Unit 1 Micro: Revision Presentation on Government Intervention
Here is a short 35 slide revision presentation on government intervention in markets designed for AS microeconomics revision
read more...»Improving Evaluation Skills in Economics Exams
Here is an updated version of the WEESTEPS approach to economics evaluation designed to boost the evaluation scores and exam results for AS and A2 students. Paul Bridges is the mastermind behind this superb approach to evaluation - it gives you some great pointers about the evaluative approaches that can be used. Works well for micro and macro - but particularly when you have to evaluate a specific policy intervention in a market / industry / or a macro policy discussion.
read more...»Unit 1 Micro: Revision Blogs on Markets and Intervention
Here is a selection of a recent blog resources on topics that appear on the core Unit 1 Syllabus focusing on changing market prices and examples of interventions to address perceived market failures
read more...»Unit 1 Micro: Climate Change Policies - Finding the Right Mix
There are many different market failures when it comes to understanding some of the key environmental problems and challenges of the age. Addressing, attacking and correcting for complex and multiple market failures requires pointing to different policy instruments / interventions. Together can they make a sizeable difference to consumer and business behaviour and lead us away from a “business as usual” approach?
read more...»Unit 1 Micro: Revision on Producer Subsidies
Here is a planned answer to an exam question on producer subsidies
“Discuss the likely effects of a EU beef subsidy on the market for beef production in Wales”
read more...»Unit 1 Micro: Inequality - The Rise of Fuel Poverty
A new report headed up by Professor John Hills from the LSE highlights the growing risks of fuel poverty facing millions of people in the UK and especially those living in lower-income families. At present, the definition of fuel poverty based on whether a household needs to spend more than 10 per cent of its income each year on energy. But this measure has been criticised because it ignores the significant seasonal variation in energy bills and the financial distress that a really large bill can have on people with little or not savings to fall back on.
read more...»Unit 1 Micro: Government launches New Buy Loan Guarantee Scheme
Here is a fresh attempt by the British government to breathe life into the moribund housing market. People in England are being offered financial help to climb onto or up the housing ladder as the government’s new mortgage indemnity scheme launches. Under the terms of the scheme, both the construction industry and taxpayers will act as co-guarantors on new homes bought by existing or first-time buyers. Will it work in boosting demand for new build homes? Is this scheme designed to help house-buyers or builders? Or is there a real risk of government failure?
Basics:
* Builders will pay 3.5 per cent of the price of the home
* Taxpayers will provide an additional guarantee of 5.5 per cent that will only be used if there is a major property crash.
* Mortgage lenders will be able to lend up to 95 per cent of the sale price which means new buyers in many instances will only need to find a five per cent deposit or £10,000 on a new £200,000 home. The typical deposit on a mortgage now is closer to £36,000
* The scheme is available on houses and flats valued under £500,000 in England only
Evidence of the dangers of protectionism
One of the dangers for a country implementing protectionist measures is the risk of retaliatory action. We have only to look at US-China trade relations to find plenty of evidence for this. The US objects to what they see as a Chinese policy of deliberately holding down the value of the yuan in order to boost Chinese exports. However, in addition to this they also object to government subsidies which the Chinese government give to some of their producers in order to help lower their production costs and so make their goods even more competitive in world markets.
read more...»Unit 1 Micro: Breaking Down the Cost of Gas
High gas prices impact on millions of households whose energy bills have soared in recent years and have led to a steep increase in fuel poverty among lower-income families. Studying the market for gas is interesting from a micro-economic perspective and a recent article in the Times (covered by a paywall) provided an overview of the breakdown of the cost structure of a typical energy bill from suppliers such as British Gas
read more...»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...»Unit 3 Micro: World’s Largest Solar Plant Opens
This autumn the world’s biggest solar plant power station opened in Spain. Comprising 600,000 parabolic mirrors, the Andasol 3 CSP plant is the size of 70 soccer fields and has 88km of piping. The economies of scale are huge and if solar power is going to work and be viable anywhere it is probably here or in North Africa.
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 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 2 Macro: Will a Youth Jobs Subsidy Work?
The Coalition Government recently heralded a new scheme designed to address the structural problem of high youth unemployment in the UK economy. Under their “youth contract” plan, employers will be given “wage incentives” worth £2,275 to take on some 160,000 18-to-24-year-olds. But will it have much impact on the problem? The independent Office for Budgetary Responsibility says that the net effect on overall unemployment will be close to zero, because the subsidy incentive will lead to a switch in employment away from older workers.
read more...»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: FirstBuy, Affordability and Effective Demand in Property
For hundreds of thousands of first-time buyers, getting a solid foothold on the housing ladder has been tough in recent years. Falling prices and lower mortgage interest rates ought to have improved affordability for would-be purchases of a new house or flat but the barrier of having to save up a deposit in order to qualify for a mortgage has become higher causing many to be frozen out of the market. The number of people renting private accommodation in England has increased by 55% in the past six years as first-time buyers struggle to make purchases.
Economists use a term known as effective demand to describe demand that is backed up by a willingness and ability to buy. There are few better case studies in low effective demand than the difficulties facing first time buyers in the UK property market. A new government scheme is designed to offer relief.
read more...»Do you agree that the government should provide support to the UK car industry?
This is a fairly classic A2 macroeconomics question, and one that the European Automobile Manufacturers Association has been considering at their meeting in London last week. Their conclusion? That non-European governments should scale back assistance for their own automotive industries, but at the same time governments in Europe should support the industry’s efforts to cut car emissions.
read more...»Electric cars: government failure?
There was a great in-depth look at activity in the car market in the Sunday Times yesterday with regards to electric powered vehicles.
A2 Micro: EU Aviation - State Aid and State Ownership
I have put together a short revision exam-style question for AQA Unit 3 (Micro) focusing on some of the issues / problems facing the European Airline industry. Many of the established airlines are part-state owned and the question of nationalisation, government emergency funding / state aid was highly topical this time last year in the wake of the recession and the volcanic ash crisis. The document can be downloaded below and I have linked also to some other A2 micro revision resources
EU_Airlines_State_Aid_Nationalisation.pdf
read more...»Key AS Micro Terms: Taxes and Subsidies
Here are some key terms relating to taxes and subsidies - two key forms of government intervention. We have also linked to recent blogs on these concepts.
read more...»Tuesday Talks - the cycling city
A Radio 4 broadcast from yesterday, Bristol: Cycling City, provides the inspiration for today’s extension activity - there is a short synopsis here. This 30 minute audio documentary looks at the way in which £22m has been used over the past 3 years to increase the use of bicycles by residents of Bristol. Cyclists, motorists and local taxpayers seem to think that in general the scheme has not been successful, with only a small increase in the number of cyclists combined with poorly thought-through cycling infrastructure.
After listening to the documentary, students could draw up their own cost-benefit analysis of the scheme, and discuss whether the £22m has been used in the most effective way (around two thirds of the funding went towards infrastructure and the remaining third towards education relating to cycling). More details on the specific projects that have been run as part of this scheme can be found here. Able students may want to consider how they would have tackled the scheme differently.
Patent Box or Innovation Box as Innovation Stimulant?
The UK coalition government does not yet have a growth strategy worth the name but they have invested plenty of capital in the idea of a Patent Box. This involves a lower corporation tax on profits drawn from patented products) and is a supply-side policy to make UK an attractive location for innovative industries. One proposal is that royalties and other profits from patented products and technologies would be taxed at just 10 per cent.
But many economists argue that this is at best an ineffective way of lifting the amount of research and development in the British economy. They look instead to the Netherlands where an Innovation Box has had a significant impact - it reflects the view that patents are only a small part of the innovation process - you dont necessarily have to patent an idea to make small scale innovations commercially viable.
Channel 4 news tonight visited Sandwich in Kent where the Pfizer research and development facility is set to close.
Economics solar power government subsidies
A timely and relevant video here on the economics of the government feed-in-tariffs (or subsidies) for companies and individuals putting up solar panels on their roofs. Solar power is an industry booming with over 10,000 installations in the first six months since housing associations were given subsidies to install solar panels in many of their properties. The video looks at the costs of installment of a system and the electricity it generates and how much extra electricity is generated into the national grid. How important will solar power be in promoting energy independence? Peak solar output from the UK does not correspond with peak demand for electricity (from 5pm to 7pm on a winter’s evening). How many of the solar panels are made in the UK? Who really benefits from feed-in-tariffs? Rather like the CAP are the major commercial benefits skewed to large businesses willing to put up big-scale solar installations in empty fields?
WTO finds Boeing guilty of using illegal subsidies
This is one of the longest running disputes in trade history. Europe and the US have been fighting for more than six years over each other’s subsidies for large passenger aircraft in the duopolistic battle between Boeing and Airbus. Now the World Trade Organisation has found that Boeing received at least $5bn (£3.1bn) in illegal subsidies and was only able to launch its 787 Dreamliner with such support. Airbus has als been found to be in breach of receiving illegal state aid. Reuters provides useful background here.
Cutting up cotton subsidies?
It’s that time of year again when we’re looking at different markets in AS Microeconomics, and once more trade-distorting subsidies are back in the news- this time in the cotton markets
read more...»Apprenticeships for a Silver Generation
The oldest contestant in the new (6th) series of The Apprentice is thirty one! But why should apprentices be concentrated only among those in the early stages of their careers?
The number of people aged fifty and over who are applying for and winning places on apprenticeship schemes has more than doubled in the last few years as this BBC news video explains. Apprenticeship programmes for older workers challenges our common preconceptions about their place in the labour market - and this is a good thing as the debate continues about how best to support and encourage people to stay in work during these challenging economic times. Lifelong learning is not merely a vaccuous slogan - it has a real meaning and is hugely important for the British economy in the years ahead.
This video reinforces the importance of human capital, the need for flexible skills to avoid structural unemployment. And it raises questions about who should and who can fund apprenticeship schemes and their longer-term economic and social benefits.
The cutting begins…
The first round of government spending cuts were announced earlier today amounting to £6.2 billion. Whilst this is not “austerity” of the sort that Greece has been talking about recently, they are genuine cuts, albeit further measures are still required to tackle the huge black hole in the public purse.
read more...»Fair trade debate
A hat tip to Harriet Thompson for this heads up - a debate at the Economist on “This house believes that making trade fairer is more important than making it freer.”
End of the Road for the Car Scrappage Scheme
Today marks the end of the UK government’s car scrappage scheme. The scheme offered drivers of cars at least 10 years old £2,000 off the price of a new vehicle with half of the money is paid by the government and half by the carmaker in question. Over the course of the scheme is estimated that the scrappage initiative has been responsible for about a fifth of all new UK car registrations. And there seems little doubt that the consumer subsidy has provided a shot in the arm for a car industry affected badly by the global financial crisis and subsequent recession. Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders is quoted as saying that it had provided a “much-needed stimulus for the UK motor industry”.
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