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Measuring a minimum income standard

Tuesday, July 29, 2014

How much money do you need for an 'adequate' standard of living? This short video from the Joseph Rowntree Foundation considers the levels of income needed to sustain a modest but adequate life-style in the UK in 2014.

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The Economics of Pay What You Want

Wednesday, July 23, 2014

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.

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Is Wayne Rooney an expert in rational economic theory?

Wednesday, June 25, 2014

So, farewell then England! Yet another failure by our boys at the highest levels of the game. Despite their stupendous salaries, they seem once again to be unable to exhibit the necessary skills, a point which seems to exercise many fans of the game. Tens of thousands, if not millions, of words have been written about the purely footballing aspect already. But one topic which is hiding away under this torrent is the question of incentives.

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Using the price mechanism to boost allocative efficiency: ‘Smart’ electricity meters

Sunday, June 01, 2014

The price mechanism should help the economy to allocate resources more efficiently. Scarcity drives up prices, sending a signal to the economy – giving firms an incentive to produce more, and households the motivation to ration their consumption.

Could ‘smart’ electricity meters, linked to dynamic electricity prices, achieve something similar?

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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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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 Elasticity of Demand and Supply

Tuesday, April 08, 2014

Our normal laws of demand suggest that as prices increase demand decreases whilst firms attempt to supply more (with the opposite happening as prices decrease). The concept of elasticity extends this understanding by asking the question ‘by how much does demand and supply change?’

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Unit 2 Macro: London House Prices continue to Surge

Friday, March 28, 2014

There seems little that is stopping the surge in London house prices at the moment but do you think the rapid acceleration of prices is good for either London or the wider UK economy? 

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Geographical mobility of labour in the UK

Saturday, March 22, 2014

One type of market failure that contributes to inequality and unemployment is the geographical immobility of labour

If the labour market really ‘cleared’ effectively, wages would equalise across the economy. Workers would drift away from regions with low wages and/or high unemployment towards areas where wages were higher and labour was scarce. 

Instead, we see wide disparities in earnings and pockets of regional unemployment - at the same time as skills shortages and wage inflation elsewhere.

Why are people finding it hard to move across the UK in search of work?

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How Coal Shortages Might Impact Indian Growth

Wednesday, March 19, 2014

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.

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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 1 Micro: 10 Questions on Markets in Action

Thursday, January 30, 2014

Here are ten questions for students wanting to check their understanding on markets in action

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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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Unit 1 Micro: Revision on the Price Mechanism

Sunday, December 01, 2013

A streamed presentation on aspects of the price mechanism with links to three revision quizzes plus revision notes and a revision video

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Unit 1 Micro: Revision Glossary on Markets

Friday, November 29, 2013

Here is an updated revision glossary covering key terms on markets and government intervention

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Unit 1 Micro: Housing Rent Controls

Tuesday, November 26, 2013

The cost of renting property in many parts of the UK continues to rise - would rent controls make any difference? Here is an updated Unit 1 economics revision presentation.

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Unit 1 Micro: Producer and Consumer Subsidies

Sunday, November 24, 2013

Here is a revision presentation on the economics of producer and consumer subsidies as forms of government intervention in markets. There are a number of up to date examples highlighted together with an evaluation of the benefits and costs of subsidy payments. This is designed as a revision aid for unit 1 students taking their microeconomics papers.

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Unit 1 Micro: Volatile Prices and Buffer Stock Schemes

Tuesday, November 05, 2013

Here is an updated revision presentation covering price volatility in commodity markets and the economics of buffer stock "price stabilisation" schemes. designed for unit 1 micro course

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Paul Ormerod: Energy and Emissions: Taxation or Technology?

Thursday, October 24, 2013

Energy prices are in the news. The recent actions of some of the energy companies can plausibly be described as provocative, no matter how well founded their decisions might be. They run the risk of provoking the ire of both the Opposition and the Government.

One interesting aspect of the debate is that it has become even clearer that decisions taken by Ed Miliband himself in the Brown government are partly to blame for our high energy bills. The plethora of green taxes and subsidies has become very expensive for consumers.

But how effective have such policies been? Not very much, seems to be the answer.

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Unit 1 Micro: Chinese Get into a Froth over Starbucks Prices

Tuesday, October 22, 2013

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%.

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Falling Coffee Prices - Farmers Switch to Oranges

Wednesday, October 09, 2013

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.

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Theory of Price - exceptions that prove the rule

Tuesday, October 01, 2013

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...

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Price Maximum Example - Milliband’s Domestic Fuel Cap

Sunday, September 29, 2013

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.

Phil Holden is back! Economics videos online

Monday, September 23, 2013

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.

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The future is shale!

Wednesday, August 07, 2013

The UK Energy and Climate Change Committee has stated that shale gas will not be a "game changer" in the future of UK energy, but they are wrong; it will be. The recent British Geological Survey report pointed to 1,300 trillion cubic feet of reserves, twice previous estimates. A recent study by the Institute of Directors found that the shale gas industry could generate 74,000 jobs and could supply up to half the country’s gas needs by 2030. Furthermore it could also trigger an investment boom worth £3.7 billion a year. Given the location of most of the reserves, it could also be hugely beneficial in reducing the north-south economic divide.

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Unit 3 Micro: BSkyB Announces Record Profits

Monday, July 29, 2013

BSkyB has announced record revenues and profits. Total revenue in the last year grew by 7% to reach £7,235m and operating profit was 9% higher at £1,330m. This gave the business an operating margin of 18.4% and helped the business to generate free cash flow of just over £1 billion. Revenue per subscriber increased by £29 to £577. BSkyB has 11.2 million customers.

Programming costs were 34% of sales revenue at £2,486m. Sky paid £59m in the last year for the right to offer live coverage of the Ryder Cup, the Lions Tour and Formula 1. It has also invested more than £55m this year in original comedy and drama.

The FT news video below provides a timely look at the UK battle between telecoms group BT and pay-TV operator BSkyB to provide both sports TV and broadband. BT Sport, with rights to some Premier League football matches, launches in August 2013. This is an excellent example to use of a contestable market with a dominant established player and a new entrant (BT) using their financial muscle to try to break into the live sports TV market. It is an expensive business - the average cost of each live game shown in the current auction period is now over £6 million.

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Unit 1 Micro: Coffee Prices and Profits Fall for Growers

Sunday, July 28, 2013

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.

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Unit 1 Micro: China Warms to Coffee Production

Sunday, July 07, 2013

Changing tastes and preferences drive resource allocation in a market economy. Coffee consumption in China has been growing steadily as the country's middle class tries new drinks and the result is that new coffee cash crops are being grown China to help satisfy growing demand from the domestic market. The Chinese Coffee Federation is also hoping that Chinese coffee will establish itself as a major coffee exporting nation.

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Unit 4 Macro: Kal Draws Dumping

Tuesday, June 25, 2013

Another great short animated video from the Economist - highly relevant to students looking at the economics of protectionism / import controls. KAL, The Economist's resident cartoonist and animator, explains what dumping means and why companines do it.

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Unit 1 Micro: The Market for E-Cigarettes

Friday, June 07, 2013

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?

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Unit 3 Micro: Carbon Trading and Business Economics

Saturday, June 01, 2013

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.

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Unit 1 Micro: Selection of Revision Presentations

Thursday, May 09, 2013

Here are some streamed revision presentations for unit 1 microeconomics

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Revision Quiz: AS Economics: Markets in Action (1)

Monday, April 22, 2013

This revision quiz provides more MCQs to test understanding of markets in action.

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Unit 1 Micro: Buffer Stocks (Revision)

Saturday, April 20, 2013

A revision presentation on buffer stocks as a form of intervention in markets where prices, revenues and producer profits are volatile

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Unit 1 Micro: Price Mechanism in Action (Revision)

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.

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Unit 1 Micro: Evaluating Government Intervention - Alcohol Pricing

Sunday, April 07, 2013

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

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Happy birthday VAT! 40 years old this month


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.

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Unit 1 Micro: Taxing Calories in Soft Drinks

Friday, April 05, 2013


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’.

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Unit 3 Micro: Samsung surges ahead in global smartphone sales

Sunday, January 27, 2013

The global smartphone industry is an example of a contestable oligopoly .... in this article from BBC news there is loads here for A2 micro students to consider - economies of scale, pricing, the use of profits / producer surplus, the effects of globalisation, fast-growing and maturing markets, shift in power towards Samsung (who spend huge amounts on marketing). Product differentiation, pricing entry-level phones especially in emerging markets. Who pays for extra capacity that the mobil industry will need to create? Allocative, productive and dynamic efficiency issues all here. Is some of Samsung's competitive advantage due to the broader range of products - exploiting economies of scope?

Unit 3 Micro: Major tea exporters consider a new cartel

Wednesday, January 23, 2013

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:

Tea cartel formed by leading producer nations (BBC news)

World tea producers may brew up higher tea prices (Telegraph Australia)

Unit 4 Macro: Fair Trade and Micro Finance - Spurs to Development?

Sunday, January 20, 2013

Mark Austen writes on this essay title: Evaluate the impact that the micro-finance and Fair Trade movements can have in supporting development in some of the world’s poorest countries.

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Unit 1 Micro: Key Term Glossary - Markets and Market Failure

Wednesday, January 02, 2013

An updated glossary of key terms for the Unit 1 Economics paper

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Unit 1 Micro: Rent Controls - Evaluating Government Intervention

Thursday, December 13, 2012

Here is a streamed revision presentation on rent controls in the housing market - designed for AS micro students.

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Unit 3 Micro: Market Power and Pricing Power

Monday, December 10, 2012

Here is a streamed version of a revision presentation on market power and pricing suitable for Unit 3 micro students

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Unit 1 Micro: Markets and Market Failure Concept Glossary

An A-Z glossary for the Unit 1 Micro course

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Unit 1 Micro: Denmark Drops the High Fat Food Tax

Sunday, November 11, 2012

The Danish government has opted to bring to an end a policy intervention  designed to curb consumption of high fat foods. The measure - introduced in the autumn of 2011  - added £1.50 per kilo of saturated fats in a product but the experiment will end because of fears over inflated food prices and domestic jobs being put at risk. Food manufacturers complained of increased compliance costs and there was some evidence of a rise in cross-border shopping to avoid the tax. A proposed new tax on sugar has also been cancelled. 

Video: Fat tax introduced by Denmark 

Unit 4 Macro: Micro Finance, Fair Trade and Development

Wednesday, October 31, 2012

Here is a streamed revision presentation on aspects of micro finance and fair trade as part of a course on development economics.

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Unit 3 Micro: The Rise of Dynamic Ticket Pricing in Sport

Saturday, October 20, 2012
An autumnal hat tip to Ralph Bostock at the Royal Grammar School Clitheroe for spotting this excellent article from BBC news on the growing use of dynamic ticket pricing by professionals sports clubs. Dynamic pricing to increase revenue - also known as yield management - has long been a common feature of pricing strategies among airlines and bus, coach and train operating companies. Now we find it occurring more frequently for tickets to football clubs many of whom have been struggling to fill their grounds on match day. The Football League has regulations governing ticket prices but Derby County has been given the go-ahead for a trial of dynamic pricing - is it working to boost the gate?
Here is the link to the article  

Unit 1 Micro: Bargain Basements for Luxury Goods

Thursday, October 18, 2012

This Financial Times new video looks at the rapid growth of outlet shopping where excess inventory (stocks) of designer brands are sold at heavily discounted prices. A useful video to watch when thinking about income elasticity of demand. The video looks at how premium brand retailers manage this section of the market.

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