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20p tax on sugary drinks propsed.

Tuesday, December 16, 2014

Here's one of those stories that help illustrate the point about de-merit goods really well.  The Children's Food Campaign are calling for a specific tax on sugary drinks to help combat obesity in children.  Key points:

  • Sugary drinks is the example of a de-merit good
  • Tax is the proposed strategy for reducing consumption
  • Costs of obesity given here (in terms of number of illnesses that could be reduced)
  • Article gives a counter argument from British Soft Drinks Association using evidence from France

Click here to read the article from The Grocer website

    The games economists play at Christmas

    Wednesday, December 10, 2014

    Many of you will know that Game Theory is an established branch of economic thought. It can be used to model a wide variety of situations, leading to predictions of the behaviour of economic agents. This blog is for people who are new to that idea.

    I am an enthusiastic player of board games, but regard Monopoly and Risk as pretty awful. Many of my pupils ask to play Monopoly in the last lesson at the end of term. Like a proper Grinch I always say no, but usually use the conversation as an opportunity to raise a discussion about what (if anything) you might learn about economics from the game.

    I was therefore drawn to an article in The Guardian by Paul Mason (who ranted about the banks recently) who argues that “the world is like a real-life game of global domination, where five mighty empires across the globe are gearing up for an economic wargame where there could be no winners”.

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    Rail fares rise pegged to inflation

    Friday, December 05, 2014

    Every so often I read an article and start to tot up the number of economic concepts being covered in just a few words.  This occurred to me again this morning when reading this BBC news article on train fare rises.  Train fares are pegged to July's inflation rate and, as inflation is quite low at the moment, this means that the average rise of 2.2% is also relatively low (although regular train users may still feel aggrieved).

    Have a read yourself and see how many concepts crop up or give them same exercise to your A2 students.  My thoughts are below:

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    The Angry Economist is back - with an Autumn Statement special edition

    Wednesday, December 03, 2014

    He's back!  Sort of by popular demand!  If you're looking for a quickfire activity for your Economics lessons this week then download the latest edition of the Angry Economist.  Ask your students to choose one of the 8 policies announced in today's Autumn Statement by George Osborne and our favourite curmudgeonly economist randomly chooses an objective to analyse.

    How does the proposed funding for new roads impact on equality for instance?  How does the change in Stamp Duty application affect economic growth.  A fun and quick way to get your students analyzing first thing in your lesson.

    Download the Angry Economist Autumn Statement Edition here.

    Teaching resource to introduce budget cuts to Local Government Spending

    Monday, December 01, 2014

    If you're looking at government intervention to correct market failure then you may find this 5 minute resource of value.  Using statistics compiled from Professor Tony Travers of the LSE, highlighted in this article, it asks students to predict which local government budget areas will see the largest cuts by 2018.

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    The Poo Bus

    Thursday, November 20, 2014

    Apologies, but I can't resist the prospect of using this story about a new solution to the market failure of pollution: an eco-friendly bus which has just gone into service to transport people between Bath and Bristol Airport.

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    Was the Rosetta comet landing mission worth the cost?

    Tuesday, November 18, 2014

    One of the jobs of an economist is to ask this question daily. What else might these resources have been spent on? This concept is known as opportunity cost.

    Perhaps the mission can be justified in cost/benefit terms. But maybe it shouldn’t have to.

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    Is Batman a good economist?

    We all know Batman, the superhero alter-ego of Bruce Wayne. Mr Wayne is the heir to a huge fortune which he uses in his quest to catch the crooks of Gotham City. But could Bruce use a few economics lessons? Is he making best use of resources? Might he achieve more if he put his resources into other uses?

    Ask yourself these questions:

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    Economic trade offs: Japanese fiscal policy transmits to GDP growth rate

    Monday, November 17, 2014

    Japan has suffered years of persistent deflation, and needs expansionary policy to change that. But they also have the highest public debt of any of the developed countries, at just under 230%, and need contractionary policy to change that. How are they to manage such a difficult trade off?

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    Amazon and ‘the invisible foot’

    Monday, October 27, 2014

    Amazon comes in for some pretty severe criticisms from various quarters. So I enjoyed reading an article by Reihan Salam in Slate, who argues that “Jeff Bezos’ company is not the problem with American capitalism. It’s the solution to our economy’s ills”.

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    Local Government Association calls for change in rules on allowing term-time holidays

    Friday, October 24, 2014

    The Local Government Association (which represents local councils in the UK) have joined the debate about term time holidays for pupils this week.  They argue that current rules banning term time holidays or imposing fines on those families who take such breaks do not recognise the complexities of modern families and also prevent poorer families from affording vacations that are invariably dearer during the holiday period.

    It struck me whilst reading one of the reports that the suggested policy is to allow head teachers that most quantifiable of options, 'common sense', to make decisions on a case-by-case basis would be the sort of argument that would make me scream if a student wrote it in an assessment answer.  Economics students, unlike Local Government officials, need to take a much more analytic approach to this question!

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    Free nursery places for 3 year olds appears to have no impact - an example of Government Failure?

    Wednesday, October 22, 2014

    Reports out over the last couple of days suggest that government spending on free nursery places for 3 year olds since 1998 has not produced any valuable educational or economic outcome. The policy was introduced as part of a series of reforms introduced by Tony Blair when he came to power in 1997. The Blair Government saw it as a method of reducing the differentials between educational attainment of poorer and wealthier sections of society and promoting a speedier return to work for some mothers.

    Researchers studying the impact of the policy during the 2002 to 2007 time period, where spending on the policy amounted to more than £7bn found that the education received at age 3 had some impact on attainment at age 5 but any improvements were lost by age 11. The research suggested that the policy had only a minor impact on enabling more women to return to work earlier. Also, there is evidence that 5 out of 6 users of the free place would have gone to a paid-for equivalent at age 3 anyway.

    So, does this offer us a good example of government failure in economic and social policy?

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    Black Gold Challenge

    Tuesday, October 21, 2014

    If you have a short break coming up - and you're new to economics - now would be a great time to collect together some resources about the extraordinary recent shift in the oil market.

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    Trick or Treat Economics Challenge

    A seasonal quiz challenge for your economics students fresh out of the tutor2u Learning Lab.

    read more...»

    Example of price fall caused by slump in demand - the Chinese Mink market

    Tuesday, October 07, 2014

    Have a read of this fascinating article from the Guardian about the fall in prices for mink fur in China.  It struck me that, not only does the article give you several traditional causes of a slump in demand (let's all draw the diagram!) but comes up with a brand new cause of a shift that I've not seen before!

    The article suggests that the shift in demand is caused by a warmer than expected winter (tick, weather conditions) and that an increase in the number of educated Chinese people are choosing not to use mink for ethical reasons (tick, change in tastes).  It also says that demand has dropped as the Chinese government are clamping down on corporate corruption preventing Chinese directors from accepting luxury goods in return for favourable business decisions - which of our Economics Teacher categories does that fit in?

    PS.  Look out for the fantastic activity 'Demand Street', which challenges students to work out what change in demand factor is being demonstrated, showcased at this year's Wow Economics Teacher CPD event fro Tutor2u.

    ‘Wordsnake’ Activity on Elasticity

    Here's a fun resource that's trickier then it sounds.  'Wordsnake' is a resource developed by our very own Graham Prior.  At first glance it appears to be a wordsearch as you see a grid of what appears to be 100 random letters.  However, the key phrase being tested 'snakes' around the grid rather than being up, down or diagonal as in a normal wordsearch.

    Students are given a question on screen with the answer hidden in the grid.  Who can be the first to spot the answer and call out its location?

    If the answer is not obvious at first, the teacher can press the space bar and the letters reveal themselves one at a time. This version contains 5 questions relating to elasticity and demand.

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    Local Schools policy drives inequality in the UK

    I love a story that really can resonate with students and get them 'irked'.  It struck me yesterday that reading about a recent Bristol University research paper that claims that school admission policies lead to greater inequality might strike a chord with some young people.

    The study suggests that the common policy in the UK of prioritizing admission places in primary and secondary schools based upon how close a student lives to that school continues a cycle of inequality.  The argument is that, wealthier people are more able to afford to move to areas with higher performing schools and so are more inclined to do so.  People without that facility have less choice in where to send their children and may have to stick with local schools despite their relative poor performance.  So the cycle continues ..... poorer people receive a poorer quality education and are therefore less equipped to get the necessary qualifications to earn higher wages.

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    ‘Four Words’ - an interactive, lively test of some key phrases from the start of the AS Curriculum

    Wednesday, October 01, 2014

    We've got another fantastic interactive quiz format for you.  This one will help test how much your students have taken in over these first few weeks of the AS course.  This activity called 'Four Words' shows students the first four words of a definition of a key phrase.  Students must decide if they think they know what the key phrase is (and earn maximum points) or wait to see the rest of the definition and earn lower points.  Of course, if they get the answer wrong they get zero points!  15 key phrases are tested.

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    Want a ‘fix’ to illustrate economies of scale?  Here’s a numerical question

    Tuesday, September 30, 2014

    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.

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    Diseconomies of Scale - activity to introduce the concept

    Sunday, September 28, 2014

    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!

    Click here to download the resource 'Diseconomies of Scale'

    10 Minute Crossword Activity to set either for AS or A2 students

    Wednesday, September 24, 2014

    Here's a couple of quick Crossword activities that you can set in class or as homework from the tutor2u team.  They are:

    1. AS Introductory Economics
    2. 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!

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    AQA AS Economics: Worked Answers for May 2014

    AVAILABLE TO PRE-ORDER NOW: ESTIMATED PUBLICATION DATE: EARLY DECEMBER 2014

    AQA ECON1 & ECON2 Worked Answers is a new printed resource from the tutor2u Economics team which we expect to be available for dispatch from early December 2014.

    read more...»

    Loom Bands - A demand and supply example (and activity)

    Friday, September 19, 2014

    If, like me, you spent much of the spring and summer of this year being 'gently persuaded' to purchase loom bands and their paraphernalia, you may find this short presentation and task on demand and supply of the product useful.

    For many weeks, it seemed almost impossible to undertake a shopping trip with my youngest son without him pointing out the huge selection of available bands and their construction tools.  He built up quite a selection or different colours and styles as my vacuum cleaner can happily testify.  Then I noticed a tailing off of his requests and noted that this week, when I pointed out a shop selling the rubber bands at half price, he declared that he was no longer interested - even at the reduced rate compared to just 4 weeks ago.  

    He seemed less than impressed when I pointed out how this was a fine example of how demand and supply impacts upon price.  However, many of you may be at the stage where you are going through demand, supply and equilibrium with your AS students.

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    Are fireworks in London a public good?

    Thursday, September 18, 2014

    London's New Year's Eve fireworks display is to be limited to a viewing area of 100,000 ticketed spectators for the first time. The event's popularity made it "untenable" to strain the transport and safety infrastructure with a larger number, the Mayor's office says. Hence the decision to charge £10. This poses a question about the nature of public goods.

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    Contrasting approaches to managing road traffic

    Thursday, September 11, 2014

    The transport economists amongst you will be giving considerable thought to the question of tackling road traffic congestion. I’ve picked up on two stories here because they take contrasting approaches. The first is to use technology and regulation to tackle the problem – the so-called command and control approach. The other relies on price signals, so might be described as a market led approach.

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    Perfect weather and a bumper wheat crop – impact on the market

    Sunday, September 07, 2014

    A great example to start you off looking at how economists understand markets: after a run of rain-wrecked years, British farmers are bringing in the last of what looks like a bumper cereals harvest. 2014 could be the biggest yield ever for wheat. Good news. But for whom?

    read more...»

    Ebolanomics: tackling drug development

    This west African health crisis is a tragedy. It could be an issue that stimulates an economics discussion. According to James Surowiecki in The New Yorker there are no real tools to stop the deadly Ebola outbreak in West Africa. The lack of treatment is disturbing. But given the way drug development is funded, it’s also predictable.

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    Lesson Activity - Categorise Factor Inputs in the Focus Circle

    Saturday, August 30, 2014

    Here is another ready-to-use edition of our thinking-skills resource Focus Circle which provides an engaging way to teach factor inputs.

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    IB Economics: The Foundations of Economics

    Saturday, August 16, 2014

    When students first ask what economics is all about, I always find it tricky not to give a very long answer. It’s the same when starting to plan those induction lessons in economics: what will help them to understand the base principles of the subject but also develop an awareness of the economist’s mindset? At IB, the Foundations of Economics section of the syllabus sets out what to cover quite nicely.  I've shared a few useful resource links below.

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    Externalities: Health Benefits of Low Emissions Zones

    Friday, August 15, 2014

    A new study finds that incentives to switch to green vehicles produce big health benefits

    read more...»

    The Economics of the Blockbuster

    Wednesday, August 13, 2014

    Why do we get summer holiday blockbusters? They seem to matter more and more to Hollywood studios. According to one professor "the entertainment industry is moving more towards a winner-take-all-market". Yet it wasn't supposed to be like this. A best-selling 2008 book, The Long Tail, argued that the mainstream was going to be "shattered into a zillion different cultural shards," as fickle consumers "scattered to the winds" using the internet to find the books, films and songs that met their unique taste. So what might be going on?

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    Recessions are good for the nation’s health

    Wednesday, August 06, 2014

    Many readers at this time of the year will be looking forward to their summer break, perhaps contemplating with a certain amount of envy their colleagues who have already departed. But is leisure good for you? A bit of a no brainer one might think. Indeed, until recently the consensus amongst applied economists was that even enforced leisure, by being made unemployed, seemed to be a good thing.

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    Public and Private Goods - Farmer Opens a Toll Road

    Monday, August 04, 2014

    Fed up with the closure of a cracked road between Bristol and Bath where repairs were likely to last several months, a farmer has invested £150,000 to build a temporary 365m toll road which saves motorists from having to make a 10 mile detour. The businessman is charging cars £2 and motor cycles £1 for each journey and is offering a £10 offer for regular users who need to use the road on twelve occasions. 

    This is a lovely example of the difference between a quasi public good and a private good. The toll road has its own booth for collecting the charges and seems to have found favour with local residents. Whether or not sufficient cars make the journey to cover the operating costs remains to be seen. Repair work on the A431 at Kelston are likely to take five months and mean that 1,000 vehicles per day are needed for the project to break even.

    The businessman Mike Watts has been using You Tube to provide the background to his decision to build the toll road!

    read more...»

    Measuring a minimum income standard

    Tuesday, July 29, 2014

    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.

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    Should there be a maximum wage?

    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. 

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    Reduction in UK consumption of drugs, alcohol and cigarettes by young people - numerical example

    Friday, July 25, 2014

    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!

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    Externalities of Waste - Do we throw too much stuff away?

    This is a super report from BBC Newsnight on the issue of our throwaway society and the externalities of waste. How can the link between consumption and the discarding of unwanted and broken products be weakened? What role can innovation play - for example the rise of modular phones where parts can be replaced when broken. The fundamental problem is that traditional manufacturing business models are based on mass production and sales. How are increasing world commodity prices affecting this model?

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    The Economics of Pay What You Want

    Wednesday, July 23, 2014

    People do care about fairness, social norms and not just about a cold calculation of marginal cost and marginal benefit. In this excellent short interview on BBC World, Joe Gladstone, Behavioural Scientist at the University of Cambridge, discusses the new form of "Pay What You Want" pricing. This means consumers can decide themselves how much they want to pay for a good or service. The catalyst is that several French hotels are experimenting with a pay what you like approach for their guests.

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    Open Data:  Britain leads the world

    The UK economy is doing well. Even so, it is not often that we are placed unequivocally at the top of a world ranking of any kind. But a team of economists led by Nicholas Gruen of Lateral Economics in Melbourne has done just that. In their recent report on the economic potential created by the concept of open data, it turns out that the UK government has been leading the world. On the Open Data Index, we score 100 compared to America’s 93. There is then a big gap to the next group, Australia, Canada and Germany, placed in the high 60s.

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    Calculation time! CMA recommends banks provision of current accounts should be investigated

    Friday, July 18, 2014

    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!

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    Price Cap introduced for the UK Payday Loans Market

    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...»

    Numeracy and Quantitative methods in the new Economics specifications

    Wednesday, July 09, 2014

    You will probably be aware that assessment in the new AS and A level in Economics (starting in September 2015) will have a much greater emphasis on numeracy and quantitative methods. 20% of marks will be awarded to answers based upon number work and interpretation of graphs, charts and tables.

    Whatever your view on the merits of this change, there is no doubt that it brings one of the biggest challenges to teachers of economics since the year 2000. Tutor2u have put together a team of experienced teachers with different awarding body knowledge to create resources and give advice through a series of CPD events during the 2014-2015 academic year.

    If you look through any of the specimen papers from the three main awarding bodies you won’t be surprised to see a huge emphasis on calculation of percentages, use of index numbers and the need to understanding fractions and ratios. You can already imagine the increased use of elasticity calculations and having to work out costs and revenues.

    Did you know however (depending on your exam board choice) that your students may have to calculate opportunity cost ratios for comparative advantage, dependency ratios, quantity theory of money, terms of trade index, national income multiplier and marginal propensity to consume? Imagine a marginal social cost/benefit diagram with figures included! Have you ever asked students to convert money in real terms? How do you think they will cope with medians and quartiles?

    Our team are working on resources and advice to hand out to teachers for our ‘New to A level Economics – Quantitative Methods’ CPD days. Details about times, dates and locations to follow soon.

    Is Wayne Rooney an expert in rational economic theory?

    Wednesday, June 25, 2014

    So, farewell then England! Yet another failure by our boys at the highest levels of the game. Despite their stupendous salaries, they seem once again to be unable to exhibit the necessary skills, a point which seems to exercise many fans of the game. Tens of thousands, if not millions, of words have been written about the purely footballing aspect already. But one topic which is hiding away under this torrent is the question of incentives.

    read more...»

    What Gangnam Style represents in opportunity cost terms

    Tuesday, June 24, 2014

    Here’s a light-hearted one! What could we have had instead of 2 billion views of Gangnam Style?The Economist ponders that question.

    read more...»

    Paul Ormerod: Innovation, Job Losses and Living Standards

    Wednesday, June 18, 2014

    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.

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    Using the price mechanism to boost allocative efficiency: ‘Smart’ electricity meters

    Sunday, June 01, 2014

    The price mechanism should help the economy to allocate resources more efficiently. Scarcity drives up prices, sending a signal to the economy – giving firms an incentive to produce more, and households the motivation to ration their consumption.

    Could ‘smart’ electricity meters, linked to dynamic electricity prices, achieve something similar?

    read more...»

    Footballs in Pakistan: An Innovation Story

    Friday, May 30, 2014

    I am really grateful to Bob Denham from Econ Films who has shared with us this newly launched video from the International Growth Centre. It focuses on the competitive challenges facing Pakistan's football manufacturing sector as it loses market share to countries such as China and Indonesia. Footballs in Pakistan are still made mainly by hand, stitching together hexagons and pentagons - a process that leads to a lot of waste  and higher unit costs and which then affects the profitability of businesses in what is already a low-margin sector.

    Could a team of economists find better ways of cutting the patterns for footballs and then align the incentives of workers and owners? This is a fascinating short video which captures many aspects of the Unit 4 development economics course. Enjoy!

    read more...»

    Gerd Gigerenzer on Risk Savvy Citizens

    Sunday, May 25, 2014

    I have been greatly enjoying Gerd Gigerenzer's new book on Risk Savvy citizens - here he is discussing some of the key themes in his book at a TED talk in Zurich in the autumn of 2013

    read more...»

    Labour Market: Food Industry Workers Protest Again Zero Hours and Low Pay

    Friday, May 16, 2014

    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...»

    Quick revision of Key Phrases - the ‘Usual Suspects’ revision activity

    Monday, May 12, 2014

    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.

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