Unit 1 Micro: Can the UK Computer Games Industry Grow
Britain is one of the world’s biggest exporters of creative products - from live TV shows and music to books, arts, architecture and films the economy has built up an enviable global reputation for excellence and a growing trade surplus to aid our balance of payments.
Computer games falls squarely into this category but, according to TIGA - the trade association representing the UK’s games industry - unless there is renewed government support, the future of this sector is at risk. TIGA claims that the British games industry is suffering a significant ‘brain drain’ as talented programmers and artists leave the country to work abroad.
read more...»Unit1 Micro: Processed Meat and Cancer Risk - Information Failure?
I do my level best to avoid the processed meat aisles in the supermarkets - or at least the lower end of what is on offer (I remember once the 5pence sausage that was a guaranteed 2 per cent pork!). But perhaps excessive consumption of processed meats - much of which finds a way into the traditional Full-English might be doing people much more harm than good? Follow this BBC news report for more details.
read more...»The Christmas Tree of Integration
A seasonal look at the methods of growth for firms, covering organic growth and the sources of external growth.
read more...»Unit 1 Micro: Empty Housing and Economic Efficiency
Channel 4 recently focused on the causes and effects of the hundreds of thousands of empty homes in the United Kingdom. Why is it given persistent shortages of affordable housing that perhaps a million homes lie empty and unused whilst an estimated two million families are in severe housing needs. New housebuilding has collapsed and in Britain we are building 100,000 fewer new houses every year than we need just to keep up with the changing mix of households and demographic change.
An interesting exercise is to show students some of the Channel 4 Campaign videos and then get them to put together policy ideas as to how to reduce the volume of empty homes and reduce the length of housing waiting lists.
Links to some of the Channel 4 videos can be accessed below:
read more...»Unit 1 Micro: Is the Sun Dipping on Solar Subsidies?
To promote the expansion of renewable energy sources, many governments have introduced subsidies for consumers who install solar panels.
In April 2010, the Labour government introduced generous feed-in tariffs to encourage households to install solar photovoltaic systems. Anyone spending £13,000 up front to fit a system to their home was paid 41.3p per kilowatt hour (kWh) generated – enough to earn them a typical annual income of £900 a year in payments, on top of a £140-a-year saving in reduced electricity bills. The big six energy companies are required by law to pay householders who generate their own energy.
It looks like the days of generous subsidies for solar panels are coming to an end and there is a rush on to install them before the feed-in-tariff system is changed.
read more...»Unit 2 Macro: A Widening Regional Divide in Life Expectancy
Life expectancy in the United Kingdom continues to improve. But one important aspect of the deep and structural divide in incomes, economic activity and status and health across different groups in Britain is the marked variation in average life expectancy for men and women. The UK Statistics Commission has just published new data on this covering the period 2004-2010 and finds that:
read more...»Unit 2 Macro: Positive and Negative Multiplier Effects
An initial change in aggregate demand can have a much greater final impact on equilibrium national income. This is known as the multiplier effect. It comes about because injections of new demand for goods and services into the circular flow of income can stimulate further rounds of spending – in other words “one person’s spending is another’s income”. Put another way, spending becomes someone else’s income. This can lead to a bigger eventual effect on output and employment.
Here are three recent news videos covering aspects of the multiplier effect at work:
read more...»Unit 1 Micro: Opportunity Cost -
A hat tip to John Wilson from New Zealand for spotting this superb article which looks at smarter consumer spending and using opportunity cost as a concept to put some of our many choice in context. Some great examples here that might be used at the start of an AS Micro course.
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...»AS Micro: Government Failure in Wind Farms
Market failure or government failure? Six wind farms in Scotland have been paid £890,000 for nothing over a few hours on two windy days in April. They were entitled to compensation because they were offering renewable electricity which the UK National Grid did not have the capacity to take in and sell, because of a transmission fault. It seems like a huge waste of money to pay wind farms not to generate energy. Bit teething problems in matching wind farm output and capacity with the ability of the national grid to absorb and utilise their output. Read: Subsidies to wind farms to stop production
Peter Day at the Faber-Castell factory
The humble pencil - I have one in front of me now - is on the surface just about the simplest product one could make. But how is it manufactured? Would you be able to do it? I for one possess virtually none of the skills required to create a pencil but fortunately the wonderful Peter Day from BBC Radio 4’s In Business has been investigating the enduring success of two of the world’s most successful pencil businesses - including a visit to the Faber-Castell factory in Germany. There are some super images from the factory on the BBC Business News Facebook Page - great for visual learners who want to understand more about the production line process.
AS Micro Revision: Banana Prices
This revision note covers supply and demand factors that help to determine the world and domestic retail price of bananas. Despite rising world prices, the UK retail price of bananas has actually fallen in recent years. Can students explain why? What effect does intense competition within the UK food retail sector have on the prices we pay?
read more...»The Elasticity Classic - Smoking
This has to be the most widely used example in classrooms up and down the country when discussing price elasticity of demand.
How about this little twist on it?
read more...»Changes in Real Prices
This is a graphic I use each year when looking at changes over time in indices of consumer prices for different goods and services. Using data drawn from the published Retail Price Index since 1988 (the base year) I print this chart out and explore in classroom discussion some of the economic factors behind the divergence in prices for rail fares, cigarettes, household repair services, clothing and electrical items. We discuss the impact of changes in indirect taxes, unit labour costs, economies of scale, trade and globalization effects and the intensity of competition among other factors. Eagle-eyed students spot the upturn in clothing prices and link it to the rising world price of cotton. Others notice the strong seasonality in clothing prices and the annual hike in rail fares!
I have copied the latest chart into a PowerPoint file for colleagues who might want to use it
Tesco - Time to start a price war!
Here is some pure gold dust for students of competition and strategy in the food retailing industry! A leading analyst (Dave McCarthy at Evolution Securities) has written a lengthy research document building the case for Tesco to launch an aggressive price war - permanently cutting prices on hundreds of different items. Much of the case for the price discounting is reproduced in this Guardian article and key arguments are that Tesco is better able to withstand the hit on group profits from doing it, and that lowering the returns from the sector will help to bring an end to the land grab and building programme that ultimately may not be in anyone’s interests.
Has Tesco lost its way recently? Sainsbury’s was the best performing supermarket over the Christmas period. Its like-for-like sales were up by 3.6%. I have stopped shopping at Tesco partly because the retail experience is so dire (the mega store in Slough is just about the most soulless place on the planet) and also because Sainsbury’s and Waitrose have significantly raised their game in keeping products available on the shelves and in extending their value range. The Waitrose “Essentials” range has been a big success.
A new CEO provides a window of opportunity for a change of direction at Tesco and this analyst believes that Tesco needs to exploit first mover advantage before the rivals become too strong to absorb future price wars.
Read: Analyst advises Tesco to launch a price war to damage the competition
The Impossible Hamster and Economic Growth
A new year hat tip to Paul Bridges and Carol Cornell at Tiffin School for pointing us towards this short and snappy animation about food happy hamsters and unsustainable growth. There are plenty of other videos linked in and around this you tube video.
Economics Q&A: How might rising food prices affect food retailers and manufacturers in the UK?
Food retailers are service sector businesses selling food products to consumers. The leading retailers in the UK are Tesco, Sainsbury’s, Asda (Walmart) and the Co-Op/Somerfield. Although the food retail industry in the UK is dominated by a handful of national chains, there are many others including thousands of small-scale retailers. And discount retailers that have done well in recent years including Aldi and Lidl.
Food manufacturers process foodstuffs into new products and they rely on buying raw materials from wholesalers. Good examples to use might be Nestle, Heinz and Sara Lee.
The larger retailers manufacture some of their own-label foods although they may choose to out-source this to another manufacturer. And likewise, some food manufacturers have their own chain of retail stores or outlets - for example Gregg’s the Baker or Domino’s Pizza.
read more...»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...»AS Economics Diagram Canvas
Here are the two word-format files to help students create their own micro and macro theory diagrams in word and then integrate into their assignments.
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Revision: Consequences of Unemployment
Persistently high unemployment create huge costs for individuals and for the economy as a whole. Some of these costs are difficult to value and measure, especially the longer-term social costs.
read more...»Teach GCSE Economics 2011 - Fresh Ideas for Teaching KS4 Economics
Lots of bookings coming in now for our first-ever CPD conference dedicated to the teaching of GCSE Economics. Amy Chapman and Innes Robinson - our two superb GCSE Economics Blog editors - are putting a terrific programme together for the day. It will be suitable for all exam boards and will cover a range of approaches, resources and teaching ideas to make your GCSE Economics course even more successful and enjoyable. The day will also be suitable for teachers who deliver the economics elements of business specifications and who wish to discover some new ways of engaging with their students in a fast-changing subject.
The first date for Teach GCSE Economics is on Friday 11 February 2011 at the Guoman Charing Cross Hotel near Covent Garden.
For online bookings for the conference using this form:
Booking Form for Teach GCSE Economics 2011
Samsung’s Galaxy Tab
Joseph Schumpeter would be proud. The creative side of his destruction is still going strong - Samsung have released a “tab” to rival Apple’s iPad - but is it any good or is it just wasteful expenditure recreating the same? On “paper” it seems better with more capabilities than the iPad… but brand loyalty can be a big attractor…
See the video clip comparison here.
Potash - a battle for grey dust that has become gold dust
The market for a particularly lucrative gray dust has been thrust into the spotlight this summer with news of a $38.5bn (£25bn) hostile takeover bid from Australian mining giant BHP Billiton for Potash Corp of Saskatchewan in Canada a business coined by some as the “Saudi Arabia of Potash”!
read more...»Capacity utilisation
Capacity utilisation is a macroeconomic term that is now commonly used in AS macro exam questions. It measures how much of the productive potential of the economy is being used at a given point in an economic cycle. Capacity utilisation falls during a recession because of falling aggregate demand for goods and services. The result is that scarce resources of land, labour and capital are not being used to their full extent.
read more...»India raises interest rates
Sean O’Grady writes here about the decision by the Reserve Bank of India to raise interest rates once more to combat retail price inflation that hovers just below the ten per cent mark. A volcanic hat tip to John Richards from Tonbridge for spotting this one.
John points out that the article covers some really interesting macroeconomic aspects: namely the use of policy interest rates to control a booming economy, changes in reserve asset ratios (remember them?) as a tool of monetary control (limiting new bank lending), And also the high importance of food in the inflation basket for Indian consumers and the uneven impact of growth on the poorest parts of Indian society.
“The World Bank has said that faster economic growth has seen rising disparities between urban and rural areas in India, prosperous and lagging states, and skilled and low-skilled workers. India’s richest states have incomes that are five times higher than those of the poorest states – a gap that is higher than in most other democratic countries, and may damage social cohesion.”
Robert Peston - On the Money
Here are two clips from the new Robert Peston series
Probably more relevant to GCSE students I guess having viewed the clips
Small businesses and financial economies of scale
The latest Bank of England survey on financial and credit conditions finds that smaller businesses are finding it tough to get the credit they need to finance an upturn in sales and production. Interest rate spreads on new loans are rising and it is larger firms that seem to be benefitting from lower borrowing costs. A Times article explains that “larger groups are enjoying a reduction in the cost of borrowing and improved access to credit as banks favour lower-risk custom.” - the main commercial banks continue to adopt a risk averse approach to new lending and this may hamper prospects of recovery.
Unsecured loans for consumers have also become harder to get and more expensive despite the ultra-low interest rate policy of the Bank of England. In 2006, the top 10 average rate for a £3,000 personal loan was 6.49%, but today it is 14.92%, analysis by price comparison website moneysupermarket.com has shown.
Nissan turns over a new Leaf
This is a hugely important announcement and boost for the North east economy whose long term future must be built on competitive advantages in the emerging low-carbon industries of tomorrow. The decision to manufacture the lithium-iron batteries used in the Leaf electric cars is the key to the employment creation effects of the new investment by Nissan. Note too the role played by government financial support. The investment is backed by a £20.7m government grant and up to £220m from the European Investment Bank.
The Nissan car plant is the most productive in the European Union. The plant opened in 1984 and has so far built 5.6 million cars. It produced a third of all cars built in Britain in 2009. Digby Jones sings the praises of businesses such as Nissan in this super interview on the Politics programme a few days ago.
Recession hits vulnerable low income families
Recessions have macroeconomic effects - a topical discussion at the moment is the impact of the slump on the UK economy’s productive capacity and underlying growth rate - but the effects on individuals, families and local groups can often be over-looked by the broader macroeconomic debates. This news article refers to new research highlighting the damage caused by the recession on younger people whose pay and jobs are vulnerable.
These groups
1/ Are at higher risk of having to accept cuts in their money and real wages
2/ Are more exposed to a reduction in working hours and therefore lower weekly gross incomes
3/ Many have a personal inflation rate higher than the published data for CPI and RPI
4/ Have higher levels of unsecured household debt on which interest rates have risen in recent years and not fallen
It also focuses on just how little people on below-average incomes can afford to save.
“More than half of people on low incomes have less than one month’s salary saved and 40pc are not saving into a pension, while 53pc have unsecured debts, averaging £5,200.”
More here: Younger workers hit hardest by the recesssion, says think tank
Margins and risk - the spiralling cost of credit
There has never been a strong link between the policy rate decisions of the Bank of England and the interest rates charged to customers who take out unsecured loans using their credit cards. But withbase rates at 0.5% and lilkely to remain well below their neutral rate for some time to come, the chasm between this and the average of 18-19 per cent annual rate on unpaid credit card balances has rarely been wider.
The lenders claim that rising debt default levels from borrowers suffering from the recession and rising unemployment has increased the risks of loans and that higher rates are the inevitable result of this.
Consumer watchdogs take a less benign view and argue that the financial companies are exploiting consumers and whacking up their profit margins even during these difficult times.
This BBC news video from Brian Milligan provides food for thought on the credit card issue and makes a good resource to use when teaching monetary policy and personal finance. The BBC Radio 4 Today programme also covered this issue during the week.
