Essay: Economic Growth in the UK

Sample Essay

Economic Forces: After experiencing a contraction in the final quarter of last year, economic growth in the UK has picked up, but still remains weak, with quarterly growth forecasts estimated at between 0.4% and 0.6%. Full year growth forecasts range from between 1.5% and 2.2% (Thomson Reuters, 2011).  Given that the smartphone is a discretionary product, the improvement in economic conditions should signal a rise in the demand for smartphones, but that demand may remain slightly subdued due to the fairly weak economic conditions.

According to Thomson Reuters (2011), The Bank of England is also on course to increase interest rates, which have stood at historical lows of just 0.5%. This reflects a contractionary monetary policy. A rise in interest rates should lead to a higher cost of borrowing for businesses (smartphone manufacturers and dealers included) and individual consumers, which may subdue the demand for smartphones in two ways: by raising their prices as businesses pass the increased cost of borrowing to consumers, and by reducing individual consumption of discretionary products as individuals unable to borrow at the higher rates choose to do without products such as the smartphone.

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