Unit 3 Micro: Key Diagrams for Business Economics
Here is a revision download containing some key theory diagrams and accompanying explanation for topics in business economics / theory of the firm / market structures.
Key_Diagrams_A2_Business_Economics.pdf
Unit 2 Macro: Skills Shortages Hold Back Recovery
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...»Unit 2 Macro: Globalisation and the Growth of Ports
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...»Unit 3 Micro: Revision on Entry Barriers
Here is a revision presentation focusing on different entry and exit barriers in imperfectly competitive markets.
Entry barriers:
* 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
Unit 3 Micro: Revision on Scale Economies and MES
What is the connection between economies of scale and the minimum efficient scale?
read more...»Unit 3 Micro: Revision on Scale Economies, Technology and Prices
Why do the prices of flat screen televisions keep falling, despite increasing demand?
read more...»Unit 4 Macro: Focus on India - World’s Cheapest Computer
A few weeks ago came the announcement that an Indian business is finally set to launch the World’s cheapest tablet computer. This laptop device will sell for around 18 times less than the price of an iPad in London! How can a laptop be manufactured for less than $US 40?
read more...»Unit 3 Micro: 3D Printing and a Manufacturing Revolution
Additive manufacturing or 3D printing is an emerging technology that takes product design data which provides a geometric representation of a product such as a pen and that data is then sent over to a machine that allows products to be manufactured ‘on the spot’ typically using additive materials in liquid or powder format.
This TED talk from Lisa Harouni (co-founder of Digital Forming) looks at examples of intricately designed products made using this new and increasingly affordable manufacturing technology. 3D machines can build structures, build replacement parts and parts within parts - the detailed resolution possible is incredible.
read more...»Unit 2 Macro: Look Upwards to Find the next Downturn
Correlation does not necessarily imply causation but analysts at Barclays Capital are worried that a surge in skyscraper construction in China and India might be a forward indicator of another burst of financial and economic distress. This report in the Independent covers their findings:
“Clusters of building activity usually coincide with periods of easy credit, excessive optimism and rising land prices, which often occur before market corrections.”
* India is scheduled to complete 14 new skyscrapers taller than 240 meters (787 feet) over the next five years from the current two
* China will increase the number of skyscrapers to 141, from the current 75, by 2017
* London’s Shard is expected to be completed in 2012 – at 1,017ft, it will be the tallest building in Western Europe
News video from the BBC: Skyscrapers ‘linked with impending financial crashes’
Guardian news video: Huaxi: the village that towers above China
Economics at the Movies - Foods that Make Billions
Here is a link to a you tube video from the BBC looking at the modern food business and the huge profits to be made from the breakfast cereal industry. Part of the series The Foods that Make Billions (cereals, bottled water and yoghurt)
The Foods That Make Billions - Cereals
Unit 1 Micro: Capital used to Build Cross Rail
The tunnelling equipment involved in CrossRail - Europe’s biggest civil construction project - is immense in every way! This BBC news video of the earth cutting machinery is a brilliant visual to use when teaching economies of scale or introducing the concept of physical capital! The machinery is made in Germany naturally!
Unit 1 Micro: Inside a Biscuit Factory
This five minute video is superb for illustrating economies of scale in the production - we take a trip through the United Biscuit factory to see how millions of products are made every day. The commentary is a little simplistic but as a visual aid it is brilliant. A great example to use of capital intensity in production and the nature of supply curves and the elasticity of supply. Here is the link to use
Unit 1 Micro: Costs and Benefits of a Super Sewer for London
Thames Water has plans for a super sewer running 20 miles from Hammersmith to Beckton but the plan has come up against intense opposition from many local resident groups. It is a good example to use of cost-benefit analysis in action with a project that will directly affect millions of people living and working in the capital. There is an almost unending list of stakeholders involved in the debate.
read more...»Unit 3 Micro: Economies of Scale and the Kinect
Here is an example of economies of scale in production. Microsoft’s motion-sensing camera the Kinect was one of the fastest-selling consumer electronics device in history when it was launched in November 2010. In a report on the FT’s technology blog, Dennis Durkin, Xbox chief financial officer, is quoted as saying that economies of scale have been the major factor driving down the unit price of Kinect from $30,000-$40,000 when it was under development two years ago to $150 now.
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.
read more...»
Unit 3 Micro: Science Cities and External Economies of Scale
This feature article from the BBC web site is essentially about the vital importance of high-knowledge industries in sustaining competitiveness and growth in a globalising world. Europe lags behind many emerging countries in terms of the resources devoted to science and technology, research and development and creative industries in particular.
But the article makes reference to the expansion of science cities - knowledge clusters that bring together higher education expertise and entrepreneurial zeal - their number continues to grow from California and Boston in the USA, Cambridge in the UK, Education City in Qatar, Science City in Zurich and Digital Media City in Seoul. All good examples to use of the commercial leverage from external economies of scale in high-tech industries.
Unit 3 Micro - Poundland expands operations
Poundland has over 370 stores in the UK and has persued an ambitious organic growth strategy. This BBC news video “Tough economic times boost Poundland stores” looks at their expansion into Northern Ireland and now the Irish Republic under a new brand name! Naturally with Ireland being part of the Euro, they have opted not to use their original name when selling discount prices - the new trading name is Dealz!
This business is a good example to use of benefitting from extensive marketing / purchasing economies of scale in the highly-competitive discount store market.
Poundland is estimated to have a 14 per cent share of the UK’s £36bn discount general merchandise market. In the 12 months to June 2011 it made profits of £21.5million on a £510million turnover. The rapid expansion has been achieved by reinvesting the cash generated from their success rather than relying on heavy borrowing. Poundland is privately owned.
Unit 3 Micro: Motorsport Valley and External Economies of Scale
The occasion of the 2011 British Grand Prix at Silverstone in Northamptonshire is an opportunity to showcase the extraordinary growth and success of the motorsport industry in the UK. It is a classic example of the benefits that can flow from external economies of scale, and also of the way in which genuine competitive advantage in the global economy can be built and nurtured.
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?
read more...»Unit 3 Micro: Economies of Scale in Solar Power
How about this for economies of scale in the renewable energy industry? A new photovoltaic park has opened in Les Mées in France, By the end of 2011, solar panels will cover 200 hectares and produce around 100MW, making it the biggest solar array in France.
A2 Micro: Market Structure, Conduct & Performance
This updated revision presentation is designed to help students preparing for markets-related topics on A2 economics specifications.
Market Structure Conduct & Performance - revision presentation
Download printable (pdf) slide handout
read more...»A2 Micro: High and Low Marginal Cost Products
Marginal cost is the change in total cost from supplying an extra unit or supplying to an extra consumer. In some markets and industries there is a clear marginal cost to producing for the next user. In others, the marginal cost is negligible, bordering on zero. How might this impact on the nature of supply and pricing?
read more...»Unit 3 Micro: Diseconomies of Scale
Diseconomies are the result of decreasing returns to scale and lead to a rise in average cost
read more...»A2 Micro: Minimum Efficient Scale
The minimum efficient scale (MES) is the scale of production where the internal economies of scale have been fully exploited. The MES corresponds to the lowest point on the long run average cost curve and is also known as an output range over which a business achieves productive efficiency.
The MES is not a single output level – more likely we describe the minimum efficient scale as comprising a range of outputs where the firm achieves constant returns to scale and has reached the lowest feasible cost per unit.
read more...»A2 Micro: External Economies of Scale
External economies of scale occur outside of a firm but within an industry. For example investment in a better transportation network servicing an industry will resulting in a decrease in costs for a company working within that industry.
read more...»A2 Micro: Economies of Scope
These are different from economies of scale! Economies of scope occur where it is cheaper to produce a range of products rather than specialize in just a handful of products. And they can be exploited when a business owns a resource that can be used more than once in different ways!
read more...»
Some light relief from revision - this week’s economics TV
Here is a selection of this week’s TV (and a bit of radio) that seems to have some good economics content and might provide a welcome, yet useful, break from revision.
Sunday 15th May: BBC4 8pm, ‘The Secret Life of the National Grid’ - could be worth a look in terms of economies of scale, network externalities, economic growth and the importance of infrastructure
Sunday 15th May: Radio 4 8pm, ‘The Bankers and the Bottom Billion’ - possibly some useful bits in terms of development economics
Monday 16th May: BBC1 8.30pm, ‘Panorama’ - this week’s investigative documentary looks at the illegal trade in waste electronic products following the introduction of regulations governing how we can dispose of such things - probably very good in terms of analysing a type of government failure
Monday 16th May: BBC1 9pm, ‘The Street That Cut Everything’ - looks rather entertaining as well as providing a bit of an insight into topics such as government spending on public goods and goods that generate positive externalities
Monday 16th May: BBC4 9pm, ‘The Golden Age of Canals’ - whilst at first glance this may not seem too appealing, I suspect there are some interesting nuggets in terms of networks and infrastructure spending, as well as a look at why canals fell into obsolence due to the invention of the combustion engine (some creative destruction here!)
Tuesday 17th May: BBC3 9pm, ‘Secrets of the Superbrands: Technology’ - a good look at how monopolies put up strategic barriers to entry in terms of branding and smart use of technology to achieve consumer loyalty
Thursday 19th May: ITV1 7.30pm, ‘The True Cost of a Car’ - a look at the impact on motorists of rising fuel prices and insurance premiums, which will bring in cross-elasticity of demand in a roundabout way
Thursday 19th May: Radio 4, 8pm, ‘The Report’ - a closer look at the operation of supermarkets and why there is opposition to their expansion (useful for looking at the impact of rising market power)
Friday 20th May: BBC2 7pm, ‘Wind Farm Wars’ - probably very useful for those sitting AS Unit 1 this summer in terms of negative and positive externalities of production, and the ins and outs of cost-benefit analysis
Hopefully there’s some light relief in there for everyone! All of the BBC programmes will be available on iPlayer for several days after they’ve been broadcast.
Peter Day at the Faber-Castell factory
The humble pencil - I have one in front of me now - is on the surface just about the simplest product one could make. But how is it manufactured? Would you be able to do it? I for one possess virtually none of the skills required to create a pencil but fortunately the wonderful Peter Day from BBC Radio 4’s In Business has been investigating the enduring success of two of the world’s most successful pencil businesses - including a visit to the Faber-Castell factory in Germany. There are some super images from the factory on the BBC Business News Facebook Page - great for visual learners who want to understand more about the production line process.
Protectionism and the demise of the US shipping industry
Here is a link to an article written by John Gapper in the Financial Times about the long term decline of the US container shipping industry. The finger of blame is pointed at the protectionist ruling that “all domestic cargo must be carried in US ships made in US shipyards, crewed by US citizens .....Of the world’s 7,200 container ships in 2007, only 89 were US-registered compared with 1,250 European ships and 860 in Greater China ......An alliance of shipping companies, trade unions and US shipyards has blocked liberalisation.”
This is also a really good article on the economies of scale in container shipping.
Apply - Vertical Integration and iPad Pricing
A half term hat tip to Henry Wingfield for spotting this super article in Wired magazine. It discusses how Apple is able to keep the iPad at the $500 price point and looks at how the company is vertically integrated and the importance of its retail stores. Have a read here.
