AS Micro
Carbon Trading - News Update
Here are three good articles on carbon trading for students wanting to be up to date and have some more arguments to hand:
BBC: “Carbon market’s value hits $64bn”
Nova Scotia News: “Canada may hook up with the EU carbon trading scheme”
Reuters: “British government shelves plans for personal carbon trading”
Madonna gives thumbs up to ticket touts
The Financial Times reports today that the pop star Madonna is “endorsing the sell-on of concert tickets, condemned by some concert promoters as scalping or touting, by making two leading companies in the secondary ticket market official partners for her forthcoming Sticky & Sweet tour of North America and Europe.....Secondary ticketing companies enable the public to trade their tickets online with customers who are prepared to pay above their face value. The company takes a cut of about 10 to 15 per cent.”
What do you think of secondary markets for tickets to sports events and live concerts? There are all sorts of arguments on both sides and secondary ticket agencies tend to have a rather dire reputation; images of shady touts patrolling venues looking for buyers immediately spring to mind. But if you have bought a ticket to an event weeks or months in advance and then find your circumstances have changed, why shouldn’t you have the option of using a legal secondary market?
Has competition in postal services delivered?
Two years on from the liberalisation of the postal services industry, has this supply-side policy to make the market more contestable made any noticeable difference to the quality of service, prices and investment in delivery? A new report casts doubt on the changes to the industry since the market opened up to competition at the start of 2006 to businesses such as UK Mail. Robert Peston reports for the BBC in this video clip. His feature asks whether the universal service provision is a millstone round the neck of the Royal Mail which remains in deep financial trouble.
Demerit goods in action
Two news stories catch the eye today with respect to demerit goods.
Firstly, the government plans to reclassify cannabis as a class B drug - but will this have any impact on its levels of use? Arthur Ma, in a related blog entry, has explored the issue in greater detail here.
Secondly, alcohol abuse is harming the health and productivity of the UK’s workers. According to the BBC, one on three employees admits being hungover at work.
read more...»OPEC-style cartel for the rice industry?
Two stories on the global rice industry attracted my attention last week. The perception that the surge in rice prices is good news across the board for rice producers is questioned by this article in the Financial Times which explains that the dramatic increase in prices is now benefitting smaller producers who have limited storage facilities, face rising costs and have little surplus production available to take advantage of the global price spike. There has been a noticeable increase in rice planting in countries such as Thailand, but by the time the fresh output comes to market, the price may well have fallen a long way from recent highs.
The rest of the article is here
The BBC reports today that Thailand wants to form an Opec-style rice cartel to give it more control over international rice prices. The article can be found here
Revision questions for students:
(a) Explain what is meant by a cartel and what its aims might be
(b) Briefly explain how a cartel might seek to stabilise the price of rice on world markets
(c) Outline the difficulties that a newly formed cartel might have in meeting its objectives
Demand and Supply Revision Challenge
I have just tried this exercise with the illustrious 12.1 of Dulwich College......
Draw a demand and supply diagram and show a shift in one of the curves (e.g. demand shifting outwards).
Give the students 5 minutes to think of as many causes of this shift.
1 point awarded for each correct cause; 3 points for one no one else has thought of.
12.1 came up with these 15 causes of demand shifting outwards:
1. increase in income – particularly luxury goods
2. increase in wealth (housing market or stock market boom)
3. increase in price of substitute
4. decrease in price of complement
5. increase in population
6. successful advertising campaign
7. anticipation/speculative demand – e.g. anticipation of scarcity
8. increase in popularity/fashion
9. Veblen effect – ‘snob’ effect, ‘must have’ good
10. change in legislation (e.g. compulsory safety equipment or emissions technology)
11. falling interest rates
12. easier credit availability
13. increase in quality of good
14. anticipation of inflation – consumers bring forward purchases
15. appreciation in exchange rate in market for imported goods which are a substitute for domestic goods
After the break we are doing the same for supply shifting inwards..... lots of good revision points already on linking the correct curve to the correct determinant!
Here are the answers for supply shifting inwards:
1. higher costs (wages, rent, raw materials, land, machinery/physical capital)
2. labour strike
3. natural disasters – particularly agriculatural-based/LEDCs
4. war
5. higher indirect taxes
6. lower or removal of susbidy
7. supply restrictions
8. cap on emissions
9. change in incentives away from producing this good
10. resources moved into other industries
11. increased scarcity of resource, e.g. oil – linked to higher costs
12. greater monopoly power/less competition
13. decrease in factor mobility
14. changing goal of seller – e.g. withdraw from particular market
15. appreciation in exchange rate increasing prices of imported raw materials and finished goods – ‘imported inflation’
Many thanks to Alex, Atin, Will, Clive, Arvin, Liam, Keval, Neal, Matt H, Matt S, Thomas......
Labour’s failure on inequality
Gary Duncan has a really important and useful article in The Times today on the issue of persistent and deep-rooted relative poverty in the UK - something which transcends the political posturing of recent days and weeks over the furore about the abolition of the 10% starting rate of income tax.
“The stark truth is that after a decade of Labour Government, Britain is a nation of greater income inequality, in which the plight of the very poor has worsened. True, Labour has succeeded in lifting half a million children out of poverty since 1998. Yet the Government’s figures are based on a poverty line drawn at 60 per cent of average incomes. If it is placed, instead, at 40 per cent - officially defined as “severe poverty” - the picture looks much bleaker, with the numbers of children in such dire straits no lower than in 1997.”
This is a superb article to read for those students revising for exam questions on income and wealth inequality. A BBC news article from March highlighted the widening wealth gap and here is a reminder that inequality is not solely a question of disposable income.
The rest of Gary Duncan’s article can be found here
One of the positives from rising food prices
The Financial Times reports that
“Afghanistan’s opium crop is forecast to shrink by as much as half this year after 2007’s record harvest, counter-narcotics officials in Kabul said, as evidence emerges that some poppy farmers are switching to legal crops because of rising food prices.........Anecdotally, a lot of farmers have calculated that, with wheat prices being what they are, they can make money out of planting wheat.”
The fall in output is also the result of climatic conditions and also the lagged effects of the bumper opium crop last year which in turn led to a sharp fall in prices
The rest of the article is here
Amazon’s new warehouse
The leading online retailer has opened a distribution centre in Swansea Bay, which will create 1,200 jobs - this BBC news video is a great clip to show to demonstrate some of the economies of scale that Amazon is able to exploit when building a warehouse of such enormous size and students can also get a feel for some of the local and regional multiplier effects from the investment and the importance attached to such inward investment for the Welsh economy. The evaluation in discussion could be broadened to include the widening range of products that Amazon is now stocking and selling together with the fact that the majority of products in the warehouse have been imported.
Revision: Stakeholders
Introducing the concept of stakeholders can add greatly to the quality of your economic evaluation in answers to essay and data response questions. This revision note looks briefly at the stakeholder concept and some of the issues where it might be relevant in AS and A2 economics questions.
Revision note
Revision_Stakeholders.pdf
