BMW - Bavarian Monopolist at Work
BMW have been fined SFr156m ($163m) by Swiss Competition Authorities for restricting the supply of BMW and MINI cars to Swiss purchasers.
read more...»Improving Evaluation Skills in Economics Exams
Here is an updated version of the WEESTEPS approach to economics evaluation designed to boost the evaluation scores and exam results for AS and A2 students. Paul Bridges is the mastermind behind this superb approach to evaluation - it gives you some great pointers about the evaluative approaches that can be used. Works well for micro and macro - but particularly when you have to evaluate a specific policy intervention in a market / industry / or a macro policy discussion.
read more...»Unit 1 Micro: Public Bads
A public bad is the opposite of a public good – it provides disutility or dis-satisfaction to people when consumed and therefore reduces our economic welfare.
read more...»Competition authorities doing more harm than good?
There have been several examples in the news recently of competition authorities acting in ways which may actually ultimately lead to less competition in several different industries. Read on to find out more.
read more...»Unit 1 Micro: Climate Change Policies - Finding the Right Mix
There are many different market failures when it comes to understanding some of the key environmental problems and challenges of the age. Addressing, attacking and correcting for complex and multiple market failures requires pointing to different policy instruments / interventions. Together can they make a sizeable difference to consumer and business behaviour and lead us away from a “business as usual” approach?
read more...»Unit 1 Micro: Externalities - Deepwater Horizon 2 Years On
This short Al Jazeerah report looks at the aftermath of the Deepwater Horizon disaster and the impact it continues to have on the regional fishing industry. Two years since oil company BP’s Deepwater Horizon rig exploded in the Gulf of Mexico, resulting in a massive oil spill, fishermen in the region are still suffering. The explosion killed 11 people and resulted in the worst accidental offshore oil spill in US history.
read more...»Royal Mail’s refusal to supply
Here is the sub-heading from the report in today’s Daily Telegraph: “Royal Mail is limiting the number of stamps it supplies to retailers now to ensure it profits from record price rises later this month.” The report goes on “Royal Mail confirmed on Thursday that it had imposed a cap on the number of stamps every shop could buy. Retailers said it was refusing to restock them when they exceeded their allocation.” Ian Murray, the shadow postal affairs minister, says that he will be writing to regulator Ofcom about this rationing of supplies.
read more...»Unit 1 Micro: Ban on cigarette display advertising
In a fresh move to reduce consumption of cigarettes, legislation has come in force banning the displays of cigarettes for sale in large retail stores. The display ban will apply to shops of more than 280 sq m (3,014 sq ft). Newsagents and small stores can display cigarettes until 2015, giving them time to refit shelves and cabinets.. It is part of the armoury of interventions that have been tried over the years to change consumer behavioural - from real terms increases in cigarette taxes to bans on advertising and ever-stronger advertising and health campaigns. The focus of the ban is to influence younger smokers by removing cigarettes from point of sale display - will it be effective?
This news report below from Al Zajeerah looks at the new measure
read more...»Minimum beer prices, May not be the solution for binge drinking.
Teresa May has copied Nicola Sturgeon’s proposals for minimum prices of alcohol which appeared in Scotland last year. Last year’s budget had significant increases in excise duties on stronger beer, lager and cider.
This resource from the Centre For Policy Studies may help pupils and teachers to evaluate different forms of government intervention and their effectiveness.
Unit 1 Micro: Unintended Consequences of the Smoking Ban
Here is an example of the law of unintended consequences where unlikely side-effect is a thoroughly welcome positive spillover effect. Researchers are finding that the number of premature births and exceptionally under-weight babies in Scotland is falling - watch this video - and then consider why this might be happening.
Scotland was the first country in the UK to ban smoking in public places, followed by Wales, Northern Ireland and England in 2007. Several years on, nearly one-in-five of mothers to be still smoke - how sad.
Unit 1 Micro - Labour Migration and the Economy
Migration from one country to another has become an increasingly important feature of our globalizing world and it raises many important economic, social and political issues. About 200-million people — about 3% of the world’s population — now live in countries in which they were not born. In the United Kingdom in 2010, the number of international migrants as a percentage of the population rose above 10% for the first time after several years of high rates of net inward migration
read more...»Drink, drink, more drink
Students are often asked to weigh up policies to limit the over consumption of demerit goods like alcoholic drinks. This BBC article cited by Ben White considers some of them.
Most governments have used a combination of policies with varying levels of success. One policy option is the use of variable rates of Excise Duty. The March 2011 budget resulted in a rise in the duty on strong beers (above 7.5% alcohol) of 25%, and the duty on weak beers (below 2.8%) cut by 50%.
read more...»Unit 3 Micro: Inside the iPhone and Intellectual Property
This is a remarkable video featuring Geoff McCormick, director of UK design firm The Alloy that looks inside an iPhone at the component parts. Each and every iPhone contains thousands of patented components, ideas, designs and processes. Fantastic when teaching about the economics of intellectual property and the patent wars dominating the courts.
read more...»A return to Glass-Steagall to prevent another crash? A lesson from economic history.
At the World Traders’ Tacitus lecture last night, Terry Smith proposed a return to the provisions of the Glass-Steagall Act in order to reform the banking sector. The title of his lecture was ‘Is Occupy right?’, and while he clearly didn’t go along with some of the propositions of the Occupy movement, such as the imposition of a financial transaction tax, he did say that they have a serious point to make about the financial system.
read more...»Unit 1 Micro: Winning the War on Deforestation
Justin Rowlatt from the BBC has been investigating some of the remarkable progress being made in controlling deforestation in Brazil. The battle focuses on an area known as the “arc of destruction” and the video reports here show the impact of a government making a clear commitment to tackling the issue and backing it up with force and with incentives.
read more...»Externalities Cartoon
KAL, The Economist’s cartoonist, has produced an excellent cartoon in the latest issue perfect for a discussion of a very topical externalities issue in North America. And one that has also been ‘causing tremors’ in the news over here too!
read more...»Unit 1 Micro: Prezi on the Economics of Negative Externalities
This blog provides a link to a constantly updated revision Prezi on negative externalities and market failure - designed for students taking AS Microeconomics Unit 1 and those studying externalities for the IB Diploma. The Prezi contains lots of short news videos on examples of externalities. Click on the link below to access the Prezi.
read more...»What is the socially optimal level of concerts in Hyde Park?
It seems those fortunate enough to live next to Hyde Park are increasingly bothered by the negative externalities arising from the concerts put on there. This BBC article is a good illustration of the difficulties involved at arriving at a socially-optimal level of production.
Prezi on Information Failures
Click below to open a new Prezi on aspects of information failures / gaps and market failure together with some of the interventions that might be used to address imfornation imperfections in many markets.
read more...»Unit 3 Micro: Patent Wars- A Touchy Subject for Apple
This excellent news piece from Ben Cohen at Channel 4 looks at the increasingly aggressive patent war being fought by the manufacturers of the world’s leading mobile phone and tablet devices - the most profitable products in the digital economy. “Where once the giants (Google and Apple) competed on features, they now compete on patents.”
The news feature looks in particular at the intellectual property surrounding the slide-screen technology used by millions to unlock a device. Apple claims the IP to this but a video tracked back to twenty years ago suggests that developers were already thinking of something remarkably similar long before the iPhone came into existence. Can the makers of Android defend legal claims from Apple that their IP has been infringed? And who will end up paying for the enormous legal fees and possible extra licencing costs?
read more...»
Unit 1 Micro: Empty Housing and Economic Efficiency
Channel 4 recently focused on the causes and effects of the hundreds of thousands of empty homes in the United Kingdom. Why is it given persistent shortages of affordable housing that perhaps a million homes lie empty and unused whilst an estimated two million families are in severe housing needs. New housebuilding has collapsed and in Britain we are building 100,000 fewer new houses every year than we need just to keep up with the changing mix of households and demographic change.
An interesting exercise is to show students some of the Channel 4 Campaign videos and then get them to put together policy ideas as to how to reduce the volume of empty homes and reduce the length of housing waiting lists.
Links to some of the Channel 4 videos can be accessed below:
read more...»Government Plans to boost the Housing Market
The Government has announced today a scheme to help first time buyers on to the property ladder. It has been reported widely in the press with mixed reactions. The BBC article outlines the main proposals (here is the link to The Daily Telegraph). It is interesting from a political point of view that this government should chose to intervene in this market, though perhaps we should not be too surprised as it was the Conservatives that brought in the ‘Right to Buy’ legislation in 1980.
read more...»Unit 3 Micro: Ofcom gives stamp of approval for flexible pricing in mail
Changes are afoot for the UK household mail industry - a sector that is often used by teachers as an example of a near monopoly in the UK. In 2010, 16bn letters were delivered to 28.2m addresses. Royal Mail was responsible for delivering over 99% of these. The total UK household and business mail market comprises around 16bn items and £6bn to £7bn per annum of revenue. Royal Mail has a market share by revenue of over 90%.
Just a few years after deregulation of the sector, the industry regulator Ofcom has produced a consultation document that is likely to give the Royal Mail more freedom in setting the prices of stamps. At present, the Royal Mail loses more than £2 million a week operating its letters business. Increasing competition from new entrants for bulk mail sorting allied to a shift towards email and text have contributed to a 25% decline in postal volumes since 2006. Household spending in Britain on postal services has fallen to just 40p a week. The 2010 Hooper Report on the postal sector, mail volumes are expected to continue to decline globally by between 25% and 40% in the next five years
read more...»Unit 1 Micro: Teacher Update on New Regulations
The end of September has brought a raft of new or changed regulations affecting different markets. Here is a summary of some of them for students and teachers wanting to keep up to date:
read more...»Unit 1 Micro: Coast Guard Protection and Moral Hazard
A hat tip to Mark Seccombe for spotting this fine piece of economics writing from the New York Times economics blog.
Casey Mulligan explores the question of whether the US coast guard should enforce that boats install safety beacons as a way of cutting the number of incidents they are required to attend. Does providing a safety-net regardless of whether participants have covered the cost of providing themselves with basic safety equipment lead to a problem of moral hazard? Has mandatory safety belts in cars led to a reduction in the quality of driving? Would compulsory air bags do the same? When is the state justified in applying and enforcing stringent safety requirements on people and businesses as they go about their daily lives?
Unit 1 Micro: Drink Driving and Government Intervention
A culture of drink-driving has been a scourge in many countries for decades. The human and economic cost of lives lost and wrecked by motorists driving under the influence of alcohol is huge and most governments have introduced a range of interventions designed to change the incentives facing drivers. But which ones have most impact?
read more...»Information failure - what does a ‘sell-by’ date really mean?
According to the Food Standards Agency and the government, the sell-by or display-until labels on food have little to do with whether the food remains edible, but are only to there to help retailers with their stock rotation. But DEFRA say that five million tonnes of edible food is discarded by UK households annually - the equivalent to £680 for a household with children - because of confusion over the date labelling. They would like to see the use-by dates on packaging used only for foods which actually become unsafe to eat, like meat, fish and prepared foods, and all stock rotation dates removed completely. They believe that this would help to avoid confusing shoppers with unnecessary information.
However, the Food Director of the British Retail Consortium says that a better solution to the problem of food waste lies in better education for consumers. “Helping consumers understand that food past its best-before date can still be eaten or cooked could contribute to reducing food waste and saving people money,” he said. Retaining the display-until labelling on foods which don’t actually go off, such as crisps and biscuits, helps consumers to know how long they have been on the shelf, and pick out those that are more recently made and so may have lost some quality, even though they are quite edible.
There is a little more on the report here.
Is Cost Benefit Analysis of our natural environment ‘a slippery slope’?
Helpful revision notes provided by a new government report yesterday, attempting to put a financial value on Britain’s ecology. The ‘National Ecosystem Assessment’ attempts to give a standard valuation on ‘ecosystem services’ like pollination by insects, water and air purification by soils and plants, the flood alleviation provided by woods and marshes upstream of towns and cities, and the value of living close to a green space; for example the value of living near a green space is calculated as £300 in terms of savings to the NHS. The first of 6 key findings of the NEA is:
“The natural world, its biodiversity and its constituent ecosystems are critically important to our well-being and economic prosperity, but are consistently undervalued in conventional economic analyses and decision making.”
read more...»
A2 Micro: The Importance of Profit
Profit measures the return to risk when committing scarce resources to a market or industry. Entrepreneurs take risks for which they require an adequate rate of return. The higher the market risk and the longer they expect to have to wait to earn a positive return, the greater will be the minimum required return that an entrepreneur is likely to demand. Economists distinguish between different types of profit – explained below:
read more...»Electric cars: government failure?
There was a great in-depth look at activity in the car market in the Sunday Times yesterday with regards to electric powered vehicles.
