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Unit 1 Micro: Price Mechanism in Action (Revision)

Saturday, April 20, 2013

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.

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Onze helden zijn terug! Our heroes are back!

Friday, April 19, 2013

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 RembrandtThis short clip Onze helden zijn terug! celebrates the rejuvenation of The Museum.

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Revision Quiz: AS Economics: Income & Cross Elasticity of Demand (1)

Tuesday, April 16, 2013

More questions on income and cross elasticity of demand here.

Launch: Revision Quiz: AS Economics: Income & Cross Elasticity of Demand (1)

Revision Quiz: AS Economics: Price Elasticity of Demand (1)

The basics of price elasticity of demand are covered in this revision quiz.

Launch: Revision Quiz: AS Economics: Price Elasticity of Demand (1)

Revision Quiz: AS Economics: Supply & Demand (1)

Sunday, April 14, 2013

10 revision questions here (MCQs) on the basics of supply and demand.

Launch Revision Quiz: AS Economics: Supply & Demand (1)


Economics at the Movies - Promised Land

Sunday, April 07, 2013

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. 

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Unit 1 Micro: Evaluating Government Intervention - Alcohol Pricing

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

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Happy birthday VAT! 40 years old this month


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.

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Unit 1 Micro: Taxing Calories in Soft Drinks

Friday, April 05, 2013


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’.

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Unit 1 Micro: Falling Car Use among Younger Drivers

Monday, February 18, 2013


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?

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Unit 1 Micro: Video Examples of the Division of Labour

Saturday, February 09, 2013

We will put together some visual resources here on the division of labour in action! Click below to access them.

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Unit 3 Micro: Samsung surges ahead in global smartphone sales

Sunday, January 27, 2013

The global smartphone industry is an example of a contestable oligopoly .... in this article from BBC news there is loads here for A2 micro students to consider - economies of scale, pricing, the use of profits / producer surplus, the effects of globalisation, fast-growing and maturing markets, shift in power towards Samsung (who spend huge amounts on marketing). Product differentiation, pricing entry-level phones especially in emerging markets. Who pays for extra capacity that the mobil industry will need to create? Allocative, productive and dynamic efficiency issues all here. Is some of Samsung's competitive advantage due to the broader range of products - exploiting economies of scope?

Unit 3 Micro: Major tea exporters consider a new cartel

Wednesday, January 23, 2013

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:

Tea cartel formed by leading producer nations (BBC news)

World tea producers may brew up higher tea prices (Telegraph Australia)

Unit 1 Micro: E-Bikes on Track for Surge in Demand

Monday, January 21, 2013

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.

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Unit 4 Macro: Fair Trade and Micro Finance - Spurs to Development?

Sunday, January 20, 2013

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 poorest countries.

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econoMAX - Will a minimum price for alcohol work?

Saturday, January 19, 2013

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? 

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Unit 4 Macro: Land Grabs and Development

Friday, January 18, 2013

Land Grabs have become an important and controversial issue in development economics in recent years.

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Unit 3 Micro: Why Lego is so popular and profitable

Wednesday, January 16, 2013

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

Unit 4 Macro: Fair Trade and Development

Saturday, January 12, 2013


The Fair Trade movement now covers over 650 producer organisations in more than 60 countries

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Paul Ormerod: Meat and potato pies and the Nobel Prize in economics

Thursday, January 10, 2013

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.

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Unit 1 Micro: Key Term Glossary - Markets and Market Failure

Wednesday, January 02, 2013

An updated glossary of key terms for the Unit 1 Economics paper

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Unit 4 Macro: The Rise of Resource Nationalism

Thursday, December 20, 2012

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 resources

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Unit 1 Micro: Rent Controls - Evaluating Government Intervention

Thursday, December 13, 2012

Here is a streamed revision presentation on rent controls in the housing market - designed for AS micro students.

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Unit 3 Micro: Market Power and Pricing Power

Monday, December 10, 2012

Here is a streamed version of a revision presentation on market power and pricing suitable for Unit 3 micro students

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Unit 1 Micro: Markets and Market Failure Concept Glossary

An A-Z glossary for the Unit 1 Micro course

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Revision for AS Economics Unit 1 (Micro)

If you are revising for your Unit 1 micro economics paper here are some revision resources to help you on your way:

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Unit 1 Micro: Denmark Drops the High Fat Food Tax

Sunday, November 11, 2012

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. 

Video: Fat tax introduced by Denmark 

Unit 1 Micro: How Hot Dogs Are Made

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!

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Chocolate Passion - Grown in St Lucia, Made in Cambridge

Friday, November 09, 2012

Angus Thirwell the co-founder and CEO of Hotel Chocolat is immensely grateful to Joanne Harris and Juliet Binoche. respectively the author and star of the hit film Hotel Chocolat. The movie educated a generation of aspirational chocolate lovers in how to pronounce Hotel Chocolat and has helped millions of consumers in Britain and around the world advocate the hit chocolate retail brand without committing a pronunication faux-pas! I wonder how many satisfied customers realise that Hotel Chocolat does not exist? Perhaps they have typed the name into Trip Advisor hoping for a review of a retreat flowing with rather wonderful chocolate made from a St Lucian plantation? 

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Unit 4 Macro: Micro Finance, Fair Trade and Development

Wednesday, October 31, 2012

Here is a streamed revision presentation on aspects of micro finance and fair trade as part of a course on development economics.

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Economies of Scale at Google

Monday, October 29, 2012


The economies of scale at Google are impressive and in some cases breath-taking. This visual tour  provides a rich example of the size and complexity of the data centres that power the world's biggest search engine. If you are looking for some more impressive images of economies of scale in action, here is a picture tour  of a Sainsburys distribution centre from a couple of years back

Unit 1 Micro: Making the Bus Cool!

Friday, October 26, 2012

The conventional wisdom is that bus transport in many countries including the UK is an inferior good - demand declines as real incomes fall. Consumer perceptions of bus travel are hard to shift and default choices when it comes to transport are often deep-rooted and tough to change. The total annual number of bus journeys made in the UK experienced a long term decline from the 1950s for nearly forty years although a recent House of Common select Committee report found that, since the mid-1990s, there has been an upturn in total passenger numbers for Great Britain, largely as a result of the introduction of national concessionary travel schemes and passenger growth in London.

Perhaps this rather wonderful video from Denmark does more than most to make bus travel cool once again! What do you think?

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Unit 3 Micro: The Rise of Dynamic Ticket Pricing in Sport

Saturday, October 20, 2012
An autumnal hat tip to Ralph Bostock at the Royal Grammar School Clitheroe for spotting this excellent article from BBC news on the growing use of dynamic ticket pricing by professionals sports clubs. Dynamic pricing to increase revenue - also known as yield management - has long been a common feature of pricing strategies among airlines and bus, coach and train operating companies. Now we find it occurring more frequently for tickets to football clubs many of whom have been struggling to fill their grounds on match day. The Football League has regulations governing ticket prices but Derby County has been given the go-ahead for a trial of dynamic pricing - is it working to boost the gate?
Here is the link to the article  

Unit 1 Micro: Bargain Basements for Luxury Goods

Thursday, October 18, 2012

This Financial Times new video looks at the rapid growth of outlet shopping where excess inventory (stocks) of designer brands are sold at heavily discounted prices. A useful video to watch when thinking about income elasticity of demand. The video looks at how premium brand retailers manage this section of the market.

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Unit 4 Macro: Perspectives on Natural Resource Curses

Saturday, October 13, 2012

My A2 students have been researching and writing about the economics of natural resource curses - some of their perspectives are provided below.

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The Kindle and the e-book - the perfect complements

Friday, October 12, 2012

I am a Kindle user.

There, I’ve said it.  As the founder member of the Kindle-owners self-help group (KOSH), I’m inviting all fellow addicts to come out and admit likewise – until you admit it to yourself no-one will be able to help you.  Until we act collectively, no-one will be able to stop those Amazon dealers from peddling their wares.

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Paul Ormerod: Ninja Turtles, Nick Clegg and Market Failure

Thursday, October 04, 2012

Christmas is coming.  Retailers are beginning to push their offers hard.  The first page of a search on Google for ‘Christmas Toys 2012’ is full of sites announcing the ones which will be ‘hot’ or ‘top’.  In total, there are over 75 million results available to be perused.

Last year it was Mishling Tree Monsters, Doggie Doo, and the like which proved the most popular.  Readers of a certain age will recall such stupendous commercial triumphs as Teletubbies, Buzz Lightyear and Teenage Mutant Ninja Turtles.  

Fond though these memories might be, the runaway successes bring tears as well as joy.  Every year, the cult toys of the year become hard, or even impossible, to acquire as the great day approaches.  

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Market Failure - Child Obesity

Wednesday, September 26, 2012


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Unit 1 Micro: Smartphone Penetration and Creative Destruction

The speed with which new consumer product technologies are taken up is of enormous interest for lots of reasons. Emerging products and services challenge demand, revenues and profits for established products and bring about  - as Schumpeter pointed out - gales of creative destruction.

In the United States, fresh data suggests that more than half of US consumers have smartphones and if the information is accurate, this means that smartphones have become one of the most rapidly adopted consumer technologies of all time.

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Unit 1 Micro: Capacity problems following Olympic surge in demand

Sunday, September 23, 2012

A hat tip to Ed Marsh from Glyn School for spotting this excellent short news video  from BBC Midlands. Demand for swimming lessons in Corby and Northampton is running well ahead of the capacity of the pools to offer them - the problem is not a lack of pool capacity, more a shortage of qualified swimming coaches - what are they doing to rectify this? 

Living Diagrams - Supply and Demand in Action!

Friday, September 21, 2012

This is a fantastic teaching idea! This week economics students at Ipswich School have been having a go at living supply and demand diagrams in AS economics. Here are a couple of examples of students getting home and finding wonderful ways of illustrating the price mechanism in action! Can anyone surpass the two examples shown below? If so please send them in or post on a twitter feed using the hash tag #ecbusteach


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Unit 4 Macro: Chile - Development Growing Pains

This new video from the Financial Times is superb on some of the growing pains for the Chilean economy, a country widely praised for good economic management in recent years. Her economy is heavily dependent on copper exports, and a target of developed country status by 2018 looks ambitious. The Chilean government believes that it can be met a year early! But there will be many obstacles to overcome not least in meeting growing demand for reform in a country where income and wealth inequality has widened.

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Paul Ormerod: We are all better off than we think

Thursday, September 20, 2012

Apple’s iPhone5 has already smashed sales records.  The first day on which consumers could make purchases over the web, more than 2 million online orders were placed.  Little wonder that JP Morgan has estimated that sales of the iPhone5 could add as much as 0.5 per cent to American GDP. These numbers have attracted criticism. If consumers simply buy iPhones instead of other products, it is hard to see how output could be boosted by such an amount. 

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Unit 1 Micro: Prices in Action - Ticket Pricing at Derby County

Monday, September 17, 2012

A warm hat tip to Ed Marsh, Head of Economics at Glyn School for spotting this superb example of a sports club using dynamic pricing technology to determine the prices of tickets for their home games. 

The BBC news site reports  that Derby County are introducing "demand-based" ticketing for the coming season with prices fluctuating according to the opposition, the team's form, kick-off times and even the weather. The system is known as Sports and Entertainment Analytical Ticketing System (SEATS) 

Buy in advance and fans will get cheaper prices - but what if a sizeable group decides to start a game of chicken with the club and hold back from buying? As match day gets closer, ticket prices should move higher, but if demand for a game is well below the stadium's capacity will prices drop back?

Hardened cynics might also point out that the Derby County ground has a fundamental design flaw .... the seats face the pitch!

Unit 4 Macro: What Is a Natural Resource Curse?

Sunday, September 16, 2012
As Geoff’s earlier blog entry on the Kwale Mineral Sands Project in Kenya  used the term natural resource curse, I thought it apposite to develop the idea with application to both high income countries (HICs) and low income countries (LICs). In both cases, it would seem, the idea that 'all that glitters is not gold' is a persuasive one. read more...»

Unit 4 Macro: Primary Export Dependence

Saturday, September 15, 2012

Many lower-income developing nations still relying on specializing in and exporting low value added primary commodities. The prices of these goods can be volatile on world markets. When prices fall, an economy will see a sharp reduction in export incomes, an adverse movement in their terms of trade, risks of a higher trade deficit and a danger that a nation will not be able to finance investment in education, healthcare and core infrastructure.


 

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Unit 3 Micro: OFT Investigates the UK Retail Fuel Market

Wednesday, September 05, 2012

The Office of Fair Trading (OFT) has announced that it is launching an investigation into prices at the pumps  amidst fears that the retail market for petrol and diesel is not operating properly and causing damage to the welfare of fuel buyers including millions of motorists and businesses.

For a long time motorists have complained that the prices they pay are quick to rise when the world price of crude increases, but the cost of filling up the tank falls much less quickly when crude oil is available on international markets at lower prices. This BBC news video report  provides some background.

Our chart below tracks the weekly average price of petrol and diesel against a benchmark international price for crude oil - is there any evidence here for the wrath of customers?

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Unit 1 Micro: Difficult Times for UK Farmers

The British farming industry faces a number of challenges including an ongoing battle with the supermarkets to achieve better prices for their products. They are also engaged in negotiations with the European Union about reforms to the CAP that might take farm land out of production. And there is the long-term threat of adapting to and coping with extreme weather linked to the impact of climate change. read more...»

Unit 1 Micro: What future for the skateboard industry?

Tuesday, September 04, 2012

Admit it, when was the last time you dusted off your skateboard and strolled over to the local skate park? The estimated number of global skateboard participants has fallen by a third in the last ten years and the industry faces big challenges in preventing decline and reinvigorating what once was a craze but now a market with a firmly downward sloping trajectory for sales. Should skateboard manufacturers stick to their core demographic or look for new alliances to change perceptions and - ultimately - sales and profits. This Financial Times video provides some interesting analysis and comment.

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Unit 1 Micro: Falling demand prompts Lexmark to exit inkjet market

Tuesday, August 28, 2012

I have always thought that ink jet printers were an expensive and inefficient luxury - the high cost of consumables has always been a source of frustration and annoyance.

It seems now that the demand for ink jets is on a steep downward path as cheaper and frankly better substitutes are chosen. Far fewer people are printing out their photos and choose instead to post onto social media sites such as Facebook and Twitter. For those who prefer a hard copy of a photo, laser printers have become a much more cost effective and affordable alternative to ink jet printers.

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