Category: Essential Economics for Business 7e
A recent report from the Office of Fair Trading has argued that the NHS may be paying up to £500m too much for branded medicines for drugs companies and has recommended reforms to the system. The Pharmaceutical Price Regulation Scheme (PPRS) sets a cap on the profits that any drug company can earn on branded medicines from the NHS and the OFT is recommending changes to the system. They argued that there are “a number of drugs where prices are significantly out of line with patient benefits”.
NHS ‘spending £500m a year too much on drugs’ Guardian (20/2/07)
NHS paying too much for drugs BBC News Online (20/2/07)
Drugs giants to be told to ‘cut prices for NHS’ Times Online (20/2/07)
NHS ‘overspending by millions’ on drugs Telegraph (20/2/07)
Drugs price fixing scheme costs health service millions, says OFT Guardian (20/2/07)
Drugs buddies Guardian – comment is free blog (20/2/07)
Prescribing prices BBC News Online – Robert Peston blog (20/2/07)
Questions
| 1. |
Explain the way in which prices for branded drugs are determined. |
| 2. |
Assess the extent to which the PPRS represents a price-fixing scheme. |
| 3. |
Discuss the policies that the government could put in place to implement the OFT recommendations. |
Have you ever had a drink or packet of peanuts from a hotel minibar and then regretted being tempted when you saw the price on checkout? If things like minibars and internet access are so over-priced in hotels, then how can they get away with it? Why do people pay these amounts and what can economics tell us about this pricing behaviour?
Minibar economics MSN Slate (17/2/07)
Questions
| 1. |
Explain the reasoning behind hotel pricing strategies for rooms and minibars. |
| 2. |
Discuss the impact of competition on hotel pricing strategies for rooms and extras like minibars and internet access. |
| 3. |
Examine the reasons why more companies do not do “advertising campaigns boasting about their what-you-see-is-what-you-get pricing”. |
Since the 1970s and 1980s we have moved away from an active exchange rate policy as part of an overall demand management strategy. Indeed, by the mid 2000s, even the role of fiscal policy in demand management had diminished. The article below looks at these changes and considers whether this new approach to demand management is proving effective.
It’s a fashionable club but can the MPC keep us out of the rough? Guardian (11/2/07)
Questions
| 1. |
Explain how the approach to management of the economy has changed over the last three decades. |
| 2. |
Assess the problems that might arise from trying to manage the economy using just one policy instrument (i.e. interest rates).. |
| 3. |
Explain what is meant by an exchange rate policy. Discuss whether the reintroduction of an exchange rate policy would help with the management of the economy. |
As part of its Target 2.0 competition for students, The Times published a series of briefings looking at the factors that cause inflation. The one linked below considers the role of labour markets in determining inflation.
Interplay of work and inflation rate Times Online (2/2/07)
Questions
| 1. |
Explain the key determinants of the equilibrium level of wages in the labour market. |
| 2. |
Assess the role of equilibrium labour market wages in the determination of the level of inflation. |
| 3. |
Discuss the extent to which the NAIRU is still a relevant theory when considering the determinants of inflation. |
January 2007 saw unseasonably cold weather in California and the big freeze that occurred may have destroyed up to 70% of the Californian orange crop. Prices as a result of oranges are likely to treble in US shops. The impact on prices elsewhere in the world may be less, but is still likely to be significant as California is an important area in global terms. Oddly the price of orange juice is unlikely to be affected as very few of the Californian oranges go for turning into juice. The majority of oranges for juice are grown in Florida.
Questions
| 1. |
Using supply and demand diagrams as appropriate, explain the impact of the freezing weather in California on the world price of oranges. |
| 2. |
Using supply and demand diagrams as appropriate, compare and contrast (a) the change in the price of oranges and orange juice and (b) the change in the price of oranges in the USA and the rest of the world.. |
| 3. |
Examine the likely impact of the cold weather in California on prices of other foods. |