general theme 1 and 3 application points Flashcards
The economic problem
Scarcity: The NHS has limited resources—staff, beds, funding.
Opportunity Cost: HS2 delays showed the trade-off between transport investment and public service funding.
Specialisation & Division of Labour
- UK factories like Nissan Sunderland use division of labour for car production.
- UK specialises in financial services and exports to EU & USA.
Elasticity
PED: Cigarettes are price inelastic → tax revenue continues to rise even with higher duties.
YED: Waitrose products are income elastic—sales dropped slightly in 2022 due to falling real incomes.
XED: iPhones vs. Samsung = substitutes; petrol and cars = complements.
Supply shocks
Brexit and Ukraine war
Indirect Taxes & Subsidies
Sugar tax (2018): Tax on sugary drinks to reduce consumption.
Subsidies: Help to Buy scheme for first-time buyers
taxes on cigarettes
16.5% of ratil price
impact of sugar tax
A 2021 study by PHE (Public Health England) and others found: → 30% reduction in average sugar content of soft drinks between 2015 and 2020.
→ No significant reduction in total soft drinks sales volume, meaning people didn’t drink less, but drank less sugary versions.
monopsonies application points
🚆 1. NHS (UK healthcare sector)
- The NHS is the largest employer of doctors, nurses, and other medical staff in the UK.
- Because there’s little alternative for doctors and nurses, the NHS has wage-setting power.
- May lead to lower wages than in a competitive labour market, even though the NHS is not profit-maximising.
✈️ 2. Amazon warehouses / delivery contractors
Context: Amazon often dominates as an employer in certain warehouse districts or rural areas.
- The government is a monopsony of teachers
Removal of bankers bonuses 2023
In October 2023, the Conservative Government removed the bonus cap for bankers, which had previously limited bonuses to no more than twice basic pay.
- Incentives and Risk-Taking(moral hazard)
- increasing social inequality
Labour’s Proposed Zero-Hour Contract Ban (2024)
Banning zero-hour contracts would provide workers with greater job security and predictable income, addressing concerns of precarious work.
🔺 Link to Theme 3 (Labour Market Inefficiencies): Reduces market failure related to insecure employment.
Reduced Exploitation
Workers on zero-hour contracts often face exploitation, with employers offering minimal hours and no guaranteed income. The ban aims to protect workers from this exploitation.
🔺 Link to Theme 3 (Labour Market Inefficiencies): Addresses issues of labour market imperfections.
Increased Labour Costs for Employers
Employers may face higher costs as they need to provide guaranteed hours, potentially increasing wages for part-time workers.
🔺 Link to Theme 3 (Government Intervention): Reflects labour market intervention to balance power between employers and workers.
Impact on Flexibility
While the ban helps workers, it could reduce the flexibility of businesses, especially in industries like hospitality and retail, where demand fluctuates.
🔺 Link to Theme 1 (Market Failures): Potential inefficiency in meeting demand with a rigid workforce.
Companies pouring sewage into water
Environmental Impact
Companies discharging untreated sewage into rivers causes pollution, harming wildlife and ecosystems.
🔺 Link to Theme 1(Market Failure): Negative externalities where firms do not bear the full social cost of pollution.
Government Regulation and Fines
In response, the UK government has imposed fines on companies like Thames Water for illegal discharges. However, regulatory failure can occur if penalties are insufficient to deter behaviour.
🔺 Link to Theme 3 (Government Intervention): Government intervention to address market failure and incentivise responsible practices.
Public Outcry and Policy Change
Public pressure has led to calls for stricter regulations and an overhaul of how water companies manage waste, aiming to prevent further pollution.
🔺 Link to Theme 1&3(Government Intervention): Policy intervention to increase accountability of private companies to the public good.
Cost of Cleanup
The long-term costs of cleaning polluted water and restoring ecosystems burdens taxpayers and public resources.
🔺 Link to Theme 3 (Market Failure): Companies externalising costs, making the public pay for damage caused by their actions.
Increased Vaping (UK Context)
Health Concerns
Rising popularity of vaping, especially among young people, has led to increased concerns about long-term health risks like lung damage and nicotine addiction.
Regulation and Taxes
The government has considered higher taxes on vaping products to discourage use, as well as stricter age checks to prevent underage sales.
Impact on Smoking Rates
Vaping has contributed to a decline in smoking rates, as many smokers switch to e-cigarettes as a less harmful alternative.
Public Health Campaigns
Public health bodies like the NHS have launched campaigns to warn of the risks of vaping, especially among non-smokers who may become addicted.
Increased Gambling (UK Context)
Rise of Online Gambling
The growth of online gambling platforms, especially during and after the COVID-19 pandemic, has led to an increase in gambling participation across all demographics.
Gambling-Related Harm
There has been a rise in gambling addiction, with a notable impact on mental health, leading to calls for stronger regulation of the industry and more support for those affected.
Government Regulation
The UK government has been considering reforms, such as limiting stakes for online slots and introducing mandatory affordability checks to prevent problem gambling.
Advertising and Sponsorship
Gambling advertisements, especially sports betting ads, have become increasingly prominent. The issue has prompted discussions about potential restrictions on gambling ads, especially targeting younger audiences.
Fat tax proposal
UK’s Proposed Fat Tax (2024)
Public Health Initiative
The UK government is considering a fat tax on unhealthy foods to combat rising obesity rates, particularly among children.
Scope of the Tax
The proposed tax would target foods high in sugar, salt, and fat, including items like cakes, biscuits, and snacks.
Government Support
Health Secretary Wes Streeting and Chief Medical Officer Chris Whitty support the tax as a measure to improve public health.
Public Opinion
A YouGov survey indicates that two-thirds of the UK public support such taxes, provided the revenue is used for children’s health initiatives.
Industry Response
Food industry representatives express concerns that the tax may disproportionately affect lower-income families and could lead to higher food prices.
cuts to hs2
✂️ Recent Cuts and Financial Implications
Cancellation of Phase 2: In October 2023, Prime Minister Rishi Sunak announced the cancellation of the northern leg of HS2 due to escalating costs and delays .
Wikipedia
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Al Jazeera
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Wikipedia
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Financial Impact:
£2 billion in costs: HS2 Ltd disclosed over £2 billion in costs following the downgrade, including £1.1 billion in incurred costs and £1 billion in accounting charges due to diminished future income expectations .
£100 million in wind-down costs: The termination of Phase 2 involves extensive wind-down costs and site restoration amounting to £100 million
labour plans for childcare
🏫 Expansion of Childcare Services
300 New Nurseries: Labour pledges to open 300 new state nurseries within 12 months, converting empty classrooms into childcare spaces to meet growing demand.
The Guardian
Free Childcare for Eligible Parents: Starting in April 2025, 80% of childcare costs will be covered for eligible parents, with full funding available from September 2025.
The Guardian
🧠 Support for Child Development
Child Health Action Plan: Labour’s plan includes providing every school with a qualified mental health counsellor, boosting preventative mental health services, and transforming NHS dentistry.
Wikipedia
Early Years Pupil Premium: An increase in funding for disadvantaged children to support early development and school readiness.
The Guardian
🏛️ Policy Reforms
Restoration of Sure Start Centres: Labour advocates for the restoration of Sure Start centres, aiming to provide comprehensive support services for families with young children.
Wikipedia
Increased Investment in Education: The October 2024 budget includes a £6.7 billion capital investment in education, with a 19% real-terms increase, to support the expansion of childcare services.
