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Here is some background on Amazon's all-cash purchase of live gaming site Twitch. Read through it and consider some of the likely business synergies from the acquisition.read more...»
A hat tip to Hannah Thomas who has spotted a new info graphic on human capital produced by the Office for National Statistics. You can find it here http://www.ons.gov.uk/ons/rel/wellbeing/human-capi... with more supporting detail and explanation here http://www.ons.gov.uk/ons/dcp171766_374868.pdfread more...»
De-mergers often figure in EdExcel Unit 3 questions e.g. on the structured multiple choice - so this one from mining giant BHP Billiton is a good example to be aware of and to understand the key drivers behind the decision. BHP Billiton plan to sell (divest) non-core assets such as their aluminium, manganese and nickel mines.
As always - focusing on core competencies, streamlining operations to avoid diseconomies of scale lie at the heart of the de-merger process
BHP Billiton is hugely profitable! BHP achieved full-year profits last year of $US13.8bn helped by a 15th straight year of record iron ore production.
More here on the planned demerger from Reuters Business Newsread more...»
An almost perfect example of price discrimination is evident in this market revealed on the BBC online news site - read this section carefully!
"Charges vary for some motorists, even if they are picking up the same vehicle from the same location and from the same hire company."
Then read through the article to find clues as to how some vehicle hire businesses have been able to segment the market and discriminate between drivers from different countries inside the EU.
The regulators are onto the issue - expect some action unless vehicle hire businesses adjust their pricing tactics!read more...»
This video report from BBC Global Business looks at the success of a very small scale bakery located in an isolated mountain our region of Spain.read more...»
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.read more...»
In this blog, Professor Simon Wren-Lewis from Oxford University bemoans the absence of debate over the notion of a maximum wage - with specific reference to the pay of senior executives.read more...»
A report out yesterday from the Health and Social Care Information Centre shows a dramatic fall in the consumption by young people (aged 11 to 15) of our favourite demerit goods – alcohol, cigarettes and drugs. The report suggests that over the last decade regular smoking fell from 9% to 3% of 11- to 15-year-olds. Regular alcohol drinking dropped from 25% to 9%. Drug use has halved from 12% to 6% over this 10 year period.
This, of course, is very good news with regards to the relative health of our youth. As an economics teacher the first question I would ask my students is how this downturn has been achieved? What has happened either within the market or with government intervention to shift consumption in this way? It could be argued that this represents the most successful example of government intervention into markets to change behaviour and can be attributed to regulation, restriction of use and good old education! Information failure does not appear to have had an impact and the political will to succeed has been fairly uniform among the major parties in power.
For me, of course, it also offers the opportunity to do the next in my series of numerical activities in preparation for the arrival of the new specifications in 2015!read more...»
An important part of the CrossRail project has been decided with the news that the £1.4bn contract to run the new Crossrail service through London from 2018 has been awarded to Hong Kong-based MTR Corporation.read more...»
Shareholder activism regarding executive pay is covered in this article from the Guardian. Note too the emergence of TNT Post as a competitor in the cities for final mile delivery of business and household mail - the mail market is becoming more contestable.
The Royal Mail's latest market report is an interesting read for those who want to study market dynamics in more details - for example the continued growth (but high contestability) in parcels contrasted with a trend decline in the volume of letters sent through the post - click here for the 2014 market overview: http://ar2013-14.royalmailgroup.com/overview/marke...
Today’s announcement that the Competition and Markets Authority (CMA) are recommending that the High Street Banks’ provision of current accounts should be investigated for lack of competition may not surprise many. The case study may be valuable when looking at competition in oligopolistic markets and a report can be found from this link. The BBC take on the story can be found from this link.
I also thought it offered a chance to do some calculations! Given my current theme of bringing the new levels of assessment of numeracy and quantitative methods in the 2015 specifications of A level economics ever increasingly to the attention of our teaching community, where better to do some number work than when looking at market share in the banking industry!read more...»
The UK Financial Conduct Authority has announced direct interventions in the market for payday loans - the high cost short term loans market which has expanded rapidly in recent years led by businesses such as Wonga. The decision is the result of a detailed assessment of the industry which had flagged up a number of market failures.read more...»
According to some sources, Dropbox was the 37th online storage solution to be developed for the web - but despite early failures and late entry it has emerged as the cloud storage product of choice for over 300 million people. The firm is now estimated to be worth about £5.9bn.
This BBC article looks at the background to the story. Article can be found here: http://www.bbc.co.uk/news/business-27579790read more...»
The financial crisis has undoubtedly created a demand in popular culture for works which portray capitalism in a bad light, such as the recent best seller by Thomas Piketty. Piketty’s writing has gathered increasing attention from economists, and his arguments do not really bear scrutiny.
The focus of Piketty’s work is the long-run evolution of the ratio of capital to income. He claims that this is now high by historical standards, and will rise even further as the 21st century unfolds. Wealth will become more concentrated and inequality will rise inexorably even more.
The message that capitalism inevitably leads to greater inequality is one that many people want to hear. Unfortunately for them, it is wrong. Piketty assembles an impressively large amount of empirical evidence. This shows clearly that from around 1910 to 1970, inequality actually declined sharply across the West.read more...»
Here is a short FT background video on the challenges facing established food retailers in the UK. The supermarket is under pressure. They face competition from both hard discounters and upmarket retailers. The FT's Andrea Felsted visits Romford, on the outskirts of London, to examine how supermarkets are adapting to their new retail landscape. The Guardian's articles in changing competition in the food retail sector provide some excellent background pieces - click here to access: http://www.theguardian.com/business/supermarketsread more...»
Here is your starter for ten. What do the Uber app and David Ricardo have in common? Ricardo, I hear you ask. Scarcely known outside academic economics, he ranks equal with Adam Smith and Keynes as the greatest ever British economist. His classic Principles of Political Economy was published in 1816. He made millions of pounds on the stock market, at a time when a million was a vast amount of money.read more...»
The varied nature of Economics means there are so many (sometimes it can seem too many) themes to explore. And priorities change. Sometimes the main issue is production (making more stuff – and how the value of that is measured). Sometimes it’s exchange (looking at how markets work). Yet distribution (often overlooked, especially when economies are booming) seems the hottest topic at the moment. Inequality tops the bestseller lists.
Here are a few tips and links for using the topic as an intro to A2 economics, great for macro, with scope for analysis and evaluation of UK government policy and approaches to development economics.read more...»
Technology always disrupts markets. It provides dynamic efficiency improvements, creates new markets, destroys old ones, and in some cases destroys monopolies and in others, creates new monopolies.read more...»
The supermarket giant Tesco is under increasing pressure! Tesco is Britain’s biggest retailer (it has 29% of the UK groceries market) and the biggest private-sector employer, and it runs about 7,000 stores worldwide. But it is facing significant commercial challenges from discount retailers such as Aldi and Lidl and seems to be squeezed in the middle as other shoppers look for the value proposition in stores such as Waitrose. Their recent trading figures made for sorry reading. For the three months to 24 May 2014, Tesco said like-for-like UK sales including VAT and excluding petrol fell 3.7%.
Is there a case for breaking up Tesco and getting the business to re-focus on what it does best? Two journalists from the Financial Times argue it out in the video below:read more...»
Trams have been experiencing a revival in a number of towns and cities in the past few decades. Edinburgh is the latest city to invest in trams, and hopes they will boost local economy. But do the benefits outweigh costs? Manchester, Sheffield, Blackpool, Nottingham, Newcastle and Croydon have all installed trams / light rail and others are considering investment.
The Edinburgh trams at running (at last) but the jury will remain out for a long time about their net impact on economic activity, traffic congestion and the broader health of Edinburgh and the local environs.read more...»
An important judgement from the newly established Competition and Markets Authority (CMA). They believe that competition is best served by having three major cross-channel service operators - namely EuroTunnel (rail) and two ferry operators.
The CMA has ruled against EuroTunnel being able to cross-subsidise the loss-making MyFerryLink on the Dover to Calais service because in doing so, it is likely to lead to the market exit of a rival provider and ultimately cause higher prices for consumers.read more...»
Until the 3rd of June we are making available in streamed format the Unit 3 Business economics revision companion - a superb resource for AQA and ExExcel in particularread more...»
What do prices mean and how are they set. A recent BBC World of Business podcast explored this and other issues.read more...»
There has been huge interest in the new book by Thomas Piketty entitled "Capital in the 21st Century". This blog entry will link to some reviews, news articles and short videos on Piketty's ideas and policy prescriptions. In "Capital," French economist Thomas Piketty explores how wealth and the income derived from it magnifies the problems of inequality. At the heart of it is a simple equation R > G - the rate of return on capital is higher than the rate of economic growth. Naturally there is a fierce debate about the data and his methodology!
Recent news articles:
Are we living in the second gilded age? (Linda Yueh, BBC)
Review of "Capitalism in the Twenty First Century"(The Independent)read more...»
A BBC news report on the widening gulf in income and wealth inequality in the United States (and New York in particular). Income inequality is now as high as it was during the worst period of the 1920s. The richest Americans now hold one fifth of all of the country's income - and the top 10% actually hold half of it.read more...»
This Channel 4 news report looks at va growing protest movement among food industry workers campaigning against zero hours contracts and persistent low pay. Zero-hours contracts do not guarantee a minimum number of hours of employment. It has been estimated that 583,000 people, around 2% of the UK workforce, were employed on zero-hours contracts between October and December 2013. The actual figure is likely to be substantially higher than that.read more...»
Looking for a quick activity to help test revision of some of the key economic terms needed for the up-coming exams? Here's a nice little test of knowledge that can either be used as an in-class activity or for individual students to use to test their own revision.
Called 'The Usual Suspects', students are given one minute to identify the definitions of as many key phrases from the micro and macro curriculum as they can. Each phrase is shown alongside 4 possible definitions (from the wider pool). Students must identify which is the correct answer. If an incorrect answer is given, the student has to click to remove a 'bar' to allow them to continue with the test.
60 key phrases are included with each of the two resources below, so the activity can be run several times. Who can get the highest score in one minute!
Click on this link for the macro version of the activity.
Click on this link for the micro version of the activity.
Here is a streamed presentation covering sone "Thoughts on Improving Your Economics Papers"read more...»
CEP Director, John Van Reenen, explains the reasons why inequality in the UK has been rising. For more films covering aspects of economic policy we recommend you take a look at the Facebook page - Click here! https://www.facebook.com/EconFilmsread more...»
Income and wealth inequality in the UK are higher than most people think they are and higher than they think they should be. These are among the messages of a new online infographics film:read more...»
Here is a streamed version of a revision presentation on the Crossrail project, a good example to use when teaching transport economics and the main principles and issues governing a cost benefit analysis approach to infrastructure investment appraisal. It is designed for use with AS and A2 economics students.read more...»
Here are some revision resources on the topic of labour market failure.read more...»
Tanzanian cola producers are taking on Coca Cola and making headway in the battle for market share. Despite economic growth, there is a fragile middle class vulnerable to changes in world commodity prices and unstable employment and wages. This opens up an opportunity for indigenous food and drinks manufacturers who might be able to supply products at a lower price harnessing environmental aims such as recycling the majority of plastic bottles used.read more...»
Today is the final day of posting resources aimed at testing knowledge on diagrams (please see the links at the bottom of this page for easy access to Monday and Tuesday's blog posts). The resources are aimed at testing knowledge on some of the key diagrams that students need to know for their exams.
Today's diagrams are for A2 students in both micro and macro economics. We're sorry, but the diagrams are primarily aimed at students undertaking the AQA version of the Economics qualification.
For both micro and macro, you have a Powerpoint file that can be used in class to test knowledge using a scrolling slideshow. There is also a static diagram file for both topics that can be used in class or as a revision tool for students.
Click here to download a Powerpoint scrolling slideshow for A2 Micro
Click here to download a document testing diagrams for A2 Micro
Click here to download a Powerpoint scrolling slideshow for A2 Macro
Click here to download a document testing diagrams for A2 Macro
Click here to go to Monday's blog post for diagrams on AS micro economics
Click here to go to Tuesday's blog post for diagrams on AS macro economics
This blog entry brings together some of our revision resources on these crucial aspects of the theory of the firm. Scroll down below for revision notes, presentations and online quizzes for your to check your understanding.read more...»
Here is a selection of key diagrams for the Unit 3 business economics courseread more...»
The introduction of a national minimum wage does not lead to job losses. That is the central finding of research by Peter Dolton and
Michael Stops, to be presented at the Royal Economic Society’s 2014 conference.
I'm sure that introducing the concept of normative statements is something that most Economics' teachers introduce early in the curriculum to show the dangers of expressing opinions without evidence. It's a tricky balancing act that we have to play - as students start to write longer, evaluative pieces we are keen for them to make reasoned arguments that don't sit on the fence but warn them of the dangers of starting to rant.
I thought that the two reports included on the document here might prove an interesting activity. The file contains two reports into a possible plan from the Welsh Assembly to introduce a ban on the smoking of E-cigarettes in public places (akin to the current ban on smoking of 'traditional' cigarettes) in Wales. The articles are interesting in their own right in explaining the reasons behind such a plan and as an example of Government intervention to solve a possible market failure (although one of the articles clearly identifies E Cigarettes as a solution to a market failure itself).
You could also ask students to read through the two articles and answer the following questions:
- Which of the two articles appears to offer more opinion-based evidence than the other?
- Highlight any words or phrases that indicate a value judgement rather than evidence-based reporting.
- Based upon your own reading and picking up on journalistic styles, have a guess which newspaper each article was published in.
The answer to this final question is in the 'read more...' section of this blog.read more...»
The big six energy firms in the UK - who account for more than ninety per cent of suppliers to UK household, commercial and industrial consumers - will be subject to another investigation by the competition authorities.
A report by regulator Ofgem has called for an investigation by the Competition and Markets Authority (CMA) which could take nearly two years to complete - effectively pushing the issue into the long grass well beyond the date of the next election.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...»
A number of students have been asking me about suggested reading for and introductions to the study of management as they look ahead to a UCAS application in the autumn. Here are some thoughts.read more...»
In recent times, pop up shops (retail outlets available on very short term leases) have grown in popularity. In part this has been because of the increase in vacant retail space during and in the aftermath of the last recession. But increasingly other organisation are thinking about using their locations as opportunities to attract small retailers and/or retail start-ups.
Transport for London is one such example. TfL owns more than 1,000 retail properties and this week TFL has signed a deal with Appear Here, an ‘online property agency’, to allow pop-up shops and restaurants in its tube stations. Consider the business potential for this kind of retail investment. Old Street is earmarked for this experiment - it is just a short walk from Silicon Roundabout in Shoreditch - the home of hundreds of emerging tech start up businesses.
A mega merger is creating the world’s largest banana company - it has been announced that Chiquita of the USA and Dublin-based Fyffes will be merging to form a giant banana distribution company.read more...»
Regulation of prices through price capping has been a feature of regulation of the utilities in the UK for many years – although this is now being phased out as most utility markets have become more competitive.
Price capping systems
- Price capping is an alternative to rate-of-return regulation, in which utility businesses are allowed to achieve a given rate of return (or rate of profit) on capital.
- In the UK, price capping has been known as "RPI-X". This takes the rate of inflation, measured by the Consumer Price Index and subtracts expected efficiency savings X. So for example, if inflation is 5% and X is 3% then an industry can raise their prices on average by only 2% per year
- In the water industry, the formula is "RPI - X + K", where K is based on capital investment requirements designed to improve water quality and meet EU water quality standards. This has meant increases in the real cost of water bills for millions of households in the UK.
Capping is an appropriate way to curtail the monopoly power of “natural monopolies” – preventing them from making excessive profits at the expense of consumers
Cuts in the real price levels are good for household and industrial consumers (leading to an increase in consumer surplus and higher real living standards in the long run).
Price capping helps to stimulate improvements in productive efficiency because lower costs are needed to increase a producer’s profits.
- The price capping system is a tool for controlling consumer price inflation in the UK.
Price caps have led to large numbers of job losses in the utility industries
Setting different price capping regimes for each industry distorts the price mechanismread more...»
The UK’s biggest companies remain biased when appointing women to their boards, according to new research by Dr Ian Gregory-Smith and colleagues, published in the February 2014 issue of the Economic Journalread more...»
Despite public calls for shareholders to get tough on executive pay, a new study of the UK’s highest paid company directors reveals that shareholders are overwhelmingly inclined to approve the pay packets of top directors, just as they were before the crisisread more...»
In a bold move in the continuing battle between Facebook and Google to dominate the next phase of digital / mobile growth, Mark Zuckerberg's listed business has agreed an £11bn acquisition of WhatsApp - a deal to be paid in a combination of cash and shares.
The total value of the deal is staggering high for a business that employs just over 50 people.
- The price Facebook is paying for WhatsApp is more than ten times what Google spent on YouTube
- It is more than 20 times what Facebook paid for Instagram
- The $19bn paid for WhatsApp works out at $40 for each of its 450m users!
- The $19bn deal to buy WhatsApp is more than 10% of the annual value of Ukranian GDP
What are some of the justifications for such a mega-priced deal?read more...»
These slides are from our January 2014 revision workshops for unit 3 microeconomics. They focus on some of the arguments surrounding the possible introduction of a £7 per hour national minimum wage in the UKread more...»
This is an updated revision presentation on aspects of monopolistic competition in marketsread more...»
Watch this short six minute video to learn how London cabbies are a lot like the ideal boyfriend. Rory Sutherland on excellent form again! In six minutes he discusses sunk costs, commitment devices, human capital, information failures and price discrimination in restaurants on Valentine's Day.read more...»