IFYEC003 Economics Assignment

Question 1:

UK petrol price jumps above £1.50 as oil costs rise

Fuel prices have hit record highs in the UK as Russia's invasion of Ukraine continues to affect global oil prices.

The average price of petrol jumped to £1.51 a litre, while diesel increased to 61.55. The cost of filling a 55-litre family car with unleaded petrol is now £83, or £85 for diesel,

The price of Brent crude oil rose by 4.6% to $102 barrel after Western nations imposed new sanctions on Russia-one the world's largest energy producers.

Petrol price movements in the UK are mainly determined by the price of crude oil, and the exchange rate between the dollar and the pound, because fuel, like oil is traded in dollars. Petrol also has a relatively low price elasticity of demand.

UK consumers are already paying a high price for fuel, with demand surging following the easing of Covid restrictions. Steve Irwin, from fuel consultancy firm Portland, told the BBC that prices had also risen due to concerns over oil and gas pipelines which travel through Ukraine and carry Russian products. He said there was "potential for enormous supply disruption

1. Explain the term price elasticity of demand. [2]
2. Explain using a diagram and the information in the article, why fuel prices in the UK have risen. [6]
3. Analyse the reasons why petrol may have a relatively low price elasticity of demand. [6]
4. Evaluate the extent which rising fuel prices in the economy might affect living standards. [6]

Question 2:

UK unemployment flat as wage growth drives inflation worries

The UK unemployment rate remained flat at 4.1% in the last quarter of 2021 and likely declined in January, data by the Office for National Statistics showed.

The information also confirmed that fewer Britons are working than before the pandemic.

Although the number of employees on payrolls rose in January and now tops pre-pandemic levels, "the number of people in employment overall is well below where it was before COVID-19 hit," said ONS head of economic statistics, Sam Beckett. "This is because there are now far fewer self- employed people.

" Around 400,000 people, mostly over the age of 50, "have disengaged from the world of work altogether and are neither working nor looking for a job," he said, with the data pointing to an increase in long-term illness, among other factors.

1. Explain the term unemployment. [2 ]
2. Explain using a diagram the likely effects on the UK economy if the number of people in employment overall stays below pre-pandemic levels. [6]
3. Analyse TWO possible causes of unemployment. [6]
4. Evaluate the possible consequences of rising numbers of people over the age of 50 who are neither working nor looking for a job.[6]

Question 3 

Explain and analyse with the use of a diagram, the likely effects of a subsidy on the market for merit goods AND evaluate the view that subsidies are the most effective method to reduce the market failure associated with the under-provision of merit goods in society.

Question 4

Explain the different forms of mergers and acquisitions that can occur AND evaluate with the use of a diagram, the extent to which you agree with the view that monopolistic competition will always create long term benefits to consumer welfare.

Question 5

Explain and analyse the difference between direct and indirect taxation AND [20] evaluate the view that fiscal policy is the most effective way for a government to Increase long run economic growth. Question 26 [20] Explain and analyse the alternative supply side policies available to a government AND evaluate the view that supply side policy is the most effective method of reducing the level of unemployment in an economy.