AS Micro

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

The external costs of food waste

Over 4 million apples and over a million and a half bananas are thrown away in Britain every day. This video from Newsnight is excellent on the external costs of the food we throw away - estimated by some to be worth around £8 billion a year. Should we actively encourage food scavengers? What are the strategies we should be adopting to reduce the amount of food thrown away? This is a good topic to use to teach evaluation skills for AS microeconomics.

Buy to let - a problem of over-supply?

The Financial Times carried a super short piece on the buy to let market today - ideal for students preparing for AQA Unit 3 - Markets at Work. According to the piece

“Rents are tumbling on some city centre flats (in cities such as Liverpool and Nottingham) as buy-to-let investors pay the price for oversupply.....The news will make uncomfortable reading for investors who bought into the boom in development of buy-to-let flats in these city centres, only to find that capital values and now rental income are falling......The cost of renting compared with the cost of servicing a mortgage on an equivalent flat or house has narrowed significantly over the year to the end of March, with both increasing. Rental costs were 75 per cent of mortgage costs in the first quarter of 2007, rising to almost 81 per cent in the first quarter of 2008.”

Have a read of the article and think about the position from the point of view of the buy to let landlord - what are the costs and benefits of their investment in the property market - and also from the point of view of tenants looking for somewhere to live.

(i) Using a supply and demand diagram, explain how a situation of over-supply can occur and what happens to prices as a result

(ii) What might happen to the property market in Nottingham if some buy-to-ler investors decide to sell some of their stock of properties?

The rest of the article can be found here

Asian Rice Crisis

The credit crunch is rivalled, arguably, by increasing food prices as a cause of economic (and human) concern in 2008.

This article from the BBC looks at some of the implications and you can watch/show videos on the rice crisis here.

“Benign”, eh?

Today the Office of Fair Trading has filed a press release accusing 112 construction companies of price-fixing. Estimated to be hundreds of millions of pounds, this will dwarf the previous record fine of £121.5m on BA last year and the £116m penalty on supermarket milk price-fixing. Some of the biggest names such as Balfour Beatty and Carillion have been accused, and shares in the construction sector generally dipped in London today.

Revision: Natural Monopolies

This revision note is aimed at A2 economics students and those studying for the International Bacc. It looks at the idea of a natural monopoly and considers examples of industries with characteristics of natural monpoly in Britain and how competition policy has sought to oversee efficiency and welfare for producers and consumers.

Revision note:
Revision_Natural_Monopoly.pdf

Unsustainable world

BBC’s Newsnight has been running an excellent series of programmes - Unsustainable World” - here is the link to the relevant web site

Inter-related markets: Farmland prices

There is an excellent example of the inter-relationships between markets in today’s Independent.

“The price of farmland is rising at its fastest rate for more than 30 years ....Arable land, in particular, has become so profitable that its average price has soared from £4,000 an acre in January last year to £5,500 an acre today.....The increases are being fuelled by the astonishing demand for agricultural holdings at a time when food prices are at an all-time high and when very little farmland is coming up for sale ....The price of wheat and other cereals has more than doubled in 12 months. While that means the cost of food is going up, it has also improved the profitability of arable farming and made it an attractive investment. At the same time, Britain’s agricultural land is attracting interest from abroad.” The rest of the article can be found here

Plenty of microeconomics here - the inelastic supply of farmland coming onto the market; the relationship between returns from financial markets and the demand for other assets including farmland; the impact of rising food prices on the profitability of owning and farming arable land. Will this help to stop the flight from farming in the UK? Or are there dangers in amateur landowners looking to buy up land as a lifestyle choice?

Simple ideas work best

Sometimes the simplest ideas work the best especially when it comes to environmental policy. Today the Campaign for the Preservation of Rural England launches its Stop the Drop campaign in a bid to raise awareness of the impact of litter and fly-tipping. And Government minister Joan Ruddock is quoted in today’s Times saying that she is receptive to the idea of restoring compulsory deposits on plastic drinks bottles and aluminium containers as a way of incentivising people to take bottle back for recycling and reducing the volumes heading for landfill. It has worked in the past - ask the good people of Oregon. What is stopping the government? Get on with it!

Tesco adds to contestability in digital downloads

News today of yet more competition in the increasingly contestable market for music and film downloads. Tesco Digital is launching a new platform-neutral service which eventually will offer 3.3m music tracks compatible with iPods and other MP3 players. At the moment, the downloable tracks are only available in windows media player format. The move heralds yet more pressure for high street retailers such as HMV who are also building an online presence. Do you think that Tesco’s move will be a success?