Economics CPD Courses in June 2014 - Book Your Places Now!
The UK Energy and Climate Change Committee has stated that shale gas will not be a "game changer" in the future of UK energy, but they are wrong; it will be. The recent British Geological Survey report pointed to 1,300 trillion cubic feet of reserves, twice previous estimates. A recent study by the Institute of Directors found that the shale gas industry could generate 74,000 jobs and could supply up to half the country’s gas needs by 2030. Furthermore it could also trigger an investment boom worth £3.7 billion a year. Given the location of most of the reserves, it could also be hugely beneficial in reducing the north-south economic divide.read more...»
Here is a great example of the fast-changing dynamics of the computer gaming industry. Indie gaming studios are proving more nimble, innovative and ultimately smarter than the blockbuster console franchises who have dominated the industry for years. The rise of smartphone and tablet gaming has spawned a new type of gamer and a new type of game with opportunities and challenges for all players.read more...»
Some useful data here on the depth of cigarette taxes by countryread more...»
BSkyB has announced record revenues and profits. Total revenue in the last year grew by 7% to reach £7,235m and operating profit was 9% higher at £1,330m. This gave the business an operating margin of 18.4% and helped the business to generate free cash flow of just over £1 billion. Revenue per subscriber increased by £29 to £577. BSkyB has 11.2 million customers.
Programming costs were 34% of sales revenue at £2,486m. Sky paid £59m in the last year for the right to offer live coverage of the Ryder Cup, the Lions Tour and Formula 1. It has also invested more than £55m this year in original comedy and drama.
The FT news video below provides a timely look at the UK battle between telecoms group BT and pay-TV operator BSkyB to provide both sports TV and broadband. BT Sport, with rights to some Premier League football matches, launches in August 2013. This is an excellent example to use of a contestable market with a dominant established player and a new entrant (BT) using their financial muscle to try to break into the live sports TV market. It is an expensive business - the average cost of each live game shown in the current auction period is now over £6 million.read more...»
We are now into the 3rd year of falling coffee prices in the world economy and the combination of weaker revenues and rising costs are causing big problems for some of the coffee suppliers in the poorest countries. This Financial Times news video provides some background on the industry. The price has fallen 60 per cent from its peak and the market seems saturated.read more...»
After 2 decades of continual growth in sales of PCs, indicators are beginning to show a worldwide slowdown. The primary cause of this change in demand appears to be a growth in demand for tablets and smartphones and an increase in the number of people purchasing these as genuine substitutes for an old-style laptop or desktop computer.
PC manufacturers have tried to hit back by increasing the use of touchscreens and even creating hybrid devices that allow users to detach screens and use them as a tablet-like device. Microsoft, dependent on the success of the PC market, has brought in a new version of Windows (v8) to bring a little life back to the computer experience. All of these changes do not appear to have had a great affect (although sales in the USA continue to be bouyant).
This link will take you to an article from the Wall Street Journal showing some facts and figures.
Follow this link for a resource that asks students to draw shifting demand and supply curves to illustrate what is happening to sales of PCs and tablets.
Virgin Cola was set up during the early 1990s and after a hugely successful launch sales started to out-strip established mega brands such as Coca Cola. An aggressive response from Coca Cola included attempts to drive Virgin Cola from the supermarket shelves and the brand never recovered. In this short interview from the Wall Street Journal, Richard Branson discusses some of the key lessons from the Virgin Cola story. It is a commonly used example when discussing barriers to entry in concentrated markets.
Here is an interesting report on the rise of digital currencies. Bitcoin, a decentralised, virtual currency, is gaining increasing interest from investors and entrepreneurs. The currency is not controlled by a government or a central bank and is traded on the internet.
In this short news video, the FT's Maija Palmer reports from a Bitcoin conference on where the currency is heading including the use as a person to person medium of exchange. In technology savvy cities in the USA, there is no a bitcoin ATM that allows people to swap standard currencies for bitcoin credits. Will retailers latch on to the new currency?
Regulators seem wary about what Bitcoin is and how it might be used, fearing for example the use that might be made of anonymous and untraceable digital currencies for illegal money laundering by terrorist organisations.
Changing tastes and preferences drive resource allocation in a market economy. Coffee consumption in China has been growing steadily as the country's middle class tries new drinks and the result is that new coffee cash crops are being grown China to help satisfy growing demand from the domestic market. The Chinese Coffee Federation is also hoping that Chinese coffee will establish itself as a major coffee exporting nation.
A super resource from the Economist. KAL, The Economist's resident cartoonist and animator, explains the dangerous history of bubbles.
A bubble is said to happen when the prices of securities or other assets rise so sharply and at such a sustained rate that they exceed valuations justified by fundamentals, making a sudden collapse likely (at which point the bubble “bursts”). Typically this is seen in property markets where housing valuations can rise to unsustainable levels relative to income or long-run average prices. Speculative demand driven by positive price expectations has the effect of amplifying market demand and driving prices higher - especially when supply is restricted and unresponsive to short-term price movements.
Bubbles are common in other asset markets such as for stocks and bonds. And increasingly we find that world commodity prices exhibit bubble tendencies with high levels of volatility in the prices of foodstuffs, oil and natural gas and metals.
The bursting of a bubble - such as a collapse in property prices - can have important demand-side effects on wealth, confidence and aggregate demandread more...»
Another great short animated video from the Economist - highly relevant to students looking at the economics of protectionism / import controls. KAL, The Economist's resident cartoonist and animator, explains what dumping means and why companines do it.read more...»
Miners made redundant from Maltby Colliery in Yorkshire many of whom with decades of experience faced years on the unemployment register when the mine closed earlier in 2013. But some have been thrown a lifeline with the rising demand for miners in the UK potash industry.
FOOD banks are a rapidly growing phenomenon in the UK. A few years ago, they barely existed, but an estimated half a million people now make use of them every week. On the face of it, it seems that poverty has sadly become endemic since the financial crisis, with many families unable even to feed themselves. Real incomes have declined since 2007, putting pressure on household budgets. But the pace of increasing demand is surprising.
In fact, the food bank is a market. It is, however, complex – with particular features which mean that it is likely to grow rapidly, exactly as we have seen. The key point is that food is not the only commodity traded.
The emergence of a competitor product can often send shock-waves through markets of established products where profits have been more or less guaranteed for decades. Will e-cigarettes have a similar effect on the tobacco industry? And is this an emerging industry in need of greater government regulation and taxation?read more...»
This morning's news stories include an implied threat to close MOSI (The Museum of Science and Industry) in Manchester, in order to keep the Science Museum in London open.
Should museums charge admissions fees or not? Is a museum a merit good or not? If entry is free, are you tempted to avoid placing money in the transparent collection box as you go in? If is free, how should the museum fund its activities - encouraging donations, marketing guidebooks, souvenirs, themed gifts, or reliance on government grants? This begs questions about how a government allocates scarce funds?
Florence's Uffizi Gallery does not charge children or pensioners, amongst others. Can you identify which museums have more price inelastic demand, and face a smaller drop in visitor numbers should charging be reintroduced? Why would visitors pay €18 to climb Pisa's famous leaning tower?
mind that AQA had set a question on this topic in 2004. "Using the data and your economic knowledge, assess the case for and against providing free entry to museums."
MOSI is supposed to be one of Manchester's biggest visitor attractions, but would there be a negative multiplier effect if it closed? Should the cultural heritage be preserved? This clip from Yes Minister helps focus a debate.
This streamed revision presentation looks at the economic impact of carbon trading schemes and effects on business costs and profits. It also focuses on an evaluation question for an exam on the effectiveness of carbon trading as a way of cutting emissions.read more...»
Firstly, I hope the first AS exam went well, whether that was macro (OCR), micro, and whether for the first time or a retake. I also hope that in amongst the revision you’re in the market for a more random blogpost…
This one’s a topic on which Paul Ormerod would have something to say. On NPR’s Planet Money radio show/podcast, they’re launching a T-shirt, and using this as a stimulus for a whole set of reporting on its genesis, from cotton subsidies to its design. The latest podcast investigated the colour of their T-shirts. “What’s the economics in that?”, I hear you cry…
In the wake of the terrible disaster in which the collapse of a factory building caused more than a thousand deaths, the Founder of the Grameen Bank Mohammad Yunus argues here the case for an international minimum wage in the garment industry and a small price premium to establish a Garment Workers Welfare Trust in Bangladesh.
"I propose that foreign buyers jointly fix a minimum international wage for the industry. This might be about 50 cents an hour, twice the level typically found in Bangladesh. This minimum wage would be an integral part of reforming the industry, which would help to prevent future tragedies. We have to make international companies understand that while the workers are physically in Bangladesh, they are contributing their labour to the businesses: they are stakeholders. Physical separation should not be grounds to ignore the wellbeing of this labour."
There is of micro and macroeconomics in this piece not least the question of price sensitivity of consumers in rich nations.
Here are some streamed revision presentations for unit 1 microeconomicsread more...»
My students loved watching Ben's human powered ferris wheel (particularly the acrobatics of the staff!) and this led to a class discussion about the whole manufacturing output up (or at least in the US)/manufacturing employment down debate.
Whereas labour in the developing world is relatively cheap hence our unique ferris wheel above, in the west staff costs still constitute the lion's share of firms' total costs - added to that developments in technology and we have a situation where employment in areas which require fewer skills and more "manual" tasks are now being performed by robots despite output actually increasing.
Looking for examples of this kind of factor substitution, some students came across the Kubota tractor factory opening somewhere in the US which neatly surmises the benefits to firms of such a move:read more...»
This revision quiz provides more MCQs to test understanding of markets in action.read more...»
A revision presentation on buffer stocks as a form of intervention in markets where prices, revenues and producer profits are volatileread more...»
Here is a revision presentation from our November 2012 AS Micro Revision Workshop programme covering aspects of the price mechanism, price volatility and inter-relationships between different markets. The presentation can be downloaded.read more...»
The Rijksmuseum in Amsterdam has reopened its doors to the public after a 10 year closure for rebuilding. It's most famous exhibit is "Nachten Watchen" or "The Night Watch" by Rembrandt. This short clip Onze helden zijn terug! celebrates the rejuvenation of The Museum. read more...»
More questions on income and cross elasticity of demand here.
The basics of price elasticity of demand are covered in this revision quiz.
10 revision questions here (MCQs) on the basics of supply and demand.
Here is another film to add to our collection of films with an economic dimension. Promised Land from Oscar-nominated director Gus Van Sant stars Matt Damon and is an anti-corporate thriller that centers on the controversial natural gas process of fracking.read more...»
AS Micro students will be gearing themselves up for a key period of intensive revision over the coming days and weeks. For most, being able to analyse and evaluate government intervention in markets is crucial to scoring well in exam questions and reaching those top grades.
Evaluation is not a skill that can be learnt overnight. It requires plenty of attempts to get the evaluative style and approach working well.BTW, if you are revising market failure I highly recommend Matt Smith's Scoop.It Board - full of great applied examples on this big area for the Unit 1 economics exam! Click here to view it read more...»
On April Fools day, 1973 VAT was introduced in the UK replacing the purchase tax, which was charged at different rates according to the luxuriousness of an item. The idea was for it to be a straightforward low flat rate of 10% levied on most goods and services so easy to apply and cheap to collect as it's the business' responsibility to collect the tax. However, according to this Guardian article VAT "has become increasingly complex, with exemptions for everything from children's clothes to Jaffa Cakes."
There have been some interesting VAT appeals from those firms seeking to have their products zero rated ie not subject to VAT. Back in 1991, a tribunal decided Jaffa cakes were indeed cakes and not biscuits and therefore not liable for VAT (why cakes should get such special treatment is anyone's guess!). Most food is VAT-exempt however beverages are not and so it was for Innocent smoothies in 2010 when it was ruled that they too, were to be subject to this tax. Nonetheless VAT is now the government's third largest source of revenue after income tax and national insurance, raising over £100 billion last year.
A tax on the calories contained in soft drinks is around 6% more effective at reducing obesity than a general tax on soft drinks – but the effect is only a drop in people’s weight of around 1.6 pounds per year. These are the findings of research by Wei Xiao, to be presented at the Royal Economic Society’s 2013 annual conference.
The study analyses the buying patterns of 10,000 American households by looking at data on soft drink purchases from supermarket scanners. Based on the calorie content of soft drinks and the medically accepted view that an intake of 6.614 calories leads to a gain in weight of 1 gram, the author simulates the effectiveness of various soft drink tax policies on people’s weight.
The research suggests that a tax that targets the calorie content will be more effective than a universal tax on soft drinks – as some soft drinks are healthier than others. But the author admits that ‘although an obesity tax on soft drinks can cause weight reduction, the effect is small’, adding that even without any dietary changes, ‘a human’s weight can change in the region of one pound in a day’.
The number of young people taking driving tests in UK has dropped a fifth in the past five years - that is a reduction of over 200,000 people having lessons and then taking their driving exam. According to data from the RAC there are significantly fewer young men with a driving licence today, down 14% compared with mid-1990s. What factors might explain the decline in demand for car use among this age group?read more...»
We will put together some visual resources here on the division of labour in action! Click below to access them.read more...»
This is potentially an important development in a key consumer industry - can major tea exporters successfully manage the world price of tea in the form of an international cartel? What are the conditions required for cartels to be successful? When do international price agreements break down? Can you think of some of the benefits and costs of such a scheme from the point of view of different stakeholders?
Links to follow:
World tea producers may brew up higher tea prices (Telegraph Australia)
Cycling is a boom sport at the moment. The numbers of people active in on-road and off-road cycling continues to grow and sales of products such as turbo trainers that allow enthusiasts to train at home when the weather is inclement are also moving into a higher gear.
Here is a story of innovation, German manufacturing excellence, joint ventures and the commercial returns from people's desire to become more active. Electric-powered bicycles (e-bikes) are being built with the help of the multinational firm Daimler Benz. The bikes, which cost as much as $5,000, only help cyclists pedal if they want them to, but their motors can also effortlessly push up drivers to 45 kilo-metres per hour. A luxury product for now, but as economies of scale take effect, prices will fall and the product will become more affordable.read more...»
Mark Austen writes on this essay title: Evaluate the impact that the micro-finance and Fair
Trade movements can have in supporting development in some of the world’s
Bill Morrison examines whether proposals for a minimum price for alcohol will work in the UK. The UK Government is looking to introduce a minimum price per unit for alcoholic drinks. The price muted is 45p which would make a relatively strong can of lager approximately £0.95. Currently a local supermarket is retailing a brand of lager containing 2.1 units per can at the equivalent of £0.75. Under the new legislation, should it come into force, the equivalent box of ten cans would have to be sold at a minimum of £9.46. More of which later. However, why do we need to introduce a minimum price for alcohol?read more...»
Land Grabs have become an important and controversial issue in development economics in recent years.read more...»
I really look forward to receiving my daily email from the Farnham Street Blog - over the last couple of years it has been a continuous stream of interesting ideas and links to thinking in business and behavioural economics. Today's article focused on the continued popularity of Lego bricks despite the loss of patents. Price anchoring, brilliant marketing, consumer perception, hard wiring into our brains the contextual value of a product ... the result is low price elasticity and the ability to raise price nearly every year! Here is the link
The Fair Trade movement now covers over 650 producer organisations in more than 60 countries
Tragedy struck at a mid-week game played during the holiday season in Football League Division Two. The pies ran out in the home supporters’ bar. The incident may seem trivial to those not involved. Yet it illustrates some important themes in economics, which have even gained their inventors the Nobel Prize.read more...»
An updated glossary of key terms for the Unit 1 Economics paperread more...»
In many countries, resource nationalism has become more frequent in recent years, indeed it has been one of the key stories in 2012 as several countries have introduced new resource taxes, natural resource licence reviews and expropriation of assets from private sector companies. This Financial Times news video looks at the trends including resource nationalism within countries as provinces and regions look to exert great control on the revenues from oil, gas and mining projects.
See also: Economist: Foreigners beware - oil and mining in Indonesia
Resource insecurity: New report from Chatham House
Interactive resource: New political economy of natural resourcesread more...»
Here is a streamed revision presentation on rent controls in the housing market - designed for AS micro students.read more...»
Here is a streamed version of a revision presentation on market power and pricing suitable for Unit 3 micro studentsread more...»
An A-Z glossary for the Unit 1 Micro courseread more...»
If you are revising for your Unit 1 micro economics paper here are some revision resources to help you on your way:read more...»
The Danish government has opted to bring to an end a policy intervention designed to curb consumption of high fat foods. The measure - introduced in the autumn of 2011 - added £1.50 per kilo of saturated fats in a product but the experiment will end because of fears over inflated food prices and domestic jobs being put at risk. Food manufacturers complained of increased compliance costs and there was some evidence of a rise in cross-border shopping to avoid the tax. A proposed new tax on sugar has also been cancelled.
For many industrial products the price elasticity of supply across different levels of demand is essentially perfectly elastic - i.e. a business can manufacture as much as is needed at a given unit cost for a given level of market demand. Processed food is a good example of this and I can find no better example of the idea than this stunningly clear five minute video on how hot dogs are made!read more...»