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The price mechanism should help the economy to allocate resources more efficiently. Scarcity drives up prices, sending a signal to the economy – usually giving firms an incentive to produce more, and households the motivation to ration their consumption.
Offering free parking sounds like a terrific idea, until you think of some of the possible consequences.read more...»
Perhaps you are starting to look at labour markets, which economists usually understand in terms of the supply of, and demand for, labour services. This is a good example of these two forces coming together to determine wage rates.read more...»
As world commodity prices plunge, who gains and who loses?read more...»
The Local Government Association (which represents local councils in the UK) have joined the debate about term time holidays for pupils this week. They argue that current rules banning term time holidays or imposing fines on those families who take such breaks do not recognise the complexities of modern families and also prevent poorer families from affording vacations that are invariably dearer during the holiday period.
It struck me whilst reading one of the reports that the suggested policy is to allow head teachers that most quantifiable of options, 'common sense', to make decisions on a case-by-case basis would be the sort of argument that would make me scream if a student wrote it in an assessment answer. Economics students, unlike Local Government officials, need to take a much more analytic approach to this question!read more...»
If you have a short break coming up - and you're new to economics - now would be a great time to collect together some resources about the extraordinary recent shift in the oil market.read more...»
A seasonal quiz challenge for your economics students fresh out of the tutor2u Learning Lab.read more...»
Have a read of this fascinating article from the Guardian about the fall in prices for mink fur in China. It struck me that, not only does the article give you several traditional causes of a slump in demand (let's all draw the diagram!) but comes up with a brand new cause of a shift that I've not seen before!
The article suggests that the shift in demand is caused by a warmer than expected winter (tick, weather conditions) and that an increase in the number of educated Chinese people are choosing not to use mink for ethical reasons (tick, change in tastes). It also says that demand has dropped as the Chinese government are clamping down on corporate corruption preventing Chinese directors from accepting luxury goods in return for favourable business decisions - which of our Economics Teacher categories does that fit in?
PS. Look out for the fantastic activity 'Demand Street', which challenges students to work out what change in demand factor is being demonstrated, showcased at this year's Wow Economics Teacher CPD event fro Tutor2u.
Here's a fun resource that's trickier then it sounds. 'Wordsnake' is a resource developed by our very own Graham Prior. At first glance it appears to be a wordsearch as you see a grid of what appears to be 100 random letters. However, the key phrase being tested 'snakes' around the grid rather than being up, down or diagonal as in a normal wordsearch.
Students are given a question on screen with the answer hidden in the grid. Who can be the first to spot the answer and call out its location?
If the answer is not obvious at first, the teacher can press the space bar and the letters reveal themselves one at a time. This version contains 5 questions relating to elasticity and demand.read more...»
Have you reached that point in the term where you've covered shifting demand and supply curves yet?
Here's a short starter or plenary to test your students knowledge and understanding on the theories of demand and supply. The resource has a single demand and supply diagram with shifted curves and labelled equilibrium points. The test lasts for 3 minutes as a series of changes to the market conditions for Product A are flashed up on the screen. Students need to pay attention, they only have 20 seconds to read the question and work out the new equilibrium point.
All this whilst an Oscar-winning song plays along in the background. Clap along if you know what the song is!read more...»
Here's a couple of quick Crossword activities that you can set in class or as homework from the tutor2u team. They are:
- AS Introductory Economics
- A2 Theory of the Firm
Both come with 15 questions and you can even download the answers if you think you might need some help!read more...»
If, like me, you spent much of the spring and summer of this year being 'gently persuaded' to purchase loom bands and their paraphernalia, you may find this short presentation and task on demand and supply of the product useful.
For many weeks, it seemed almost impossible to undertake a shopping trip with my youngest son without him pointing out the huge selection of available bands and their construction tools. He built up quite a selection or different colours and styles as my vacuum cleaner can happily testify. Then I noticed a tailing off of his requests and noted that this week, when I pointed out a shop selling the rubber bands at half price, he declared that he was no longer interested - even at the reduced rate compared to just 4 weeks ago.
He seemed less than impressed when I pointed out how this was a fine example of how demand and supply impacts upon price. However, many of you may be at the stage where you are going through demand, supply and equilibrium with your AS students.read more...»
The transport economists amongst you will be giving considerable thought to the question of tackling road traffic congestion. I’ve picked up on two stories here because they take contrasting approaches. The first is to use technology and regulation to tackle the problem – the so-called command and control approach. The other relies on price signals, so might be described as a market led approach.read more...»
A great example to start you off looking at how economists understand markets: after a run of rain-wrecked years, British farmers are bringing in the last of what looks like a bumper cereals harvest. 2014 could be the biggest yield ever for wheat. Good news. But for whom?read more...»
Why do we get summer holiday blockbusters? They seem to matter more and more to Hollywood studios. According to one professor "the entertainment industry is moving more towards a winner-take-all-market". Yet it wasn't supposed to be like this. A best-selling 2008 book, The Long Tail, argued that the mainstream was going to be "shattered into a zillion different cultural shards," as fickle consumers "scattered to the winds" using the internet to find the books, films and songs that met their unique taste. So what might be going on?read more...»
This video report from BBC Global Business looks at the success of a very small scale bakery located in an isolated mountain our region of Spain.read more...»
How much money do you need for an 'adequate' standard of living? This short video from the Joseph Rowntree Foundation considers the levels of income needed to sustain a modest but adequate life-style in the UK in 2014.read more...»
People do care about fairness, social norms and not just about a cold calculation of marginal cost and marginal benefit. In this excellent short interview on BBC World, Joe Gladstone, Behavioural Scientist at the University of Cambridge, discusses the new form of "Pay What You Want" pricing. This means consumers can decide themselves how much they want to pay for a good or service. The catalyst is that several French hotels are experimenting with a pay what you like approach for their guests.read more...»
So, farewell then England! Yet another failure by our boys at the highest levels of the game. Despite their stupendous salaries, they seem once again to be unable to exhibit the necessary skills, a point which seems to exercise many fans of the game. Tens of thousands, if not millions, of words have been written about the purely footballing aspect already. But one topic which is hiding away under this torrent is the question of incentives.read more...»
The price mechanism should help the economy to allocate resources more efficiently. Scarcity drives up prices, sending a signal to the economy – giving firms an incentive to produce more, and households the motivation to ration their consumption.
Could ‘smart’ electricity meters, linked to dynamic electricity prices, achieve something similar?read more...»
I am really grateful to Bob Denham from Econ Films who has shared with us this newly launched video from the International Growth Centre. It focuses on the competitive challenges facing Pakistan's football manufacturing sector as it loses market share to countries such as China and Indonesia. Footballs in Pakistan are still made mainly by hand, stitching together hexagons and pentagons - a process that leads to a lot of waste and higher unit costs and which then affects the profitability of businesses in what is already a low-margin sector.
Could a team of economists find better ways of cutting the patterns for footballs and then align the incentives of workers and owners? This is a fascinating short video which captures many aspects of the Unit 4 development economics course. Enjoy!read more...»
If you’ve looked at labour markets, you’ll understand the basic theory: workers seek to supply more labour as wage rates rise, and the returns to work mount up. However, at some point, the marginal utility of extra leisure exceeds the marginal utility of extra income.
In other words, rich people start working less, because they can afford to. And for most of human history rich people had the most leisure, but that might be changing.read more...»
A document containing the key diagrams and terms for Unit 1 Micro is streamed below.
For more revision support for AS Micro, visit our dedicated AS Micro blog channel. We also have a free AS Micro revision class on our sister site Zondle and a wide collection of revision notes for AS Micro here on the tutor2u website.read more...»
Demand is the quantity of a good or service that consumers are willing and able to buy at a given price in a given time periodread more...»
Here is an updated revision presentation covering aspects of market imperfections / market failure in the UK housing industry.
I have also linked to a recent presentation on the economics of rent controls.read more...»
Tanzanian cola producers are taking on Coca Cola and making headway in the battle for market share. Despite economic growth, there is a fragile middle class vulnerable to changes in world commodity prices and unstable employment and wages. This opens up an opportunity for indigenous food and drinks manufacturers who might be able to supply products at a lower price harnessing environmental aims such as recycling the majority of plastic bottles used.read more...»
Here are twelve more questions covering markets and market failure - test your understanding with this zondle-powered quiz!read more...»
Our normal laws of demand suggest that as prices increase demand decreases whilst firms attempt to supply more (with the opposite happening as prices decrease). The concept of elasticity extends this understanding by asking the question ‘by how much does demand and supply change?’read more...»
How should a public service broadcaster be funded? This excellent article from the BBC looks at the financing of state broadcasters across a range of countries. The BBC is largely funded by the licence fee but as the article makes clear, there are many other options. The funding links back to the nature of broadcasting and the public good characteristics of much of the BBC's output.
Have a read of the article and then test your understanding of public and private goods using our Zondle quiz!read more...»
In 2007 a ban on smoking in enclosed public places was introduced in England - Scotland had introduced a similar measure a year earlier. Fresh evidence published in the medical journal The Lancet finds that enforced bans on smoking are now having a discernible effect on measures of public health.read more...»
There seems little that is stopping the surge in London house prices at the moment but do you think the rapid acceleration of prices is good for either London or the wider UK economy?read more...»
One type of market failure that contributes to inequality and unemployment is the geographical immobility of labour.
If the labour market really ‘cleared’ effectively, wages would equalise across the economy. Workers would drift away from regions with low wages and/or high unemployment towards areas where wages were higher and labour was scarce.
Why are people finding it hard to move across the UK in search of work?read more...»
The development of India, or its non-development relative to China, is an interesting topic, and one that Bob Hindle has already been blogged about in relation to its tax system.
However, there are other aspects of the Indian economy that will also impede its ability to grow, notably its lack (or should that be 'lakh'?) of coal.read more...»
The government wants more new homes to be built, so too do hard-pressed home-buyers facing a continued problem of low property affordability. But cautious construction companies are reluctant to press ahead favouring share buy-backs (returning money to their shareholders) and only a limited expansion of new building.read more...»
The cost of a thirty second advertising slot at the annual Superbowl final is immense. This year advertisers are paying $4 million dollars for a 30 second advertisement during America's largest televised event. But big hits on the social web often produced at a tiny fraction of the cost challenge the conventional view that mega bucks spent reaching a TV audience remains a viable way of using the marketing dollars. This short news video from the Financial Times is a useful reminder of the importance attached to brand advertising by some of America's biggest consumer products.read more...»
Here are ten revision questions covering income elasticity and cross price elasticity of demandread more...»
Here are ten multiple choice revision questions covering the topic market demand and market supplyread more...»
Here are ten questions for students wanting to check their understanding on markets in actionread more...»
Here is a short video on the challenges and opportunities facing cocoa producers across the world but especially in sub Saharan Africa which accounts for 70% of global production. Supply is struggling to keep pace with rising world demand and there have been some structural declines in production in several countries.
The FT's Emiko Terazono reports from Ghana on how chocolate manufacturers and traders are striving to boost cocoa supplies, which are coming under pressure from climate change and urbanisation amid growing demand for confectionery in emerging markets. Farmers are being encouraged to develop supplementary incomes and invest in sustainable production methods.read more...»
So farewell, then, Facebook! That is the conclusion of a highly technical paper by two Princeton researchers, John Cannarella and Joshua Spechler, which received a lot of publicity in the press last week. The authors conclude that “Facebook will undergo a rapid decline in the coming years, losing 80 per cent of its peak user base between 2015 and 2017”.read more...»
Here are somr revision resources on government intervention in markets. There are some revision notes, a streamed revision video from PJ Holden and then ten questions for students wanting to check their understanding on government intervention in marketsread more...»
Do consumers of carbonated soft drinks really know how much sugar is in their regular fix? This five minute Newsnight clip is ideal for showing when teaching aspects of the economics of information failure. Will "getting the information in people's hands" help them to adjust their lifestyles? What are the economic arguments for and against direct intervention in the market for carbonated drinks such as a tax on high sugar content products? What are the alternative options or should we simply let consumers make their own choices?read more...»
The NHS is part of the British establishment just as much as tea, talking about the weather and sarcasm. This view through rose-tinted spectacles has prevented serious debate and clouded our judgment. Foreign visitors are now being charged to use our A & E services, yet they can still see GP's for free. This ludicrous half measure is just one example that we are blinded by love for our NHS. A situation has arisen in which any attempt from politicians to discuss much needed improvements for the current healthcare system is political suicide. This is hindering development.
A streamed presentation on aspects of the price mechanism with links to three revision quizzes plus revision notes and a revision videoread more...»
The release of two major new iterations of games console including the PS4 is an opportune moment to take stock of the transformation of the oligopolistic computer gaming industry into one whose revenues now exceed films and where social gaming, connectivity and collaboration are features of an industry where dynamic efficiency is crucial. Paul Mason from Channel 4 news reports in this short clip.read more...»
Here is an updated revision glossary covering key terms on markets and government interventionread more...»
The cost of renting property in many parts of the UK continues to rise - would rent controls make any difference? Here is an updated Unit 1 economics revision presentation.read more...»
The launch of Sony's PS4 alongside Microsoft's XBox One signals the beginning of a highly intense competitive battle in the oligopolistic games console market. With both the new consoles being launched in time for the crucial Christmas sales period, pricing strategy is crucial in order to gain maximum market share.
In the US, Sony has priced the PS4 at $399 (retail). Of course that is the retail price. Distributors will be wanting to make their margin on each unit sold. So how much does it cost Sony to make a new PS4?read more...»
Here is a revision presentation on the economics of producer and consumer subsidies as forms of government intervention in markets. There are a number of up to date examples highlighted together with an evaluation of the benefits and costs of subsidy payments. This is designed as a revision aid for unit 1 students taking their microeconomics papers.read more...»
"The market will define our future" - the words of an organic farmer growing produce in Mexico City's water farms and which - according to this excellent video report from the Financial Times - have the potential to feed huge numbers of people living in the metropolis. Careful husbandry of the canals and surrounding farm land creates the opportunity for farmers to complete between seven and nine harvests a year, an interesting link to the concept of price elasticity of supply. The video reinforces the importance of human capital - detailed, specific knowledge of the growing conditions and calendar of crops that is handed down from one generation to another.read more...»
This BBC news report is superb background for students who want a mini case study of the potential of mobile technology in improving farm yields and incomes for farmers in developing countries. A 29-year-old developer from Ghana has created a mobile app that he hopes will transform the livelihoods of farmers and help address food shortagesread more...»