China bans its airlines from paying EU carbon tax
On 1st January this year, the EU introduced an Emissions Trading Scheme (ETS) which levies a charge on flights in EU airspace based on carbon emissions. They estimate that this will add between 2 and 12 euros to flight tickets. Airlines are required to purchase emissions permits, like utilities and heavy industry in the EU, and airlines that do not comply face fines of 100 euros for each tonne of carbon dioxide emitted for which they have not surrendered allowances. In the case of persistent offenders, the EU has the right to ban airlines from its airports.
read more...»Unit 1 Micro: Low Cost Airlines Beat the Recession
The global financial and economic crisis has created many problems for airlines - falling business and 1st class passenger revenues, increased insurance costs, problems in getting loan finance, volatile exchange rate and the challenges of steep increases in aviation fuel prices to name just a few. We could also add the shockwaves from the spring 2011 Japanese earthquake and tsunami, the Arab Spring and a decline in tourism, and the steadily deteriorating global economic outlook - with the Euro Zone crisis threatening a second recession for Western Europe.
But discount airlines - carriers that offer no-frills and charge plenty for extras on top of low basic fares - seem to have fared pretty well despite the turbulent conditions. Many passengers now appear willing to sacrifice luxury for cheaper flights and there are plenty of news stories of low-cost airlines in Europe, Asia and Africa who are announcing expanded route maps for 2012 and beyond.
What economic factors help explain the continued expansion of low-cost airline carriers?
read more...»Unit 3 Micro: Oligopoly and Duopoly in Bus Markets
The UK Competition Commission has published an important report into the market structure of local and regional bus services in the UK, twenty five years after the industry was deregulated and largely privatised. Coverage of the report can be found here (BBC news).
Largely as a result of a long-term process of consolidation through merger and acquisition, the UK bus industry is found to be highly concentrated with five businesses dominating the sector even though more than 1,200 businesses provides services.
The five largest operators (Arriva, FirstGroup, Go-Ahead, National Express and Stagecoach) carry 70 per cent of those passengers. The CC also found that head-to-head competition between operators is un-common and that-on average-the largest operator in an urban area runs 69 per cent of local bus services - effectively a monopoly position.
Unit 3 Micro: Hope Bikes - A Commitment to Excellence
Are you into your cycling? The huge expansion of interest in cycling in the UK from road racing through to BMX and mountain-biking has gone hand in hand with the fantastic success of British cyclists on the international stage. 2012 promises to be another strong year for the industry despite difficult economic conditions.
read more...»International Approaches to Congestion on Zoom.it
Zoom.it is one of my favourite finds and this zooming and panning map outlines international approaches to dealing with traffic congestion.
read more...»Unit 1 Micro: Asymmetric Information - Buying a Used Car
An autumnal hat tip to Kevin Hinde at Durham Business School for spotting a new report from the Office of Fair Trading which finds that the market for second-hand, used cars remains the biggest source of complaints from customers. Nationally over 56,000 people have complained to the OFT-managed Consumer Direct in the year to date with 70 per cent of the complaints relating to faults with the cars and over 13 per cent about misleading claims or omissions by the seller. The used car market is a classic example of asymmetric information and the risks of consumer welfare being damaged by fraudulent selling and sub-standard service. The OFT have released a short film on customer rights that might be a good teaching resource to use when covering this topic.
The Bicycle - A merit good and an integral part of sustainable transport solutions?
A recent economic study1 found that bicycle ownership can boost household income in sub-Saharan Africa by 35%. I may be biased given my passion for cycling but I think there are indeed some very strong economic arguments for encouraging more bicycles both in the developing and the developed world.
The bicycle: more than just a mode of transport
The cure for economic slowdown - drive faster
This is the headline used by Reuters in their report of the government Transport Secretary’s proposal that the speed limit on motorways should be raised from 70 to 80mph.
The justification for the proposal is largely that, when the limit was introduced, cars were less safe than they are now, and that technical improvements have made 80mph a safe speed at which to travel. Other arguments include the desire to conform with the higher motorway speed limits in Europe, which are generally higher than in the UK, and also the fact that many drivers do drive at between 70 and 80 on motorways anyway and tend not to be fined for it, so the law may as well be amended to keep up with actual behaviour.
read more...»Unit 1 Micro: Drink Driving and Government Intervention
A culture of drink-driving has been a scourge in many countries for decades. The human and economic cost of lives lost and wrecked by motorists driving under the influence of alcohol is huge and most governments have introduced a range of interventions designed to change the incentives facing drivers. But which ones have most impact?
read more...»Transport Economics: Rail Investment
Here is a super short transport cost benefit analysis example regarding plans to re-open a rail link between Oxford and Milton Keynes could generate millions of pounds for the economy. In total it would cost £178m and then £11.6m a year to run, but Oxford Economics says it would bring an economic benefit to the area which it estimates at £32m a year. This BBC news video would make for a good short introduction to the example, and here are some other links to coverage of the Oxford Economics research in the local papers.
Oxford Mail: Rail link could be worth £38m a year
Official web site East West Rail
Unit 3 Micro: Motorsport Valley and External Economies of Scale
The occasion of the 2011 British Grand Prix at Silverstone in Northamptonshire is an opportunity to showcase the extraordinary growth and success of the motorsport industry in the UK. It is a classic example of the benefits that can flow from external economies of scale, and also of the way in which genuine competitive advantage in the global economy can be built and nurtured.
read more...»Unit 1 Micro: High price of petrol drains demand
New figures from the Automobile Association (AA) show that motorists in Britain are buying less fuel in response to record highs for petrol and diesel prices. They bought one billion fewer litres of petrol and diesel in the first three months of 2011 compared with the pre-credit crunch January to March 2008 period. It seems that high prices have incentivised drivers to cut back on their driving to save money and the pressure to economise has been raised by higher levels of VAT and a fall in real wages.
read more...»Transport Economics - Government Failure in Roadbuilding?
A controversial motorway extension in Scotland is set to open. Glasgow’s new £657m M74 extension set to open (BBC News). The 6-lane elevated M74 extension is over-budget at a cost of £657m, which works out at £131m per mile or £75,000 a yard (£80,000 a metre). How can road extensions cost so much? Can the costs be justified by the suggested economic benefits? The BBC article provides a good mini-case study in transport cost-benefit analysis. Here are some other supporting links:
read more...»A2 Micro: External Economies of Scale
External economies of scale occur outside of a firm but within an industry. For example investment in a better transportation network servicing an industry will resulting in a decrease in costs for a company working within that industry.
read more...»Electric cars: government failure?
There was a great in-depth look at activity in the car market in the Sunday Times yesterday with regards to electric powered vehicles.
Is the local bus market competitive?
One of the aims of deregulation is to encourage competition.
The Office of Fair Trading (OFT) referred the local bus market to the Competition Commission (CC) in January 2010 because they had reasonable grounds for suspecting that competition is not working effectively in that market
Buses matter providing a daily service for millions of people in the UK, carrying twice the number of passengers as do trains.
This is particularly true at a time when commuters are switching from cars to buses in response to record petrol prices – inter modal shift in action
There are equity issues. Buses are used by low income households those who cannot afford a car. Many passengers are dependent on the bus and do not have a realistic or desirable alternative, such as getting into a car or a train, if fares rise or services deteriorate.
Their provisional findings published today make interesting reading:
read more...»A2 Micro: EU Aviation - State Aid and State Ownership
I have put together a short revision exam-style question for AQA Unit 3 (Micro) focusing on some of the issues / problems facing the European Airline industry. Many of the established airlines are part-state owned and the question of nationalisation, government emergency funding / state aid was highly topical this time last year in the wake of the recession and the volcanic ash crisis. The document can be downloaded below and I have linked also to some other A2 micro revision resources
EU_Airlines_State_Aid_Nationalisation.pdf
read more...»New! OCR A2 Economics Unit F584 Transport Economics Rapid Revision Q&A 2011
We are pleased to announce the publication of a new rapid revision guide for OCR A2 Economics Unit F584 (Transport Economics). The OCR Transport Economics Revision Q&A has been authored by experienced OCR Economics teacher Richard Young (Wood Green School) and is available via a cost-effective network licence. Contents and samples below + links for ordering.
OCR_F584_QA_2011_Contents_and_extracts.pdf
Buy the OCR Transport Economics Revision Q&A here
AS Micro: The volatile price of crude oil
Few commodity prices are watched as closely as the international price of crude oil. Brent crude is currently trading at over $122 a barrel - the highest price for over two years. Our Timetric chart is constantly updated and will always show the latest price. We have included below links to many of our recent blogs on the economics of oil prices and some of their micro and macro economic effects.
read more...»AS Micro: Prices for New and Second Hand Cars
The prices of new and second-hand cars as measured by the consumer price index have changed in absolute and real terms in recent years as the chart below shows
read more...»Innovation: Google’s Driverless Car
A four minute gem from TED!
Tuesday Talks - the cycling city
A Radio 4 broadcast from yesterday, Bristol: Cycling City, provides the inspiration for today’s extension activity - there is a short synopsis here. This 30 minute audio documentary looks at the way in which £22m has been used over the past 3 years to increase the use of bicycles by residents of Bristol. Cyclists, motorists and local taxpayers seem to think that in general the scheme has not been successful, with only a small increase in the number of cyclists combined with poorly thought-through cycling infrastructure.
After listening to the documentary, students could draw up their own cost-benefit analysis of the scheme, and discuss whether the £22m has been used in the most effective way (around two thirds of the funding went towards infrastructure and the remaining third towards education relating to cycling). More details on the specific projects that have been run as part of this scheme can be found here. Able students may want to consider how they would have tackled the scheme differently.
Transport Forecasts can go awry
I spent a happy half term virtually rewriting the Tutor2U OCR Transport Q&A which has been out of print for a few years now. Details to follow.
And these are exciting days for us Transport Train Spotters as there is an awful lot of context to be gleaned for the just published High Speed Rail: Investing in Britain’s Future.
So I feel a series of blogs coming on. Here is the first. Transport forecasting.
Traffic forecasts estimate how many passengers, vehicle and freight are likely to travel by a given mode in the future.
Here are some projections published back in the day in 1996 when assessing the economic case for Eurostar.
Forecasts give a broad indication of behaviour based on past trends and best understanding of future events but are bound to be uncertain. For instance, assumptions about future fuel prices, GDP income and population may prove inaccurate
So why were the 1996 projections so wide of the mark- unexpected external events. I quote:
A further reason for the lower than expected passenger revenues is the success of the low-cost airlines in competing with Eurostar on price, and their much larger range of destinations. These events illustrate the difficulty of accurately forecasting revenues on novel major projects. The Link is moreover the only high speed railway in the country and the first new railway line for a hundred years, so there is no recent national experience with which to compare it Source: Forecasting of passenger traffic
Can we trust the HSR projections of passenger numbers?
Chinese and Indian Railways - Importance of Infrastructure
Two videos show the stark contrast between rail networks between China and India! Good for understanding a little more about the importance of rail network investment (high speed and conventional) as a platform for economic growth and development.
read more...»
Protectionism and the demise of the US shipping industry
Here is a link to an article written by John Gapper in the Financial Times about the long term decline of the US container shipping industry. The finger of blame is pointed at the protectionist ruling that “all domestic cargo must be carried in US ships made in US shipyards, crewed by US citizens .....Of the world’s 7,200 container ships in 2007, only 89 were US-registered compared with 1,250 European ships and 860 in Greater China ......An alliance of shipping companies, trade unions and US shipyards has blocked liberalisation.”
This is also a really good article on the economies of scale in container shipping.
WTO finds Boeing guilty of using illegal subsidies
This is one of the longest running disputes in trade history. Europe and the US have been fighting for more than six years over each other’s subsidies for large passenger aircraft in the duopolistic battle between Boeing and Airbus. Now the World Trade Organisation has found that Boeing received at least $5bn (£3.1bn) in illegal subsidies and was only able to launch its 787 Dreamliner with such support. Airbus has als been found to be in breach of receiving illegal state aid. Reuters provides useful background here.
Transport: High Speed Rail Discussion
BBC Radio 4 ‘Open Country’ programme on the High Speed Rail through the English countryside
good evaluative points on the impact of this new infrastructure on Buckinghamshire
BBC Radio 4 ‘Open Country’
A Motorbiking Triumph
Here is a product from over here that is doing really well over there! It is always positive to read of success stories from the UK manufacturing sector. This article from the Guardian highlights the success of the iconic motor bike bran Triumph in ousting the likes of Honda and Yamaha to rise to the summit of the market share rankings for new bikes sold in the UK. And sales are strong in the United States where Triumph is competing with Harley-Davidson. Students who read through the article ought to be able to glean two or three factors that lie behind Triumph building a competitive advantage in the market. Can they then come up with other ingredients in the mix that apparently makes Triumph competitive in price and non-price terms?
More good background here:
Triumph rides high as UK bestseller takes on Harley-Davidson (Guardian)
Motorcycle Sales Not All Bad News says Motor Cycle Industry Association
Economics Q&A: What economic factors affect the demand for new cars?
The motor industry is one of the sectors whose fortunes seems to permeate nearly every part of the economy. Most of us know someone who works in the motor trade and changes in demand and production have sizeable effects not just on the industry itself but on many supply-chain businesses and economic activity in areas where car production is concentrated.
In 2010 just over two million new cars were registered in the UK - a rise of 1.8% on the 2009 figure. The biggest single course of rising demand came from the fleet market which rose by over 10% in 2010, but demand for and spending on privately bought cars slipped following the end of the Car Scrappage Incentive Scheme. Crucially for the year ahead, the new car market is forecast to decline by 5% in 2011 to 1.93 million units - according to the Society of Motor Manufacturers and Traders “difficult market conditions continue.”
So what are the main factors that affect the market demand for new cars?
read more...»OCR Transport - Revision Wordle
A good resource here from Ben White and his students at Bromsgrove.
As we approach the end of the OCR A2 Transport Economics course, I spent a good lesson with an U6th class brainstorming the key terms and definitions and the following was created:
On a separate note the middle page of today’s independent has a great picture of the Amazon warehouse and a smaller version can be found online:
Good stimulus for channels of distribution, e-commerce, worker motivation (workers will walk 10 miles because of ‘manic Monday’!)
