Emerging markets drive demand for oil

A neat graphic on The Economist website this week helps illustrate the rapid economic growth of emerging markets such as India & China.  It breaks down the historical demand for oil from the key economies, highlighting the changes between 1980 and the latest forecasts for 2030 by the International Energy Agency.  The oil market is a good example to use when illustrating the dynamics of changing supply and demand on market prices.  And there is a good discussion to have with students about why an emerging economy such as China, Malaysia or India would experience such a significant increase in demand for oil (rapid industrialisation; wider car ownership etc)

Q&A - How are businesses affected by unemployment?

Businesses are affected in a variety of ways depending on whether unemployment is high or low, and rising or falling.

Q&A - Explain what unemployment is and how it is measured

Unemployment arises when the supply of those making themselves available for work is greater than the demand for workers.  Unemployment is, therefore, the excess supply of labour in the labour market.

Demand and supply in action - tea prices surge

The new Edexcel GCSE Business Unit 1 specification encourages students to look at commodity markets to develop their understanding of how demand supply interact to determine market prices. 

Here is an excellent example of how two significant shifts in the demand and supply curves can affect the global price of a commodity. Failing crops and surging demand for tea is pushing prices higher.

As a leading exporter of tea, Keyna is benefitting from the surge in prices, after suffering from higher production costs in recent years.

Banks lend more and charge more at the same time

Commercial loans and overdrafts and other forms of credit for businesses are hugely important to sustain businesses fighting a recession or those in better shape and looking to expand. It is a truism that the UK economy will not engineer a durable recovery unless the international financial and economic backdrop improves. Increasing the availability of bank lending especially to small and medium-sized enterprises is another essential building block to an upturn in output and jobs.

In this sense the news that Barclays has lent £17 billion to UK households and business in the first half of 2009 - already outstripping the £11 billion target it set for the whole of 2009 - is welcome. But that figure hides the actual cost of servicing loans. Even if a business can maintain an overdraft facility or gain access to fresh credit, it is likely to be paying more for the privilege. The cost of debt can be as important as the supply. Here is a good video on Rhino Rugby a manufacturer of equipment for the rugby industry.

Given that thousands upon thousands of smaller businesses use credit cards as a way of tiding them over from month to month (something the business studies textbooks and exam boards seem strangely reluctant to recognise despite overwhelming evidence), it will come as little comfort to entrepreneurs to be paying upwards of 40 times base rate (policy rate) for their loans.

Workforce planning - getting ready for swine flu

The swine flu pandemic has the potential to cause substantial disruption to the operations and workforces of many businesses - large and small.  Forget the media hysteria.  Employers around the UK are now being given direct advice on how to prepare for the potential storm…

Q&A - Explain the causes of inflation

There are two main causes of inflation:
• Demand-pull (when there is excess demand), and
• Cost-push (when costs rise)

A booming rental market – for car parking spaces

It’s enterprising, practical and meeting a need for both buyers and sellers: increasing numbers of homeowners are renting out their driveways and garages to commuters who are fed up with overpriced and crowded car parks.  There’s an interesting article and video clip about firms springing up to link frustrated drivers with parking landlords. 

Video case study - German Car Industry

This video would be really useful when teaching the importance of the supply chain (working with suppliers) and when considering the knock-on effects on demand of the economic downturn.  It describes how three major suppliers to the German car industry have been affected by the significant global reduction in demand for new cars experienced by the likes of Volkswagen, BMW and Audi.

Download student worksheet (including video link)

Q&A - What are commodities and how are their prices determined?

A commodity is a product for which there is demand and which is supplied without any clear difference in product quality or standard. 

An important feature of a commodity is that its price is determined as a function of its market as a whole – by the interaction of market demand and market supply.