Get Summer 2014 Right First Time with tutor2u Exam Coaching & Revision Workshops
Employees in the UK are not being denied their fair share of economic growth, according to research by João Paulo Pessoa and Professor John Van Reenen, director of the Centre for Economic Performance at LSE. Their investigation of claims that wage growth has become ‘decoupled’ from productivity growth finds that decoupling has been overstated and cannot be used to justify redressing the balance between wages and profits.read more...»
The release of two major new iterations of games console including the PS4 is an opportune moment to take stock of the transformation of the oligopolistic computer gaming industry into one whose revenues now exceed films and where social gaming, connectivity and collaboration are features of an industry where dynamic efficiency is crucial. Paul Mason from Channel 4 news reports in this short clip.read more...»
Price fixing and bid rigging by groups of firms in Europe are not solely the preserve of highly concentrated industries. According to research by Professor Stephan Davies and Dr Oindrila De, even industries with relatively large numbers of firms feature such anti-competitive practices – and they typically have a ‘ringleader’, which organises and enforces the cartel. Their study, published in the November 2013 issue of the Economic Journal, finds that roughly a quarter of the 89 cartels detected by the European Commission over the past two decades have a ringleader or ringleaders. In cartels with relatively large numbers of firms, the ringleader tends to be the dominant firm, acting aggressively to set prices and ensure that smaller firms fall in line.read more...»
The Tutor2u slideshare channel has just notched up over a million hits and we continue to add new resources each week. Here is the link to the site.
The launch of Sony's PS4 alongside Microsoft's XBox One signals the beginning of a highly intense competitive battle in the oligopolistic games console market. With both the new consoles being launched in time for the crucial Christmas sales period, pricing strategy is crucial in order to gain maximum market share.
In the US, Sony has priced the PS4 at $399 (retail). Of course that is the retail price. Distributors will be wanting to make their margin on each unit sold. So how much does it cost Sony to make a new PS4?read 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...»
A currently fashionable pessimistic topic is the lifetime prospects of children born into the middle class. Graduate debt, lack of finance to buy homes and job insecurity after they graduate, the list goes on. Alan Milburn, the government’s ‘social mobility tsar’, put the seal of approval on this prevailing angst last month. His Social Mobility and Child Poverty Commission pronounced that children from families with above-average incomes are now set to enjoy a worse standard of living as adults than their mothers and fathers.read more...»
Do consumer choice and competition between suppliers improve the quality of outcomes for consumers? The answer might seem so obvious that it is hardly worth asking. But a powerful strand of political opinion is building up to an attack on the concept.read more...»
We are delighted to host on our blog this article from Alex Macarthur an upper-sixth student at Altrincham Grammar School for Boys. Alex enjoys is especially interested in ‘Behavioural Economics’. In this feature he looks at pricing anchoring in markets. This article was originally published in the student magazine www.lucigmag.co.ukread more...»
The FT video clip below provides a short interview with Dame Ellen MacArthur - the former ocean yachtswoman - and her idea of building a circular economy - this idea might be a fruitful area for student exploration when studying environmental economics. To quote from the web site:L
"The linear ‘take, make, dispose’ model relies on large quantities of easily accessible resources and energy, and as such is increasingly unfit for the reality in which it operates. Working towards efficiency—a reduction of resources and fossil energy consumed per unit of manufacturing output—will not alter the finite nature of their stocks but can only delay the inevitable. A change of the entire operating system seems necessary"read more...»
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.read more...»
This is an updated revision presentation on aspects of perfectly competitive markets. You can access revision notes on perfect competition by clicking here. Take a revision quiz on perfect competition by clicking on this link.read more...»
The market for retail gas supplies is mired in controversy and threats of direct government intervention to freeze prices should a new Labour government be elected in 2015. This week we have seen a classic example of the type of price leadership we expect to see in an oligopoly.
Young adults in England have scored almost the lowest result in the developed world in international literacy and numeracy tests. A study by the Organisation for Economic Co-operation and Development (OECD) shows how England's 16 to 24 year olds are falling behind their Asian and European counterparts. England is 22nd for literacy and 21st for numeracy out of 24 countries.
New Labour and the educational establishment harangued us for years about the stupendous success of the system, as record numbers of both passes and A-grades in GCSE and A-levels were registered year after year. The OECD study, by no means the first of its kind, confirms what many suspected. Grade inflation was rampant, and the statistics had as much meaning as the pronouncements about production levels made in the Soviet Union. Actually, that is unfair. When the Soviet Union said 10 million boots had been produced, they really had been. They might have been poor quality and all left-footed, but the boots did exist. It now turns out that many people with GCSE passes can barely read and are virtually unable to add up.read more...»
Monetizing a product is essential for a business to survive and ultimately prosper. This BBC news article outlines in a clear way the revenue channels that Twitter is using - it is still losing more than $1 a week despite a surge in revenues. Can Twitter grow the top-line revenue without disturbing the experience of millions of users? Anyone out there planning to invest in some Twitter shares?read more...»
This is a cross-posting from the Business blog (written by Penny Brooks)
"The 20th Century was about dozens of markets of millions of consumers. The 21st Century is about millions of markets of dozens of consumers."
So said Joe Kraus, founder of a search engine called Excite in the middle of the 1990s. Never heard of it? That's not surprising; in 1999 it was a $6.7bn enterprise with hundreds of employees, but a year later the dot-com bubble burst and it disappeared from the market place. But this quote is one of in an article about Peter Day's Radio 4 Archive programme to be broadcast tonight, and already recommended by Michael Owen in his blog below; forgive me for this repetition, but this is such a brilliant article that it really merits a second look, and hopefully between us we will convince you of that!read more...»
The dates and locations for our popular programme of exam technique coaching & revision workshops to prepare AS & A2 Economics students for exams in May & June 2014. The details are listed below together with important information about changes in way that bookings are processed.
Please note that for summer 2014 we are taking confirmed bookings only. Places are allocated on a strictly first-confirmed basis. Once each screen capacity is filled, the event is full and no further bookings can be accepted. Our overall capacity is lower than in previous years and we fully expect each workshop to be fully booked before the Christmas break - so please contact us early to ensure that your students can attend!read more...»
Inequality has been rising for 30 years. The gap between rich and poor is the widest since the second world war. If current trends continue, we will have reached Victorian levels of inequality in 20 yearsread more...»
Revision presentation on business growth, business integration and the factors affecting the shareholder returns from merger and takeover activity.read more...»
Since the appalling fire a few months back at the Rana Plaza complex that cost the lives of more than 1100 people, there has been intense interest and scrutiny of working and living conditions of thousands employed in Bangladeshi clothing factories.
On Monday night the BBC programme Panorama broadcast an investigation into this and the findings were compelling and deeply disturbing.
In "Dying for a Bargain" Panorama discovered there have been at least 50 fires in Bangladeshi clothing factories in the last 10 months. Clothing factory workers filmed by
#BBCPanorama were released at 2:30 am, 19 hours after they started. They were due back at 7am. You can see a clip of this here. Events uncovered at the Ha Meem Sportswear factory will no doubt have left executives at Lidl scrambling to find out the truth about what is happening at one of their major clothing suppliers.
The concept of the ‘rent seeker’ is one of the most valuable in the whole of economics. The activity of rent-seeking involves obtaining money by manipulating the social or political environment in which economic activity takes place, instead of getting paid for creating new wealth. It is a part of public choice theory, for which James Buchanan was awarded the Nobel Prize.read more...»
The micro-blogging web site Twitter has announced plans to go public with an initial public offering (IPO) estimated to be worth $10 billion. Whilst this is a fraction of the stock market capitalisation of the social network business Facebook, the planned IPO is an important landmark in the growth story of Twitter which now has in excess of 200 million users. Will the floatation change the nature of the business now that investor pressure for higher revenues and profits will intensify? How best can Twitter monetise their product without annoying and aggravating the Twitter user communities? Will investors be limited to 140 shares or less? (!!) For legions of Twitter officiandos this is a story well worth watching in the months to come.read more...»
A feisty start to a Sunday morning: is Archie Norman's piece anti-union, anti-public sector? Both? Neither?
I suspect the latter - although, it is tinged with the sort of right-wing rhetoric that might make it seem both. The real issue is management - and it is an interesting read. However, I quibble with some of it.read more...»
Tomorrow the UK will see its newest High Street bank open 631 branches. However, this new bank will be called the TSB (Trustee Savings Bank) which is a brand that was first created over 200 years ago. The creation of the bank comes from EU directives to split up the Lloyds TSB group and create greater competition in the banking market and counteract any advantage Lloyds TSB might have from being Government-owned.
This link will take you to a short Powerpoint stimulus presentation to be used in class. The presentation gives a brief explanation of the TSB story and has links to a few interesting video clips as well as the branch finder web page so that you can show your students where their nearest TSB is located.
One of the greatest economists of the last 100 years has died at the ripe old age of 102. This blog entry will feature an updated listing of obituaries and other resources on Coase's work. Coase was awarded the 1991 Nobel in economics “for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy." His final book, 'How China Became Capitalist,' was published last year, when he was 101.read more...»
Would Apple Inc have succeeded without a helping hand from the US government? Where are the European Googles? A new book focuses on the key roles that the state can fulfill as an agent of innovation and economic growth. Without the US government for example, there would be no iPhone, says economist Mariana Mazzucato in her new book 'The Entrepreneurial State'. The author of the book is featured here in an FT interview. Some of the examples discussed in the book are covered in this article from the Economist. Mazzucato argues that "“All the technologies which make the iPhone ‘smart’ are also state-funded ... the internet, wireless networks, the global positioning system, microelectronics, touchscreen displays and the latest voice-activated SIRI personal assistant.”read more...»
The International Business Times is producing a series of short videos on life, work and enterprise inside Tech City - a fast-growing hub of digital start ups and established tech businesses centred around Old Street / Digital Roundabout. The clips reveal the energy of the start-up economy in this part of London and the importance of network effects, collaboration and attracting human capital in accelerating routes to market for lean start-ups. This series of short videos is worth a look if you are interested in this potentially significant catalyst for growth in the UK economy and to learn more about the factors that influence the emergence and success/failure of start ups.read more...»
The Office of Fair Trading is investigating potentially illegal pricing activities by six furniture retailers. It all relates to the use of price discounts.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...»
These are proving tough times for Zynga - the online social game business. It has grown to a huge scale boasting 240 million average monthly active users over 175 countries. All of its games are free to play, and it generates revenue through the in-game sale of virtual goods and advertising.read more...»
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.read more...»
As of today, any employee wishing to take their employer to an unfair dismissal, unequal pay or sexual discrimination tribunal will have to pay a fee. This fee will not be automatically refunded on a successful tribunal outcome meaning that employees who are making choices about such an action have to be aware of the potential financial cost of such an action.
The government argue that this removes some of the burden of tribunal costs away from tax payers and should also reduce the number of frivolous claims made (and thus reduce a further burden on businesses). As such, you could claim that the tribunal fee represents a supply-side policy by the government - an attempt to improve the efficiency of the operation of businesses by reducing some of the red-tape that can stop a business working effectively (particularly small businesses).
Trade Unions are unhappy about the fee introduction. They argue that it reduces the opportunity for poorer workers (or unemployed people who have lost a job) to seek justice for what may have been unfair treatment. An evaluative argument here, therefore, might suggest that the tribunal fee acts as a barrier to fair pay, particularly in cases of discrimination.
Follow this link for some details as illustrated by the New Statesman.
A major news story this week has been the attack made on the pay-day lending industry by the Archbishop of Canterbury Justin Welby. He claimed that he wanted to compete the likes of Wonga out of existence by encouraging the Church of England to offer more support for credit unions. Whether this is likely is open to question.
The commercial pay day loans businesses have grown rapidly in recent years but concerns over some of their practices has led to an investigation into the industry by the Office of Fair Trading. Payday lenders have been accused of a variety of poor practices, including aggressive debt collection and failing to work out whether repayments are affordable.
Pay day loans industry by numbers (Telegraph)read more...»
Here is a lovely example of game theory applied to the battle for the Ashes. Stefan Szymanski looks at how the Prisoner's Dilemma can be applied to the controversy / debate over whether a batsman should walk or stay at the crease when he or she has nicked one to the wicket-keeper or the slips. Click here for the blog article
The coalition government has announced plans to privatise the Royal Mail by selling a majority stake in the business using an initial public offering (IPO) which could value it at more than £3 billion. The business has had a long term struggle to become more efficient and profitable in recent years - it faces a number of significant competitive challenges from rival postal businesses and from new technologies and a decline in the volume of letters sent.
According to Business Secretary Vince Cable
"The government's decision on the sale is practical, it is logical, it is a commercial decision designed to put Royal Mail's future on a long-term sustainable business. It is consistent with developments elsewhere in Europe where privatized operators in Austria, Germany and Belgium produce profit margins far higher than the Royal Mail but have continued to provide high-quality and expanding services."
Trade union leaders oppose the plans fearing that a move to the private sector will cost jobs and that the commitment to a universal postal service will eventually end.
On or around the point of IPO, Government will transfer 10% of its shares in Royal Mail to an employee share scheme designed to boost incentives for those who work for the business.read more...»
This video brings together a set of short animations on economics topics produced by the Open University and narrated by comedian David Mitchell - enjoy!
- The Invisible Hand
- The Paradox of Thrift
- The Phillips Curve
- The Principle of Comparative Advantage
- The Impossible Trinity
- Rational Choice Theory
Virgin Cola was set up during the early 1990s and after a hugely successful launch sales started to out-strip established mega brands such as Coca Cola. An aggressive response from Coca Cola included attempts to drive Virgin Cola from the supermarket shelves and the brand never recovered. In this short interview from the Wall Street Journal, Richard Branson discusses some of the key lessons from the Virgin Cola story. It is a commonly used example when discussing barriers to entry in concentrated markets.
This short video from the Financial Times is relevant to students who are looking at businesses who are moving beyond their duty to maximise returns from shareholders. With an increasing number of companies refocusing their priorities beyond profit and towards the welfare of their suppliers, employees and the planet, Andrew Hill, management editor, asks what the repercussions are for business. The video includes a brief interview with the CEO of US business Whole Foods and LUSH the ethical cosmetics retailer.read more...»
The Competition Commission is to launch a full-scale inquiry into the operation of payday loan companies. In the past three years, the payday loan industry has expanded rapidly from £90m to around £2.2bn - a reflection of the increasing financialisation of the British economy. The review will take over a year to complete and a range of actions are possible including caps on the sky-high interest rates that are charged on loans.
Average loan interest rates charged by Wonga, the UK’s largest payday lender, are now 5,853 per cent (annual percentage rate). For more on this potentially important competition inquiry - Payday loans industry to face competition inquiry (BBC news)
CK Prahalad once wrote of the "fortune at the bottom of the pyramid" - reflecting the commercial opportunities for businesses that can successfully connect and bring products to markets inhabited by low income consumers whose living standards are on the rise. China's fast-growing economy provides an enormous opportunity, but how can companies win sales in the Chinese interior, hundreds of miles away from the coastal centres of commerce?
As wealth and consumerism reach China's most remote cities, foreign brands are venturing far from Shanghai and Beijing hoping to win over millions of new consumers. The FT's Patti Waldmeir visits two lower tier cities in central China and looks at how Adidas is expanding in the far outposts of the Middle Kingdom.
Airbus is pushing Boeing for market leadership in the twin engine aircraft market. Andrew Parker reports from the Paris air show on why a price war might be in the offing -- which would be bad news for the two manufacturers, but good for airlines.This short Financial Times video considers the prospects for a price war emerging in an industry which is often used by teachers and students as a classic case of duopoly.
The Financial Times website has published a new special report on their selection of 50 Top Business Ideas. I am linking below to the supporting video content which might be of interest to teachers and students who want to explore which ideas have made it into the final choice!read more...»
IT’S not all fun and games at the Co-op Bank. Just over a month ago, the bank was serious about acquiring 632 branches from Lloyds. Now its debt has been downgraded six notches to junk status, and veteran HSBC banker Niall Booker has been brought in as replacement chief executive after Barry Tootell resigned.
Inquests have begun, and it is only human nature to look for a scapegoat other than the large amount lost on the bank’s new IT system. Management has delved into its hat, and, hey presto, here is the old Britannia Building Society, merged with the Co-op in 2009. It is, we are solemnly told, the bad debts on the Britannia’s commercial property portfolio which are the problem.
For international transactions conducted online through eBay, the distance between buyers and sellers is far less important than for
offline trade. That is the central finding of research by Marcelo Olarreaga and colleagues, to be presented at the TIGER Forum 2013.
Their study shows that eBay reduces ‘information frictions’ and establishes trust between market participants that would not otherwise
have traded. What’s more, the gains from the adoption of eBay are largest in those parts of the world where they are most needed – in
remote countries with bad institutions that make it difficult for sellers to create a good reputation.
This suggests that e-commerce can become a development tool by helping remote sellers from unstable countries integrate into world markets. Export promotion agencies in these countries should probably redirect part of their effort towards connecting producers to online markets.
The political controversy over corporate tax avoidance from many of the world's biggest transnational businesses is unlikely to go away anytime soon. Google, Amazon and Starbucks and Apple have all come under intense scrutiny.
Network Rail is a state owned business whose debts are backed up by government. Network Rail owns and operates the UK's railway infrastructure. Their stated objective is "Building a safer, smarter, bigger, greener network – every day."
It is achieving rising
revenues but remains heavily reliant on state subsidy -
there is plenty of applied business economics in this article if you read through. It runs a network
creaking under capacity constraints - passenger numbers are growing well ahead of forecast. 529 million more passenger journeys per year have been completed on time compared to 2002 but Network Rail faces problems over failing to meet tougher punctuality targets.