http://www.tutor2u.net/blog/index.php/economics/ en tutor2u.net Copyright 2012 2012-02-12T07:41:03+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/china-bans-its-airlines-from-paying-eu-carbon-tax http://www.tutor2u.net/blog/index.php/economics/comments/china-bans-its-airlines-from-paying-eu-carbon-tax#When:05:52:33Z On 1st January this year, the EU introduced an Emissions Trading Scheme (ETS) which levies a charge on flights in EU airspace based on carbon emissions. They estimate that this will add between 2 and 12 euros to flight tickets. Airlines are required to purchase emissions permits, like utilities and heavy industry in the EU, and airlines that do not comply face fines of 100 euros for each tonne of carbon dioxide emitted for which they have not surrendered allowances. In the case of persistent offenders, the EU has the right to ban airlines from its airports. A2 Micro, Emerging Economies, China Economy, Business Economics, Environmental Economics, European Economy, Government Intervention, Indirect Taxes, Market Failure, Externalities, Transport Economics, 2012-02-06T05:52:33+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-low-cost-airlines-beat-the-recession http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-low-cost-airlines-beat-the-recession#When:20:57:39Z The global financial and economic crisis has created many problems for airlines - falling business and 1st class passenger revenues, increased insurance costs, problems in getting loan finance, volatile exchange rate and the challenges of steep increases in aviation fuel prices to name just a few. We could also add the shockwaves from the spring 2011 Japanese earthquake and tsunami, the Arab Spring and a decline in tourism, and the steadily deteriorating global economic outlook - with the Euro Zone crisis threatening a second recession for Western Europe. But discount airlines - carriers that offer no-frills and charge plenty for extras on top of low basic fares - seem to have fared pretty well despite the turbulent conditions. Many passengers now appear willing to sacrifice luxury for cheaper flights and there are plenty of news stories of low-cost airlines in Europe, Asia and Africa who are announcing expanded route maps for 2012 and beyond. What economic factors help explain the continued expansion of low-cost airline carriers? AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Emerging Economies, Business Economics, European Economy, Global Economy, Transport Economics, 2012-01-01T20:57:39+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-oligopoly-and-duopoly-in-bus-markets http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-oligopoly-and-duopoly-in-bus-markets#When:15:01:48Z The UK Competition Commission has published an important report into the market structure of local and regional bus services in the UK, twenty five years after the industry was deregulated and largely privatised. Coverage of the report can be found here (BBC news). Largely as a result of a long-term process of consolidation through merger and acquisition, the UK bus industry is found to be highly concentrated with five businesses dominating the sector even though more than 1,200 businesses provides services. The five largest operators (Arriva, FirstGroup, Go-Ahead, National Express and Stagecoach) carry 70 per cent of those passengers. The CC also found that head-to-head competition between operators is un-common and that-on average-the largest operator in an urban area runs 69 per cent of local bus services - effectively a monopoly position. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, AS Micro, Business Economics, Monopoly, Oligopoly, Competition Policy, Market Equilibrium and Price, Nature of Supply, Transport Economics, UK Economy, Regional Economics, 2011-12-20T15:01:48+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-hope-bikes-a-commitment-to-excellence http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-hope-bikes-a-commitment-to-excellence#When:17:44:51Z Are you into your cycling? The huge expansion of interest in cycling in the UK from road racing through to BMX and mountain-biking has gone hand in hand with the fantastic success of British cyclists on the international stage. 2012 promises to be another strong year for the industry despite difficult economic conditions. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Management Issues, Economic Growth, Economics of Technology, International Trade, Manufacturing Industry, Teaching of Economics, Transport Economics, UK Economy, Regional Economics, 2011-11-30T17:44:51+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/international-approaches-to-congestion-on-zoom.it http://www.tutor2u.net/blog/index.php/economics/comments/international-approaches-to-congestion-on-zoom.it#When:15:49:03Z This zoom-able map outlines the various approaches to traffic congestion which are in use around the world. It also shows the locations of the 15 most heavily congested cities.Zoom.it is one of my favourite finds and this zooming and panning map outlines international approaches to dealing with traffic congestion. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, OCR AS Economics Unit F581, Government Intervention, Market Failure, Externalities, Transport Economics, 2011-11-14T15:49:03+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-asymmetric-information-buying-a-used-car http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-asymmetric-information-buying-a-used-car#When:10:17:29Z An autumnal hat tip to Kevin Hinde at Durham Business School for spotting a new report from the Office of Fair Trading which finds that the market for second-hand, used cars remains the biggest source of complaints from customers. Nationally over 56,000 people have complained to the OFT-managed Consumer Direct in the year to date with 70 per cent of the complaints relating to faults with the cars and over 13 per cent about misleading claims or omissions by the seller. The used car market is a classic example of asymmetric information and the risks of consumer welfare being damaged by fraudulent selling and sub-standard service. The OFT have released a short film on customer rights that might be a good teaching resource to use when covering this topic. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, A2 Micro, AS Micro, Government Intervention, Market Failure, Information Failure, Market Equilibrium and Price, Nature of Demand, Teaching of Economics, Transport Economics, 2011-11-14T10:17:29+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-bicycle-a-merit-good-and-an-integral-part-of-sustainable-transport-solu http://www.tutor2u.net/blog/index.php/economics/comments/the-bicycle-a-merit-good-and-an-integral-part-of-sustainable-transport-solu#When:18:19:53Z A recent economic study1 found that bicycle ownership can boost household income in sub-Saharan Africa by 35%.  I may be biased given my passion for cycling but I think there are indeed some very strong economic arguments for encouraging more bicycles both in the developing and the developed world. The bicycle: more than just a mode of transport Beyond the Bike - the Economic Cycle, A2 Macro, A2 Micro, AS Macro, Emerging Economies, African Economy, Economic History, Environmental Economics, Macroeconomic Policies, Monetary Policy, Supply-side policies, Market Failure, Externalities, Merit & De-Merit Goods, Transport Economics, Unemployment, 2011-10-05T18:19:53+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-cure-for-economic-slowdown-drive-faster http://www.tutor2u.net/blog/index.php/economics/comments/the-cure-for-economic-slowdown-drive-faster#When:06:38:34Z This is the headline used by Reuters in their report of the government Transport Secretary’s proposal that the speed limit on motorways should be raised from 70 to 80mph. The justification for the proposal is largely that, when the limit was introduced, cars were less safe than they are now, and that technical improvements have made 80mph a safe speed at which to travel. Other arguments include the desire to conform with the higher motorway speed limits in Europe, which are generally higher than in the UK, and also the fact that many drivers do drive at between 70 and 80 on motorways anyway and tend not to be fined for it, so the law may as well be amended to keep up with actual behaviour. A2 Micro, AS Micro, Behavioural Economics, Environmental Economics, Government Intervention, Government Failure, Market Failure, Transport Economics, 2011-10-01T06:38:34+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-drink-driving-and-government-intervention http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-drink-driving-and-government-intervention#When:18:14:01Z A culture of drink-driving has been a scourge in many countries for decades. The human and economic cost of lives lost and wrecked by motorists driving under the influence of alcohol is huge and most governments have introduced a range of interventions designed to change the incentives facing drivers. But which ones have most impact? AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Government Intervention, Regulation, Market Failure, Information Failure, Teaching of Economics, Transport Economics, 2011-09-26T18:14:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/transport-economics-rail-investment http://www.tutor2u.net/blog/index.php/economics/comments/transport-economics-rail-investment#When:16:59:00Z Here is a super short transport cost benefit analysis example regarding plans to re-open a rail link between Oxford and Milton Keynes could generate millions of pounds for the economy. In total it would cost £178m and then £11.6m a year to run, but Oxford Economics says it would bring an economic benefit to the area which it estimates at £32m a year. This BBC news video would make for a good short introduction to the example, and here are some other links to coverage of the Oxford Economics research in the local papers. Oxford Mail: Rail link could be worth £38m a year Official web site East West Rail   AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, A2 Micro, AS Micro, Cost Benefit Analysis, Macroeconomic Policies, Supply-side policies, Teaching of Economics, Transport Economics, UK Economy, Regional Economics, 2011-08-12T16:59:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-motorsport-valley-and-external-economies-of-scale http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-motorsport-valley-and-external-economies-of-scale#When:08:52:00Z The occasion of the 2011 British Grand Prix at Silverstone in Northamptonshire is an opportunity to showcase the extraordinary growth and success of the motorsport industry in the UK. It is a classic example of the benefits that can flow from external economies of scale, and also of the way in which genuine competitive advantage in the global economy can be built and nurtured. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Economies of Scale, Economic Growth, Economics of Technology, Manufacturing Industry, Transport Economics, 2011-07-12T08:52:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-high-price-of-petrol-drains-demand http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-high-price-of-petrol-drains-demand#When:20:24:00Z New figures from the Automobile Association (AA) show that motorists in Britain are buying less fuel in response to record highs for petrol and diesel prices. They bought one billion fewer litres of petrol and diesel in the first three months of 2011 compared with the pre-credit crunch January to March 2008 period. It seems that high prices have incentivised drivers to cut back on their driving to save money and the pressure to economise has been raised by higher levels of VAT and a fall in real wages. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, GCSE Economics, Market Equilibrium and Price, Nature of Demand, Transport Economics, 2011-07-09T20:24:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/transport-economics-government-failure-in-roadbuilding http://www.tutor2u.net/blog/index.php/economics/comments/transport-economics-government-failure-in-roadbuilding#When:05:35:01Z A controversial motorway extension in Scotland is set to open. Glasgow’s new £657m M74 extension set to open (BBC News). The 6-lane elevated M74 extension is over-budget at a cost of £657m, which works out at £131m per mile or £75,000 a yard (£80,000 a metre). How can road extensions cost so much? Can the costs be justified by the suggested economic benefits? The BBC article provides a good mini-case study in transport cost-benefit analysis. Here are some other supporting links: AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, A2 Micro, Cost Benefit Analysis, Government Intervention, Government Failure, Transport Economics, 2011-06-28T05:35:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-external-economies-of-scale http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-external-economies-of-scale#When:17:48:40Z External economies of scale occur outside of a firm but within an industry. For example investment in a better transportation network servicing an industry will resulting in a decrease in costs for a company working within that industry. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, Economies of Scale, Transport Economics, 2011-05-18T17:48:40+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/electric-cars-government-failure http://www.tutor2u.net/blog/index.php/economics/comments/electric-cars-government-failure#When:12:37:01Z There was a great in-depth look at activity in the car market in the Sunday Times yesterday with regards to electric powered vehicles. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, OCR AS Economics Unit F581, AS Micro, Business Economics, Competitive Markets, Government Intervention, Government Failure, Regulation, Subsidies, Market Failure, Externalities, Merit & De-Merit Goods, Market Equilibrium and Price, Price Mechanism in Action, Transport Economics, 2011-05-16T12:37:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/is-the-local-bus-market-competitive http://www.tutor2u.net/blog/index.php/economics/comments/is-the-local-bus-market-competitive#When:15:42:00Z One of the aims of deregulation is to encourage competition. The Office of Fair Trading (OFT) referred the local bus market to the Competition Commission (CC) in January 2010 because they had reasonable grounds for suspecting that competition is not working effectively in that market Buses matter providing a daily service for millions of people in the UK, carrying twice the number of passengers as do trains. This is particularly true at a time when commuters are switching from cars to buses in response to record petrol prices – inter modal shift in action There are equity issues. Buses are used by low income households those who cannot afford a car. Many passengers are dependent on the bus and do not have a realistic or desirable alternative, such as getting into a car or a train, if fares rise or services deteriorate. Their provisional findings published today make interesting reading: Transport Economics, 2011-05-06T15:42:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-eu-aviation-state-aid-and-state-ownership http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-eu-aviation-state-aid-and-state-ownership#When:16:48:00Z I have put together a short revision exam-style question for AQA Unit 3 (Micro) focusing on some of the issues / problems facing the European Airline industry. Many of the established airlines are part-state owned and the question of nationalisation, government emergency funding / state aid was highly topical this time last year in the wake of the recession and the volcanic ash crisis. The document can be downloaded below and I have linked also to some other A2 micro revision resources EU_Airlines_State_Aid_Nationalisation.pdf AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, European Economy, Single Market, Government Intervention, Subsidies, Teaching of Economics, Transport Economics, 2011-04-28T16:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/ocr-a2-economics-unit-f584-transport-economics-rapid-revision-guide http://www.tutor2u.net/blog/index.php/economics/comments/ocr-a2-economics-unit-f584-transport-economics-rapid-revision-guide#When:13:55:00Z We are pleased to announce the publication of a new rapid revision guide for OCR A2 Economics Unit F584 (Transport Economics).  The OCR Transport Economics Revision Q&A has been authored by experienced OCR Economics teacher Richard Young (Wood Green School) and is available via a cost-effective network licence.  Contents and samples below + links for ordering. OCR_F584_QA_2011_Contents_and_extracts.pdf Buy the OCR Transport Economics Revision Q&A here AS and A2 Specifications, A2 Micro, Transport Economics, 2011-04-27T13:55:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/as-micro-the-volatile-price-of-crude-oil http://www.tutor2u.net/blog/index.php/economics/comments/as-micro-the-volatile-price-of-crude-oil#When:20:21:00Z Few commodity prices are watched as closely as the international price of crude oil. Brent crude is currently trading at over $122 a barrel - the highest price for over two years. Our Timetric chart is constantly updated and will always show the latest price. We have included below links to many of our recent blogs on the economics of oil prices and some of their micro and macro economic effects. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Commodities Markets, Oil and Gas, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Price Mechanism in Action, Price Volatility, Teaching of Economics, Transport Economics, 2011-04-09T20:21:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/as-micro-prices-for-new-and-second-hand-cars http://www.tutor2u.net/blog/index.php/economics/comments/as-micro-prices-for-new-and-second-hand-cars#When:20:07:00Z The prices of new and second-hand cars as measured by the consumer price index have changed in absolute and real terms in recent years as the chart below shows AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Price Mechanism in Action, Price Volatility, Transport Economics, UK Economy, 2011-04-09T20:07:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/innovation-googles-driverless-car http://www.tutor2u.net/blog/index.php/economics/comments/innovation-googles-driverless-car#When:16:35:00Z A four minute gem from TED! Economic Growth, Economics of Technology, Teaching of Economics, Transport Economics, 2011-03-31T16:35:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/tuesday-talks-the-cycling-city http://www.tutor2u.net/blog/index.php/economics/comments/tuesday-talks-the-cycling-city#When:15:24:00Z A Radio 4 broadcast from yesterday, Bristol: Cycling City, provides the inspiration for today’s extension activity - there is a short synopsis here. This 30 minute audio documentary looks at the way in which £22m has been used over the past 3 years to increase the use of bicycles by residents of Bristol. Cyclists, motorists and local taxpayers seem to think that in general the scheme has not been successful, with only a small increase in the number of cyclists combined with poorly thought-through cycling infrastructure. After listening to the documentary, students could draw up their own cost-benefit analysis of the scheme, and discuss whether the £22m has been used in the most effective way (around two thirds of the funding went towards infrastructure and the remaining third towards education relating to cycling). More details on the specific projects that have been run as part of this scheme can be found here. Able students may want to consider how they would have tackled the scheme differently. Government Intervention, Subsidies, Teaching of Economics, Tuesday Talks, Transport Economics, UK Economy, Regional Economics, 2011-03-08T15:24:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/transport-forecasts-can-go-awry http://www.tutor2u.net/blog/index.php/economics/comments/transport-forecasts-can-go-awry#When:07:11:00Z I spent a happy half term virtually rewriting the Tutor2U OCR Transport Q&A which has been out of print for a few years now. Details to follow. And these are exciting days for us Transport Train Spotters as there is an awful lot of context to be gleaned for the just published High Speed Rail: Investing in Britain’s Future. So I feel a series of blogs coming on. Here is the first. Transport forecasting. Traffic forecasts estimate how many passengers, vehicle and freight are likely to travel by a given mode in the future. Here are some projections published back in the day in 1996 when assessing the economic case for Eurostar. Forecasts give a broad indication of behaviour based on past trends and best understanding of future events but are bound to be uncertain. For instance, assumptions about future fuel prices, GDP income and population may prove inaccurate So why were the 1996 projections so wide of the mark- unexpected external events. I quote: A further reason for the lower than expected passenger revenues is the success of the low-cost airlines in competing with Eurostar on price, and their much larger range of destinations. These events illustrate the difficulty of accurately forecasting revenues on novel major projects. The Link is moreover the only high speed railway in the country and the first new railway line for a hundred years, so there is no recent national experience with which to compare it Source: Forecasting of passenger traffic Can we trust the HSR projections of passenger numbers? Transport Economics, 2011-03-01T07:11:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/chinese-and-indian-railways-importance-of-infrastructure http://www.tutor2u.net/blog/index.php/economics/comments/chinese-and-indian-railways-importance-of-infrastructure#When:21:11:00Z Two videos show the stark contrast between rail networks between China and India! Good for understanding a little more about the importance of rail network investment (high speed and conventional) as a platform for economic growth and development.   AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Emerging Economies, Development Economics, China Economy, Indian economy, Cost Benefit Analysis, Global Economy, Macroeconomic Policies, Supply-side policies, Teaching of Economics, Transport Economics, 2011-02-25T21:11:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/protectionism-and-the-demise-of-the-us-shipping-industry http://www.tutor2u.net/blog/index.php/economics/comments/protectionism-and-the-demise-of-the-us-shipping-industry#When:08:38:01Z Here is a link to an article written by John Gapper in the Financial Times about the long term decline of the US container shipping industry. The finger of blame is pointed at the protectionist ruling that “all domestic cargo must be carried in US ships made in US shipyards, crewed by US citizens .....Of the world’s 7,200 container ships in 2007, only 89 were US-registered compared with 1,250 European ships and 860 in Greater China ......An alliance of shipping companies, trade unions and US shipyards has blocked liberalisation.” This is also a really good article on the economies of scale in container shipping. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Business Economics, Economies of Scale, Global Economy, International Trade, Teaching of Economics, Transport Economics, 2011-02-24T08:38:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/wto-finds-boeing-guilty-of-using-illegal-subsidies http://www.tutor2u.net/blog/index.php/economics/comments/wto-finds-boeing-guilty-of-using-illegal-subsidies#When:08:23:00Z This is one of the longest running disputes in trade history. Europe and the US have been fighting for more than six years over each other’s subsidies for large passenger aircraft in the duopolistic battle between Boeing and Airbus. Now the World Trade Organisation has found that Boeing received at least $5bn (£3.1bn) in illegal subsidies and was only able to launch its 787 Dreamliner with such support. Airbus has als been found to be in breach of receiving illegal state aid. Reuters provides useful background here. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, Business Economics, Oligopoly, European Economy, Single Market, Global Economy, Government Intervention, Subsidies, OECD Economies, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Teaching of Economics, Transport Economics, 2011-02-01T08:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/transport-high-speed-rail-discussion http://www.tutor2u.net/blog/index.php/economics/comments/transport-high-speed-rail-discussion#When:13:28:03Z BBC Radio 4 ‘Open Country’ programme on the High Speed Rail through the English countryside good evaluative points on the impact of this new infrastructure on Buckinghamshire BBC Radio 4 ‘Open Country’ A2 Micro, Transport Economics, 2011-01-19T13:28:03+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a-motorbiking-triumph http://www.tutor2u.net/blog/index.php/economics/comments/a-motorbiking-triumph#When:21:56:00Z Here is a product from over here that is doing really well over there! It is always positive to read of success stories from the UK manufacturing sector. This article from the Guardian highlights the success of the iconic motor bike bran Triumph in ousting the likes of Honda and Yamaha to rise to the summit of the market share rankings for new bikes sold in the UK. And sales are strong in the United States where Triumph is competing with Harley-Davidson. Students who read through the article ought to be able to glean two or three factors that lie behind Triumph building a competitive advantage in the market. Can they then come up with other ingredients in the mix that apparently makes Triumph competitive in price and non-price terms? More good background here: Triumph rides high as UK bestseller takes on Harley-Davidson (Guardian) Motorcycle Sales Not All Bad News says Motor Cycle Industry Association AS and A2 Specifications, AQA Economics Unit 1, AS Micro, Business Economics, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Transport Economics, UK Economy, 2011-01-13T21:56:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-qa-what-economic-factors-affect-the-demand-for-new-cars http://www.tutor2u.net/blog/index.php/economics/comments/economics-qa-what-economic-factors-affect-the-demand-for-new-cars#When:09:31:00Z The motor industry is one of the sectors whose fortunes seems to permeate nearly every part of the economy. Most of us know someone who works in the motor trade and changes in demand and production have sizeable effects not just on the industry itself but on many supply-chain businesses and economic activity in areas where car production is concentrated. In 2010 just over two million new cars were registered in the UK - a rise of 1.8% on the 2009 figure. The biggest single course of rising demand came from the fleet market which rose by over 10% in 2010, but demand for and spending on privately bought cars slipped following the end of the Car Scrappage Incentive Scheme. Crucially for the year ahead, the new car market is forecast to decline by 5% in 2011 to 1.93 million units - according to the Society of Motor Manufacturers and Traders “difficult market conditions continue.” So what are the main factors that affect the market demand for new cars? AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Business Economics, GCSE Economics, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Transport Economics, UK Economy, Regional Economics, 2011-01-09T09:31:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/ocr-transport-revision-wordle http://www.tutor2u.net/blog/index.php/economics/comments/ocr-transport-revision-wordle#When:08:00:01Z A good resource here from Ben White and his students at Bromsgrove. As we approach the end of the OCR A2 Transport Economics course, I spent a good lesson with an U6th class brainstorming the key terms and definitions and the following was created: On a separate note the middle page of today’s independent has a great picture of the Amazon warehouse and a smaller version can be found online: Good stimulus for channels of distribution, e-commerce, worker motivation (workers will walk 10 miles because of ‘manic Monday’!) Business Economics, Transport Economics, 2010-11-30T08:00:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/yet-another-airline-cartel-story http://www.tutor2u.net/blog/index.php/economics/comments/yet-another-airline-cartel-story#When:21:38:00Z Just in case you wanted one more example of price fixing, cartels, collusion and whistle blowing, here it is. The EU has boosted its revenue for the year by fining 11 airlines almost 800m euros for fixing cargo prices between 1999 and 2006. AirFrance-KLM are hit the hardest, at 340m, followed by BA at 104m - but Lufthansa, who blew the whistle on the other airlines involved, are not fined at all. AS and A2 Specifications, AQA Economics Unit 3, A2 Micro, Behavioural Economics, Game Theory, Business Economics, Oligopoly, Competition Policy, European Economy, Government Intervention, Regulation, Transport Economics, 2010-11-09T21:38:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/start-up-stories-tony-fernandes-of-air-asia http://www.tutor2u.net/blog/index.php/economics/comments/start-up-stories-tony-fernandes-of-air-asia#When:09:29:00Z I had the pleasure of meeting Tony Fernandes in February of this year and I follow news of the expansion of Air Asia and related commercial ventures with interest. Here is an interview with him as part of the BBC’s Start Up Stories series. A2 Micro, AS Micro, Emerging Economies, Business Economics, Competitive Markets, Transport Economics, 2010-11-04T09:29:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/boriss-bikes-gearing-up-for-success http://www.tutor2u.net/blog/index.php/economics/comments/boriss-bikes-gearing-up-for-success#When:22:13:01Z Over one million bike rides have been taken using the new bicycle hire system introduced by Boris Johnson and Transport for London (supported by Barclays). Perhaps this is a good example of how getting the pricing right and other related incentives and disincentives provides the right choice architecture for a successful scheme and a change in commuter behaviour?  Membership of the scheme is affordable (£45 per year + £3 for each key) and journeys under thirty minutes are free at any time. There are stiff penalties for late and non-return of the bikes as well as for damaged bikes. The network of docking stations is substantial and TFL appear to becoming more proficient in getting round London and re-balancing supply with demand for bikes at key times during the day. I was chatting to a couple of students at the LSE the other day who make daily use of the bikes to and from lectures. To judge from the heavy demand for bikes at the Waterloo and South Bank docking stations as I have been walking past in recent weeks, there is already firm evidence that the scheme has bedded in well. The number of stolen bikes is far lower than in Paris and the volume of bike rides taken is set to grow strongly as new docking stations are opened and the stock of bikes grows. There is still plenty to do - many users complain of logistics problems that leave docking stations empty and also the limited choice of gears - but the early signs are promising indeed. The Guardian writes in praise of the scheme here.   AS and A2 Specifications, AQA Economics Unit 1, Market Equilibrium and Price, Nature of Demand, Transport Economics, 2010-10-30T22:13:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/two-super-transport-economics-resources http://www.tutor2u.net/blog/index.php/economics/comments/two-super-transport-economics-resources#When:22:47:00Z Two handy transport economics resources came into view today. In the first the excellent Phillippe Legrain (who has written extensively in recent years on the economic and social benefits from open migration) argues for continued investment in the UK transport infrastructure to enhance our mobility. Read Why we need to continue investing in transport In the second I spotted a really good BBC news video on threats of a sizeable hike in regulated train fares as part of an attempt to cut the cost of government subsidies to the rail industry. Watch: Train commuters face rising fares Teaching of Economics, Transport Economics, 2010-10-08T22:47:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/market-implications-of-creating-the-worlds-biggest-airline http://www.tutor2u.net/blog/index.php/economics/comments/market-implications-of-creating-the-worlds-biggest-airline#When:18:56:00Z For those of you studying or teaching OCR’s A2 Economics ‘Transport’ option, you may well have tackled, or be tackling, the ‘market structure’ section of the course. There is always usually at least one ‘market structure’ question of some sort on each paper and relevant application to the world of transport is often a weak point for some pupils. This article from the Guardian reports the approval of the merger between United and Continental to create the world’s biggest airline, in an industry which has struggled over the past decade. I suspect there are plenty of relevant Business and Economic issues to draw from this article from the impact of dominant firms and their actions on the industry, to the Business issues of growth through mergers and the relevant benefits and problems that may arise. Business Economics, Competitive Markets, Economies of Scale, Transport Economics, 2010-09-19T18:56:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/toll-roads-not-the-solution-for-congestion http://www.tutor2u.net/blog/index.php/economics/comments/toll-roads-not-the-solution-for-congestion#When:11:54:00Z According to a report out today, the UK’s only private motorway toll, the M6 Toll, has not significantly cut congestion. Video clip here and article here. AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, EdExcel Economics Unit 3, A2 Micro, AS Micro, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Transport Economics, 2010-08-31T11:54:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/brazilian-aviation-reaches-new-heights http://www.tutor2u.net/blog/index.php/economics/comments/brazilian-aviation-reaches-new-heights#When:08:59:00Z This BBC News Asia report provides a terrific example of how the Brazilian aviation industry is enjoying fast growth on the back of greater competition and rising per capita incomes. (Air travel has a high income elasticity of demand). Domestic demand for short haul and long haul flights is rising quickly and the emergence of Brazil as the world’s third largest manufacturer of commercial airlines is testimony to the increasing diversity of the Brazilian economy away from dependence on exporting commodities. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, AS Macro, Emerging Economies, Brazil Economy, Economic Growth, Standard of Living, Teaching of Economics, Transport Economics, 2010-05-25T08:59:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/as-economics-revision-oil-and-petrol-prices http://www.tutor2u.net/blog/index.php/economics/comments/as-economics-revision-oil-and-petrol-prices#When:13:23:00Z This week we have heard news that the price of petrol and diesel at the pumps has reached a record high. The data chart above provides another opportunity for students to familiarise themselves with changes in price information over time and perhaps try this question “Using the extract, identify two points of comparison between UK diesel and petrol prices and the world price of crude oil over the period shown by the data” (8 marks) AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Oil and Gas, Market Equilibrium and Price, Price Volatility, Transport Economics, 2010-05-22T13:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/as-economics-revision-changing-market-prices-for-cars http://www.tutor2u.net/blog/index.php/economics/comments/as-economics-revision-changing-market-prices-for-cars#When:12:57:00Z This chart provides some price information from the markets for new and used vehicles in the UK. I am using it as practice for my students in describing economic data - one of the skills that is tested on their Unit 1 micro paper. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Business Economics, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Price Volatility, Teaching of Economics, Transport Economics, 2010-05-22T12:57:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/three-big-gear-shifts-for-the-world-car-industry http://www.tutor2u.net/blog/index.php/economics/comments/three-big-gear-shifts-for-the-world-car-industry#When:20:05:00Z Margareta Pagano has a fascinating comment piece in the Independent citing three possible game changers in the world auto industry 1/ The takeover of Volvo by Chinese car maker Geely 2/ A sizeable investment in research by the Norwgeian government in advanced batteries for the next generation of electric cars 3/ Research in Italy about a new business model for car finance built around leasing vehicles rather than buying them - this (according to Pagano) could be the tipping point for the industry “leasing cars is the future; it’s cheaper and more sustainable as the manufacturer takes back the cars to recycle. Imagine that, no more second-hand dealerships; no more Arthur Daleys.” How might a move towards leasing vehicles affect the car insurance industry? There is a growing market in car rentals - especially for those wanting short-term mobility around cities. Can leasing ever take-off from the household sector? More here A2 Micro, AS Micro, Emerging Economies, Business Economics, Transport Economics, 2010-04-04T20:05:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/end-of-the-road-for-the-car-scrappage-scheme http://www.tutor2u.net/blog/index.php/economics/comments/end-of-the-road-for-the-car-scrappage-scheme#When:18:48:00Z Today marks the end of the UK government’s car scrappage scheme. The scheme offered drivers of cars at least 10 years old £2,000 off the price of a new vehicle with half of the money is paid by the government and half by the carmaker in question. Over the course of the scheme is estimated that the scrappage initiative has been responsible for about a fifth of all new UK car registrations.  And there seems little doubt that the consumer subsidy has provided a shot in the arm for a car industry affected badly by the global financial crisis and subsequent recession. Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders is quoted as saying that it had provided a “much-needed stimulus for the UK motor industry”. A2 Micro, AS Micro, Business Economics, Cycles and Shocks, Aggregate Demand, Consumer Spending, Government Intervention, Subsidies, Macroeconomic Policies, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Teaching of Economics, OCR F585 Economics, Transport Economics, UK Economy, Credit Crunch, 2010-03-31T18:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/geely-buys-volvo-a-fresh-sign-of-the-march-of-chinese-fdi http://www.tutor2u.net/blog/index.php/economics/comments/geely-buys-volvo-a-fresh-sign-of-the-march-of-chinese-fdi#When:22:59:00Z Chinese car maker Geely has signed a deal to buy Volvo from US car giant Ford for $1.8bn (£1.2bn). It is fresh evidence of the foreign direct investment being made by Chinese companies in a bid to buy access to European markets and access Western technology. This BBC news video provides some background. In 2009 China overtook the US as the world’s largest car market. A2 Macro, AS Macro, Emerging Economies, China Economy, Economic Growth, European Economy, Teaching of Economics, Transport Economics, 2010-03-29T22:59:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/nissan-turns-over-a-new-leaf http://www.tutor2u.net/blog/index.php/economics/comments/nissan-turns-over-a-new-leaf#When:12:14:00Z This is a hugely important announcement and boost for the North east economy whose long term future must be built on competitive advantages in the emerging low-carbon industries of tomorrow. The decision to manufacture the lithium-iron batteries used in the Leaf electric cars is the key to the employment creation effects of the new investment by Nissan. Note too the role played by government financial support. The investment is backed by a £20.7m government grant and up to £220m from the European Investment Bank. The Nissan car plant is the most productive in the European Union. The plant opened in 1984 and has so far built 5.6 million cars. It produced a third of all cars built in Britain in 2009.  Digby Jones sings the praises of businesses such as Nissan in this super interview on the Politics programme a few days ago. A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Demand, Capital Investment, Economic Growth, European Economy, GCSE Economics, Government Intervention, Subsidies, Manufacturing Industry, OECD Economies, Teaching of Economics, Transport Economics, UK Economy, Regional Economics, Recession Watch, Unemployment, 2010-03-18T12:14:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/cbi-call-for-changes-to-work-patterns-to-cut-congestion http://www.tutor2u.net/blog/index.php/economics/comments/cbi-call-for-changes-to-work-patterns-to-cut-congestion#When:12:04:00Z The Confederation of British Industry has a new report out on the costs of the congested road and motorway network in the UK. Road pricing is one of their favoured options and they emphasise too the importance of changes to work patterns including flexible hours and more home working as a way of reducing peak-time congestion. “With vehicle traffic having grown by a quarter in just 20 years, road congestion now costs the economy an estimated £7-8bn a year, which is likely to more than double by 2025 unless more action is taken” The CBI report can be downloaded from here AS Micro, Business Economics, Cost Benefit Analysis, Market Failure, Transport Economics, 2010-03-18T12:04:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/take-off-for-air-asia-finding-opportunities-in-a-recession http://www.tutor2u.net/blog/index.php/economics/comments/take-off-for-air-asia-finding-opportunities-in-a-recession#When:14:55:00Z I have heard many presentations from business folk over the years and the last two years of our embryonic Entrepreneurship Society have been memorable for some superb talks. None has quite matched the impact and the quality of a talk given by Tony Fernandes, Founder and CEO of Air Asia last Thursday night. A2 Micro, AS Micro, Business Economics, Competitive Markets, Management Issues, Teaching of Economics, Transport Economics, 2010-02-13T14:55:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/2009-a-desperately-difficult-year-for-airlines http://www.tutor2u.net/blog/index.php/economics/comments/2009-a-desperately-difficult-year-for-airlines#When:16:40:00Z This BBC news article highlights some of the key economic challenges facing the global airline industry as we move further in 2010. IATA reports that world airline passenger traffic dropped by 3.5% from a year earlier, while freight traffic fell 10.1% as the downturn hit demand. Losses have mounted and the industry continues to have to weather many uncertainties such as the likely strength of a rebound in global tourism, freight and business travel and the volatility of aviation fuel costs. This in the week when Japanese Airlines filed for bankruptcy. IATA has forecast that airlines will lose $5.6 billion (£3.5 billion) on a net basis this year after losing $11 billion in 2009. A2 Micro, AS Micro, Market Equilibrium and Price, Elasticity of Demand, Teaching of Economics, Transport Economics, Recession Watch, 2010-01-27T16:40:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/is-hitch-hiking-the-most-carbon-efficient-form-of-transport http://www.tutor2u.net/blog/index.php/economics/comments/is-hitch-hiking-the-most-carbon-efficient-form-of-transport#When:10:46:00Z Justin Rowlatt from Newsnight thinks it might be - with a little help from Simon Calder of the Independent and the team at More or Less - more here AS Micro, Environmental Economics, Teaching of Economics, Transport Economics, 2010-01-17T10:46:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/assorted-links-31-dec-2009 http://www.tutor2u.net/blog/index.php/economics/comments/assorted-links-31-dec-2009#When:07:42:00Z 1/ Firms move production back to UK (BBC news) based on a new report from the Engineering Employers Federation 2/ Japan pledges to end economic spiral (The Times) - The ten-year plan would see Japan shift some of the focus of its giant economy, with new emphasis placed on environmental technology, science, tourism and medical care. 3/ Economics emerges from the rubble in fragile state (Larry Elliot in the Guardian) 4/ Freakonomics meets More or Less (BBC Radio 4) - Tim Harford gets together with Steve Levitt for a special edition of the excellent Radio 4 programme 5/ Counting the cost of high speed trains (BBC Global Business)  - how large are the economic and environmental benefits of investment in new high speed trains? A2 Macro, A2 Micro, AS Macro, AS Micro, Business Economics, Cost Benefit Analysis, Economic Growth, Economics of Technology, Manufacturing Industry, Teaching of Economics, Transport Economics, UK Economy, 2009-12-31T07:42:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/structural-decline-in-russian-motoring http://www.tutor2u.net/blog/index.php/economics/comments/structural-decline-in-russian-motoring#When:17:33:00Z Here are two revealing BBC news videos about the decline in Russian car production and the economic and social challenges that result from it. In the first we visit a town heavily dependent on car manufacturing and one desperately seeking to generate new small businesses as part of a structural change in the local economy. In the second a report on the financial crisis facing loss making vehicle maker Lada and demands for state support to keep open an industry that perhaps should have closed years ago. The video is memorable partly for the continued use of the hammer to put the finishing touches to new cars!  How can a business survive by employing 100,000 people but making only 130,000 cars a year? A2 Macro, AS Macro, Emerging Economies, Russia Economy, Business Economics, Government Intervention, Manufacturing Industry, Transport Economics, 2009-11-22T17:33:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/airlines-scramble-to-find-new-revenue-streams http://www.tutor2u.net/blog/index.php/economics/comments/airlines-scramble-to-find-new-revenue-streams#When:16:03:00Z The days of the all in one ticket price - a simple means of flying from A to B are looking like a distant memory. The global aviation industry is set to lose up to $30bn this year and with average ticket prices continuing to decline and capacity utilization falling, the airlines are falling over themselves to find extra ways of getting passengers to part with their cash. New wheezes include asking passengers to pay for the right to choose a seat, together with the growth of charges for baggage check-in and meals on board. If you are willing to pay in advance, travel light, book online and check-in online in a seat of the airline’s choice, you can still find very cheap flights. But the extras amount to a premium on choice and flexibility - I guess this is an example of the hurdle model of price discrimination - BA has launched a second-bag check-in fee on some of its flights and a reservation fee for passengers wanting to book particular seats more than 24 hours in advance of flight time. Day by day it is starting to resemble a budget airline in tactic as well as consumer goodwill. I booked a return flight to Hong Kong today with Cathay Pacific - no tedious optional extras - what a refreshing change! This BBC video is good on the new a la carter revenue policies of airlines. A2 Micro, AS Micro, Business Economics, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Transport Economics, 2009-10-07T16:03:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-trade-impact-of-car-scrappage http://www.tutor2u.net/blog/index.php/economics/comments/the-trade-impact-of-car-scrappage#When:10:14:00Z As expected, the UK government has announced an extension to the car scrappage scheme which will expand the consumer subsidy to another 100,000 cars. The ‘clash for clunkers’ scheme has at least helped to stabilise domestic car production but four fifths of the new cars sold in the UK are imported from overseas. According to the Guardian “For the year to date, production has declined by 44.6%. But the slight improvement recorded last month has prompted some carmakers to hope that the slump is bottoming out.” So the direct impact on UK car assembly plants is smaller than we might think. Factor in though the multiplier effects on the suppliers of car parts and the boost to retail and distribution businesses. Stephanie Flanders is on excellent form in her latest Stephanomics blog. She argues that the much larger German car scrappage scheme may have had an even bigger effect on our own producers than the UK government’s modest version. The German subsidy is worth ten times that of the UK and around 40% of German car sales last year were imports. More here. A2 Macro, AS Macro, Business Economics, Government Intervention, Subsidies, Manufacturing Industry, Transport Economics, UK Economy, Recession Watch, 2009-09-29T10:14:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/second-hand-car-market-law-of-unintended-consequences http://www.tutor2u.net/blog/index.php/economics/comments/second-hand-car-market-law-of-unintended-consequences#When:14:50:00Z Drive a new car off the forecourt and you it immediately loses a sizeable slice of its value. And, under normal market conditions, second-hand cars lose value by about 15 per cent a year, but this year they are increasing in value – by an average of £600 so far this year – mainly due to a shortage of supply caused by the government’s scrappage scheme. AS Micro, Government Intervention, Government Failure, Subsidies, Market Equilibrium and Price, Elasticity of Demand, Price Mechanism in Action, Transport Economics, UK Economy, 2009-09-13T14:50:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/volkswagen-looks-to-china-on-the-road-to-being-the-biggest-car-maker http://www.tutor2u.net/blog/index.php/economics/comments/volkswagen-looks-to-china-on-the-road-to-being-the-biggest-car-maker#When:10:32:00Z Volkswagen has a hugely ambitious long term aim - by 2018 it wants to overtake Toyota as the world’s biggest car manufacturer. With this in mind it makes clear sense to focus capital investment in countries where the projected growth of demand for new vehicles is strongest. The relatively mature markets of Western Europe and North America look less attractive compared to emerging economies such as China and Brazil. This week Volkswagen has announced a Euro 4 billion plan to expand capacity and output in China. In the short term the commercial need is to have sufficient capacity in place to meet the surge in demand brought about by the deep cuts in taxes on new cars introduced by the Chinese government as part of its economic stimulus programme - there has been a temporary cut in the purchase tax on cars with 1.6 liter engines to 5%. In the first half of 2009 Volkswagen has already sold over 620,000 cars in China! Long term however the market demand for automobiles is forecast to rise by more than 10% per annum. Volkswagen has engineered joint ventures with Chinese manufacturers to build cars at plants in Nanjing and Chengdu - it is not beyond the realms of possibility that within eight years, it could be assembling over two million cars a year in China - a staggering volume of production and one designed to maximise the economies of large scale production. More here from the BBC news site AS Macro, AS Micro, Emerging Economies, Brazil Economy, China Economy, Business Economics, Economies of Scale, Cycles and Shocks, Aggregate Demand, Capital Investment, Manufacturing Industry, Transport Economics, 2009-09-13T10:32:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/mclarens-new-super-sports-car-income-elasticity-and-status-races http://www.tutor2u.net/blog/index.php/economics/comments/mclarens-new-super-sports-car-income-elasticity-and-status-races#When:18:34:01Z We are told that this new product has been forty-five years in the making. McLaren has unveiled its new super sports car, designed using Formula 1 technology. This BBC video offers a sneak preview of the new car and it might be a good one to use when discussing needs and wants! Or the income elasticity of demand for luxury products and the price premium for motorists already wetting themselves in anticipation of getting behind the wheel! Given the relative absence of economies of scale in production, you might get students to estimate the likely introductory price in the market? At a pinch I would price it between £175,000 and £200,000 but then again I am happy to potter around in a nine year old Citroen that is just a year from the knackers yard. A2 Micro, AS Micro, Business Economics, Competitive Markets, Economic Growth, Economics of Technology, Market Equilibrium and Price, Elasticity of Demand, Nature of Demand, Transport Economics, 2009-09-10T18:34:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/full-speed-ahead http://www.tutor2u.net/blog/index.php/economics/comments/full-speed-ahead#When:09:03:01Z Yesterday, Network Rail proposed a new £34 bn high-speed railway line linking Scotland and London by 2030, which would get passengers from London to Manchester in an hour; and London to Glasgow in two and a quarter hours. AS Macro, AS Micro, Cost Benefit Analysis, Cycles and Shocks, Aggregate Demand, Capital Investment, Transport Economics, UK Economy, Regional Economics, 2009-08-27T09:03:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/signs-that-scrappage-is-driving-demand http://www.tutor2u.net/blog/index.php/economics/comments/signs-that-scrappage-is-driving-demand#When:22:08:00Z Just over one fifth of new new-car registrations in the UK are being attributed to the government-backed scrappage incentives, according to the Society for Motor Manufacturers and Traders. Hyundai Motor Co led the way in the sales charts for July. The UK version of the car scrappage scheme offers motorists £2,000 in discount on new vehicles when they trade in vehicles that are more than 10 years old. For the moment it is private buyers who are driving sales higher. My local Citroen dealer confirmed to me today that their sales have been boosted by the consumer discount - which is part financed by the government and by vehicle manufacturers. As our charts show new car registrations have moved higher and car production - affected greatly by winter plant shut-downs and extended holidays - is now showing signs of recovery. Sales and output for 2009 will be down as a whole - but perhaps the worst is now over? More on the impact of the car scrappage scheme here from the BBC news site Together with an excellent background section on the challenges facing the car industry during this downturn. A2 Macro, AS Macro, Business Economics, Government Intervention, Subsidies, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Transport Economics, Recession Watch, 2009-08-10T22:08:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-snapshot-hedging-the-fuel-price http://www.tutor2u.net/blog/index.php/economics/comments/economics-snapshot-hedging-the-fuel-price#When:11:01:00Z Hedging is a way of reducing uncertainty over the future path of volatile commodity prices such as the cost of fuel. One the most important decisions that an airline can take is the extent to which it uses hedging to lock in the price of a barrel of kerosene for a period of six or twelve months. Ryanair provides a good example of how this can have a decisive effect on profitability. Late in 2008 Ryanair was hedged into paying the equivalent of $125 a barrel for kerosene just as the world price price of oil was collapsing to below $40 a barrel - the result was higher operating costs and a Euro 150 million hit on profits. For 2009 around four-fifths of Ryanair’s fuel requirements are locked in at $62 a barrel which with oil prices nudging up towards $70 a barrel will give the airline much needed breathing space as the recession affects demand for seats and forces many airlines to cut prices still further to maintain a profitable level of load-factor (the percentage of seats on each flight that are filled). *Ryanair is now Europe’s largest airline having overtaken Lufthansa and British Airways *In the last twelve months nearly 60 million passengers have flown with the airline *With a market capitalisation of £4.6 billion, Ryanair is larger than the German flag carrier and easily more than twice the size of BA. *Ryanair has a 28% stake in rival Irish airline Aer Lingus and has tried several times to take it over - so far without success! A2 Micro, AS Micro, Business Economics, Competitive Markets, Oil and Gas, Market Equilibrium and Price, Nature of Supply, Price Volatility, Transport Economics, 2009-07-28T11:01:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-trivia-losses-in-global-aviation http://www.tutor2u.net/blog/index.php/economics/comments/economics-trivia-losses-in-global-aviation#When:13:46:01Z The global aviation industry is in crisis IATA forecasts that airlines will lose $4.7bn in 2009 International passenger traffic is falling at an annual rate of 10% Fares for First and Business class passengers have dropped by as much as 40% this year In the decade to the end of 2007 airlines globally generated a revenue of $3.6 trillion and made a net profit of zero Source: Wall Street Journal A2 Micro, AS Micro, Global Economy, Credit Crunch, Transport Economics, Quirky Trivia, 2009-07-23T13:46:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/1bn-programme-to-electrify-the-great-western-mainline http://www.tutor2u.net/blog/index.php/economics/comments/1bn-programme-to-electrify-the-great-western-mainline#When:10:38:00Z This Times article covers the announcement of a major investment in the rail network - £1bn of extra spending to electrify the Great Western Mainline. About 300 miles (480km) of line will be upgraded at a cost of £1.1billion, including tracks from Didcot to Oxford, Reading to Newbury and Liverpool to Manchester. Lord Adonis the current Transport Minister is quoted as saying that the scheme will “pay for itself over a 40 year time period”. The investment might make a good case study for cost benefit analysis: Students might generate a series of advantages / disadvantages and then discuss how they divide into private and social costs and benefits. A2 Macro, AS Macro, Cost Benefit Analysis, Cycles and Shocks, Aggregate Demand, Capital Investment, Environmental Economics, Government Intervention, Transport Economics, UK Economy, Regional Economics, 2009-07-23T10:38:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/scrappage-scheme-makes-tracks http://www.tutor2u.net/blog/index.php/economics/comments/scrappage-scheme-makes-tracks#When:08:43:00Z It looks like the car scrappage scheme may be starting to bring about a softening in the decline in market demand for new cars. Over 85,000 new orders have been taken under the terms of the subsidy which affects cars more than ten years old. Scrap yards are benefitting from a boost in demand for their services and the car industry (naturally) is looking for an extension to the funding given to the scheme. This BBC video looks at some of the early impact - has the car subsidy given much of a shot in the arm for the British car industry? And this article looks at the pros and cons of car subsidies. AS Micro, Business Economics, Government Intervention, Subsidies, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Transport Economics, 2009-07-13T08:43:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/air-passenger-duty-a-tax-too-far http://www.tutor2u.net/blog/index.php/economics/comments/air-passenger-duty-a-tax-too-far#When:08:23:00Z Airlines and trades unions representing those employed in the aviation industry are lobbying the British government for a rethink about the proposed increases in air passenger duty (APD). The duty is currently £10 for short-haul flights and £40 for longer journeys, costs which airlines pass on to passengers. Under the government’s plans, the tax will rise to £85 for Australia and £60 to the US by November next year. The revised APD will be based on four bands set at intervals of 2,000 miles from London. This BBC news article provides a useful background on some of the key economic and social arguments relating to the duty and the views of different stakeholders. A2 Micro, AS Micro, Environmental Economics, GCSE Economics, Government Intervention, Indirect Taxes, Market Failure, Externalities, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Price Mechanism in Action, Transport Economics, Fiscal Policy, 2009-07-11T08:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/east-coast-rail-line-is-nationalised http://www.tutor2u.net/blog/index.php/economics/comments/east-coast-rail-line-is-nationalised#When:08:17:00Z The profitable East Coast rail line north of Newcastle heading into Northumberland towards Berwick upon Tweed is one of the most glorious on the entire British rail network. There are stunning views looking out to Holy Island, Bamburgh Castle and the delightful village of Alnmouth. And as trains pull out of Durham there is a fantastic panorama featuring Durham Cathedral, a view to take the breath away whatever the weather. Even the most hardened commuter is tempted away from their laptop to soak up the view. It is unlikely that senior executives at National Express will be in the mood to savour these delights since the government is taking the East Coast rail line that runs from London to Edinburgh into public ownership.   A2 Micro, AS Micro, Business Economics, Monopoly, Competition Policy, Government Intervention, Transport Economics, Recession Watch, 2009-07-01T08:17:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/hidden-pollution-and-our-lung-capacity http://www.tutor2u.net/blog/index.php/economics/comments/hidden-pollution-and-our-lung-capacity#When:14:07:00Z David Shukman reports on research that finds that microscopic particles of pollution from road traffic is damaging the lung capacity of people living in pollution hotspots - young people in particular are particularly vulnerable to this invisible mist pollution. A superb video to show when discussing some of the negative externalities of traffic pollution. AS Micro, Environmental Economics, Market Failure, Externalities, Transport Economics, 2009-06-23T14:07:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/cost-benefit-analysis-and-new-rail-lines http://www.tutor2u.net/blog/index.php/economics/comments/cost-benefit-analysis-and-new-rail-lines#When:09:23:00Z It is refreshing to read of a possibility of an expansion of the UK rail network. This is not simply an emotional response to the beauty of steam, but because for decades now we have underestimated the economic and social benefits from a well integrated and efficient rail network. The Association of Train Operating Companies has released a report urging new investment in the UK rail network to include opening up perhaps fourteen new lines in the years ahead. According to ATOC, today’s rail network carries 30% more passengers than it did 45 years ago on a network considerably smaller than it was then. Using their own cost benefit analysis - which gives great weight to possible agglomeration economies of scale, they estimate that in England alone there are 14 places where there could be a positive business case for a new line to provide access to communities each with a population of 15,000 or more but which are currently not served by rail. Here is the link for colleagues who want to download the report and the accompanying cost benefit analysis. It could form the basis for an excellent case study. A2 Micro, AS Micro, Cost Benefit Analysis, Cycles and Shocks, Aggregate Demand, Capital Investment, Transport Economics, 2009-06-16T09:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/transport-economics-crossrail-construction-under-way http://www.tutor2u.net/blog/index.php/economics/comments/transport-economics-crossrail-construction-under-way#When:16:49:00Z Construction work has begun on the biggest transport project since the Channel Tunnel - London’s £16bn Crossrail… Transport Economics, 2009-05-28T16:49:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/grey-skies-for-ba-as-revenues-fall-and-losses-take-off http://www.tutor2u.net/blog/index.php/economics/comments/grey-skies-for-ba-as-revenues-fall-and-losses-take-off#When:09:18:00Z British Airways announces a record loss and scraps its dividend. BA has announced some terrible financial figures. Having made a profit in excess of £900m last year, BA this week reported a loss before tax of £401m for the year to 31 March, after seeing its results hit by a weak pound and higher fuel costs. The airline spent more than £3bn on fuel in the last year - it has hit by being fully hedged at an oil price well above $100 a barrel. The falling pound is also a headache for BA executives as the oil it buys is priced in dollars.   A2 Micro, AS Micro, Business Economics, Management Issues, Cycles and Shocks, GCSE Economics, Market Equilibrium and Price, Nature of Demand, Inter-related Markets, Transport Economics, UK Economy, Recession Watch, 2009-05-24T09:18:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/barak-sees-mileage-in-fuel-efficiency-targets http://www.tutor2u.net/blog/index.php/economics/comments/barak-sees-mileage-in-fuel-efficiency-targets#When:18:57:00Z Here is a good example of government intervention through regulation “Under the proposed new standards, manufacturers must reach an average of 39 miles per gallon for passenger cars by 2016, and 30 miles per gallon for light lorries…The increase in mileage is to be introduced gradually, and is expected to add $1,300 to the cost of a vehicle by the time it is fully implemented in 2016.” In a similar vein, the EU has progressively cut the maximum Co2 emissions per km for all passenger cars.   1. Think about how this type of regulation will affect producers both in the short and the long term.   2. How will this affect consumers? Is it (a) effective (b) does it promote efficiency? (c) Is it equitable?   3. What are some of the possible macroeconomic effects of such an intervention? Regulation is an alternative to taxation and/or subsidy ... or should we regard it as a complement? Part of a mix of policies needed to address environmental issues and targets? A2 Micro, AS Micro, Business Economics, Cost Benefit Analysis, Environmental Economics, Government Intervention, Regulation, Market Failure, Externalities, Transport Economics, US Economy, 2009-05-19T18:57:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/servicing-the-car-makers http://www.tutor2u.net/blog/index.php/economics/comments/servicing-the-car-makers#When:05:47:00Z Our motor vehicle industry appears to be in a fragile state, rarely a day goes by without one manufacturer or another locked in talks with the government about loan guarantee schemes or other emergency measures designed to prop up production in a sector hit by falling sales and the challenge of an industry with huge global capacity. The Society of Motor Manufacturers and Traders estimate that nigh on 800,000 people are employed in the motor vehicle industry in the UK. But how many of them have jobs on the production line itself, physically assembling the vehicles? The answer is smaller than you might think. A2 Micro, AS Micro, Business Economics, Economies of Scale, Management Issues, Global Economy, Government Intervention, Subsidies, Market Equilibrium and Price, Nature of Supply, Transport Economics, UK Economy, 2009-05-12T05:47:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/not-so-heavy-laden http://www.tutor2u.net/blog/index.php/economics/comments/not-so-heavy-laden#When:19:08:00Z Shipping has taken a major hit because of the recession and this piece to camera from Adam Mynott of the BBC taken at the port of Rotterdam is superb on the challenges facing the shipping industry and the risks of a bloodbath for some of the smaller container businesses. I used to play hockey with Adam when he played at Harrogate HC - great to see a former team mate continuing to do so well at the BBC AS Micro, Transport Economics, Recession Watch, 2009-04-12T19:08:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/global-airlines-nudge-towards-carbon-emissions-trading http://www.tutor2u.net/blog/index.php/economics/comments/global-airlines-nudge-towards-carbon-emissions-trading#When:17:58:00Z In 2012 European airlines are scheduled to be included in the carbon emissions trading scheme for the first time. Aviation is a industry responsible for 650 million tonnes of CO2 annually - around two percent of global greenhouse gas pollution but this share is expected to rise in the years ahead and the industry has been under sustained pressure from stakeholders including the EU Commission and green pressure groups to do something to tackle carbon emissions. The airlines have complained about being included in the EU scheme - they complain that participation will damage their competitiveness during a difficult time for airline businesses. Swiss International Airlines chief executive Christoph Franz has argued that including airlines in the EU-ETS could actually lead to more greenhouse gas emissions as airlines sought to fly around EU airspace. But without signs of an active commitment to reducing their emissions, the industry may well find that it is subject to even tougher regulation in the years ahead and/or a specific pollution tax on aviation fuel as a means of ‘making the polluter pay’. This week four of the world’s biggest airlines have supported a global scheme to curb carbon emissions - they are Air France/KLM, British Airways, Cathay Pacific, Virgin Atlantic together with the under-fire airport operator BAA. The Aviation Global Deal Group is pushing for a global cap on aviation emissions to take effect in 2013 when the new climate deal to replace the Kyoto Protocol must be in place. A UN body would be charged with auctioning the C02 allowances with some of the revenue earmarked for financing lower carbon investments in developing countries and some to help fund development of sustainable second-generation biofuels for use in aviation. Watch this airspace .... this is a really important aspect of the climate change policy domain within the European Union. A2 Micro, AS Micro, Environmental Economics, European Economy, Government Intervention, Teaching of Economics, Transport Economics, 2009-04-10T17:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/electric-cars-subsidise-the-consumer-or-producer http://www.tutor2u.net/blog/index.php/economics/comments/electric-cars-subsidise-the-consumer-or-producer#When:09:33:00Z We can expect a battery of articles in the days and weeks ahead on government incentives to grow the UK electric car market. Gordon Brown is reported as favouring a sizeable subsidy for consumers to purchase electric vehicles - according to the FT, buyers of electric cars will be offered discounts of more than £2,000 – paid for by the state – under plans by Gordon Brown to make Britain a leading centre for manufacturing “greener” vehicles.   A2 Micro, AS Micro, Business Economics, Economies of Scale, Cost Benefit Analysis, Economic Growth, Economics of Technology, Environmental Economics, Government Intervention, Subsidies, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Transport Economics, 2009-04-09T09:33:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/buyers-market-drives-new-car-prices-below-second-hand http://www.tutor2u.net/blog/index.php/economics/comments/buyers-market-drives-new-car-prices-below-second-hand#When:09:14:00Z This seems to defy microeconomic logic but it is a sign of how the balance of power in the new car market has switched to the buyer rather than the seller. New car registrations remain almost a third lower than at the same time last year and car dealerships are so desperate to unload stocks and generate much needed cash flow that their deep discounts on the prices of new or nearly new cars have driven the prices of some models below that of prices for the same vehicles in the second hand market. A2 Micro, AS Micro, Business Economics, Cycles and Shocks, Aggregate Demand, Consumer Spending, GCSE Economics, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Transport Economics, 2009-04-09T09:14:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/qa-what-is-a-scrappage-subsidy-and-will-it-work-in-the-uk http://www.tutor2u.net/blog/index.php/economics/comments/qa-what-is-a-scrappage-subsidy-and-will-it-work-in-the-uk#When:18:33:00Z A scrappage subsidy is a “pay-to-scrap” scheme where a government offers a financial incentive to car buyers if they scrap a car that has reached a specified age and in its place they are offered a payment towards the cost of a new vehicle. Germany and France both offer scrappage subsidies to consumers and there is a growing number of voices from inside the UK business community and motor vehicle industry clamouring for one to be launched in the UK. The Retail Motor Industry Federation and the Society of Motor Manufacturers and Traders (SMMT) are at the head of the queue lobbying for a scrappage scheme to be introduced as soon as possible. Economics Q&A, Q&A - Market Failure, Q&A - Markets, AS Macro, AS Micro, Cycles and Shocks, Aggregate Demand, Consumer Spending, Government Intervention, Subsidies, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Transport Economics, UK Economy, 2009-04-07T18:33:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/bus-oligopoly-under-scrutiny http://www.tutor2u.net/blog/index.php/economics/comments/bus-oligopoly-under-scrutiny#When:10:52:00Z The Office of Fair Trading has announced an investigation into the alleged lack of competition in local bus services. Years after the deregulation of bus services, the market has become concentrated in the hands of just a few main operators. Announcing the launch of a review, the OFT said that “This sector has become increasingly concentrated by takeovers, with nearly two-thirds of services now controlled by five large operators. The study will consider whether concentration in the market has a positive or negative impact on the prices consumers pay and the services they receive, and whether or not there is competition between operators bidding for tendered services.” The five biggest local bus operators are Arriva, First Group, Go Ahead Group, National Express and Stagecoach. Arriva has approximately 20 per cent of the London market under contract to Transport for London. Outside of London Arriva runs more than 5,000 buses and has built up an approximate market share of 15 per cent. Expect a report to emerge in the autumn about the extent to which the competition authorities may have to intervene to provide greater safeguards against the dimunition of competition in local bus markets where often one firm has emerged as a dominant force. Are consumers’ interests best served by unfettered competition between bus service providers on the road? A2 Micro, AS Micro, Business Economics, Oligopoly, GCSE Economics, Government Intervention, Transport Economics, 2009-04-06T10:52:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/waitrose-provides-a-welcome-break http://www.tutor2u.net/blog/index.php/economics/comments/waitrose-provides-a-welcome-break#When:10:17:00Z What do you use a motorway service area for? A comfort break? Perhaps a chance to check emails or phone ahead to your destination? Perhaps a night’s break before continuing your journey - or maybe a chance to avoid the supermarket queues at home and pick up some groceries on the way home? Waitrose is entering into a franchise agreement with Welcome Break to open up food stores in some of its motorway service stations. It is another sign of how food retailers are looking to extend their reach away from the superstore and also how businesses are responding to our changing needs and wants when we set off on long haul drives on our major roads. A2 Micro, AS Micro, Business Economics, Oligopoly, Market Equilibrium and Price, Transport Economics, 2009-04-03T10:17:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/fasten-your-seatbelts-scrappage-subsidy-in-germany http://www.tutor2u.net/blog/index.php/economics/comments/fasten-your-seatbelts-scrappage-subsidy-in-germany#When:15:44:00Z The Times reports that new vehicle sales are soaring in Germany partly as a result of their car scrappage subsidy. “Germany is offering €2,500 for drivers who have cars that are over nine years old to scrap them and buy new ones. The scheme is to be extended until the end of the year after fears that the programme would run out of cash by the end of this month because it has proved so popular.” More here The odds on this being introduced in the UK budget on the 22nd April must be pretty high! If the scrappage scheme is as powerful as it seems to have been in Germany it will provide a big shot in the arm to the embattled vehicle industry. A2 Macro, AS Macro, Government Intervention, Subsidies, Transport Economics, 2009-04-02T15:44:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/taxi-licences-and-excess-supply http://www.tutor2u.net/blog/index.php/economics/comments/taxi-licences-and-excess-supply#When:14:14:00Z Taxi drivers in Reading are facing an uncertain future after the council increased the number of taxi licences from 120 to 180, despite falling demand as a result of the economic downturn. A local association representing taxi drivers the Reading Taxi Drivers’ Association says that this move is highly dangerous, with cab drivers having to wait on average over an hour for a fare, resulting in more hours being worked to take home the same pay. In effect a cut in their real wage rate. AS Micro, GCSE Economics, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Price Mechanism in Action, Transport Economics, 2009-03-25T14:14:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/airports-for-sale-any-bidders http://www.tutor2u.net/blog/index.php/economics/comments/airports-for-sale-any-bidders#When:20:01:00Z The confirmation from the Competition Commission that Ferrovial will be required to sell three of their UK airports represents one of the most important competition rulings of recent years. A2 Micro, AS Micro, Business Economics, Monopoly, Competition Policy, Transport Economics, 2009-03-20T20:01:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/qa-is-roadbuilding-an-effective-way-of-reducing-unemployment http://www.tutor2u.net/blog/index.php/economics/comments/qa-is-roadbuilding-an-effective-way-of-reducing-unemployment#When:16:17:00Z Q&A: To what extent would a major road building project by the government be an effective way for the government to tackle unemployment? Road to recovery or bridge to nowhere? Road-building projects would count as capital investment spending and (if financed by borrowing) a net injection of demand into the circular flow of income and spending. The question mentions a major programme hinting at projects that together could amount to many millions of pounds. The question also invites the student to focus on whether this is an effective way to tackle unemployment and so a good answer will go back to the main causes of people being out of work and address how a spending programme might tackle this. Economics Q&A, Q&A - Macro, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, GCSE Economics, Transport Economics, UK Economy, Unemployment, Keynesian Economics, 2009-02-28T16:17:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/premum-flyers-go-awol http://www.tutor2u.net/blog/index.php/economics/comments/premum-flyers-go-awol#When:19:58:00Z The front seats of many aircraft have been rather quiet and empty in recent months…. A2 Micro, AS Micro, GCSE Economics, Market Equilibrium and Price, Nature of Demand, Transport Economics, 2009-02-07T19:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/giant-car-park http://www.tutor2u.net/blog/index.php/economics/comments/giant-car-park#When:14:44:00Z Following on from my blog yesterday on falling road traffic in the UK, there was also an article in The Times yesterday looking at the every expanding car park that is emerging at Southampton docks! More than 12,000 new cars are parked in rows at the dock covering acres of land. Most of them are Hondas being stored until exports pick up. There are also Range Rovers, Land Rovers, Jaguars, Mini Coopers and BMWs stored in “multideck” car parks. The Hondas represent two weeks of output from the company’s factory in Swindon, which is on a four month shutdown. The local economy in Southampton depends upon the three Cs- cars, containers and cruises. It is home to Britain’s second largest container terminal as well as the British fleet of P & O and Cunard. Container business was down 10% in 2008. The big cruise ships on currently out on their round-the-world voyages and will not be returning for a month or two. Their current docking berths are occupied by cargo ships, each paying £5000 a week for mooring. Before the credit crunch Southampton was handling 42 million tonnes of cargo a year, including one million containers at the recently renamed Dubai World Port Terminal. Nearly all imports come from the Far East. The collapse of major importers such as Woolworths has been “pretty disastrous”. Recently arrived and sitting on the dockside is one of the 27 Olympic trains being imported from Hong Kong for London 2012.  The flow of manufactued products is now nearly all one way highlighting yet further the decline of UK manufacturing. For full article click here. Transport Economics, UK Economy, Regional Economics, 2009-02-07T14:44:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/road-traffic-falling http://www.tutor2u.net/blog/index.php/economics/comments/road-traffic-falling#When:19:31:01Z An article in today’s Times highlights that road traffic has fallen for the first time in 30 years after rising fuel prices and recession has prompted millions of drivers to leave their cars at home. Transport Economics, UK Economy, 2009-02-06T19:31:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a-collapse-in-uk-vehicle-production http://www.tutor2u.net/blog/index.php/economics/comments/a-collapse-in-uk-vehicle-production#When:11:26:36Z Car manufacturing and commercial vehicle production in the UK slumped to its lowest level for over 21 years last month as the sector suffers from the squeeze on credit and the broader economic recession. A2 Macro, AS Macro, Cycles and Shocks, GCSE Economics, Government Intervention, Subsidies, Manufacturing Industry, Transport Economics, UK Economy, Recession Watch, Unemployment, Credit Crunch, 2008-12-19T11:26:36+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/global-downturn-leave-costly-empty-vessels http://www.tutor2u.net/blog/index.php/economics/comments/global-downturn-leave-costly-empty-vessels#When:21:17:13Z The global shipping industry is associated with huge internal economies of scale and where demand is closely tied to the fortunes of industries such as iron ore, oil and coal but also to the world economic cycle. Things are looking grim for shipping operators who have bet hundreds of millions of dollars on expanding a fleet for which there is now substantially less demand.   A2 Macro, A2 Micro, AS Macro, AS Micro, Emerging Economies, China Economy, Cycles and Shocks, Aggregate Demand, Capital Investment, Global Economy, Transport Economics, 2008-12-18T21:17:13+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/formula-one-and-external-economies1 http://www.tutor2u.net/blog/index.php/economics/comments/formula-one-and-external-economies1#When:18:48:58Z Honda’s decision to pull their team out of Formula One for next season and their desperate bid to find a buyer for operation provides an example of the shut down point in operation. The costs of putting two cars on the grid are simply staggering - in the order of £150 million per season. And with the global economic downturn hitting marketing budgets for many of the main sponsors of international sport, it is hardly surprising that the first of the major teams has decided that there is no business rationale for staying within the sport. So Honda was the first - who will be next? Answer - keep an eye on Williams. The Guardian/Observer carried a feature on this story at the weekend and included a nifty graphic which showed the location of the F1 team bases in the UK. McLaren are based in Woking but Renault, Honda, Williams and Red Bull are all clustered in the east Midlands. Partly this is an accident of history - namely the availability of disused airfields after the war. But the article is worth reading as an example of the external economies of scale that can be generated when a group of producers develop and expand in a relatively small geographical area. And as the extract below suggests, the negative multiplier effects that might occur if there is a wider retreat from F1 would be huge. “Most of the teams currently racing are based in the UK, along with their R&D operations. A whole network of industries, such as component suppliers, engineering and design firms, have sprung up in Britain, mostly in central England, to serve the sport both here and abroad.” “F1 also helps to support a far larger motorsport industry in the UK, for example rally car racing and all its associated industries. Estimates of the total number of jobs dependent on motorsport in the UK vary between 45,000 and 110,000. Geoff Goddard, professor in Motorsport Engineering Design at Oxford Brookes University, estimates that it accounts for 1 per cent of GDP, not insignificant when compared to car manufacturers, which represent about 5 per cent.” The remainder of the article is here   A2 Micro, AS Micro, Business Economics, Economies of Scale, GCSE Economics, Transport Economics, 2008-12-10T18:48:58+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/premium-passengers-may-be-deserting-ba http://www.tutor2u.net/blog/index.php/economics/comments/premium-passengers-may-be-deserting-ba#When:19:05:01Z BA has announced a slump in the number of premium passengers. The airline has taken the strategic decision note to slash prices for these customers because they are the most profitable segment of their operations. But last month the number of passengers fell by over 10 per cent contributing to a decline in the carrier’s load factor, which measures how full each plane is from 76.6% to 74.4%. Global economic turbulence forces BA and many other airlines into a series of difficult decisions. The income elasticity of demand for airline travel is likely to be strongly positive especially for luxury travel and on routes where there is genuine competition the price elasticity of demand is also likely to be a constraint on how high fares can be. In line with many other carriers, BA is cutting back services on some routes in a bid to reduce spare capacity and there have been several stories circulating in the media about BA entering into negotiations with the Australian carrier Qantas to form a giant international operator. A2 Micro, AS Micro, Business Economics, Market Equilibrium and Price, Elasticity of Demand, Nature of Demand, Transport Economics, 2008-12-03T19:05:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/bailing-out-detroit http://www.tutor2u.net/blog/index.php/economics/comments/bailing-out-detroit#When:18:40:00Z Leander McCormick-Goodhart looks at the perilous state of the US car market Surely nobody would allow Detroit, the backbone of American industry, to go bankrupt? In a last effort to prevent collapse of the US auto industry, Detroit is seeking a bailout. The CEOs of the big three automakers- GM, Ford and Chrysler- have appealed for a $25 billion package. Detroit has come under scrutiny, with accusations of mismanagement and the fundamental inability to reform itself. A2 Micro, AS Micro, Business Economics, Government Intervention, Subsidies, Transport Economics, Recession Watch, US Economy, 2008-11-25T18:40:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/further-rise-signalled-in-rail-fares http://www.tutor2u.net/blog/index.php/economics/comments/further-rise-signalled-in-rail-fares#When:14:17:01Z Regulated fares on for UK train services will rise again in the New Year as the government continues to seek a reduction in the subsidy paid by the taxpayer. In a good example of how regulatory agencies can have a direct effect on the cost of living, the price of regulated fares including season tickets will increase by six per cent from the start of 2009. Regulated fares are based on a set formula which limits increases to 1% above retail price index (RPI) inflation This BBC article looks at the background to the latest annual rise in the cost of travelling by train. The views of various stakeholders are flagged up – is the government right to squeeze the subsidy on passengers? Will higher fares be used to fund necessary investment in new rolling stock to boost the capacity of the system? Or will they serve only to keep people off rail services who are then prompted to make more use of their cars? AS Micro, Market Equilibrium and Price, Nature of Demand, Transport Economics, 2008-11-21T14:17:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/airline-mergers-and-competition-policy http://www.tutor2u.net/blog/index.php/economics/comments/airline-mergers-and-competition-policy#When:20:16:01Z Today we heard of another instance of consolidation in the European Union aviation industry. Lufthansa has agreed with Michael Bishop, founder of BMI to up their stake in the UK airline from 30 per cent to 80 per cent by buying out Sir Michael’s own equity stake in the business. Having acquired Swiss Airlines a while back Lufthansa continues to build a broader base for its operations, and in buying BMI it gains a well established mainly short-haul operator which has a significant number of scarce and hugely valuable landing slots from Heathrow. Lufthansa will emerge as the second-biggest carrier behind British Airways at Heathrow. Virgin has 3 percent of slots at Heathrow, the main airport for London; bmi has 12 percent and British Airways more than 40 percent. These land slots represent an important barrier to entry for airlines wanting the green light to expand their operations at chosen airports. Just as a few weeks back, when the government nudged Lloyds TSB into mating with embattled bank HBoS, at times of great economic and financial uncertainty, many mergers and takeovers are born of necessity rather than excessive optimism. And this creates a possible headache for the Competition Policy authorities who must make a judgement about whether to allow the integration to proceed without intervention or insist that the newly enlarged business divests some of their operations to ensure that the markets remain competitive. When the survival of a business is at stake and with it thousands of jobs, are the competition authorities more inclined to turn a blind eye? The answer is probably YES and there will be many more mergers in the airline industry before the current economic crisis is over. A2 Micro, Business Economics, Monopoly, Competition Policy, GCSE Economics, Transport Economics, 2008-10-29T20:16:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/why-are-the-car-companies-cutting-production http://www.tutor2u.net/blog/index.php/economics/comments/why-are-the-car-companies-cutting-production#When:10:25:01Z This week Nissan became the latest car manufacturer to announce a scaling back of production in the face of falling demand for new vehicles. Nissan, which is 44%-owned by Renault SA, of France plans to halt production at its huge plant in Sunderland for a fortnight and shorten production runs on its main assembly lines for a further three weeks in the lead up to Christmas. AS Macro, AS Micro, GCSE Economics, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Transport Economics, UK Economy, Credit Crunch, 2008-10-22T10:25:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/maintaining-profitability-in-the-airline-industry http://www.tutor2u.net/blog/index.php/economics/comments/maintaining-profitability-in-the-airline-industry#When:17:36:01Z My students have been tackling this assignment this week as part of their microeconomics course. (a) Many airlines have reported heavy losses and several have already gone into administration or filed for bankruptcy. Using cost and revenue diagrams, explain why airlines have been experiencing such losses (15) (b) Discuss the ways in which airlines can control their losses and continue to operate profitably in an industry where costs and revenues are unpredictable (15 marks) Answers to part (b) sort the wheat out from the chaff! A2 Micro, AS Micro, Business Economics, Price Discrimination, Market Equilibrium and Price, Elasticity of Demand, Nature of Supply, Price Volatility, Transport Economics, 2008-09-21T17:36:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/turbulent-times-for-airlines http://www.tutor2u.net/blog/index.php/economics/comments/turbulent-times-for-airlines#When:08:21:00Z Profit is a matter of opinion, cash is a matter of fact. Willie Walsh, CEO of British Airways has warned that up to thirty airlines could go bust by the end of 2008 as the industry continues to battle the most difficult trading conditions in a generation. This week XL collapsed and left thousands of passengers stranded. It is fast becoming a familiar story - in this case an integrated travel company and airline struggling to cope with the impact of rising fuel costs and the squeeze on demand caused by the credit crunch which has a decimating effect on their cash-flow. Paddy Power has been taking bets on the next airline or travel operator to fail! As today’s Independent reports: “The travel sector is particularly vulnerable at this time of year because operators have to begin paying suppliers, such as hoteliers just as the number of bookings begins to dwindle. This year, however, is especially difficult because the UK’s economic slowdown has begun to damage sales. At the same time, the costs of airlines and other travel companies remain high, primarily because of the hugely inflated price of jet fuel, which has doubled in a year.” BA’s own fuel costs have risen by nearly £1bn this year and the business has not been slow in introducing cost-saving measures. The company will cut scheduled flights during the winter, raise air fares, reduce capital spending on new aircraft and cut the payroll by not replacing staff who retire. Yesterday they announced too that they have decided to give managers and senior managers the option to apply for voluntary severance. Desperate times call for decisive action. No airline is safe. Alitalia looks to be the next in line - the airline has been on the ‘condition critical list’ for some time it has said that it is running of the bare cash needed to guarantee the fuel needed to pay for flights in the next few days.       A2 Micro, AS Micro, Business Economics, Transport Economics, 2008-09-13T08:21:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/signed-sealed-and-delivered-the-box-starts-a-journey http://www.tutor2u.net/blog/index.php/economics/comments/signed-sealed-and-delivered-the-box-starts-a-journey#When:05:20:00Z Containerisation has long been regarded as one of the key drivers of the current wave of globalisation. And now the BBC is putting together a series of video reports entitled The Box to demonstrate the impact that containerisation is having on our lives. Here Declan Curry finds out how the container box has transformed the way cargo moves around the world and in this report, Declan explains why such containers are so important in the modern world. The series is inspired by the recent book by Marc Levinson “The Box How the Shipping Container Made the World Smaller and the World Economy Bigger” and seems destined to produce and tremendously rich vein of news clips for us over the next year. Hat tip to John Richards for alerting me to this. A2 Macro, AS Macro, Economic Growth, GCSE Economics, Global Economy, Transport Economics, 2008-09-09T05:20:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/behavioural-change-behind-the-wheel http://www.tutor2u.net/blog/index.php/economics/comments/behavioural-change-behind-the-wheel#When:08:22:00Z I am about to hit the motorway this morning to return home for a new school year - so the front page of the Independent made for interesting reading. Trafficmaster has released figures which seem to indicate that congestion on Britain’s major roads is easing for the first time in over a decade. It offers firm evidence that motorists are responding to the effects of higher fuel prices when making their travel decisions. AS Micro, Transport Economics, Credit Crunch, 2008-08-27T08:22:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/baa-faces-break-up-after-competition-probe http://www.tutor2u.net/blog/index.php/economics/comments/baa-faces-break-up-after-competition-probe#When:16:28:00Z Michael O’Leary, CEO of Ryanair has called it the ‘best decision in the history of aviation ever.’ Colin Matthews, Chief Executive of BAA has slammed it as ‘flawed’. The Competition Commission has delivered a report which suggests that BAA should see three of its UK airports including two in London and one at either Edinburgh or Glasgow. A2 Micro, AS Micro, Business Economics, Monopoly, Government Intervention, Transport Economics, 2008-08-21T16:28:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/cheap-flights-elasticity-and-effective-demand http://www.tutor2u.net/blog/index.php/economics/comments/cheap-flights-elasticity-and-effective-demand#When:07:12:00Z Double-digit annual inflation rates in the prices of airline tickets for the low cost carriers will bring about a radical restructuring of the industry according to a report in today’s Times. I have tended to assume in the past that the demand for cheap airline tickets was fairly inelastic - for most people the price of a return flight for a holiday is a low percentage of their annual income; holidays in the sun have come to be regarded as an essential part of the year for millions of travellers. And for those with second homes in the mediterranean flights are pretty much unavoidable. The Times article hints at a low price elasticity of demand “According to analysts a 10 per cent increase in fares typically leads to a 6.5 per cent fall in passenger numbers. Budget airlines carry an estimated 45million British passengers a year. If fares rise by 20 per cent over two years, passenger demand looks set to fall by more than five million.” So the predicted large contraction in demand isn’t down to any fudnamental change in demand elasticity - more the scale of the fare hikes which are pricing thousands more out of the market - effective demand is taking a hit. I suspect the response may be even greater if the low cost airlines continue to fashion new ways of extracting revenue from their passengers. Doug McVite is quoted as saying “it is probably only a matter of time before some joker suggests charging for using the toilet. The whole experience of flying budget will become even more unpleasant.” AS Micro, Business Economics, GCSE Economics, Market Equilibrium and Price, Elasticity of Demand, Nature of Demand, Transport Economics, 2008-07-28T07:12:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/grounding-flights-the-shut-down-point http://www.tutor2u.net/blog/index.php/economics/comments/grounding-flights-the-shut-down-point#When:15:00:01Z I normally teach about there being a shut-down price - a price so low that a business cannot hope to cover even the variable costs of production and one that implies that it might be better to close down production in the short term. Perhaps I should be tweaking this to talk about the ‘shut-down point’ - focusing less on the price facing consumers, but more on businesses making calculated decisions about which shops to keep running, which factories to close and which products to continue selling. The airlines provide an example of this. Faced with surging aviation fuel prices, slowing consumer demand and expensive take-off and landing fees, Ryanair has become the latest airline to ground some of its flights and cut back on operating capacity in a bid to stem losses. In his typically colourful language, Ryanair CEO Michael O’Leary has blamed the “twats” at the British Airports Authority” for his decision. In today’s Guardian he claims that “the airline would lose less money by grounding its aircraft and not hiring personnel to fly them rather than operating them at a loss from Stansted.” Grounding planes is his response rather than abandoning route - the airline will be making a 14% reduction in the number of weekly flights at Stansted this winter, from more than 1,850 a week to to just under 1,600 this winter. The number of planes based at Stansted will fall from 36 to 28. The number of weekly flights to Dublin will fall from 58 to 50, to Glasgow from 29 to 20 and to Rome CIA from 35 to 28. Ryanair Press Release EasyJet (24th July) has also announced reductions in their winter capacity as a cost cutting measure - The Telegraph reports that “Oil price inflation had increased the company’s fuel bill by £185m for the full year” A2 Micro, Business Economics, Transport Economics, 2008-07-17T15:00:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/fares-fair http://www.tutor2u.net/blog/index.php/economics/comments/fares-fair#When:11:59:00Z For occasional taxi journeys from my home to and from Heathrow and to my local station at Slough I am almost completely price insensitive. But in central London I do weigh up the costs and benefits of jumping in a taxi for shorter forays. This is a terrific article on the cost pressures facing London’s metered cabs whose prices are capped by Transport for London. Earlier on this year, the price of metered can journeys was raised by 2.7% - below the CPI and RPI rate of inflation and nowhere near the increase in the cost of fuel at the forecourts. AS Micro, Business Economics, Price Discrimination, Government Intervention, Regulation, Market Equilibrium and Price, Elasticity of Demand, Nature of Supply, Price Mechanism in Action, Transport Economics, 2008-07-17T11:59:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/cross-elasticity-demand-for-new-aircraft http://www.tutor2u.net/blog/index.php/economics/comments/cross-elasticity-demand-for-new-aircraft#When:07:12:00Z Over twenty airlines have gone bust since the price of aviation fuel started to climb and the turbulence in the global aviation market is likely to lead to a fall in demand for new aircraft according to a report in today’s Times.   A2 Micro, Business Economics, Cycles and Shocks, Aggregate Demand, Capital Investment, Oil and Gas, Market Equilibrium and Price, Elasticity of Demand, Inter-related Markets, Transport Economics, 2008-07-14T07:12:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/price-deflation-for-second-hand-cars http://www.tutor2u.net/blog/index.php/economics/comments/price-deflation-for-second-hand-cars#When:07:13:00Z The balance of power is tilting firmly towards buyers in the second hand car market to judge from new data which shows that the average forecourt price of second-hand cars has slumped more than 14 per cent in the past year. The absence of buyers has left dealers worried about being stuck with excess stocks of cars and more buyers are not prepared to accept the advertised windscreen price. Demand has been hit by the loss of consumer confidence, the prospect of much higher vehicle excise duty on older less fuel efficient vehicles and by the rising price of fuel. And double-digit price deflation has been reinforced because many dealers are now able to source their vehicles more cheaply too as families with multiple cars on their drive way look to offload them as budgets are squeezed. AS Micro, GCSE Economics, Market Equilibrium and Price, Price Mechanism in Action, Transport Economics, 2008-07-12T07:13:00+00:00