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.
As an example of collusion, this news article showing alleged price fixing by Canadian chocolate manufacturers and their wholesale distributors illustrates how highly-dominant firms can impact against the public interest.
Reading this article and admitting that chocolate is the closest product that I consume which exhibits addictive qualities (apart from coffee and salt-laden crisps that is) it struck me that this perhaps could be used as an evaluative argument when considering the case for legalisation of slightly stronger narcotics. One argument for legalising cannabis is that tax revenue can be accrued and there would be a reduction in crime given the lowering of prices (and consequential drop in burglary and stealing to pay for the relatively expensive habit). This reduction in price, it could be argued, might only occur if the newly formed legal market for cannabis is highly competitive and doesn't suffer from oligopolistic distribution conditions like chocolate does in Canada (or in the UK, for that matter).
Just a thought. Now, where's the other half of that Twirl?
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.
Mainly designed for A2 micro students taking exams in business economicsread more...»
This revision presentation looks at aspects of intervention in utility industries in the UKread more...»
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...»
Those of you who are about to take your Econ 3 exam (or whose students are getting ready for the final push), might find this story about sexism in TV an interesting example of inequality in the labour market. A report out yesterday and being pursued by Deputy Leader of the Labour Party, Harriet Harman suggests that a lowly 18% of UK TV presenters over the age of 50 are women. Some channels are worse than others.
The story is also a good example of how current government intervention in this labour market is having little effect. Anti-ageist and sexist laws exist and yet there appears a very real 'glass-ceiling' when it comes to women over the age of 50 wishing to work on TV. If legislation is ineffective what other policies could students suggest might improve the situation? A quota system? Fines? Here is a real chance to offer critical and evaluative analysis on government intervention.
Follow this link to read a report.
Those of you who avidly follow Geoff Riley's blogs on this website may have read that he advises students to avoid getting too worked up about whether the economy is actually in recession.
Most economic students will readily tell you the official definition of a recession and can analyse the impact of an under-performing economy. However, it was interesting to read today that, having officially avoided a triple-dip recession last month we may have to revise whether we actually sank in to a double-dip recession in the first place. Follow this link to read the Telegraph's report on how the ONS are revising recent statistics on the economy's performance, suggesting that the shrink in the construction industry shrank by 5.0% (not 5.4% as originally reported) in the first three months of 2012 and, as a consequence, the UK did not slip into another recession.
As Geoff would tell you, whether the country was in a recession or not is the not the most important factor - the economy's sluggish growth should be the paramount concern and the word 'recession' has become more of a political tool. In the upcoming exams, students should remember that the avoidance of a double-dip or triple-dip is fairly irrelevant - the overall performance is the key indicator and there is still plenty to be worried about.
The credit crunch is widely regarded to have started during 2007 and is certainly not over yet! Indeed the period of severe constraints on credit availability and rising borrowing costs most notably for smaller businesses has now lasted longer than the Second World War. It represents a major barrier to sustained and hopefully more robust economic recovery. This short streamed presentation looks at the importance of the credit squeeze on the UK economy.
A number of new government policy initiatives have been introduced but doubts persist about their effectiveness. Underneath the surface new forms of business finance are taking shape including peer to peer lending and the rise of retail bonds issued by a number of businesses.read more...»
I'm always sightly dubious about statistics and information represented by campaign organisations - I'm left with the reservation that information can presented in any way that you want to prove whatever point that you are trying to make (wasn't it an economist who came up with the phrase 'lies, damned lies and statistics'?). So this fascinating report from an organisation called 'Vision of Humanity' needs to be looked at with an open mind.
However, if you take it at face value, it offers some really interesting information.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...»
The role of government intervention in markets is addressed with these 10 revision MCQ questions
The European Union's carbon emissions trading scheme is under huge pressure at the moment and there are many who believe that the market-based system of carbon pricing has effectively collapsed.
- There is a fundamental over-supply of carbon permits in the market - on some estimates, an excess of supply of over 840 million permits (one permit = one tonne of CO2)
- This has caused a sharp fall in the market price of carbon to below Euro 5 per tonne
- At such low prices there is an incentive to use coal rather than cleaner natural gas for electricity generation
- Latest figures show that greenhouse gas output in Europe fell in 2012 by 1.4% - but this is largely the result of very weak economic growth in the EU
(Source: The Economist) - click here
Unicef have just released their latest 'report card' on the relative state of well being among children in 29 of the most wealthy countries. The report (a full version and a summary) are available from this link.
The report shows pleasing progress for the UK (our place on the overall ranking has gone up from last place to 16th) with an improvement in obesity levels and a reduction in consumption of alcohol, cigarettes and drugs compared to the 2007 report.
However, worryingly, the UK is ranked 24th in the table with regards to its provision of Education. The biggest weakness highlighted, is the fact that the UK has one of the lowest percentages of young people continuing with education post 16 (only 74%) and very high levels of young people not in education, employment or training at all (nearly 10%). Students of economics could use this as evidence of government failure with regards to supply-side policies - with such a low level of participation in comparison to our major competitors can we guarantee that we are developing skills that will allow the economy to grow in the future? Could your students suggest (and then evaluate) suggestions for how this situation could be remedied?
How Britain escaped from the travails of the Great Depression and achieved 4% a year growth in the years from 1933 to 1937 has important lessons for today’s policy-makers, according to research by Professor Nicholas Crafts, presented at the Economic History Society’s 2013 annual conference.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 UK national minimum wage (NMW) has been in the news in recent days with several reports suggesting that Coalition government ministers are considering introducing a freeze on the pay floor or going further and reducing the minimum hourly pay rate. The NMW was introduced into the UK in the spring of 1999 and has been up-rated regularly but never cut. It is presently at £6.19 an hour and recommendations on changes to the pay floor come from the annual review conducted by the Low Pay Commission
The success of small firms is crucial to hopes of a sustained recovery in the UK economy and the government is keen to promote innovation within small and medium sized enterprises with a range of tax incentives including the Patent Box. The Patent Box system allows companies to apply an effective 10 percent preferential rate of corporation tax to profits attributable to patents and is introduced from April 2013.
Will this fresh supply-side fiscal policy prompt a significant boost to patent applications from UK firms? The evidence so far is mixed. The number of patent applications to the UK Intellectual Property Office from within the UK was just 15,370 in 2012, almost equal to the 2011 figure of 15,343. (Source: Independent, March 2013). But there has been a large rise in the number of patent applications made in the UK by foreign businesses especially in the pharmaceutical sector.
The reality is that most small businesses are too busy reinvesting their revenues back into growing their businesses rather than going through the lengthy, uncertain and often costly process of making multiple patent bids on their new product and process ideas. In a recent blog from the Wall Street Journal it was claimed that "it is almost impossible to defend software or business process innovation patents in the UK." Others are more optimistic - read this short piece from the Scotsman which claims that the Patent Box fits well with the ambition of the Scottish government to attract inward investment from high-knowledge businesses.read more...»
With Evening Standard-like speed, please follow this link for a short set of questions about today's Budget.
Schools and College up and down the country are preparing for all sorts of different activities for the Comic Relief Red Nose Day this Friday (15th March). Are you doing anything with your class?
Here is a ready-made Powerpoint game to run for approximately 20 to 25 minutes in your class this Friday. Whilst being a fun, team-based challenge, the multi-choice questions are all about facts and figures related to the causes that Comic Relief are attempting to support. As such, the information contained within the game should prove a useful stimulus for discussion within your class about the causes of poverty in Africa, as well as alcohol-abuse and other social issues within the UK. It could also prove a useful tool with discussing why these problems exist and what government solutions could be implemented (as well as asking why they haven't already been put in place!).
Click on this link to go to the Powerpoint file that contains the game.read more...»
The winning bids for the 4G licences in the UK have been announced. Paying for a licence is an entry barrier into this market - but the total value of the bids was a small fraction of the £22bn gifted to the government in 2000 when the 3G licences spectrums were sold - the latter was an example of the winners' curse in action.In 2013 the telecoms businesses were more savvy - freeing up money to invest infrastructure and capacity. Will this be a kick-start to growth that the UK government expects?
The subject of obesity is an increasingly important topic in the study of market failure. Its consequences are severe and go right to the heart of the ‘inefficient allocation of resources’ economic concept of market failure. Overconsumption of a number of demerit goods are one of the many causes of this growing epidemic and worrying trends and statistics can be found here with this BBC video clip also providing a useful overview on the facts behind global obesity. The UK is one of the most obese nations in the world with about a quarter of adults classed as obese and that figure is predicted to doubly by 2050.
Today's announcement of routes for the HS2 project highlights the importance governments ascribe to public works projects.
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)
Although it's not been too bad in my area, the recent cold snap is another example of the extreme weather we've seen a number of times in recent years. But what does extreme mean in this case? This isn’t a hurricane. It’s extreme in the sense that it’s unusual. This weather would not faze the Finns or Swedes. They are equipped for this weather, so surely we too could avoid the loss of a work/school day by some investment.
Students taking their Business Economics unit exam this week might like to use online file-storage as an example of a contestable market. This comes during the week of an announcement by the colourfully-named internet tycoon Kim Dotcom of a re-launch of his file-sharing cloud-site Mega - which offers up to 50 Gb of free file storage and out-trumps its big and more established competitors at Dropbox, Microsoft and Google. According to Mr Dotcom he already has a quarter of a million registered users and over a million hits on his website within the first day.read more...»