Farrell and Sean O’Grady from the Independent, they have all contributed in one way or another to the credit crunch. Here is the link to what is an excellent background article for students.
End tobacco smoking by 2025?
Could we end the smoking of tobacco in the Uk within a generation. On first glance it looks like one of those utterly grandiose targets that New Labour used to launch (and re-launch) such as abolishing Child Poverty by 2020. But this ultra-ambitious target comes from the Royal College of Physicians who argue that radical measures are needed to curb smoking. They argue that “The primary objective of regulation of smoked tobacco should be to make smoking and smoked tobacco products as unappealing, unattractive, unaffordable and unavailable as possible, as quickly as possible.”
The measures include:
Increase the tax on tobacco by 10% every year
License tobacco retailers and prohibit the sale of smoked tobacco in premises where children are admitted
Crack down on tobacco smuggling, and apply Class A drug penalties for tobacco smuggling and under-age sale
Encourage sale of low cost single day nicotine packs, available from any retail outlet
Permanently exempt medicinal nicotine from VAT
Provide free medicinal nicotine for all smokers on the NHS, not just those on a smoking cessation programme
What do you think?
Ending Tobacco Smoking in Britain is available here
BAA faces break up after Competition probe
Michael O’Leary, CEO of Ryanair has called it the ‘best decision in the history of aviation ever.’ Colin Matthews, Chief Executive of BAA has slammed it as ‘flawed’. The Competition Commission has delivered a report which suggests that BAA should see three of its UK airports including two in London and one at either Edinburgh or Glasgow.
A2 Economics revision - The Great Energy Rip-Off?
Are power companies ripping off UK consumers?
Writing in last week’s Times on May 21st, Robin Pagnamenta explores whether there is evidence that UK energy companies are engaged in tacit collusion.
read more...»Revision: Market Power
This revision note is designed for AS economists - and covers aspects of market power and regulation.
read more...»Revision: Business Pricing Strategies
This two page revision note is designed for A2 economists and considers some of the factors that can influence the pricing behaviour of businesses - notably a move away from maximising behaviour when setting prices and the impact of increased market contestability and technological change.
read more...»
Mind Map: Credit Crunch
Our A2 macro group mind-mapped the Credit Crunch in a lesson on Friday, a text summary appears below and the original map is also available as a pdf file.
read more...»BAA raises passenger charges
British Airports Authority, which owns and runs seven of the largest airports in the UK including Heathrow, Stansted and Gatwicj has been given clearance by the Civil Aviation Authority to increase the charge it makes for each passenger using the airport. It is a good example of how an industry regulator has the power to cap charges or prices in a market and the news has been criticised by many of the major airlines who are lobbying for a breakup of the BAA monopoly. They accuse the CAA of regulatory failure, of collapsing against the pressure placed on them by BAA to give them greater freedom to life passenger charges for taking off.
According to the Financial Times ”The CAA said it was increasing the price cap at Heathrow by £2.44 or 23.5 per cent in real terms to £12.80 per passenger for the coming year from April 2008. Charges in the four subsequent years could rise by 7.5 per cent a year above inflation.”
I wrote about BAA in a recent edition of EconoMax. BAA is now owned by the Spanish firm Ferrovial and is struggling under a mountain of debt. They face huge bills for ramping up security arrangements at all of the major airports and in investing in new capacity and facilities at airports already stretched to breaking point. Ultimately of course, given the nature of the business, it is the passenger who will foot the bill through higher fares.
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