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You may have seen my post giving you an example of introducing the concept of diseconomies of scale on Sunday where you ask a large team of students to draw an image of Steve Jobs. This next one is nothing like that!
Instead, here's another example of a future-proofed activity that uses a bit of number work to make its point. I'm not saying that you'll get a question like this in the new specification (but who knows?) but this does illustrate the concept of economies of scale using numbers.read more...»
Here's a 10 to 15 minute activity to introduce the concept of diseconomies of scale. The activity asks groups to re-draw an image (in this case, the face of Steve Jobs) onto a grid. The image is held on screen (as part of a Powerpoint slideshow) whilst the groups re-draw the image. The trick is to separate the class into teams of different sizes. So, for example, if you had a class of 16 you could separate it into teams of 6, 4, 3 and 3. All team members must participate and the teams are only given 3 minutes to re-draw the image.
Generally, the larger teams will be less successful as they will get in each other's way. Also, the smaller teams may feel more motivated as they want to beat the bigger teams. A fun way to start talking about diseconomies of scale. You can use the re-drawn images afterwards as a class room poster (with some annotation) to illustrate the point and remind your students of their artistic prowess!
Here's a couple of quick Crossword activities that you can set in class or as homework from the tutor2u team. They are:
- AS Introductory Economics
- A2 Theory of the Firm
Both come with 15 questions and you can even download the answers if you think you might need some help!read more...»
Tata Group, perhaps best known in the UK for its ownership of Jaguar Land Rover (JLR) and Corus, has set out ambitious plans to invest $35bn in capital spending over the next three years as part of its vision for the next 10 years.read more...»
Here is a selection of key diagrams for the Unit 3 business economics courseread more...»
Today, the world's largest mining company, BHP-Billiton, has signalled that it is considering demerger and slimming the business, as a way of improving productivity and performance. However, is there more to this than meets the eye?read more...»
Here is a selection of short extracts on the Royal Mail and the changing structure of the industry. I have been using them when teaching Unit 3 business economics - it strikes me as an excellent case study for revising lots of parts of the course. I have added some links below to recent media coverage of Royal Mail stories.read more...»
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:read more...»
This topic is very helpful when analysing the benefits or drawbacks arising from internal growth. Over the last couple of years the Economist has kept referring back to the case study of PepsiCo, and how the huge corporation has tried to control diseconomies of scale.
Here’s the latest update – a proposed break-up of the company.read more...»
Here are 12 questions (type the answer) on aspects of market structures for unit 3 economicsread more...»
The numbers are breath-taking and they reflect the growing scale and prominence of Gulf air carriers in the international aviation market. Emirates, Etihad and Qatar Airways together have just ordered over 200 of new Boeing 777X aircraft, a more fuel-efficient version of the 777 jumbo. Here we have the monopsony power of major buyers coming face to face with the duopolistic market power of the dominant aircraft manufacturers - US plane maker Boeing, and European rival Airbus.
Check out our revision notes on monopsony power using the link belowread more...»
Calls ask us to "buy local," supporting domestic industry and cutting back on "food miles." The reasons advanced include saving fuel used in transportation, and not "exploiting cheap labour" in developing countries. Self-sufficiency is, however, an expensive delusion.
This morning few of us draw our own well water to wash in. Nor did we grow our own cotton and weave it into shirts. We did not grow even our own wheat and combine it with “oaty goodness” to produce Cheerios. This is because we stick to what we can do, which is none of these things.
A huge reminder about the shifts in economic power arrived with the news about the development of Hinkley C nuclear power station.read more...»
The issue of measuring economic activity - and hence GDP - is a really great topic to dig into. Here’s an extra link from the Economist, which notes that if activity in informal industries and rural areas were properly measured, India’s GDP would look bigger and more stable, and the present slump less severe.read more...»
Revision presentation on business growth, business integration and the factors affecting the shareholder returns from merger and takeover activity.read more...»
In the whole of the 20th century, only a few countries managed to transform themselves and join the club of rich economies. Japan is the most prominent example. The key question for the first half of the 21st century is whether or not China will manage to do the same. It is a difficult and elusive feat, and the number of failures, of countries who nearly made it but then fell back, is as great as the successes.read more...»
Britain's exports of whisky have been growing strongly in recent years helped by a lower pound and fast-rising demand from whisky drinkers in emerging markets. Whisky exports set to rise to £4.5bn by 2017 even though sales to traditionally strong markets in the European Union have stalled because of persistent recession in countries such as Spain, Portugal and Italy. This Channel 4 news report looks at the experiences of two whisky producers - one a small-scale manufacturer and the other the giant Diageo to consider prospects for UK exports as a way of strengthening the recovery,read more...»
Here is a great example of factors of production at work in the mining industry. The BBC's Linda Yueh has been on a tour of Mount Whaleback - an iron ore mine in the Pilbara region of Western Australia. The mining is taking place on an epic scale and the commodities industries have been a major source of economic growth for Australia in recent years.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...»
This is a simply fabulous video to show to economics students of whatever vintage - there is so much relevant stuff in here it would struggle to fit into one of the containers that fill the world's largest ever freight ships. Challenge your students to find as much economics in this as possible and then make some connections between the topics!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...»
MOOCs, massive open online courses, may change the university and college system for ever. How potentially disruptive are MOOC providers such as EdX, Coursera and others in the complex market for higher education?
MOOCs - threat or opportunity? (BBC Newsnight, July 2013)
IMF launches MOOC on finance (June 2013)
MOOCs - an education revolution (New Scientist)read more...»
Here is a great example of the fast-changing dynamics of the computer gaming industry. Indie gaming studios are proving more nimble, innovative and ultimately smarter than the blockbuster console franchises who have dominated the industry for years. The rise of smartphone and tablet gaming has spawned a new type of gamer and a new type of game with opportunities and challenges for all players.read more...»
The scale of the new London Gateway Super deepwater Port is truly stunning and its importance to the economy as a trading nation is hard to underestimate - Britain will have a new world class hub port in a key location impacting on many trades and services in and around the South East and beyond. It has taken 10 years to establish and build this huge new infrastructure project, building eventually started in 2008.
Behind the port sits Europe's largest logistics park connected to the South east by road and rail.
This Financial Times news video looks at the background to the project - it is a good example to consider of the macroeconomic consequences of the investment. What price a new Thames Estuary airport (supported by Boris Johnson) to amplify the transformative impact in the years ahead?
Update: BBC news (November 2013) - click hereread more...»
Mainly designed for A2 micro students taking exams in business economicsread more...»
A short streamed revision presentation of examples of monopsony power in marketsread more...»
I have to come clean as a self-confessed container nerd (geek alert: follow the world’s containers using this amazing tool). Not only are the ships hugely impressive from an engineering perspective, but they are a gift for an Economics or Business enthusiast. You might want to be thinking about economies of scale, or the negative externalities associated with transport – or perhaps discuss supply side issues and infrastructure. Container ships cover the lot.
A while ago I argued that container shipping is the greatest of all 20th century innovations, and this week The Economist has reported that the container has been a greater driver of globalisation than all trade agreements in the past 50 years taken together.read more...»
This 10-question revision quiz focuses on economic efficiency.
Indian e-commerce lags behind countries such as China and a growing number of African nations. A new report in the economist looks at the future for the Indian mobile technology sector - can the adoption of cheap smartphones and adoption of 3G and 4G phone networks create new competitive advantages for the Indian economy? Who will investto build the telecoms capacity infrastructure? To what extent is the industry held back by hugely complex laws and endemic corruption? India is expected to have close to 165 million mobile Internet users by March 2014, up from 87.1 million in December 2012 - the potential is vast.
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...»
This Scoop It Board is curated daily to add new content and commentary on market and industry news relevant to A2 micro unit 3 students.read more...»
Here is my current Business Economics glossary designed for the EdExcel unit 3 economics paperread more...»
Here is a streamed version of a revision presentation on market power and pricing suitable for Unit 3 micro studentsread more...»
Several news sources are quoting the fact that Goldman Sachs have only appointed 70 new 'partners' to its directorship this month - the lowest amount of high level promotions in the company's public-listed history. The business appoints the partners as a recognition process for top-ranked employees following the tradition started when it was a private partnership. This relatively small level of new partnerships not only reflects the reduced level of profits made by one of Americas biggest banks, along with a general reduction in staffing of nearly 10% but also recognition that actually bigger isn't necessarily better in the banking world.read more...»
Matt Smith has been curating a Scoop-It collection of news stories connected to unit 3 microeconomics and specifically the economics of market structures. Click here to view it.
The #econ3 hashtag is a great way for A2 students to follow a growing number of teachers who post ideas, links and advice on Twitter. Likewise use #econ4 for tweets focused on A2 macroeconomics.
For many industrial products the price elasticity of supply across different levels of demand is essentially perfectly elastic - i.e. a business can manufacture as much as is needed at a given unit cost for a given level of market demand. Processed food is a good example of this and I can find no better example of the idea than this stunningly clear five minute video on how hot dogs are made!read more...»
The topic of economies and diseconomies of scale is a key one in microeconomics, and it's nice to see The Economist taking an interest in this important economic conceptread more...»
The economies of scale at Google are impressive and in some cases breath-taking. This visual tour provides a rich example of the size and complexity of the data centres that power the world's biggest search engine. If you are looking for some more impressive images of economies of scale in action, here is a picture tour of a Sainsburys distribution centre from a couple of years back
I was told off this week by my students for using McDonald's as an example to illustrate my point yet again. In fact it was the second week on the trot that I was reprimanded as they told me previously that I was always peppering my conversation with Latin phrases "'cos it makes you sound more clever."
"No I don't," I replied - I've told my students a million times not to exaggerate. The offending example came as I was attempting to explain how fatty foods (especially those from the exalted temple of the Golden Arches) were a demerit good. I thought about it for a little while and realised that two weeks ago I'd told them about the use of 'stars' to motivate McDonald's staff and their extensive training programmes when we discussed labour productivity. I'd also mentioned them when we discussed possible issues relating to economies of scale and the fact that a homogenised world can lead to less choice (a weak argument in their view - a McDonald's in every town sounded like a wonderful idea) and discussed the use of persuasive advertising as an example of non-price competition. They were right, I seemed to be talking about McDonald's all the time - and I'm a vegetarian!
"Mea culpa," I confessed.read more...»
If you saw my 'Diseconomies of Scale Activities' post on the 25th of September, I thought you might like to see the drawings made by my students for the 'Dog and Bone' activity.read more...»
The speed with which new consumer product technologies are taken up is
of enormous interest for lots of reasons. Emerging products and services
challenge demand, revenues and profits for established products and
bring about - as Schumpeter pointed out - gales of creative
In the United States, fresh data suggests that more than half of US consumers have smartphones and if the information is accurate, this means that smartphones have become one of the most rapidly adopted consumer technologies of all time.
I always imagined that if an Economics Teacher ever had the equivalent of a go-to flat-headed screwdriver in their teaching toolkit, it is the activity they use to illustrate the concept of diseconomies of scale. It is a theory that will probably be taught early on during the course and has the tendency to cause a look of confusion - 'Hold on, yesterday you said that big is good! We've just got used to the idea of falling average costs.'
Inventive teachers are always looking for ways to prove the proverbial 'too many cooks....' idea. Here are a couple of lesson starter resources that you might like to use to illustrate your point.read more...»
The international parcels industry is a superb example of a network industry where the fixed costs are high and the marginal cost of collecting, sorting and delivering each parcel is way below the average cost for a particular parcel business. Two global integrators, UPS and TNT Express are set to join forces in Europe as part of a merger but the European Competition Commission is investigating this planned horizontal integration on the grounds that a much larger combined business will raise market concentration levels to a position that might harm consumers.
“UPS and TNT Express are two out of the only four so-called “integrators” currently operating in Europe. Integrators are companies that control a comprehensive air and road small package delivery network throughout Europe and beyond and are capable of offering the broadest portfolio of such services. The other integrators present in Europe are DHL, which is owned by Deutsche Post, and FedEx, a US-based company”
(EU Competition Commission press release, July 2012)
This new video from The Economist provides some excellent background on the industry and gives a vivid illustration of the investment needed to run an international parcels business.read more...»
The milk industry is in the news once again with some dairy farmers threatening to go on strike and limit milk supplies in protest at cuts in the wholesale price of milk offered to them by the major milk processing businesses. I have put together some video resources available from different web sources and built them into a Storify slideshow, as more videos are added the slideshow will be updated automatically.
A potentially important moment for the contestability of the tablet market. Technology giant Microsoft has unveiled its touchpad tablet computer. The “Surface” will face tough competition from Apple’s iPad and many other devices including those made by Samsung. These video resources provide some background. The Surface tablet computer will not be available until the Autumn on 2012.read more...»
Here is a revision download containing some key theory diagrams and accompanying explanation for topics in business economics / theory of the firm / market structures.read more...»
Here is a superb news report from Channel 4 news about the shortage of skilled workers in the North East of England (an area of high unemployment). Nissan this week announced a big new investment in car making at their ultra-high productivity plant in Washington, Tyne and Wear. But many of the manufacturers along Nissan’s supply chain are finding it tough to get enough skilled people coming througth to make realistic bid for the orders that will come from Nissa. Some businesses are having to turn down contracts because they dont have the extra workforce to cope with the higher volumes of businesses.
Skills shortages are restricting the growth of many small and medium sized businesses especially in manufacturing. Little wonder that Nissan is working very closely with Gateshead College to run an apprenticeship scheme - an example of external economies of scale in action.read more...»
Ports are a key part of the critical infrastructure of a country engaged in trade with the rest of the world. This BBC news video looks at the rapid expansion of container ports in the Gulf - facilities that offer a vital link between Europe to the west and China and India to the east.read more...»
Here is a revision presentation focusing on different entry and exit barriers in imperfectly competitive markets.
* Block potential entrants from making a profit
* Protect the monopoly power of existing firms
* Maintain supernormal profits in the long run
* Barriers to entry make a market less contestable