Context for question 1
Source material: The economy of the Isle of Man
| Isle of Man fact file | 2022 |
|---|---|
| gross domestic product (GDP) | $7.0bn |
| insurance industry share of GDP | 18.0% |
| GDP growth rate | 10.3% |
| unemployment rate | 0.7% |
The Isle of Man is an island located between the United Kingdom (UK) and Ireland. Its geographical location has helped to attract foreign labour and capital. In 2022, it had a very low unemployment rate and high GDP growth rate. The island has the same monetary policy as the UK but sets its own fiscal policy. Some fiscal policy measures have attracted many insurance firms to operate on the island.
The Isle of Man is set to generate as much as 75% of its electricity from renewable sources by 2026. A higher percentage of renewable energy generation may reduce pollution and affect health and life expectancy. In addition, energy costs could also decrease which will affect secondary sector firms such as food processors. Table 1.1 shows the percentage of energy obtained from renewable sources and life expectancy in selected countries in 2021.
| country | percentage of energy from renewable sources | life expectancy (years) |
|---|---|---|
| Bangladesh | 1.6% | 74.3 |
| Timor-Leste | 0.4% | 69.5 |
| Iceland | 100.0% | 83.0 |
| Isle of Man | 5.0% | 80.5 |
| Luxembourg | 85.0% | 82.8 |
| Oman | 1.9% | 72.5 |
Goods are transported to and from the island by air or sea. The government has increased spending to improve the airport and move the economy’s production possibility curve (PPC). The increased spending was used to increase the number of employees and improve the airport building. This has affected the number of flight cancellations. However, some airport users are still not satisfied. Some industries are also dissatisfied as the government is not funding projects which affect these other industries directly.
Firms deciding whether to invest in the Isle of Man consider several influences including the level of demand and labour availability. The market for goods and services on the island is very small. However, there is free trade with neighbouring countries. Foreign workers are attracted by the low cost of living in the Isle of Man. However, some workers stay for only a short period of time before moving to jobs elsewhere.