Unit 1 Micro: Can the UK Computer Games Industry Grow
Britain is one of the world’s biggest exporters of creative products - from live TV shows and music to books, arts, architecture and films the economy has built up an enviable global reputation for excellence and a growing trade surplus to aid our balance of payments.
Computer games falls squarely into this category but, according to TIGA - the trade association representing the UK’s games industry - unless there is renewed government support, the future of this sector is at risk. TIGA claims that the British games industry is suffering a significant ‘brain drain’ as talented programmers and artists leave the country to work abroad.
read more...»Unit 3 Micro: The Economics of Solar Subsidies
This blog provides a link to a new prezi presentation on the economics of solar subsidies - I have been using it as part of my teaching on aspects of environmental economics for Unit 3 AQA but it might also be useful for unit 1 market failure. I have kept theoretical diagrams out of it and plan to build up relevant analytical concepts such as economies of scale, consumer subsidies, economic and social welfare, government failure et al on a normal whiteboard rather than embed them into the Prezi. I hope it is useful.
Follow the tags at the bottom of the blog entry for more recent articles on solar subsidies such as feed-in-tariffs and other environmental economic resources.
read more...»Unit1 Micro: Processed Meat and Cancer Risk - Information Failure?
I do my level best to avoid the processed meat aisles in the supermarkets - or at least the lower end of what is on offer (I remember once the 5pence sausage that was a guaranteed 2 per cent pork!). But perhaps excessive consumption of processed meats - much of which finds a way into the traditional Full-English might be doing people much more harm than good? Follow this BBC news report for more details.
read more...»The future’s not so bright for Orange(s)?
This week, the price of orange juice concentrate on the global market hit a record high, reaching $2.12 (£1.38) a pound (0.45kg).
read more...»Unit 1 Micro: Biomass Subsidies and Timber Prices
If you are a fan of laminate flooring, wood panelled walls or neat wood-based fencing for the garden, the chances are that you will be paying higher prices in the years ahead. Despite the Britain offering a temperate climate for a plentiful supply of wood and a well organised system of land registry and plantation management, the UK market price of different types of timber has shot up over the last two years.
read more...»Unit 3 Micro: Sub Normal Profits - BP Leaves the Solar Industry
British Petroleum has decided to exit the solar energy energy industry claiming that the business has become unprofitable because of excess supply and falling prices. In 2011 a number of solar firms have gone out of business including California’s Solyndra and Germany’s Solon. BP will focus instead on investing in other renewable energy sectors including wind power and biofuels.
Whilst the decision by BP to exit the industry appears significant, infact total global investment in solar power continues to rise. MidAmerican Energy Holdings owned by Warren Buffett have agreed to purchase a $2 billion solar project under development in California and a 49 percent stake in a $1.8 billion plant in Arizona.
Google Inc. and KKR & Co have announced a joint venture to pump money in four California solar power plants with total capacity of 88 megawatts. The powerful search engine business uses a huge anount of energy every year and has committed itself to large scale investment in renewable energy supplies to help power their server farms.
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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?
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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...»Unit 3 Micro: Tacit Collusion in the Supermarket
What do students make of the current price match / big price drop schemes offered by many of the leading food retailers in the UK?
On the surface the brand price match scheme shown in the picture below looks like a good deal for consumers in this time of financial hardship and distress.
But what it this ‘parallel pricing’ serves merely as a form of tacit collusion with prices on a range of products actually higher than they might be without the facade of price comparisons and discount voucher compensation?
Unit 3 Micro: Brand Loyalty in Mobile Phones
Brand loyalty is hugely important in all kinds of industries and markets. The costs of acquiring a new customer vastly outweigh the expense of selling more to existing buyers and most of the mobile phone suppliers in this oligopolistic industry focus an enormous effort in building brand identity and brand loyalty to reduce the rate of customer churn (people who switch brands).
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...»Pasty Prices - Something to Chew Over
I am trying to get my head around this example of pasty prices that I encountered at Waterloo Station on Tuesday night. The vendor is selling a large pasty for £3.90 and “The Big One” for £4.00 - a difference of just ten pence? Why not charge more? Or at least cut the price of the large pasty to something like £3.30 to encourage people to pay the £4.00 option? Am I missing something here?
I asked the guy running the concession “what is the difference between the large pasty and the big one?” His cogent reply put me right “The big one is bigger!” I bought the large pasty because as far as I can see, there is no difference in size.
Unit 1 Micro: Asymmetric Information - Buying a Used Car
An autumnal hat tip to Kevin Hinde at Durham Business School for spotting a new report from the Office of Fair Trading which finds that the market for second-hand, used cars remains the biggest source of complaints from customers. Nationally over 56,000 people have complained to the OFT-managed Consumer Direct in the year to date with 70 per cent of the complaints relating to faults with the cars and over 13 per cent about misleading claims or omissions by the seller. The used car market is a classic example of asymmetric information and the risks of consumer welfare being damaged by fraudulent selling and sub-standard service. The OFT have released a short film on customer rights that might be a good teaching resource to use when covering this topic.
Unit 1 Micro: Luxury Goods in Action!
Have you got £40,000 or £50,000 to spare on a Christmas present? A hat tip to Freddie Drapkin for spotting these examples of products perfectly suited to status races and ostentatious consumption!
Glass pool table (£39,000)
£45,000 - luxury table football table
World’s largest jigzaw puzzle (£200)
And for the lazy tea drinkers among you - try this!
Unit 3 Micro: Time of Use Pricing for Energy
When is electricity demand highest in the UK? The answer comes at the end of the blog!
The UK government is committed to the rolling out of smart energy meters between now and the end of 2020. Millions of homes will have smart meters installed which track how much electricity you use and when you use it - the installation cost is approximately £350 per unit although this may come down with the utilisation of economies of scale. Smart meters will give consumers and the utility businesses minute-by-minute information about energy consumption and this could fast-forward the launch of time of use pricing tariffs for us all in the years ahead. It will mark a move away from flat-rate tariffs towards fully-fledged peak and off-peak pricing.
At the moment around one in ten households are on Economy 7 tariffs which offers lower prices for electricity used during off-peaking times in the late evenings and early mornings. Economy 7 seems to have been around for as long as CEEFAX and if you understand that you are giving your age away!
read more...»Unit 1 Micro: Google Maps to Charge for Usage
Google has announced that heavy users of the Google maps application will now be charged - it will be interesting to see if this move from a zero price targeted at websites that make extensive use of the Google Maps coding will affect demand for the program.
read more...»Unit 3 Micro: Examples of Price Discrimination in Action
I tweeted earlier on today asking economics teaching colleagues what examples they like to use when teaching the topic of price discrimination under conditions of monopoly / imperfect competition. Thank you to everyone who contributed!
Unit 3 Micro: Price Discrimination in the E-Book Market
Seth Godin’s Domino Project is an attempt to re-fashion the way in which e-books are published, sold and priced. This blog is particularly interesting for teachers and students who consider different forms of price discrimination. It proposes (at least) three different price tiers:
$1.99 ebooks - a clearing price for the majority of e-books
$5 ebooks. This is the price for bestsellers, hot titles and academic titles required by courses
$10 - $20 ebooks. This is the price you will pay to get the book first, to get it fast, to get it before everyone else
What do you think? How do you see e-book pricing tactics evolving as the market grows? The UK Office of Fair Trading is currently investigating the market for e-books in the UK amid allegations of price fixing / collusion by several leading publishers. You can access the OFT investigation using this link.
Further reading:
Guardian (August 2011): Apple and major publishers face lawsuit over ebook ‘price fixing’
Telegraph: EU raids publishers in ebook price-fixing probe
By way of background - new research has found that the average e-book price of front-list e-books across the world was €10.50 net of taxes. The average price of UK frontlist e-books was €10.80, €1.50 more than equivalent US titles, but less than those in Germany, Spain and France.
Unit 1 Micro: Is the Sun Dipping on Solar Subsidies?
To promote the expansion of renewable energy sources, many governments have introduced subsidies for consumers who install solar panels.
In April 2010, the Labour government introduced generous feed-in tariffs to encourage households to install solar photovoltaic systems. Anyone spending £13,000 up front to fit a system to their home was paid 41.3p per kilowatt hour (kWh) generated – enough to earn them a typical annual income of £900 a year in payments, on top of a £140-a-year saving in reduced electricity bills. The big six energy companies are required by law to pay householders who generate their own energy.
It looks like the days of generous subsidies for solar panels are coming to an end and there is a rush on to install them before the feed-in-tariff system is changed.
read more...»Unit 1 Micro: University fees and elasticity of demand
When teaching price elasticity of demand, here is a good article on the BBC today on the effect of higher university fees on demand for higher education. Good for discussion of how PED will differ with respect to different types of consumer and for different types of universities, as well as the cross price elasticity of demand with foreign universities.
read more...»Unit 3 Micro: Tesco Behaving Badly - Price Anchoring
On paper, it sounds like a totally reasonable price strategy from the market leader in an oligopolistic market - after announcing their worst sales figures in nearly 20 years, Tesco’s came out with a price cut promotion “The Big Price Drop”. The supermarket – which has pledged to spend £500 million on the high-profile promotion – has promised customers that it would reduce the price of 3,000 essential products across its stores.
read more...»Hard Choice in Kenya
This short video report from Will Ross for the BBC from the island of Lamu, considers a number of economic concepts.
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 3 Micro: Amazon launches the Kindle Fire
In the increasingly competitive and contestable market for tablet devices, leading online retailer Amazon has launched the Kindle Fire.
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Unit 1 Micro: Exercise on Equilibrium Market Prices
I have produced a classroom exercise on changing conditions of supply and demand and how they might affect equilibrium prices. This is available to download as a pdf file using the link below.
read more...»Unit 1 Micro: Exercise on Market Demand
I have attached in this blog a quick exercise on the determinants of market demand. There are twenty examples and students are asked to identify whether there is a movement or a shift in the demand curve and in which direction.
read more...»Unit 1 Micro: The Price of Football
The BBC’s new Price of Football survey offers an excellent opportunity to use wide differences in the cost of attending football matches across the length and breadth of the UK. A summer hat tip to Ben White (newly installed Head of Economics and Business at St Peter’s School in York) for flagging up this resource on the BBC web site - it is ideal stimulus material for generating a discussion on different pricing tactics, price elasticity of demand and income inelasticity of demand in the soccer industry.
Unit 1 Micro: Cotton Prices and the Retail Price of Clothing
How does the world price of raw cotton affect the cost of buying new clothing on the high street and in the supermarkets? The answer is that the price of natural fibres is a key raw material into manufacturing garments and home furnishings. If prices rise, this increases the costs of production causing an inward shift of supply for clothing and furnishings at a given market price.
The world price of cotton has been rising steeply in recent times. As our chart below shows, raw cotton prices are well down from their peak in the spring of 2011, but the index is still more than twice the level of two years ago.
read more...»Unit 1 Micro: Economics of Volatile Corn Prices
Corn is a soft commodity along with the likes of coffee, tea and rubber. Referred to as “yellow gold”, corn is used in products ranging from cereals, snack foods, salad dressings, soft drink sweeteners, chewing gum and peanut butter. Little wonder that shifts in the world price of corn can have a noticeable effect on the prices that we may for many popular foods and drinks.
The world’s appetite for corn is strong. In recent months there has been a surge in the global price of corn, indeed at the end of June 2011, corn prices were up 74 per cent on a year earlier. Super-high prices affect the price of feed for livestock farmers and eventually lead to more expensive foodstuffs for consumers, including millions of people in the world’s poorest countries exposed to persistent and life-shortening food poverty. Robert Zoellick, President of the World Bank has said that high and volatile food prices are “the single gravest threat” facing developing countries at the current time.
read more...»Unit 3 Micro: Oligopsony - Dairy Losses Drive Farmers from the Fields
Hats off to the herd! Milk production in the UK is expanding yet many dairy farmers have or are likely to leave the industry over the next five years unless raw milk production becomes more economically viable. Can the stakeholders in the sector reach fresh agreement on sustainable contracts for the near 40 million litres of milk produced every day?
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