US jobless figure climbs above 10 per cent
It perhaps has a political significance greater than its marginal economic impact - but when one worker in ten is out of work, an economy truly is on the verge of mass unemployment. The US economy is showing signs of a rebound in demand and production but the labour market data continues to show the depth of the preceding slump. Over eight million Americans have now lost their job since the start of the recession in December 2007, with more than 15m Americans now out of work. Here are some links to coverage of this news.
Guardian: US jobless rate hits 10%
Independent: Sharp rise in US unemployment figures
•AS Macro - •Credit Crunch - •Unemployment - •US Economy -
Tags: recession, unemployment, employment
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Cash is the enemy of creativity!
The Founder and CEO of King of Shaves, Will King gave an engaging and dynamic presentation to a large audience of economics and business students at our Entrepreneurship Society last night. The UK sales figures for the new Azor razors are quite remarkable and are testimony to the impact that this challenger brand is having on a monopolistic/duopolistic market. In the past four weeks in the UK KoS has sold 107,000+ Azor system razor handles and 602,000+ Azor Endurium cartridges.
Conventional MBA theory would suggest that the barriers to entry are just too high for a new firm to dislocate and disrupt the cosy market power of Gillette and Wilkinson Sword. The razor remains of the most patent protected products in the world and the billions of blades sold each year (at profit margin of over 90 per cent) represent an enormous cash cow for the US shaving giants. But easy cash can often stifle genuine creativity. The momentum of passionate and persistent challenger brands who truly understand the web and who talk to customers in a different way can make a big difference. The big Mo is with King of Shaves and it is easy to see why!
Will reports on his visit here
Our next meeting (Thursday 12th November) focuses on global economics and is with Paul Donovan, Chief Economist of UBS.
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•Teaching of Economics -
Tags: economics, entrepreneur, duopoly, eton college, will king, king of shaves, gillette, entrepreneurship society, wilkinson sword
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Caffeinated stimulus to demand
Coffee shops seem - by and large - to be surviving the recession and, in many cases thriving. The number of independent coffee stores has grown by more than 7% in the last year. Across the country hundreds of new stores have opened. This doesn’t make coffee an inferior good - whose demand rises as real income falls. Instead there are stronger forces at work, for example the rise of the nomadic entrepreneur who prefers to work away from expensive offices. Hugh Pym provides an overview of the strength of retail coffee demand in this piece from BBC news. London has the highest concentration of coffee stores in the UK followed by Edinburgh.
Not every brand is enjoying the same performance. Costa Coffe which has 974 stores in the UK has reported like-for-like sales growth yesterday of 2.5 per cent in the six months to the end of August.
Caffè Nero, which has almost 400 UK outlets, is believed to be trading at a similar level to Costa, although Starbucks has like-for-like sales down by an estimated 4.5 per cent to 5 per cent in recent months. Brand fatigue in action.
•AS Micro - •Business Economics - •Competitive Markets - •Market Equilibrium and Price - •Nature of Demand - •Price Mechanism in Action -
Tags: recession, entrepreneur, coffee
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Tim Harford at the Keynes Society
We are delighted to have the Undercover Economist Tim Harford returning to the Keynes Society on Thursday 19th November at 8-45pm in Upper School. Hot on the heels of his hugely successful books The Undercover Economist and The Logic of Life, Tim has made a timely and swift return to the top of the book charts with Dear Undercover Economist: The Very Best Letters from the “Dear Economist” Column: The Undercover Economist Solves Life’s Everyday Mysteries and Problems. Tim’s ability to connect with his audience and make Economics appealing, relevant and thought provoking is well established - it should be another super evening. A warm welcome is extended to teaching colleagues. We are likely to be pretty full for this meeting so if you are coming and plan to bring some students.
Tags: economics, tim harford, logic of life, undercover economist
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Paul Donovan at the Keynes Society
On Thursday 12th September we are delighted to welcome Paul Donovan, Chief Economist of UBS to speak at the Keynes (Economics) Society. Paul is a very highly rated city economist and a tremendous speaker. It should be a terrific opportunity to take the pulse of where the global economy is at this crucial stage of the cycle and just fifteen months after the meltdown in financial markets. A warm welcome is extended to teaching colleagues for this meeting. Please if you would like to come and if you plan to bring some students along. The meeting starts at 8-45pm in the Egerton Room, Eton and lasts one hour.
Sub-prime carbon - government failure?
This will be a teaching topic I return to in the spring, but Radio 4 today carried an excellent report by Roger Harrabin from the BBC on criticisms of the EU’s carbon trading scheme. The report focuses on new research from Friends of the Earth that is highly critical of the emissions trading scheme. “FoE says most trades are done not by polluting industries, but by speculative traders packaging carbon credits into complex financial products similar to those which triggered the sub-prime mortgage crash.” More here from Friends of the Earth which included a link to their report (in pdf format).
Here is the link to the Radio 4 discussion - CEO of the European Climate Exchange Patrick Birley and the author of the FOTE report, Sarah Jane Clifton, discuss the rise in the carbon trading market.
•AS Micro - •Cost Benefit Analysis - •Environmental Economics - •European Economy - •Government Intervention - •Government Failure - •Teaching of Economics -
Tags: carbon trading, government failure, european union, carbon tax, emissions trading, pollution permits, friends of the earth
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Judging the impact of QE
The BBC carries this interesting video discussion with De Anne Julius about the impact of the Bank’s Quantitative Easing programme designed to support demand and lending in the UK economy. She emphasises the importance of gradually withdrawing the QE programme and she argues that the main effect of QE so far has been to hold down the interest rate on government debt (gilts) but that there is little evidence so far that QE has enabled a rise in lending to consumers and small businesses. The Indy’s Big Question looks at QE in their edition today.
read more...» •AS Macro - •Credit Crunch - •Cycles and Shocks - •Monetary Policy - •Recession Watch! - •UK Economy -
Tags: demand, debt, banks, bank of england, quantitative easing, roger bootle, david smith, gilts, government debt, bank lending
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Job Vacancy - Economics Teacher at Tonbridge School
Thanks to Dr John Richards for letting us know about a new job vacancy for an Economics Teacher to join the successful department at Tonbridge School. Details have just been put on the Tonbridge website here. Again, please don’t forget to mention that you heard about the job from tutor2u - it helps Tonbridge identify the source of applications.
Stimulating Times
I was drawn to this very interesting graphic from the latest IMF report on the state of government (fiscal) finances in countries around the world.
read more...» •AS Macro - •Credit Crunch - •Cycles and Shocks - •Fiscal Policy - •Keynesian Economics - •Teaching of Economics - •UK Economy -
Tags: demand, china, investment, confidence, incentives, fiscal stimulus
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The economist’s new clothes
This superb article from Stephanie Flanders provides a great discussion in her Stephanomics blog on the discipline of Economics from the view of some big hitters including Scholes (of Black-Schole options fame); Charlie Bean (of Bank of England fame); Lord Skidelsky (of Keynes fame); and Thaler (of Nudge fame).
Investment - Teacher Presentation
This revision presentation is ideal for AS Macro students who wish to build their knowledge and understanding of the important topic of investment and its role in driving macroeconomic performance. The presentation stays clear of AD-AS or PPF diagrams as we cover this analysis next - I will post a second presentation on applying investment to the AD-AS framework sometime next week.
Launch interactive presentation on the economics of investment
Download printable pdf (slides)
•Cycles and Shocks - •Aggregate Demand - •Capital Investment - •UK Economy -
Tags: investment, infrastructure, working capital, accelerator effect, capital stock, fixed capital
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Unemployment & the UK Labour Market - Teacher Presentation
This updated revision presentation examines the key issues involved with rising unemployment in the UK labour market. It looks at new data on the causes and consequences of UK unemployment and also touches on the regional, gender and other differences in the experience of unemployment - there is a set of right up to date charts on these aspects.
Launch interactive presentation on UK unemployment
Download printable pdf version of the slides
•AS Macro - •Labour Economics - •UK Economy - •Unemployment -
Tags: unemployment, employment, labour force survey, claimant count, frictional, structural, cyclical, jobless
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Job Vacancy - Head of Economics at Oundle
We are always happy to support requests from colleagues to highlight relevant job vacancies - and here is a cracker. There is a vacancy for Head of Economics at Oundle School…
read more...»Rated: (5/5), based on 6 reviews
GlaxoSmithKline and Pfizer choose to collaborate on HIV drugs
Here is an excellent highly relevant article on cooperative behaviour between oligopolistic giants. Two of the world’s biggest drugs companies GlaxoSmithKline and Pfizer have announced a plan to merge their HIV treatments in a joint venture. ViiV Healthcare is an attempt for both companies to limit the risks of costly races to find new profitable treatments for HIV/aids and give them an opportunity to counter the loss of the revenues as these companies lose patent protection and are open to competition from generic drug makers. It is a strong reminder of the very high fixed costs of research into new drugs; the long lead times between new drug development, testing and finally getting it to the market. And also the impact of the entry of generic drugs into markets once patent protection runs out. The new company has a 19% share of the global drugs market, in comparison to the Californian company Gilead’s 31%.
Drug firms’ collaboration pools HIV treatments (Independent)
IPO of HIV business is ‘up to shareholders’ (Telegraph)
•Business Economics - •Oligopoly - •Teaching of Economics -
Tags: competition, risk, costs, profit, oligopoly, joint venture, patent, pfizer, collaboration, glaxosmithkline
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Newsmap
For those of you who are “visual learners” or have a predilection for seeing things visually rather than in a long list of text hyperlinks, (or indeed don’t have time or the inclination to spend time sifting through the plethora of news articles in any given day) this neat website offers a different way of catching up on the hot stories of the day. You can tweak the settings to focus on Business news from your particular country
RBS Lloyds sell-off
The UK market has fewer bank brands than most other countries and choice has fallen in recent years after the Spanish bank, Santander bought up Abbey, Alliance & Leicester and Bradford & Bingley, and Lloyds has taken over all of HBOS’s brands. However, as per a ruling from the European Commission, RBS will sell 318 branches while Lloyds will dispose of more than 600 branches over the next four years.
read more...»Rated: (3/5), based on 4 reviews
•Business Economics - •Competitive Markets - •Oligopoly - •Government Intervention - •Regulation -
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Economics Revision Workshops - December 2009 (Fulham, Birmingham, Manchester)
The session titles for the popular AS & A2 Economics revision workshops in December 2009 are outlined below. Each one-day workshop has a distinctive micro flavour (focusing on Unit 1 / Unit 3) of the three main Econ exam boards. Bookings are still being taken, though I think we’re pretty much full for AS in London already - so please send your details in as soon as possible.
AS Economics Workshop
Session 1. Essential market mechanism
Session 2. Core business economics
Session 3. Market failure basics
Session 4. Market failure extras
Session 5. Government intervention
Session 6. Success in AS Economics with great exam technique
A2 Economics Workshop
Session 1. Growth and objectives of firms
Session 2. Economies & diseconomies of scale
Session 3. Monopoly and oligopoly
Session 4. Barriers to entry & contestable markets
Session 5. Regulating markets
Session 6. Mastering examination technique at A2
Johannes Huth at the Management Society
Johannes Huth, Manager of KKR’s Operations in Europe will be speaking at our Management Society this Wednesday at 8-45pm in Upper School. His topic is “Mergers and Acquisitions”. A warm welcome is extended to all teaching colleagues who might want to come to the meeting.
Will King at the Entrepreneurship Society
The Founder of King of Shaves Will King speaks at our Entrepreneurship Society this coming Thursday at 8-45pm in the Egerton Room. All student places have been taken but a warm welcome is extended to any teaching colleagues who might want to come to the meeting.
John Eatwell at the Keynes Society
Cambriddge economist Lord Eatwell is speaking at our Keynes Society this Thursday evening at 8-45pm in Upper School. Teaching colleagues who are in the vicinity and who might like to come are extended a warm welcome.
Flexible taxation
A report in Monday’s Times examines the way in which local councils are trying to avoid increases in council tax bills over the next year.
Focusing on London councils, it is expected that on average council tax bills will be frozen, with a number of councils actually reducing local tax bills for residents. This is due in part to low inflation, but also to the local elections in London which will take place next May acting as an incentive for councillors to reduce the burden on their electors.
read more...»Rated: (3/5), based on 2 reviews
•Fiscal Policy - •Government Intervention - •Standard of Living - •UK Economy - •Regional Economics -
Tags: council tax, local government, burden of taxation
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Perfect Competition - Teacher Presentation
This revised PowerPoint presentation will help take students through the model of perfect competition. Links within the presentation encourage students to explore further by accessing relevant blog posts and video resources.
Launch interactive version of Perfect Competition presentation
Download printable pdf version (slides)
Rated: (3/5), based on 4 reviews
•Business Economics - •Competitive Markets - •Market Equilibrium and Price - •Teaching of Economics -
Tags: competition, market structure, perfect competition, economic efficiency
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Super cruisers and the law of increased dimensions
Graphically illustrated in this short piece from the Telegraph!
•AS Micro - •Business Economics - •Economies of Scale -
Tags: costs, law of increased dimensions, container principle, super cruiser
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Hot wiring the brain to pay off more debt
This report for Radio 4’s Money Box programme is a superb example of behavioural economics in action and in particular the anchoring effect. Researchers have found that by putting a small minimum required payment at the bottom of credit card statements, people’s brains are wired to pay less back than if no such minimum was posted. The result is that debt takes many years more to repay and the accumulated interest to the lender is naturally much higher. Offering low minimum repayments each month seems seems intuitively to benefit the borrower - making the servicing of debt appear more manageable on a month-by-month basis. But the anchoring effect in fact lifts the profits of finance houses.
Anchoring describes the human tendency to rely to heavily or ANCHOR on a trait or piece of information in particular. Natural human nature is to rely to heavily on certain pieces of information and then adjust to that piece of information to account for other elements of the circumstance.
When a price anchor is established for a product, it serves as a reference price for all similar products and substitutes. For example, when bread-makers were first introduced to consumers in the USA at a retail price of $275, consumers were not prepared to buy them. However, when a similar product was priced at $400, consumers flocked to buy the $275 bread-maker because they perceived it to be available at a bargain price. This was because their price anchor had shifted from $275 per bread-maker to $400. Anchoring a price for a good or service at a higher level helps to attract consumers to products priced below the level of the anchor.
Rated: (3/5), based on 3 reviews
•A2 Micro - •Behavioural Economics - •Teaching of Economics -
Tags: price, profit, debt, compound interest, anchoring, credit cards
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OFWAT plans to turn the tap on water company prices
The Times today has an interesting article on the power battle between the water industry regulator OFWAT and the regional monopoly providers such as Thames Water. It appears that a much tougher pricing regime is planned for the utilities leading to cuts in the real price of water supplies for consumers.
“Every five years, Ofwat sets limits on prices that water companies in England and Wales can charge. For 2010-15, it has proposed that, before taking inflation into account, bills should be reduced for many customers, bringing the average annual water and sewerage bill down by 4 per cent from £344 to £330 by 2015. The water companies had wanted a £28 rise to fund their business plans.”
OFWAT wants the utilities to invest more in in improving drinking water quality, cutting leakage levels and raise the number of metered households from 36 per cent to 50 per cent (in a bid to control water usage). But will imposing real price cuts help achieve this objective? The aim is to have a pricing regime that forces the utilities to raise productivity and cut out as many inefficiencies as possible.
Water is a good example of where a strong regulator is needed because of the absence of competition - after all consumers can’t switch supplier if they are given a poor service.
•Business Economics - •Monopoly - •Government Intervention - •Regulation -
Tags: inflation, price, monopoly, price capping, ofwat
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Economics in the News Quiz - 2 November 2009
The first weekly Economics quiz after half-term. Were you keeping up-to-date?
Launch interactive version of Economics in the News 2 November 2009
Download printable pdf handout version
Download SCORM-VLE import file
Monopoly and Entry Barriers - Teacher Presentation
This updated presentation provides an overview of the role of barriers to entry in protecting the position of a monopolist.
Launch interactive version of presentation
Rated: (4/5), based on 1 review
•Business Economics - •Competitive Markets - •Monopoly -
Tags: monopoly, entry barriers
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Economics of Saving - Teacher Presentation
This revision presentation examines recent data on the extent of saving in the UK economy.
Launch interactive presentation on the Economics of Saving
Download printable pdf of slides
•Credit Crunch - •Cycles and Shocks - •Aggregate Demand - •Saving - •Monetary Policy - •UK Economy -
Tags: saving, disposable income, savings ratio, paradox of thrift, dissaving
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UK Recession and Business Capacity - Teacher Presentation
This streamed presentation provides a snapshot of the latest economic data on UK business capacity. The slump in output in the British economy has left many businesses and industries with a huge amount of spare capacity and the negative output gap is expected to grow beyond 6% of GDP in 2010 according to the OECD. A high level of spare capacity (or productive slack) has important consequences for jobs, inflationary pressures, planned investment and business profits.
Launch interactive presentation on Recession & Capacity
•Cycles and Shocks - •Aggregate Demand - •Capital Investment - •Aggregate Supply - •Labour Economics - •Recession Watch! - •Teaching of Economics - •UK Economy -
Tags: recession, capacity, stocks, spare capacity, output gap, productive slack, potential gdp, capital investment, destocking
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Guardian’s World Economic Cycle Guide
This is a fascinating time for keeping up to speed with where regions and countries are in their business cycles. The UK seems to be one of the laggards - Stephanie Flanders explores some of the reasons here - whereas the USA is tentatively starting a recovery. And demand and output in many emerging market economies remains strong. Click here for the Guardian’s interactive guide to the world economic cycle.
•AS Macro - •Credit Crunch - •Cycles and Shocks - •Global Economy - •Recession Watch! - •UK Economy -
Tags: demand, usa
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