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Here is a planned answer to this Unit 1 question
“Explain how a producer cartel might affect the supply, market price and output levels of a commodity as well as total revenue for producers”read more...»
On Monday 2nd April 2012 a landmark resolution (number 65) is before the United Nations General Assembly. Bhutan has a population under 800,000, the average income is about $110 per month - low enough for the vast majority of people in Bhutan not to have to pay taxes. The fledgling Bhutanese constitution requires that at least 60% of the country remains under forest cover forever and its stated policy is to be 100% organic in its agricultural production. Major progress has been made in achieving rising per capita incomes, reduced infant mortality, higher life expectancy and a rising percentage of females in education.
Resolution 65 states that “happiness is a fundamental human goal and universal aspiration; that GDP by its nature does not reflect that goal; that unsustainable patterns of production and consumption impede sustainable development; and that more inclusive, equitable and balanced approach is needed to promote sustainability, eradicate poverty and enhance well-being”.
The passing of resolution 65 is a small stepping stone towards a wider recognition that ecological sustainability, equity, and life satisfaction are being given great emphasis in global politics. But whether gross national happiness (GNH) will ever substitue Gross National Income as one of the default measures of economic progress is doubtful.read more...»
Why is the distinction between fixed costs and variable costs not always clear?read more...»
What are index numbers and why do economists use them?read more...»
Adam Posen is a member of the Monetary Policy Committee featured in Extract 1 of the OCR F585 paper for June 20120. He has consistently argued that the Bank of England should maintain their policy of ultra-low policy interest rates and also expand QE if and when the economic conditions require it. In a speech to the National Institute this week, Adam Posen contrasted the differences in economic recoveries in the United States and the UK.read more...»
Here is a planned answer to an exam question
“Explain two factors that are likely to affect the level of aggregate investment.”read more...»
Because each of the 50 states in the USA has its own laws, it can provide rich sources of data on a number of different topics, something exploited by the Freakonomics crew. Here is another example that I’m sure that students will be able to relate to – the effect of different minimum wage laws on the availability of foot long sandwiches from Subway.read more...»
Just a few years ago, Conab, Brazil’s official crop bureau was busy buying up surplus supplies of Brazilian coffee to support the weak global price of high quality arabica coffee. Over the years Conab has accumulated large stockpiles of coffee in their warehouses. Some estimates put the 2002-2003 stockpile purchases at just under 4 million kg together with 1.9m kg bought in 2007-08. The 2009-10 buffer stock purchases are much higher - exceeding 91 million kg. That is a lot of coffee to hold in reserve!
In theory a buffer stock scheme should be profitable when stocks are purchased at a low price and then off-loaded onto the market when prices are higher. Indeed Conab was planning just such a sale earlier this year before favorable weather and the speculators intervened. Better than expected coffee harvests in Brazil have prompted a steep fall in coffee prices and the buffer stock has postponed an intervention into the market.
The coffee price drop is a far cry from last year. Arabica coffee prices hit a 34-year high in March 2011 amid fears of a shortage. Since then, much has changed. From a peak of $3.089 per pound nearly a year ago, prices are down roughly 40 per cent to $1.851 per pound.
Inventories of high-quality beans remain low, but the threat of a shortage has vanished as Brazil is expected to see a bumper harvest this year. This is in contrast to a number of other coffee-growing countries - but Brazil remains a dominant force in the market.read more...»
For several years the European Union Competition Commission has been targeting the oligopolistic mobile phone industry accusing it of damaging consumer welfare with high roaming charges when people are travelling and working within Europe. Yesterday marked another landmark in the battle between the regulators and the industry.read more...»
Leaders of Brazil, Russia, India, China and South Africa are meeting for the 4th time to discuss a deepening of economic ties within the fast-growing bloc of countries. The acronym BRIC was first coined by Jim O’Neill from Goldman Sachs in 2001. Recently he suggested another group of countries that deserved to be included in a broader grouping of high-growth and increasingly influential economies in the world economic system.
These countries make up forty per-cent of the world’s population and over a fifth of global GDP. Crucially they, and another cluster of rapid-growth countries will be the main drivers of world growth in the years ahead even though they are not immune to the financial volatility and commodity price inflation inflicting external shocks on advanced nations.
One of the key items on the summit’s agenda is a proposal to establish a “BRICS Bank” that would fund development projects and infrastructure in developing nations. The summit is also on opportunity to discuss ways of building intra-BRICS trade, which expanded by 28 percent last year to $230 billion. There are divisions within the BRIC grouping - for example Brazil’s criticisms of China’s exchange rate policies but the summit is a reminder that the balance of power and influence in the world economy is changing forever.
Here is a selection of news articles and videos covering the BRICS summit for 2012read more...»
The recession and weak recovery is bringing about important employment and income distribution effects among different generations in Britain. The externalities of a slump are never uniform and I hope that good examiners at AS and A2 level will always reward students who bring comments and arguments about equity / fairness into their evaluative discussions. Recently there has been increased media coverage of the inter-generational effects of the financial crisis and the recession.read more...»
Professor David Blanchflower didn’t pull his punches when he was a member of the Bank of England’s Monetary Policy Committee and he is making his mark once more with an attack on what he views as the Coalition government’s lacklustre approach to tackling youth unemployment. Blanchflower is reported in the Guardian as wanting zero national insurance contributions for employers who take on younger workers in depressed regions and localities. And he wants greater investment in vocational education in schools and colleges with the school-leaving age raised to 18.read more...»
Newly published and revised figures for growth in the UK economy show that output fell by 0.3% in the final three months of 2011, and that, over the year as a whole, real GDP in Britain climbed by a paltry 0.7% during the year as a whole. To put that into context, the crisis-ridden Euro Zone achieved growth of double that largely because of a strong performance from Germany.
Output in the UK remains well below the peak before recession engulfed the economy in the autumn of 2008. In the charts and links below we track some of the key economic indicators as the country stuggles to achieve a durable and resilient / robust upturn.read more...»
Faisal sells ful (Arabic equivalent of baked beans on toast) & chaai (tea) in a windswept shack on the side of the desert road in northern Sudan. In his spare time he digs in the local area for gold
Millfield’s Economics Society was privileged recently to welcome George Buckley, Deutsche Bank’s Chief UK economist, to the school to deliver a lecture on the current state of the UK economy. Laura Dearman reports on his talk and the issues raised in discussion.read more...»
When my old boss told me that observing UK inflation flying above 3% would be an exciting moment in my career as an economist in London, I knew it was time to leave. Most African policymakers, meanwhile, would be delighted to see single digit inflation. I’ve discussed the challenges of formulating monetary policy as well as for the broader economy with two central bankers en route so far…
Brian Khan sits on the South Africa Reserve Bank’s (SARB) Monetary Policy Committee. A former academic at the prestigious University of Cape Town, he kindly agreed to see me at the SARB’s Pretoria HQ before I set off in July last year. Stephen Kabayo, meanwhile, is head of financial markets at the Bank of Uganda (BoU). A long term stalwart at the Bank, his career spanning 3 decades, I spoke to him & his head of research Jimmy Appa in Kampala earlier this month.
Author with Brian Khan (July 2011). Questions over ID of author at BoU, Feb 2012.Stephen Kabako at BoU – I had spoken at his son’s school the day before; Jimmy Appa in the Monetary Policy Committee Roomread more...»
An update for colleagues helping students prepare for the OCR A2 Economics Unit F585 The Global Economy exam in June 2012. Geoff and the team have just completed their superb F585 June 2012 Revision Toolkit. We’re posting it to all colleagues who have made a pre-order. I think this is the first time we’ve been able to get the resource completed by the end of March - and Geoff and the team have done another fantastic job providing comprehensive analysis of the pre-released stimulus material. It really is a cracker.read more...»
An interesting article from the BBC stating that Royal Mail are hiking up the price of their postage stamps despite the current economic climate. An article worthy of discussion in any lesson but especially when teaching the law of demand, pricing strategy, production costs, efficiency, technological change, inflation or just as a Case Study for Royal Mail.read more...»
What contributed to the boom and bust?
Many answers might focus on the reckless behaviour of lenders and borrowers; or irresponsible fiscal policies set by politicians who believed that the days of boom and bust were over. But to turn the question on its head, you could ask if “to what extent did Central Banks play a part in the debacle”?read more...»
Institute of Economic Affairs Essay Competition
The Dorian Fisher Memorial Prize
Deadline: Friday 6th July
An entry to the competition should contain the following three pieces of work
1. A short essay of roughly 1,200 words, on ONE of the following questions:
a) In economics, what is the role of the entrepreneur and why is it important?
b) What does economics theory (such as that of Optimal Currency Areas) suggest about the causes of the crisis in the Eurozone and the possible ways forward?
c) Why do most economists favour free trade and freer immigration when polls suggest the majority of the public do not?
2. A 500 word answer to ONE of the following three questions:
a) What part does the idea of knowledge play in modern economics?
b) Why is the idea of opportunity cost so important in economic thought?
c) What is the difference between risk and uncertainty and why does this matter in economics?
3. A 500 word answer to the following question:
- Identify an area of economics that you think should be given more attention in the A-level syllabus and say this is so
Top prize is 1000 GBP, with runner ups receiving 500 GBP and an invite to a lecture.
Entries should be submitted to:
Dr S Davies
Institute of Economic Affairs
2 Lord North Street,
It is now over three years since the Monetary Policy Committee of the Bank of England cut policy interest rates to 0.5% and subsequently introduced a policy of quantitative easing (or an asset purchase programme) now worth £325 billion.
These have been difficult times for the Bank. The average rate of CPI inflation since 2008 has averaged 3.5% - well above the official target - and the Bank has faced pressures from many sectors of the economy not least the millions of pensioners and other net savers whose incomes have been dragged lower by this period of ultra-low interest rates.
Has conventional monetary policy lost its effectiveness in the aftermath of the global financial crisis? Bank lending continues to fall, consumer and business confidence is fragile, many people have seen interest rates on unsecured credit rise not fall, and the depreciation of sterling seems to have had a muted expansionary effect on demand, profits and jobs.
QE itself may have become ineffective. Adam Posen, a member of the BoE’s MPC stated in a recent speech that
“quantitative easing may be ineffective under the present circumstances. This could be because money put into the hands of risk-averse investors and banks simply sits there, on their balance sheets.’ instead of being lent out to businesses and individuals who need to borrow to finance investment.
Remember too that monetary policy does not operate in isolation. The effects of lower interest rates and the QE programme might well have been negated by other events in the world economy, for example falling demand and confidence and a return to recession in the euro area or the depressive effects of high oil and gas prices on real incomes and spending.read more...»
Given the return to protectionist strategies that we have seen post -financial crisis as governments seek to protect their domestic economies, it is interesting to see a number of free trade agreements being discussed this week. To aid with application and context, pupils might be interested to read about the following agreements that have been in the media this week between
Given this context, for revision purposes it might be worth considering the macroeconomic consequences of such deals and use this to contrast against the reasons for, and consequences of protectionist strategies.
The latest edition of econoMAX - tutor2u’s digital magazine for A Level Economics Teachers and Students - is now available…read more...»
Teresa May has copied Nicola Sturgeon’s proposals for minimum prices of alcohol which appeared in Scotland last year. Last year’s budget had significant increases in excise duties on stronger beer, lager and cider.
This resource from the Centre For Policy Studies may help pupils and teachers to evaluate different forms of government intervention and their effectiveness.
The news that the government plans to introduce a minimum price per unit of alcohol is clearly a great item for discussion with AS Microeconomic students looking at government intervention policies for reducing the consumtpion of demerit goods.
Another item of interest to those involved in research for RES essays - yesterday Glaxo said it will invest £500mn in a biopharmaceutical facility in Cumbria, which will be its first new UK factory for 40 years. I will leave individual students to research this for themselves and work out how they can use it!
Those who are interested in the ‘austerity’ title for the RES essay competition might find this article on the BBC website useful. Today there is a general strike planned in Portugal, in protest against the country’s austerity measures. Portugal’s three main parties all voted in favour of stringent austerity measures for the country. The new government, voted in last summer, has privatised several industries, cut public sector wages and raised taxes, including VAT. They have been praised by Brussels for their approach, and the latest government estimate put its budget deficit for 2011 at close to 4% of GDP, well below the official target of 5.9%. In this interesting piece of writing, many different perspectives are offered of the effects of these measures, ranging from an increase in bad behaviour in schools to an increase in home-grown vegetables.
As ever, there are loads of sources that students can use to analyse the Budget and to extract pieces of Evidence for the Examples they will need to add depth to their analysis in essays. Those who are attending the current round of revision workshops will recognise this as a key part of ensuring that they write essays which PEEL the answer (each paragraph makes one Point, using Examples with Evidence, offering Evaluation and Linking to the question). As start points, I would suggest these sources which are reasonably free of opinions:
BBC website: Budget 2012 at a glance, Farewell 50p tax rate, and Over 65-s tax-free income freeze
The Guardian Budget 2012: welfare cuts, tax cuts too, but retreat on child benefit and for the visual learners a nice graphic version: Tax and spending plans visualised
The US and China rely heavily on each other for trade but retaliatory protectionist policies continue to be a recurring theme between these two nations that prevent the free movement of goods and services between the two countries.
Allegations that the undervalued Yuan gives an unfair advantage to Chinese exporters, twinned with high US unemployment has led to protectionist American responses and a tariff (tax on imports) on Chinese solar panels to protect this strategic and growing industry. The move followed a review by the US Commerce Department which in a preliminary decision claimed that Chinese firms are benefiting from unfair export subsidies.read more...»
It will be interesting to receive my personal statement spelling out exactly how much of my income is paid to the state and what it is being spent on! However for those wanting this information sooner than this, there is a great resource from the Guardian data team which shows you, on a sliding scale, exactly how much direct taxation you pay on your income and specifically where that money is spent.
This is an excellent resource for fiscal policy and useful to start debates about how and why the UK taxpayer is taxed and where the government should be spending the revenue received. There is no doubt that following Wednesday’s budget, the role of fiscal policy will take centre stage in Economics classrooms up and down the country - keep your eye out for some top analysis in the media over the next few days.
One of my favourite little statistical gems has always been the claim that the NHS is the world’s third largest employer, after the Indian Railways and the Chinese army, so it is deeply disappointing to find that this is not true - it’s actually only the fifth on the list with 1.7 million staff.
Ahead of the NHS are McDonalds’ global workforce in 4th place (1.9 million), Walmart, including Asda in the UK in third (2.1 million), the Chinese army 2nd with 2.3 million and, at the top of the table, the US Department of Defense with a whopping 3.2million staff - although only 1.6 million of these are on active service,with the rest in civilian and other support roles.read more...»
How important is the’ internet economy’ as a contributor to UK GDP? According to a study by the Boston Consulting Group, it contributes 8.3% of our GDP, which is a larger proportion than in any other of the G20 economies. The report’s author told the Today programme this morning that this was down to the UKs “great broadband infrastructure” and that British business has taken to the internet and is exporting around the world, “leading the world in e-commerce”. You can hear the interview with him here.read more...»
Thank you to former student Arjun Bali who flags up this new competition for budding Economics journalists being run by the Marshall Society at the University of Cambridge. Click here for details
Staff and A2 students who live in the Guildford area might be keen to attend a lecture at the The Royal Grammar School on Wednesday evening. The topic is rail privatisation; further details have been provided by Paul Bridges, Head of Economics there:read more...»
In the lead up to the 2012 Budget, this short BBC news video clip looks at the cost of a pint of beer and claims that some brewers have weakened their beer to avoid the higher excise duty on higher-strength drinks. There is a neat explanation of the breakdown of beer costs and students may be surprised to find out the amount of tax they pay if they drink a pint! About 95p from every pint goes to the government.
Higher taxes have been one factor bringing down consumption levels. There has been a 13 per cent decline in alcohol consumption per head in Britain since 2004. The percentage of men aged 16-24 who drank more than 21 units per week has fallen from 32 per cent to 21 per cent from 2005 to 2010read more...»
Here is a slideshare of a presentation I gave to the Economics Society at St Catharine’s College, entitled “Is China’s Bubble Sustainable?”.
A new report headed up by Professor John Hills from the LSE highlights the growing risks of fuel poverty facing millions of people in the UK and especially those living in lower-income families. At present, the definition of fuel poverty based on whether a household needs to spend more than 10 per cent of its income each year on energy. But this measure has been criticised because it ignores the significant seasonal variation in energy bills and the financial distress that a really large bill can have on people with little or not savings to fall back on.read more...»
This news video from the BBC focuses on a man who has been out of work for over two years in the seaside town of Weston-super-mare a town dominated by tourist businesses where employment is highly seasonal. It provides a strong short case study in the problems of people who have been out of paid employment for a long time. Watch the piece here
Channel 4 news have a special section on the unemployment crisis in the UK economy. Follow this link for fresh teaching and studying resources on unemployment. Follow this link for the Channel 4 News Jobs Reportread more...»
On Thursday, I was fortunate enough to get a ticket to see Michael Sandel speak at LSE. I have attended several events at LSE in the past two years and this was, by some margin, the best I have seen. Michael was delivering the first of three lectures and the subject for discussion was whether bankers should be paid more than nurses. Although this type of discussion is commonplace in our classrooms, Michael’s background as a philosopher meant that the event had me thinking about the issue in new ways. The style used relies almost entirely on contributions from the audience and makes it difficult to summarise but what follows is my best effort.read more...»
Here is a fresh attempt by the British government to breathe life into the moribund housing market. People in England are being offered financial help to climb onto or up the housing ladder as the government’s new mortgage indemnity scheme launches. Under the terms of the scheme, both the construction industry and taxpayers will act as co-guarantors on new homes bought by existing or first-time buyers. Will it work in boosting demand for new build homes? Is this scheme designed to help house-buyers or builders? Or is there a real risk of government failure?
* Builders will pay 3.5 per cent of the price of the home
* Taxpayers will provide an additional guarantee of 5.5 per cent that will only be used if there is a major property crash.
* Mortgage lenders will be able to lend up to 95 per cent of the sale price which means new buyers in many instances will only need to find a five per cent deposit or £10,000 on a new £200,000 home. The typical deposit on a mortgage now is closer to £36,000
* The scheme is available on houses and flats valued under £500,000 in England only
With the Easter holidays and key revision period not too far away, economists with exams approaching may find the excellent youtube channel of Phil Holden useful. My pupils find these clips concise with clear explanations and they act as a useful revision tool for a variety of AS/ A2 micro and macroeconomic topics. I’m sure colleagues have come across this before but if you haven’t then it’s well worth spending some revision time on this link
Discussing innovation and Shumpeter’s creative destruction recently, we had some fun in class digging up these adverts from the 80s for what was then cutting edge technology. Look at the mobile you have now, and check out the brick back then, not to mention the price nor the battery pack that you had to lug around with you - as the blurb says “Look at the size and look at the price! They were heavy, the battery life was short, and the per-minute rate was prohibitive. But hey, let’s take it to the beach and chit-chat!” Enjoy!read more...»
Here is a selection of news video resources that I have been using when teaching the economics (and politics) of the Euro Zone crisisread more...»
One of the dangers for a country implementing protectionist measures is the risk of retaliatory action. We have only to look at US-China trade relations to find plenty of evidence for this. The US objects to what they see as a Chinese policy of deliberately holding down the value of the yuan in order to boost Chinese exports. However, in addition to this they also object to government subsidies which the Chinese government give to some of their producers in order to help lower their production costs and so make their goods even more competitive in world markets.read more...»
Here are some links to video resources on prospects for further enlargement of the European Union single market.read more...»
Here is a superb piece from Ruth Sutherland on the BBC news website on the background to the creation of the $1 a day benchmark for people living in absolute poverty. Much progress has been achieved why has the $1-a-day figure had to change and what have been the unintended consequences of a heavy policy focus on this number?
Here is an example of the law of unintended consequences where unlikely side-effect is a thoroughly welcome positive spillover effect. Researchers are finding that the number of premature births and exceptionally under-weight babies in Scotland is falling - watch this video - and then consider why this might be happening.
Scotland was the first country in the UK to ban smoking in public places, followed by Wales, Northern Ireland and England in 2007. Several years on, nearly one-in-five of mothers to be still smoke - how sad.
We were looking today in AS macro at the policy options being considered as part of a strategy to drive a stronger recovery in demand, output, jobs and investment in the UK economy.
I am trying to encourage my students to put things into context as soon as possible in their longer essay-style questions. Here are some thoughts on a question on policies designed to bolster growth:read more...»
Germany is always an economy worth looking at by students keen to deepen their awareness and understanding of the European economy. There has been a number of good background news stories on the changing centre of gravity in the German and the EU economy and in this blog I am providing links to some of them - all ideal for prompting discussion in the classroom.read more...»
I’m going to use Richard Wilkinson’s very interesting TED talk about the serious negative effects of income inequality in my lesson tomorrow about income distribution. Read on to find out about this video and how I will use it to aid classroom discussion of this topic.read more...»