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Local Government Association calls for change in rules on allowing term-time holidays

Friday, October 24, 2014

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!

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Free nursery places for 3 year olds appears to have no impact - an example of Government Failure?

Wednesday, October 22, 2014

Reports out over the last couple of days suggest that government spending on free nursery places for 3 year olds since 1998 has not produced any valuable educational or economic outcome. The policy was introduced as part of a series of reforms introduced by Tony Blair when he came to power in 1997. The Blair Government saw it as a method of reducing the differentials between educational attainment of poorer and wealthier sections of society and promoting a speedier return to work for some mothers.

Researchers studying the impact of the policy during the 2002 to 2007 time period, where spending on the policy amounted to more than £7bn found that the education received at age 3 had some impact on attainment at age 5 but any improvements were lost by age 11. The research suggested that the policy had only a minor impact on enabling more women to return to work earlier. Also, there is evidence that 5 out of 6 users of the free place would have gone to a paid-for equivalent at age 3 anyway.

So, does this offer us a good example of government failure in economic and social policy?

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Local Schools policy drives inequality in the UK

Tuesday, October 07, 2014

I love a story that really can resonate with students and get them 'irked'.  It struck me yesterday that reading about a recent Bristol University research paper that claims that school admission policies lead to greater inequality might strike a chord with some young people.

The study suggests that the common policy in the UK of prioritizing admission places in primary and secondary schools based upon how close a student lives to that school continues a cycle of inequality.  The argument is that, wealthier people are more able to afford to move to areas with higher performing schools and so are more inclined to do so.  People without that facility have less choice in where to send their children and may have to stick with local schools despite their relative poor performance.  So the cycle continues ..... poorer people receive a poorer quality education and are therefore less equipped to get the necessary qualifications to earn higher wages.

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Contrasting approaches to managing road traffic

Thursday, September 11, 2014

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.

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Perfect weather and a bumper wheat crop – impact on the market

Sunday, September 07, 2014

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?

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Externalities: Health Benefits of Low Emissions Zones

Friday, August 15, 2014

A new study finds that incentives to switch to green vehicles produce big health benefits

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Should there be a maximum wage?

Tuesday, July 29, 2014

In this blog, Professor Simon Wren-Lewis from Oxford University bemoans the absence of debate over the notion of a maximum wage - with specific reference to the pay of senior executives. 

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Reduction in UK consumption of drugs, alcohol and cigarettes by young people - numerical example

Friday, July 25, 2014

A report out yesterday from the Health and Social Care Information Centre shows a dramatic fall in the consumption by young people (aged 11 to 15) of our favourite demerit goods – alcohol, cigarettes and drugs. The report suggests that over the last decade regular smoking fell from 9% to 3% of 11- to 15-year-olds. Regular alcohol drinking dropped from 25% to 9%. Drug use has halved from 12% to 6% over this 10 year period.

This, of course, is very good news with regards to the relative health of our youth. As an economics teacher the first question I would ask my students is how this downturn has been achieved? What has happened either within the market or with government intervention to shift consumption in this way? It could be argued that this represents the most successful example of government intervention into markets to change behaviour and can be attributed to regulation, restriction of use and good old education! Information failure does not appear to have had an impact and the political will to succeed has been fairly uniform among the major parties in power.

For me, of course, it also offers the opportunity to do the next in my series of numerical activities in preparation for the arrival of the new specifications in 2015!

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Open Data:  Britain leads the world

Wednesday, July 23, 2014

The UK economy is doing well. Even so, it is not often that we are placed unequivocally at the top of a world ranking of any kind. But a team of economists led by Nicholas Gruen of Lateral Economics in Melbourne has done just that. In their recent report on the economic potential created by the concept of open data, it turns out that the UK government has been leading the world. On the Open Data Index, we score 100 compared to America’s 93. There is then a big gap to the next group, Australia, Canada and Germany, placed in the high 60s.

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Price Cap introduced for the UK Payday Loans Market

Friday, July 18, 2014

The UK Financial Conduct Authority has announced direct interventions in the market for payday loans - the high cost short term loans market which has expanded rapidly in recent years led by businesses such as Wonga. The decision is the result of a detailed assessment of the industry which had flagged up a number of market failures.

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A Video Introduction to Behavioural Insights

Tuesday, July 15, 2014

For students and teachers interested in behavioural insights this short video from the behavioural insights team in New South Wales provides a good introduction to some of the behavioural nudges employed to influence choices. 

Behavioural insights draws on research into behavioural economics and psychology to influence choices in decision-making. By focusing on the social, cognitive and emotional behaviour of individuals and institutions.

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RES Essay: Should childcare costs be deductible against tax for working mothers?

Saturday, June 07, 2014

This is the second essay of six available for students researching an entry for the 2014 RES competition. There has been some discussion about the choice of phrase "working mothers" in the question. We will expect to see some students challenge this in their answer to broaden the discussion to "working parents" but any approach is fine as long as the economics is interesting, relevant, evidence-based and has a strong narrative running through it!

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Unit 3 Micro: Ban on Eurotunnel ferry service confirmed by CMA

Friday, May 30, 2014

An important judgement from the newly established Competition and Markets Authority (CMA). They believe that competition is best served by having three major cross-channel service operators - namely EuroTunnel (rail) and two ferry operators.

The CMA has ruled against EuroTunnel being able to cross-subsidise the loss-making MyFerryLink on the Dover to Calais service because in doing so, it is likely to lead to the market exit of a rival provider and ultimately cause higher prices for consumers.

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Obama allies lead the way on a positive approach to climate change

Wednesday, May 28, 2014

The fracking debate continues apace, with the announcement by the British Geological Survey that there are over 4 billion barrels of oil in the shale rocks of the South of England. The government has proposed new rules of access to land in order to speed up the exploitation of this oil, with payments of £20,000 being made to those living above the land where fracking takes place.

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Unit 1 Micro: Key Diagrams and Glossary

Friday, May 09, 2014

A document containing the key diagrams and terms for Unit 1 Micro is streamed below. 

You can also download this pdf document for free from our online store here

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. 

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Unit 1 Micro: Housing Market Failure

Tuesday, May 06, 2014

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.

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UK Housing Industry: Turning Houses into Gold!

Thursday, May 01, 2014

Britain’s crisis of housing affordability is nothing to do with foreign speculators, according to Paul Cheshire writing in the Spring 2014 issue of CentrePiece magazine. Rather, it is a result of decades of misguided planning policies that constrain the supply of land and turn houses into something like gold or artworks. Houses have been converted from places in which to live into people’s most important financial asset.

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UK Income and Wealth Inequality - A New Film

Income and wealth inequality in the UK are higher than most people think they are and higher than they think they should be. These are among the messages of a new online infographics film:

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Unit 3 Micro: Revision on the Private Finance Initiative

Thursday, April 24, 2014

Here is a short revision presentation covering aspects of the Private Finance Initiative - which figures on unit 3 for EdExcel micro economics

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Revision on Labour Market Failure

Sunday, April 20, 2014

Here are some revision resources on the topic of labour market failure.

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Unit 4 Macro: Brazil’s Unfinished Mega Railroad

Saturday, April 19, 2014

Government failure and the harm it can wreak on local communities is evident in this short piece from the New York Times

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Policies to reduce collusion

Friday, April 18, 2014

Investigating and understanding price fixing and collusion are an important part of analysing behaviour in oligopolistic markets. Not all of these corrupt practices are headline grabbers: most are in such unglamorous areas as ball-bearings and cargo rates, which go on unnoticed for years, quietly bumping up the end cost to consumers of all manner of goods and services.

What steps can be taken to undermine the incentives for business to engage in these illegal activities?

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Unit 1 Micro: AS Micro Revision Quiz 4

Wednesday, April 16, 2014

Here are twelve more questions covering markets and market failure - test your understanding with this zondle-powered quiz!

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Unit 1 Micro: Revision on Market Failure

Here are some revision quizzes for students to check their understanding of market failure

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The ‘Gentleman in Whitehall’ does not know best

Friday, April 11, 2014

The government is relaxed about people cashing in their pension schemes to buy a Lamborghini. But the left-leaning liberal commentariat is certainly not. Abuse has been heaped onto George Osborne’s Budget measure of removing the requirement for people to buy an annuity. The main thrust of the attacks is that individuals may act irresponsibly. They may take financial decisions that are not in their best interests.

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The changing face of Government Spending - a teacher resource

Wednesday, April 09, 2014

Here's a short but fun classroom starter to stimulate discussion about how the Government Spends its money.  

Based upon information from a BBC article showing how Government spending has changed since 1953, the resource asks students to separate 'blocks' representing the percentage of overall spending on each department (e.g. health, defense) into those that they think represent spending in 1953 and those that represent 2013.  Having separated the blocks, students must then re-arrange the blocks into perfect squares on the printable 'mats' provided as part of the resource.

As well as stimulating discussion about how the Government spends its money and changes in its priorities, it may provide a useful hook for getting your students to remember the proportion of spending the Government places on each of its department which they can use as evidence within their exam answers.

Click on this link to download the resource.

Click on this link to go to the original BBC article.

Unit 1 Micro: Smoking Bans and Obesity

Tuesday, April 08, 2014

Anti-smoking measures, such as taxes and bans, eventually lead people to eat better and lose weight. That is the central conclusion of research by Luca Savorelli, Francesco Manaresi and Davide Dragone, to be presented at the Royal Economic Society’s 2014 annual conference. The three economists overturn the conventional wisdom that kicking the smoking habit is healthy but results in weight gain.

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Labour Market: UK Minimum Wage does not Cost Jobs

The introduction of a national minimum wage does not lead to job losses. That is the central finding of research by Peter Dolton and
Michael Stops, to be presented at the Royal Economic Society’s 2014 conference.

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UK carbon taxes in a mess

Wednesday, April 02, 2014

Climate change is back in the news, and continues to stir up heat, but not much light. It’s proving fantastically difficult to come up with consistent and efficient policies to reduce CO2 emissions.

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Unit 3 Micro: Energy firms face competition inquiry

Friday, March 28, 2014

The big six energy firms in the UK - who account for more than ninety per cent of suppliers to UK household, commercial and industrial consumers - will be subject to another investigation by the competition authorities.  

A report by regulator Ofgem has called for an investigation by the Competition and Markets Authority (CMA) which could take nearly two years to complete - effectively pushing the issue into the long grass well beyond the date of the next election. 

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Unit 1 Micro: Smoking Bans Improve Health

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.

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Why are rich countries democracies?

Thursday, March 27, 2014

You may be asking why what sounds like a politics question finds a place on the economics blog. The answer of course is that the issue of governance crops up a lot in economics. Governments have to address the challenges thrown up by market failure, and offer a fiscal framework that helps tackle macroeconomic problems. Regulators intervene in uncompetitive markets. Those of you looking at development economics don’t get far before asking if poor quality government holds back the weakest economies.

Hence the question (above). All rich, developed, mature economies are democracies. Ricardo Hausmann offers and insight into why this might be so on the pages of Project Syndicate.

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F585 Pre-Release Resources (and F583, F582 & F581 too)

Sunday, March 23, 2014

I thought it worthwhile sharing my resources which I have been collecting for students (and teachers alike). I have been promoting them on Twitter (@Economics_KSF) through scoop.it but for those of you not on there, the link for the scoop.it boards are here:

http://www.scoop.it/u/economics-kcsf

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Unit 2 Macro: Hurdle Rates and New Housebuilding

Tuesday, March 18, 2014

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.

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Unit 4 Macro: Oxfam and IMF Focus on Inequality

Monday, March 17, 2014

Inequality is an issue that remains firmly in the spotlight of the news media and also of policy makers in different countries.

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Unit 2 Macro: UK R&D Spending Remains Low

Thursday, March 13, 2014

For years the government has tried to lift research and development spending as a share of national income - but seemingly to no avail. The latest data finds that the UK is spending less on R&D than any other EU country. What might this mean for the supply-side competitiveness of the economy? 

The data finds that

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Unit 1 Micro: Information Failure and Coca Cola

Monday, March 10, 2014

In this memorable Newsnight interview, Jeremy Paxman quizzes / interrogates a senior Coca Cola executive about the amount of sugar in Coca Cola drinks. Coca Cola wants to "make sure that the information is available" but if they did would students, cinema goers and millions of other consumers change their preferences?

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Price Regulation in Industries

Wednesday, March 05, 2014

Regulation of prices through price capping has been a feature of regulation of the utilities in the UK for many years – although this is now being phased out as most utility markets have become more competitive.

Price capping systems

  • Price capping is an alternative to rate-of-return regulation, in which utility businesses are allowed to achieve a given rate of return (or rate of profit) on capital.
  • In the UK, price capping has been known as "RPI-X". This takes the rate of inflation, measured by the Consumer Price Index and subtracts expected efficiency savings X. So for example, if inflation is 5% and X is 3% then an industry can raise their prices on average by only 2% per year
  • In the water industry, the formula is "RPI - X + K", where K is based on capital investment requirements designed to improve water quality and meet EU water quality standards. This has meant increases in the real cost of water bills for millions of households in the UK.

Advantages

Capping is an appropriate way to curtail the monopoly power of “natural monopolies” – preventing them from making excessive profits at the expense of consumers

Cuts in the real price levels are good for household and industrial consumers (leading to an increase in consumer surplus and higher real living standards in the long run).

Price capping helps to stimulate improvements in productive efficiency because lower costs are needed to increase a producer’s profits.

  • The price capping system is a tool for controlling consumer price inflation in the UK.

Disadvantages

Price caps have led to large numbers of job losses in the utility industries

Setting different price capping regimes for each industry distorts the price mechanism

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Executive Pay: Shareholders have failed to curb excesses

Wednesday, February 26, 2014

Despite public calls for shareholders to get tough on executive pay, a new study of the UK’s highest paid company directors reveals that shareholders are overwhelmingly inclined to approve the pay packets of top directors, just as they were before the crisis

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Transport Economics - compensation for rail delays

Saturday, February 22, 2014

Did you know that most train operating companies will refund 50% of your ticket for a delay of 30 minutes or more, and will double that if the delay is for an hour or longer? And that, if you are travelling by tube, Transport for London offers refunds if your journey is delayed by 15 minutes or more (although you won't get a refund if the delay is caused by a security alert, "third party action" such as a strike or bad weather)? Most probably you didn't, as a survey by the Office of Rail Regulation has found that more than 75% of rail passengers know "not very much" or "nothing at all" about what they are entitled to when services are disrupted.

The report also found that 74% of passengers felt that train companies do "not very much" or "nothing at all" to proactively provide information about compensation when there are delays. As Simon Gompertz found in this video report, there are plenty of ways in which the train operating companies could make the information available, whether through instructions on the back of the tickets and announcements on trains to apps.

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Unit 3 Micro: Economics of a £7 Minimum Wage

Saturday, February 15, 2014

These slides are from our January 2014 revision workshops for unit 3 microeconomics. They focus on some of the arguments surrounding the possible introduction of a £7 per hour national minimum wage in the UK

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Unit 1 Micro: Information Failures in Markets

This blog brings together some of our resources on information failures in markets.

Click below for:

Mo Tanweer's superb revision notes on aspects of information economics

Try our short Zondle revision quiz on information failure

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Boris Bikes - Do Benefits Exceed the Costs?

Friday, February 14, 2014

Boris Johnson, The Mayor of London, has been happy to extend the use of bicycles in London; and the pattern of use has thrown up some interesting points. There were 7.4 million cycle hire trips last year but an estimated 71% of cycling use was by men. Most of these journeys would have been made on foot (31%) or by public transport (47%). Coverage of the study published in the BMJ looked at the health effects is found here.. The notes in the article, provide good examples of the strengths and weaknesses of cost benefit analysis.

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Government underestimates the amount of student loans that are likely to be paid back

According to a report published by the Parliamentary Public Accounts Committee, the Government are currently underestimating how many students will actually pay back their university loans over the coming decades.  Currently, the Government estimates that between 35 and 40% of loans to Higher Education students are never paid back - the Committee believes that the rate on non-repayment is much higher and reflects a weakness in the loan collection method.  The primary reason for non-repayment is that student details get lost over a period of time particularly if the graduate moves and works abroad or was an EU citizen who has returned to their own country.  The method of using the income tax registration process as a way of locating former students has been criticized for not being an effective method of collecting information.  It is estimated that the shortfall could be as much as £80 million by 2042.

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UK economy: Tidal Lagoons

Friday, February 07, 2014

Cost benefit analysis, economies of scale, energy economics, regional development, economic growth, competitiveness ... there is a veritable a tidal wave of applied economics in this article from the Guardian on plans for Tidal Lagoon Power.

Alcohol Floor Price Scheme Announced for England & Wales

Tuesday, February 04, 2014

This will be an excellent case study to use when you're discussing the issues around minimum prices to solve the problem of externalities.

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Energy companies charge cash-paying customers more - market failure and Government intervention

If you attended the recent tutor2u revision conferences for up-coming micro-economic exams (look out for the macro workshops and combined micro and macro to come in March) you will have seen how fuel-pricing was used as an example of market failure, government intervention strategies and government failure.  

Fortunately, the energy market is a gift that keeps giving to us in the economics world (every cloud has a silver lining) as a report out today (see this link for the BBC version of the story) indicates that Parliament is about to intervene to try and stop the energy companies charging more to customers who pay by cash rather than by direct debit (£114 per year, according to the report).

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Government looks to abandon use of Microsoft Office to save money

Thursday, January 30, 2014

It was announced yesterday that the Government is planning to abandon its use of expensive software such as Microsoft Office (see article in the Guardian here) partly as a way of reducing costs but also as a means of breaking some of the software company's 'oligopolistic' stranglehold on the market.

As well as offering an example of Government policy to combat market failure, this story gives us a little insight into the issue of contestability in the software industry.

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Building a Future for Chocolate

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.

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Unit 1 Micro: Revision on Government Intervention

Wednesday, January 29, 2014

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 markets

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