Thursday's homework:

1) Think about how we define abundance. Is body heat an abundant resource?


Abundant means plenty. I is hard to describe a body heat in terms of quantity. We know, however,  that the b.h. is fully renewable so we might describe it as abundandt.

2) Why are energy and oil prices so high? How does scarcity affect their price?


The demnad for oil is: VAST and inelastic, which means that producers can increase the price and still sell virtually the same amount. That is why the oil prices are so high. Another factor is that crude depositis, as an unrenewable resource, will eventually end so the less it will be, the more it will cost.


3) Could this source of heating be described as a market failure? If so, how could we illustrate this on a diagram?


Well we might describe body heat as a positive externality, but only in the case when it is used in some economic purpose, otherwise it is getting wasted.

Here is the diagram showing positive externalities. It is labeled for condoms, but it also works for the body heat:

4) Consider the Swedish firm’s profit-maximising price and output. The new heating method is said to reduce their costs – will it affect their average and/or marginal costs? Show the impact on a diagram. What happens to the firm’s profits?

Yes it will but i cannot really draw any diagram on this thing.

5) Is this heating method something other firms could benefit from? How could they decide whether it is cost-effective?


It can be used to heat every building, providing that enough people will pass through it. It works best, however, when the outside temp. is relatively low and the gas price high (as in the case of cold and expensive Sweden).

6) Is there a role for the government to encourage more firms to use this method? Explain your answer.


Definitely yes. It might be an efficient alternative to gredually more expensive and unrenewable oil. This technology should be developed, mainly due to its simplycity. People just need to be in a building and the rest is going to do itself. I might also be a good idea to instal such a energy creator in places, where people generate more heat. For example gyms.

Wednesday homework:

1) Outline the measures agreed at the eurozone heads of government summit on 21 July.

• Greece, Portugal and Ireland will have the interest rate on the money borrowed from the European Union cut to 3.5%.
• An agreement by private-sector creditors to accept a writedown on their Greek debt.
• Boost economic growth in Greece, with the deployment of "structural funds" under a European "Marshall Plan". The members said they would "mobilize all resources necessary in order to provide exceptional technical assistance to help Greece implement its reforms".

2) Explain what is meant by a ‘haircut’ in the context of debts. What types of haircut were agreed at the summit?

Haircut  – the private financial sector to offer facilities such as bond exchange, rollovers and buybacks "on conditions comparable to public support" but on a voluntary basis

3) How big a reduction in Greece’s debt stock will result from the deal? Why may it not be enough?

"More than expected but not enough to make us sleep comfortably" - According to some Berclay specialists the deal lacks of details in areas like private sector involvement for Greece and collateral requirements. Also, the overall project will not be sufficient until the whole debt of PIGS will decresase, which suggest that the case of Greece cannot be solved without a greater action in Southern Europe economy.

4) Explain how the European Financial Stability Facility (ESFS) works? How will this change as a result of the agreement?

EFSF is authorised to use the following instruments linked to appropriate conditionality:

• Provide loans to countries in financial difficulties
• Intervene in the debt primary and secondary markets. Intervention in the secondary market will be only on the basis of an ECB analysis recognising the existence of exceptional financial market circumstances and risks to financial stability
• Act on the basis of a precautionary programme
• Finance recapitalisations of financial institutions through loans to governments

To fulfill its mission, EFSF issues bonds or other debt instruments on the capital markets.

The main change after the agreegement is that the interest rates for Greece were lowered to 3,5% .

Also the EFSF will be allowed to "intervene in the secondary markets". It may fund "recapitalisation of financial institutions through loans to governments including in non programme countries", code for Italy and Spain. The full weight of the German-led creditor bloc will stand behind south Europe's banking system.

5) What vulnerabilities remain in the eurozone?

The overall economic crisis. Economies of all eurozone are at the slow dow, in terms of the GDP growth. Some other, major eurozone countries are getting closer to the bankrupcy line, for example, Italy. The national debts are simply to high.

6) What are the arguments for closer fiscal union in the eurozone? Is more required than merely a return to the Stability and Growth Pact?

The main arguement is that closer fiscal integration will prevent net crises to so easily appear. When each country's finances were more severely controlled, states would not be able to run into massive debts anymore. The natural trade-off is a certain decrease of member state's soveregnity. 

Ed Balls's plan:

Ed Balls, a shadow chancellor in Ed Miliban's SC proposed a Labour economic plan, which aim is to boost British economy.

• slashing VAT to 5% for home improvements and a one-year small firms national insurance tax holiday for taking on extra workers.
• reversing VAT rise from 17.5% to 20% and promised a repeat of this year's bankers' bonus tax, using the money to guarantee 100,000 jobs for young people and building 25,000 affordable homes.
• bringing forward genuine long-term investment projects covering schools roads and transports

There was no costing for his overall proposals but his aides said the targeted VAT cut for the housing industry would cost between £100m and £500m, adding similar targeted VAT cuts were being tried in France. The national insurance holiday for small business taking on extra staff would be funded from money left over from the government's failed national insurance rebate fund. Ministers had originally set aside £1bn for this fund.
(by guardian.co.uk)

another essay

Analyse what other difficulties the leaders of parties in Opposition are likely to encounter.

Being in the opposition is certainly uneasy for the political leader. After a defeat in the elections he has to face many difficulties in the party and patiently wait for the next, in order to gain power.

The major problem for the opposition party leader is to sustain the leadership. It is the leader who takes responsibility for party result, so after a defeat many of his fellow party members may question his competences and try to replace him. That is what happened in 2010, in the Labour Party, where after a defeat Gordon Brown was replaced with Ed Miliband.

Especially after a high defeat the morale in the opposition party may be low. It may lead to wide conflicts inside the party or even withdrawals of some members. An example of this may be the 1997 elections, when the Conservatives, under the leadership of John Major were virtually destroyed by Blair's New Labour. After that Major had resigned and the Conservative Party remained in opposition until 2010. In such a situation leader has to remain strong, reorganize his people, start to expose the governmental weaknesses and do everything to prevail in the next elections.

The leader of the opposition party needs to form a Shadow Cabinet. It is an equivalent of the cabinet, where the opposition proposes counterparts for each of the current Minister. It is a difficult task, because when the Shadow Cabinet members are not as competent or as popular as the real Cabinet members, they may actually damage the image of their party.

Being in Her Majesty's Loyal Opposition is definitely not a dream of any party leader. It has many difficulties and little privileges. Leader of the opposition party has to not only fight with the government leader, but also with his fellows, who want to overthrow him. 

essay homework

Direct democracy is back in fashion, seen as a way of restoring trust in politics. But are the referendums a bad idea?

Direct democracy is the oldest form of this political regime. It was born in 5^th century before Christ.

It is direct, which means that people get in one place and decide. It is unmediated – all the people are the government and a separate political class does not exist and continuos, which means that people regularly engage in political life. Today the most common form of direct democracy is the referendum, but is this form of political participation a good or bad idea?

Referendums might have a positive impact on the society, when they are a result of a longly built consensus for a particular case. An example can be the 1997 devolution referendum for Scotland, Wales and Ireland, which gave these countries some political autonomy. Scotland established a National Parliament and Wales and Ireland established their National Assemblies. This result united peoples and strengthened their national identity.

Referendums may also improve the political education and awareness in the society. When people, by the referendum, are given some more power, there is a chance that they will learn about the voted issue. For example, in 2003 there was a EU accession referendum in Poland. At first the society had been sceptical, but a massive information campaign were organised and people realised that the accession was beneficial for Poland and eventually agreed. It clearly shows that referendum is an opportunity for the people to acquire a lot of useful knowledge.

On the other hand, the idea of referendum lowers the responsibility of the governments. Letting people to decide might be used by the politicians as a way to avoid consequences. For example, a referendum in the controversial cases such as abortion or euthanasia it is comfortable for the politicians not to expose themselves on conservative people criticism by voting pro or liberal people criticism, by voting contra.

To many referendums in important issues may also destabilise the political scene. In the California for example, constant recalls and referendums made many people redundant, many hospitals bankrupt and civil liberties threatened. It shows that in some cases ,where the expert knowledge is required, masses simply are not competent enough to make right choices.

The institution of referendum certainly has some advantages. It may unite the people and improve their knowledge. On the other hand, giving people too much power leads to destabilization of the system. Therefore, I conclude that the referendum should be used only in some general cases, such as EU accession or devolution. In other cases, people should leave the decision to the experts.  

Monday Homework:

1) What information failures are there in the market for higher education places?

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?

3) Apart from externalities and information asymmetries, what other market failures

apply to the market for student places in HE?

4) 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?

5) What is the best way of tackling the problem of unequal access to higher education?

I am deeply sorry but I do not understand these questions at all.