Explain two causes of price inflation

One cause of inflation is due to the wage rate increasing at a faster rate than output. The cost of production for firms increases and to maintain profits they are likely to raise prices. When the prices rise, wage increases are demanded by employees to maintain their standard of living. This subsequent increase in wages … Read More»

Discuss the view that nationalisation of the railway services in the UK would be beneficial for consumers.

[This is an exam style essay question, with the response being just one paragraph of multiple the student would have to write]One significant advantage to UK consumers of nationalising railway services could be that greater levels of economic efficiency, and in particular dynamic efficiency, would be achieved, allowing for lower prices and consumer welfare gain. … Read More»

Why is the marginal cost curve shaped the way it is?

First of all let’s define Marginal Cost:-It is the cost to a firm to produce one additional unit of output e.g. the cost of Volkswagen to produce an extra carInitially due to the law of increasing marginal returns (extra unit of input produces a more than proportional amount of output) the MC curve dips. However, … Read More»

What is the difference between the RPI and CPI rate of inflation

Both the Consumer Price Index (CPI) and Retail Price Index (RPI) are ways of measuring inflation which is the average change in price of a basket of goods. The RPI, however, includes the costs of housing such as mortgage mortgage repayments, rent and council tax, which take up a large proportion of someone’s income. The … Read More»

What are the factors affecting Cross-Price Elasticity?

First, it is important to understand the difference between own price elasticity and cross-price elasticity.Own price elasticity concerns about the responsiveness of the the quantity demanded of good X to a change in its own price; while cross-price elasticity concerns with the responsiveness of demand of good X to a change in price of good Y.So the size of cross-price … Read More»

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