The UK recently reported strong GDP growth of 2.

8% in 2023, outpacing most other

developed economies. However, unemployment also rose to 5.2% in December from 4.9% the
previous month, the highest level in over a year (Source: Office for National Statistics).
Consumer confidence declined for the third consecutive month, with the key index falling to -
15 in January 2024 from -12 in December 2023 (Source: Market Research Consumer
Sentiment Survey, January 2024).

Using the data provided, discuss the relationship between economic growth,
unemployment, and consumer confidence in the UK. How might rising unemployment
impact consumer confidence and future GDP growth?"

The unemployment rate is the number of those actively seeking work divided by the total
amount of labor force x 100. Given that the unemployment rate has risen by 0.3% in the last
month, more people are unemployed. Despite this, the GDP has still risen by 2.8%. This could
be due to the improving economy causing more people to start searching for work given that it
seems more likely that firms would employ more labor during times of economic boom.
Therefore while the actual number employed does not increase, the labor force does which
would increase unemployment rate. Factors such as cheaper wages or new technological
advancements means that firms are able to employ more, which boosts economic efficiency and
therefore means that resources are used more efficiently. This shifts AD right, which causes real
output to increase, which is apparent in the 2.8% growth.

However, while the economy is growing, consumer confidence is still falling. Consumer
confidence is related to consumption and how likely a consumer is going to save or spend
depending on economic factors such as inflation, interest rates and job security. Consumer
confidence is down by 3 points which suggests that this growth could be led by inflation and
therefore consumers could be uninformed about the future and want to save more and consume
less in preparation for higher inflation in the future. Assuming the growth seen is nominal, and
therefore not adjusted for inflation, high inflation is usually met by high interest rates which
further supports the idea that consumers are saving for the future by saving more than spending
now.

To conclude, the rising unemployment rate alongside rapid GDP growth and declining
consumer confidence paints a complex picture of the current state of the UK economy. While
GDP continues to expand at a relatively robust pace, the gains may be predominantly driven
by inflation rather than real output gains. Both the Market Research Consumer Sentiment
Survey and stagflationary figures suggest that there are underlying weaknesses to the UK’s
economy, despite the steady growth.

The price of lumber recently soared over 50% in a one-month period according to
industry data, reaching record levels (Source: National Association of Home Builders).
Lumber is a key component of new home construction. Evaluate what is likely
happening in the lumber market by creating and analyzing supply and demand
diagrams. Estimate whether demand for lumber is elastic or inelastic at current
prices based on principles of price elasticity. Finally, predict and justify what may
happen to the price of lumber over the next 6-12 months using economic theories
related to pricing mechanisms in inefficient markets."
We havent done inefficient markets so we cannot predict what will happen but you initially you
can talk about how price is inelastic as companies are raising prices and the total revenue is
increasing due to them continuing their price increases This is probably happening due to
demand or due to a supply chain shock ie agriculture in Ukraine causing a left shit in supply.