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Unit 3 Micro: Revision on the Private Finance Initiative

Thursday, April 24, 2014

Here is a short revision presentation covering aspects of the Private Finance Initiative - which figures on unit 3 for EdExcel micro economics

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Revision on Labour Market Failure

Sunday, April 20, 2014

Revision resources on the topic of labour market failure

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Unit 3 Micro: Tanzania’s cola wars

Saturday, April 19, 2014

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.

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Policies to reduce collusion

Friday, April 18, 2014

Investigating and understanding price fixing and collusion are an important part of analysing behaviour in oligopolistic markets. Not all of these corrupt practices are headline grabbers: most are in such unglamorous areas as ball-bearings and cargo rates, which go on unnoticed for years, quietly bumping up the end cost to consumers of all manner of goods and services.

What steps can be taken to undermine the incentives for business to engage in these illegal activities?

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Test your Knowldge on A2 Diagrams (Day Three)

Wednesday, April 16, 2014

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

Unit 3 Micro: Business Objectives, Costs, Revenues and Profits

Monday, April 14, 2014

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.

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Unit 3 Micro: Some Key Diagrams for Business Economics

Sunday, April 13, 2014

Here is a selection of key diagrams for the Unit 3 business economics course

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Higher of Lower? A fun way to learn predicted growth in GDP for the world’s major economies

Saturday, April 12, 2014

Here's a quick a fun resource to help students learn the predicted economic growth of the world's major economies.  Although a student wouldn't be expected to quote percentage growth statistics, it is always handy to have some figures ready to use as evidence or, at least, an understanding of the world's fastest growing states.

The game is called 'Higher or Lower' and is very simple.  You are presented with the name of a country (e.g. China) and the predicted growth in GDP (compared to 2013) for 2014, as calculated by the IMF.  You are also presented with the name of another country (e.g. United Kingdom).  Your task is to say whether you think that the UK's predicted GDP growth is either higher or lower than that of China.  Get the answer correct you earn a point and are presented with a third country and must predict whether their growth is higher or lower than that of the UK.  However, get an answer wrong, you are out of the game!  The maximum score of 37 (the number of countries in the database).  Play the game a few times and really start to get a feel for the statistics for the different countries.  The game is randomly set up so you can run it a few times a get a different sequence of countries each time.

Challenge your friends!  Alternatively, you can go to the table on slide 3 of the resource and learn all of the figures off-by-heart!

Click on this link to upload the game.  It is a Powerpoint-based game so you will need to have Powerpoint on your PC or Mac (versions beyond 2003).  When prompted you should 'enable' macros.  Sorry, this game does not work on mobile devices or OS like Android.

Labour Market: UK Minimum Wage does not Cost Jobs

Tuesday, April 08, 2014

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.

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Normative statements - using E-Cigarette newspaper reports to look at normative statements

Friday, April 04, 2014

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:

  1. Which of the two articles appears to offer more opinion-based evidence than the other?
  2. Highlight any words or phrases that indicate a value judgement rather than evidence-based reporting.
  3. 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.

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Lancashire and London have dominated the Premier League.  Can it last?

Thursday, April 03, 2014

The Premier League season draws to an exciting close. It is by no means clear who will be champions, or who will gain the coveted top five European qualifying spots. There could even be a surprise. If Liverpool win, for the first time since 1995 a team from outside Manchester and North London will be crowned. Even then it was Blackburn. In the previous 21 seasons of the Premier League, all the winners have come from either the North West or London. So a Scouse victory would not alter this.

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Together They Fall, Divided they Stand

Tuesday, April 01, 2014

Today, the world's largest mining company, BHP-Billiton, has signalled that it is considering demerger and slimming the business, as a way of improving productivity and performance. However, is there more to this than meets the eye?  

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Unit 3 Micro: Energy firms face competition inquiry

Friday, March 28, 2014

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. 

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Unit 3 Micro: Royal Mail - Industry Extracts

Tuesday, March 25, 2014

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.

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UCAS and Oxbridge - Delving into Management

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.

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F585 Pre-Release Resources (and F583, F582 & F581 too)

Sunday, March 23, 2014

I thought it worthwhile sharing my resources which I have been collecting for students (and teachers alike). I have been promoting them on Twitter (@Economics_KSF) through scoop.it but for those of you not on there, the link for the scoop.it boards are here:

http://www.scoop.it/u/economics-kcsf

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Paul Ormerod: Trends in Inequality: Truth and Myth

Thursday, March 20, 2014

Concern about inequalities of income and wealth is now a fashionable topic. It featured strongly in the gathering of the world’s top brass at Davos earlier this year. Much of the popular coverage of the topic gives the impression that not only is inequality at record highs, but that it is confined to the wicked Anglo-Saxon economies. A recent paper published by authors linked to the George Soros-funded Institute for New Economic Thinking shows very decisively that neither of these points is true.

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How Coal Shortages Might Impact Indian Growth

Wednesday, March 19, 2014

The development of India, or its non-development relative to China, is an interesting topic, and one that Bob Hindle has already been blogged about in relation to its tax system.

However, there are other aspects of the Indian economy that will also impede its ability to grow, notably its lack (or should that be 'lakh'?) of coal.

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Elinor Ostrom and A Level Economics

Tuesday, March 18, 2014

Elinor Ostrom was the first and so far only women to win a Nobel Prize in Economics (strictly speaking the Swedish bank prize) in 2009 for her work on commons. According to the biologist Garrett Hardin, in an example familiar to A level economic students, unowned or collectively owned resources, say a fishing ground, tend to get trashed because of over use. 

The 'tragedy of the common' happens because people may over fish or destroy environments because of the free rider effect. One person who fishes less is discouraged from doing so because others may simply fish more, until the fish stocks run out. Ostrom looked at how local communities could organise to stop such over exploitation without government regulation. She found that instead of 'tragedy' sometimes the commons worked quite well.

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Unit 3 Micro: Pop Up Shops on the Underground

Saturday, March 15, 2014

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.

Economies and Diseconomies of Scale at PepsiCo

Friday, March 14, 2014

This topic is very helpful when analysing the benefits or drawbacks arising from internal growth. Over the last couple of years the Economist has kept referring back to the case study of PepsiCo, and how the huge corporation has tried to control diseconomies of scale.

Here’s the latest update – a proposed break-up of the company.

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Oligopoly price wars - who will be the winner?

Thursday, March 13, 2014

There are two useful articles here for A2 economists about the news that Morrisons has made a £176m pre-tax loss for the year to February 2, and the strong impact that their plans to compete hard with the discount retailers has had on the stock market value of Tesco and Sainsburys. 

We often cite the UK supermarket industry as an example of oligopoly, and today's news around Morrisons (Britain's 4th biggest supermarket) gives plenty of scope for students to use some stakeholder analysis to look at what is going on in that market - who wins and who loses?

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Unit 3 Micro: Merger of Chiquita and Fyffes

Tuesday, March 11, 2014

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.

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Price Regulation in Industries

Wednesday, March 05, 2014

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.

Advantages

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.

Disadvantages

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 mechanism

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New evidence of persistent gender bias at the UK’’s top companies

Wednesday, February 26, 2014

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 Journal

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Executive Pay: Shareholders have failed to curb excesses

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 crisis

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Transport Economics - compensation for rail delays

Saturday, February 22, 2014

Did you know that most train operating companies will refund 50% of your ticket for a delay of 30 minutes or more, and will double that if the delay is for an hour or longer? And that, if you are travelling by tube, Transport for London offers refunds if your journey is delayed by 15 minutes or more (although you won't get a refund if the delay is caused by a security alert, "third party action" such as a strike or bad weather)? Most probably you didn't, as a survey by the Office of Rail Regulation has found that more than 75% of rail passengers know "not very much" or "nothing at all" about what they are entitled to when services are disrupted.

The report also found that 74% of passengers felt that train companies do "not very much" or "nothing at all" to proactively provide information about compensation when there are delays. As Simon Gompertz found in this video report, there are plenty of ways in which the train operating companies could make the information available, whether through instructions on the back of the tickets and announcements on trains to apps.

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Unit 3 Micro: Facebook Buys WhatsApp

Friday, February 21, 2014

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?

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Unit 3 Micro: Economics of a £7 Minimum Wage

Saturday, February 15, 2014

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 UK

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Unit 3 Micro: Monopolistic Competition

This is an updated revision presentation on aspects of monopolistic competition in markets

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Boris Bikes - Do Benefits Exceed the Costs?

Friday, February 14, 2014

Boris Johnson, The Mayor of London, has been happy to extend the use of bicycles in London; and the pattern of use has thrown up some interesting points. There were 7.4 million cycle hire trips last year but an estimated 71% of cycling use was by men. Most of these journeys would have been made on foot (31%) or by public transport (47%). Coverage of the study published in the BMJ looked at the health effects is found here.. The notes in the article, provide good examples of the strengths and weaknesses of cost benefit analysis.

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Government underestimates the amount of student loans that are likely to be paid back

According to a report published by the Parliamentary Public Accounts Committee, the Government are currently underestimating how many students will actually pay back their university loans over the coming decades.  Currently, the Government estimates that between 35 and 40% of loans to Higher Education students are never paid back - the Committee believes that the rate on non-repayment is much higher and reflects a weakness in the loan collection method.  The primary reason for non-repayment is that student details get lost over a period of time particularly if the graduate moves and works abroad or was an EU citizen who has returned to their own country.  The method of using the income tax registration process as a way of locating former students has been criticized for not being an effective method of collecting information.  It is estimated that the shortfall could be as much as £80 million by 2042.

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Perfect Competition vs Monopoly Essay Guide

Monday, February 10, 2014

A quick but informative guide on how to structure an essay evaluating perfect competition and monopoly. For more videos, click here

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Transport Economics: Airline Passenger Data for 2013

Thursday, February 06, 2014

Are you teaching transport / airline economics? The newly released 2013 IATA data resource might be useful - http://www.iata.org/publications/economics/Documents/passenger-analysis-dec2013.pdf

Globally there was a 5.2% increase in passenger demand compared to 2012. The 2013 performance aligns with the average annual growth rate of the past 30 years. Capacity rose 4.8% and load factor averaged 79.5% up 0.4 percentage points over 2012.

Unit 3 Micro: The Market for In-Flight Wifi

Wednesday, February 05, 2014

The market for in-flight wifi is dominated by one service provider and tends to be slow and expensive. This article provides some background. It is an interesting example to think about when considering the different types of economic efficiency i.e. allocative, productive and dynamic. Less than 10% of airline users take up the wifi offer! Consider reasons for this that go beyond the high price! When was the last time you either used or wanted to use wifi on a flight?

Energy companies charge cash-paying customers more - market failure and Government intervention

Tuesday, February 04, 2014

If you attended the recent tutor2u revision conferences for up-coming micro-economic exams (look out for the macro workshops and combined micro and macro to come in March) you will have seen how fuel-pricing was used as an example of market failure, government intervention strategies and government failure.  

Fortunately, the energy market is a gift that keeps giving to us in the economics world (every cloud has a silver lining) as a report out today (see this link for the BBC version of the story) indicates that Parliament is about to intervene to try and stop the energy companies charging more to customers who pay by cash rather than by direct debit (£114 per year, according to the report).

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Game Theory - The Hotelling Model of Spatial Location

Monday, February 03, 2014

Here is a really well produced and clear visual explanation of the Hotelling model of spatial location. As two competitive cousins vie for ice-cream-selling domination on one small beach, discover how game theory and the Nash Equilibrium inform these retail hot-spots. A good short video to use when teaching or learning about game theory.

For more ....Tutor2u's Introduction to Game Theory

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Superbowl Adverts - Has the Viral Video Trumped the Big Event?

Saturday, February 01, 2014

The cost of a thirty second advertising slot at the annual Superbowl final is immense. This year advertisers are paying $4 million dollars for a 30 second advertisement during America's largest televised event. But big hits on the social web often produced at a tiny fraction of the cost challenge the conventional view that mega bucks spent reaching a TV audience remains a viable way of using the marketing dollars. This short news video from the Financial Times is a useful reminder of the importance attached to brand advertising by some of America's biggest consumer products.

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Unit 3 Micro: Perfect Competition Summary

Friday, January 31, 2014

Here is an updated revision presentation on aspects of perfect competition - A2 economics revision notes can be found here

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10 Questions on Business Objectives

Thursday, January 30, 2014

Here are ten multiple choice revision questions covering the topic business objectives

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10 Questions on Contestable Markets

Here are ten multiple choice revision questions covering the topic contestable markets

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10 Questions on Economic Efficiency

Here are ten multiple choice revision questions covering the topic economic efficiency

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Unit 3 Micro: Profit Satisficing and Profitability Factors

Here is an updated revision presentation on satisficing as an alternative to profit maximisation and also some of the factors affecting the profitability of a business such as Stagecoach plc - A2 economics revision notes can be found here

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Government looks to abandon use of Microsoft Office to save money

It was announced yesterday that the Government is planning to abandon its use of expensive software such as Microsoft Office (see article in the Guardian here) partly as a way of reducing costs but also as a means of breaking some of the software company's 'oligopolistic' stranglehold on the market.

As well as offering an example of Government policy to combat market failure, this story gives us a little insight into the issue of contestability in the software industry.

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Does Facebook have a Future?

So farewell, then, Facebook! That is the conclusion of a highly technical paper by two Princeton researchers, John Cannarella and Joshua Spechler, which received a lot of publicity in the press last week. The authors conclude that “Facebook will undergo a rapid decline in the coming years, losing 80 per cent of its peak user base between 2015 and 2017”.

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Unit 3 Micro: Revenues and Profits

Wednesday, January 29, 2014

Here is an updated revision presentation on short run revenues and profits for businesses - A2 economics revision notes can be found here

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Unit 3 Micro: Short Run Costs of Supply

Tuesday, January 28, 2014

Here is an updated revision presentation on short run costs for businesses - A2 economics revision notes can be found here

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Unit 3 Micro: Fixed and Variable Costs

Monday, January 27, 2014

Here is an updated revision presentation on fixed and variable costs for businesses - A2 economics revision notes can be found here  

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Capping Bonuses for Bankers - Unintended Consequences

Friday, January 24, 2014

Capping seems to be all the rage at the moment. We read of capping electricity and gas prices, capping welfare payments for families ... and now a proposed cap on bonuses for bankers is being put forward by the EU and by the Labour Party. 

In this article, Tim Harford cuts to the chase and highlights the contradictions in the EU blanket policy on capping bankers' bonuses. It is a good example of a policy where the unintended consequences include the probably that banking salaries would rise still further.

Under the EU proposal, a cap on rewards would limit payouts to banking executives to annual pay - or twice that only if shareholders approve.

Further reading:

BBC - banking bonuses - how much do they matter?

BBC Hard Talk:  Adair Turner on the effect of a bonus cap on bank salaries

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Saudi Arabia - the ‘dominant producer’ in the world’s oil market

Saudi Arabia’s position as one of the largest players in the global oil market, producing more than a tenth of the world’s output and owning a quarter of the world’s proven reserves, has negative effects on other market participants. Writing in the Economic Journal, Anton Nakov and Galo Nuño document two features that have made the Kingdom different from other oil producers:

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