Monday, 28 November 2011


1) What information failures are there in the market for higher education places?
There are two major information failures in the education market. Firstly that not all students know all the available place in every since there are just too many different universities, and no human being will be able to research all the available places.  The second one is that students must apply to university, therefore universities do not know all the students but only a small procent of possible applicants. 

2) What externalities are involved in higher education and will this lead to an over or underprovision of higher education in a pure market system?
There are positive externalities in consumption in higher education. This means that the MSB is above the MPB on the externality diagram. This meaning that when people consume (learn) they become educated and then go of to inventing and researching or taking a more advanced job than taking out the trash. 

As depicted in the diagram above higher education in consumption produces a positive externality. This is the yellow area on the diagram. I myself do not know why the government in England would stop subsidizing higher education, although there is an argument that we are in recession and that the government needs money, but I believe there are other things that can be reduced in government spending instead of higher education. This is just my view and probably because I am a soon to be student, meaning I am one of the first to go to university in the UK paying 9000 pounds instead of 3000. 

3) What are the arguments for subsidising non-STEM subjects (as well as STEM ones)? Should these subsidies vary from course to course and from university to university?
Well the arguments are that STEM courses are often much more expensive than a english course, and student fees might not cover the costs. This is due to students conducting experiments on expensive equipment and using expensive materials. The sciences are indeed quit an expensive course. 
4) What is the best way of tackling the problem of unequal access to higher education?
Looking from the view point of the general majority, this would be to banish private education and have all kids go to public schools. As well as stop paying student fees and make all citizens pay for education even if they are not going to university. Although these methods have quit a few flaws in them, since if private schools will be banished a kind of black market would apear, since all people will money and power would send their children to publics schools which are in average better, but now money would not be playing a big role but the connections and location of living. Lets say the schools only accept people living close by this would create the land around the school to shoot up in price and make a huge separation of the rich and poor. 

Friday, 11 November 2011

A few questions

Evaluate possible economic policies other than increasing the age limit that a government might use to significantly reduce the consumption of alcoholic drinks
The government can do quite a few things to reduce the consumption of alcoholic drinks except increasing the age limit. Probably the policy that would have the biggest effect on the alcohol consumption would be putting a specific tax on the producers of alcohol. Although this has already been done in the UK and other countries, although the tax can be increased to reduce alcohol consumption. Another policy that the government could do is to start advertising and raising awareness of how alcohol harms the human body. A good idea would be to do something similar as was done with cigaretts, to put stickers on the bottles showing disgusting pictures and stating facts about alcohol consumption. The graph below shows how putting a specific tax on the producer would shift the price upwards causing the consumer surplus to be lower and decreasing the amount of alcohol sold.

Assess the view that the environmental problems caused by the disposal of rubbish can best be dealt with by market forces rather than by government intervention.

The environmental problems caused by the disposal of rubbish are basically negative externalities, and how to adjust negative externalities without government intervention. This is actually a hard thing to do since all things that come to my mind are government interventions like adding red tape. Although I did some research and found the Coase theorem. I am not quit sure how this works but the basically what I picked up from it was that when there are no transaction costs in trade the negative externalities be dealt with by the private sector. Im not quite sure how this works maybe someone could tell me in the comments?

Wednesday, 9 November 2011

Correcting Patrick Bateman

Black = Patrick Bateman 
Red= Me

1) What are the arguments for a rise in Bank rate at the current time?

The current Britain inflation rate is 3,3%. Current Bank rate is 0,5%. Such a difference makes further inflation increase possible and probable. The threat of higher inflation is high and, therefore, some say that increase in interest rate is inevitable.
Current bank rates? Well the current bank rates are more about 3-4 % although yes the Bank of England rate is 0.5%

2) What are the arguments against a rise in Bank rate at the current time?

Higher interest rates may decrease the demand. After all, the higher they are the more expensive the mortagages. British economy is already vulnerable, so increasing the i.r. is a risk of another economic slow down.
3) What information would you require to decide which of the arguments was the
more powerful?

The type of inflation has to be considered. Todays inflation comes from indirect taxation, food and energy, which , as experts argue, the MPC has not real influence on. So increase of increase rates may be actually a worse solution, regardless the current rate of inflation.

Increase of increase? The questions asked what information you need to decide what argument is more powerful not what the UK government should do. 

4) Why is it difficult to decide the size of the output gap?

Because in such difficult and unpredictable economic times it is hard to guess what potential GDP is going to be.

It is difficult to decided the size of the output gap because all the data and statistics we receive are already old when we receive them. 

5) To what extent do the arguments for and against a rise in Bank rate depend on
the factors determining expectations, and what expectations are important here?

Most of all the increase of the wages is to be considered. If wages are to increase, than the increase of i.r. would be more likely, as people would afford more expensive mortgages.

Yes but why only wages? Are the expectations for inflation important? or interest rates? or normal good?

6) To what extent are exchange rates relevant to the effectiveness of interest rate

Well it would be useful if you actually wrote something so i could comment on it. You might have said that when the interest rates are low then the exchange rate is low since there is no demand for the pound. Although on the other hand if the interest rate is high e.g. there is demand for foreign investors to buy the pound and put it into banks in the UK. A strong exchange rate resulting in cheap imports and expensive exports causing leakages therefore at this time point the UK would prefer a low exchange rate, to have expensive imports but cheap exports. 

Just a word of advice for your blog, proof read what you write and spell check. 

Saturday, 5 November 2011

Exam Technique

Imagen this question
Identify 2 significant point of comparison...

Extract A compares the price indexes of new and used cars using 2005 as the base 100. It is visible that the price of used cars fluctuates much more than the price of new cars. The range of prices of used cars is around 55 whereas the new cars only fluctuate around 10.

Use units
Not the price but the price index fluctuates

New car prices went down to a trough of 95 in 2002 and a peak of 106 in 2008. Used cars reached their peak at the beginning of 1998 or around 132 to an all time low of 80 in 2008. This shows that the trend for new cars is that the prices are increasing slowly but steadily whereas used car prices are massively dropping at a rate of 5 index points a year since 1998.

Price index went to 95 not the prices*
Use units


The price of new cars rose over the whole period from an index of approximately 100 in January 1996 to an index of approximately 105 late in 2008 whereas the price of used cars fell from an index of approximately 125 to an index of approximately 82 late in 2008.

After 2005 there were fluctuations in the price of used cars but not in the price of new cars e.g. in 2001 the price index for used cars fluctuated between a high of aprox. 118 and a low of aprox. 113 whereas the price index for new cars was stable at an index of aprox. 95

Wednesday, 2 November 2011

Made in Britain 2

The second part of the video Made in Britain concentrates on the fact of Great Britain concentrating on the innovative side and marketing side of production. The world trade is depicted as a race between Great Britain inventing products and other countries like China catching up. In the video the viewer is introduced to a 3 step process of producing a product. The first step is to think of a product and develop it. The second phase is to produce it, and the third to sell it. As Evan Davis says the UK concentrated on the first and last step of this process, allowing other countries like China to produce the product. Although nowadays China is catching up with their sports brand Li Ning which is catching and not only producing the clothing but also inventing and selling it. I believe the second part is actually more interesting for me than the first episode.

Thursday, 27 October 2011

More Sex is Safer Sex...

The article More Sex is Safer Sex by Steven Landsburg has a very interesting perspective on polygamy monogamy. The main point of the article as the title states is that more sex actually would be safer sex. This is represented by an interesting example, of going into a pub and meeting potential sexual partner. 50% of the potential sexual partners could be prostitutes or just more promiscuous partners who are more likely to be infected with an STI. Then the other 50% of "Once a year revelers" who are likely not to have an STI. This is a 50-50 chance of getting an STI, whereas if the once a year revelers would start to be twice a year revelers then on any given night there would be twice as many of them. This puts your chances of getting an std now from 50% to 2 out of 6. Another point mentioned in the article was subsidizing condoms or giving them out for free. It is said that this is positive and negative meaning that the positive side is that safe sex is promoted whereas the negative side is that sex is promoted, resulting in STIs. Although looking from the perspective of this article, there are two upsides to subsidizing condoms or giving them out for free.
In my opinion taken from a purely economic perspective this is quit reasonable, although looking at it from a non mathematical point of view, there probably would be a bigger possibility of the "twice a year revelers" to go out on a certain night making the chances of an STI very low although on other night putting the chances back to 50-50 or even more.