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If, like me, you spent much of the spring and summer of this year being 'gently persuaded' to purchase loom bands and their paraphernalia, you may find this short presentation and task on demand and supply of the product useful.
For many weeks, it seemed almost impossible to undertake a shopping trip with my youngest son without him pointing out the huge selection of available bands and their construction tools. He built up quite a selection or different colours and styles as my vacuum cleaner can happily testify. Then I noticed a tailing off of his requests and noted that this week, when I pointed out a shop selling the rubber bands at half price, he declared that he was no longer interested - even at the reduced rate compared to just 4 weeks ago.
He seemed less than impressed when I pointed out how this was a fine example of how demand and supply impacts upon price. However, many of you may be at the stage where you are going through demand, supply and equilibrium with your AS students.read more...»
Why do we get summer holiday blockbusters? They seem to matter more and more to Hollywood studios. According to one professor "the entertainment industry is moving more towards a winner-take-all-market". Yet it wasn't supposed to be like this. A best-selling 2008 book, The Long Tail, argued that the mainstream was going to be "shattered into a zillion different cultural shards," as fickle consumers "scattered to the winds" using the internet to find the books, films and songs that met their unique taste. So what might be going on?read more...»
People do care about fairness, social norms and not just about a cold calculation of marginal cost and marginal benefit. In this excellent short interview on BBC World, Joe Gladstone, Behavioural Scientist at the University of Cambridge, discusses the new form of "Pay What You Want" pricing. This means consumers can decide themselves how much they want to pay for a good or service. The catalyst is that several French hotels are experimenting with a pay what you like approach for their guests.read more...»
If you’ve looked at labour markets, you’ll understand the basic theory: workers seek to supply more labour as wage rates rise, and the returns to work mount up. However, at some point, the marginal utility of extra leisure exceeds the marginal utility of extra income.
In other words, rich people start working less, because they can afford to. And for most of human history rich people had the most leisure, but that might be changing.read more...»
A document containing the key diagrams and terms for Unit 1 Micro is streamed below.
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.read more...»
Demand is the quantity of a good or service that consumers are willing and able to buy at a given price in a given time periodread more...»
Here are twelve more questions covering markets and market failure - test your understanding with this zondle-powered quiz!read more...»
How should a public service broadcaster be funded? This excellent article from the BBC looks at the financing of state broadcasters across a range of countries. The BBC is largely funded by the licence fee but as the article makes clear, there are many other options. The funding links back to the nature of broadcasting and the public good characteristics of much of the BBC's output.
Have a read of the article and then test your understanding of public and private goods using our Zondle quiz!read more...»
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.read more...»
The development of India, or its non-development relative to China, is an interesting topic, and one that Bob Hindle has already been blogged about in relation to its tax system.
However, there are other aspects of the Indian economy that will also impede its ability to grow, notably its lack (or should that be 'lakh'?) of coal.read more...»
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.read more...»
The cost of a thirty second advertising slot at the annual Superbowl final is immense. This year advertisers are paying $4 million dollars for a 30 second advertisement during America's largest televised event. But big hits on the social web often produced at a tiny fraction of the cost challenge the conventional view that mega bucks spent reaching a TV audience remains a viable way of using the marketing dollars. This short news video from the Financial Times is a useful reminder of the importance attached to brand advertising by some of America's biggest consumer products.read more...»
Here are ten multiple choice revision questions covering the topic market demand and market supplyread more...»
So farewell, then, Facebook! That is the conclusion of a highly technical paper by two Princeton researchers, John Cannarella and Joshua Spechler, which received a lot of publicity in the press last week. The authors conclude that “Facebook will undergo a rapid decline in the coming years, losing 80 per cent of its peak user base between 2015 and 2017”.read more...»
Do consumers of carbonated soft drinks really know how much sugar is in their regular fix? This five minute Newsnight clip is ideal for showing when teaching aspects of the economics of information failure. Will "getting the information in people's hands" help them to adjust their lifestyles? What are the economic arguments for and against direct intervention in the market for carbonated drinks such as a tax on high sugar content products? What are the alternative options or should we simply let consumers make their own choices?read more...»
A streamed presentation on aspects of the price mechanism with links to three revision quizzes plus revision notes and a revision videoread more...»
The launch of Sony's PS4 alongside Microsoft's XBox One signals the beginning of a highly intense competitive battle in the oligopolistic games console market. With both the new consoles being launched in time for the crucial Christmas sales period, pricing strategy is crucial in order to gain maximum market share.
In the US, Sony has priced the PS4 at $399 (retail). Of course that is the retail price. Distributors will be wanting to make their margin on each unit sold. So how much does it cost Sony to make a new PS4?read more...»
Do consumer choice and competition between suppliers improve the quality of outcomes for consumers? The answer might seem so obvious that it is hardly worth asking. But a powerful strand of political opinion is building up to an attack on the concept.read more...»
We are delighted to host on our blog this article from Alex Macarthur an upper-sixth student at Altrincham Grammar School for Boys. Alex enjoys is especially interested in ‘Behavioural Economics’. In this feature he looks at pricing anchoring in markets. This article was originally published in the student magazine www.lucigmag.co.ukread more...»
Where would you expect a Starbucks latte to be cheaper - in a coffee store in downtown New York or in a Starbucks store in China? Keep in mind that per capita incomes in China are around one tenth of those in the United States.
The answer may come as something of a surprise!
In a report on coffee prices that has caused something of a stir across social media platforms, the state-owned broadcaster CCTV reported that a medium-sized latte cost Rmb27 ($4.43) in China compared with Rmb19.98 in Chicago, Rmb14.6 in Mumbai and Rmb24.25 in London.
Starbucks responded that its pricing strategy was based on local market costs, including infrastructure investment, real estate and labour costs. It also added that its Asia-Pacific profit margin was for 14 countries, not just China. They added that each Starbucks market is unique and has different operating costs and that it would be inaccurate to draw conclusions about one market based on the prices in a different market.
The prices of imported goods in China are often raised because of the effects of import taxes (tariffs) - in this case the customs duty on roasted coffee beans is 15%. Add to that a sales tax of 17%.read more...»
After more than a year of relatively low prices, rising global demand for cocoa is a key factor behind a surge in the international price of cocoa beans, prompting fears that the traditional consumer splurge on chocolate treats during the Festive season will be noticeably more expensive this year! In this short BBC news video, some of the background to the rise in cocoa prices is explored. You can download the cocoa price chart below.read more...»
The market for retail gas supplies is mired in controversy and threats of direct government intervention to freeze prices should a new Labour government be elected in 2015. This week we have seen a classic example of the type of price leadership we expect to see in an oligopoly.
The Guardian technology blog has given a less than glowing review of the recently launched Argos MyTablet computer - read Argos MyTablet review: cheap, nasty and frustrating to use - the price point says it all - £99 for a low entry level tablet supplied under the Bush brand name and marketed at younger members of the family. Surely this is another product to add to teaching examples of inferior goods? The discount tablet market is being fought over by major high street retailers - Tesco is selling the Hudl and now Argos has joined the battle. I'll be staying well away from this!read more...»
This is a cross-posting from the Business blog (written by Penny Brooks)
"The 20th Century was about dozens of markets of millions of consumers. The 21st Century is about millions of markets of dozens of consumers."
So said Joe Kraus, founder of a search engine called Excite in the middle of the 1990s. Never heard of it? That's not surprising; in 1999 it was a $6.7bn enterprise with hundreds of employees, but a year later the dot-com bubble burst and it disappeared from the market place. But this quote is one of in an article about Peter Day's Radio 4 Archive programme to be broadcast tonight, and already recommended by Michael Owen in his blog below; forgive me for this repetition, but this is such a brilliant article that it really merits a second look, and hopefully between us we will convince you of that!read more...»
Here is a familiar tale - sharply falling world coffee prices are causing the terms of trade to drop and threatening the commercial viability of coffee production among many of Indonesia's small scale coffee farmers. Can stronger marketing and investment in processing help these farmers move up the value chain?
The price of coffee in Indonesia has dropped to a third of the price from one year ago, due to an oversupply of it in the world's market. This has caused many coffee farmers in Indonesia to stop growing coffee and switch to other plants, such as oranges.read more...»
Perhaps you're starting to look at supply and demand, the start point of the theory of price in Economics. A good way to test your understanding might be to look at a few oddball examples which seem to fly in the face of the theory. In the title of this blog I'm using the phrase 'to prove the rule' to mean to test the theory. See what you think...read more...»
Ed Milliband’s conference speech last week gave us one of those all-too-rare moments where we can illustrate a real (or potential) government policy with a standard economic diagram.
Mr Milliband clearly stated that, should the Labour Party win the next General Election (in 2015) they will cap the price of domestic fuel. His policy is aimed at restricting how much people would have to spend on energy so as to improve their general purchasing power as well as reducing business costs. The big losers would be the energy companies themselves who do not seem particularly keen on the policy. Mr Milliband argued that their profits were sufficiently high and, besides, they have been using the lack of competition within the market place to bolster their coffers.
Assuming that teachers have already covered the basics in Demand and Supply diagrams, this link will take you to a short (up to 10 minute) activity asking students to draw the ‘Price-Cap’ diagram and consider the economic arguments for and against the policy proposal.
Tesco launches an own-brand seven inch tablet with the forgettable name Hudl - how will it be received by Tesco customers and the wider constituency of people looking for an affordable device? My first instinct is to add this product to my list of inferior products! Tesco says that it is every bit as good as the competition and you can get it in four different colours - what do you think?read more...»
Thousands of students have been helped by the online videos on economics concepts produced and presented by Phil Holden. The good news is that he is back and delivering two new lectures each week. They are ideal for supporting your work in school and nailing the new concepts and relationships as the AS course progresses. Here are some of the early video pieces.read more...»
As part of our introduction to micro economics we have been looking at the shortage of housing in the UK. The chronic shortage of affordable and suitable housing raises many micro (and macro) issues and I find it a good example of an issue where different policy measures can be looked at in a non-technical way as a path into supply and demand analysis. It also covers the ground with topics such as scarcity, changing needs and wants, affordability, cost-benefit principles, opportunity cost and production possibilities.read more...»
In a world dominated by hyper-productive (but often loss-marking) industrial milk farming here is a heart-warming, touching and rewarding documentary that has swept critics off their feet at film festivals during 2013. The Moo Man is a remarkable story of a maverick farmer and his unruly cows, filmed over four years on the marshes of the Pevensey Levels. In an attempt to save his family farm, Stephen Hook decides to turn his back on the cost cutting dairies and supermarkets, and instead stay small and keep his close relationship with the herd. How can a milk farmer operating on such a small scale compete and survive in today's world? The Moo Man provides some revealing answers!read more...»
The global smartphone market is brutally competitive as the executives at struggling phone company Blackberry are finding out. Sales of their phones have been hugely disappointing for some time and the re-launch of their devices seems to have done little for Blackberry as they compete against Apple and Samsung, the dominant players in the industry.read more...»
Some useful data here on the depth of cigarette taxes by countryread 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.
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.
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…
Here are some streamed revision presentations for unit 1 microeconomicsread more...»
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.
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...»
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...»
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...»
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
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...»