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/unit-1-micro-can-the-uk-computer-games-industry-grow http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-can-the-uk-computer-games-industry-grow#When:22:17:37Z Britain is one of the world’s biggest exporters of creative products - from live TV shows and music to books, arts, architecture and films the economy has built up an enviable global reputation for excellence and a growing trade surplus to aid our balance of payments. Computer games falls squarely into this category but, according to TIGA - the trade association representing the UK’s games industry - unless there is renewed government support, the future of this sector is at risk. TIGA claims that the British games industry is suffering a significant ‘brain drain’ as talented programmers and artists leave the country to work abroad. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, A2 Micro, AS Micro, Business Economics, Economic Growth, Economics of Technology, GCSE Economics, Government Intervention, Subsidies, Macroeconomic Policies, Supply-side policies, Market Failure, Factor Immobility, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Teaching of Economics, UK Economy, Regional Economics, Unemployment, 2012-01-24T22:17:37+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit1-micro-processed-meat-and-cancer-risk-information-failure http://www.tutor2u.net/blog/index.php/economics/comments/unit1-micro-processed-meat-and-cancer-risk-information-failure#When:21:55:28Z I do my level best to avoid the processed meat aisles in the supermarkets - or at least the lower end of what is on offer (I remember once the 5pence sausage that was a guaranteed 2 per cent pork!). But perhaps excessive consumption of processed meats - much of which finds a way into the traditional Full-English might be doing people much more harm than good? Follow this BBC news report for more details. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Cost Benefit Analysis, GCSE Economics, Health Economics, Market Failure, Information Failure, Merit & De-Merit Goods, Market Equilibrium and Price, Nature of Demand, 2012-01-17T21:55:28+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-christmas-tree-of-integration http://www.tutor2u.net/blog/index.php/economics/comments/the-christmas-tree-of-integration#When:15:12:26Z A seasonal look at the methods of growth for firms, covering organic growth and the sources of external growth. AS and A2 Specifications, AQA Economics Unit 3, Business Economics, Monopoly, GCSE Economics, 2011-12-15T15:12:26+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-empty-housing-and-economic-efficiency http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-empty-housing-and-economic-efficiency#When:11:08:50Z Channel 4 recently focused on the causes and effects of the hundreds of thousands of empty homes in the United Kingdom. Why is it given persistent shortages of affordable housing that perhaps a million homes lie empty and unused whilst an estimated two million families are in severe housing needs. New housebuilding has collapsed and in Britain we are building 100,000 fewer new houses every year than we need just to keep up with the changing mix of households and demographic change. An interesting exercise is to show students some of the Channel 4 Campaign videos and then get them to put together policy ideas as to how to reduce the volume of empty homes and reduce the length of housing waiting lists. Links to some of the Channel 4 videos can be accessed below: AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, GCSE Economics, Housing Economics, Government Intervention, Regulation, Subsidies, Introductory Economics, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Standard of Living, Teaching of Economics, UK Economy, Regional Economics, London Economy, 2011-12-15T11:08:50+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-is-the-sun-dipping-on-solar-subsidies http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-is-the-sun-dipping-on-solar-subsidies#When:18:35:34Z To promote the expansion of renewable energy sources, many governments have introduced subsidies for consumers who install solar panels. In April 2010, the Labour government introduced generous feed-in tariffs to encourage households to install solar photovoltaic systems. Anyone spending £13,000 up front to fit a system to their home was paid 41.3p per kilowatt hour (kWh) generated – enough to earn them a typical annual income of £900 a year in payments, on top of a £140-a-year saving in reduced electricity bills. The big six energy companies are required by law to pay householders who generate their own energy. It looks like the days of generous subsidies for solar panels are coming to an end and there is a rush on to install them before the feed-in-tariff system is changed. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, A2 Micro, AS Micro, Business Economics, Cost Benefit Analysis, Environmental Economics, GCSE Economics, Government Intervention, Subsidies, Market Failure, Externalities, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Teaching of Economics, 2011-10-27T18:35:34+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-a-widening-regional-divide-in-life-expectancy http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-a-widening-regional-divide-in-life-expectancy#When:17:23:20Z Life expectancy in the United Kingdom continues to improve. But one important aspect of the deep and structural divide in incomes, economic activity and status and health across different groups in Britain is the marked variation in average life expectancy for men and women. The UK Statistics Commission has just published new data on this covering the period 2004-2010 and finds that: AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Supply, Demography, GCSE Economics, Health Economics, Poverty and Inequality, Standard of Living, Teaching of Economics, UK Economy, Regional Economics, Unemployment, 2011-10-19T17:23:20+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-positive-and-negative-multiplier-effects http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-positive-and-negative-multiplier-effects#When:07:44:03Z An initial change in aggregate demand can have a much greater final impact on equilibrium national income. This is known as the multiplier effect. It comes about because injections of new demand for goods and services into the circular flow of income can stimulate further rounds of spending – in other words “one person’s spending is another’s income”. Put another way, spending becomes someone else’s income. This can lead to a bigger eventual effect on output and employment. Here are three recent news videos covering aspects of the multiplier effect at work: AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, AS Macro, Cycles and Shocks, Aggregate Demand, GCSE Economics, Teaching of Economics, UK Economy, Unemployment, 2011-10-14T07:44:03+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-opportunity-cost http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-opportunity-cost#When:19:29:00Z A hat tip to John Wilson from New Zealand for spotting this superb article which looks at smarter consumer spending and using opportunity cost as a concept to put some of our many choice in context. Some great examples here that might be used at the start of an AS Micro course. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Cost Benefit Analysis, GCSE Economics, Introductory Economics, Teaching of Economics, 2011-07-11T19:29:00+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/as-micro-government-failure-in-wind-farms http://www.tutor2u.net/blog/index.php/economics/comments/as-micro-government-failure-in-wind-farms#When:10:24:00Z Market failure or government failure?  Six wind farms in Scotland have been paid £890,000 for nothing over a few hours on two windy days in April. They were entitled to compensation because they were offering renewable electricity which the UK National Grid did not have the capacity to take in and sell, because of a transmission fault. It seems like a huge waste of money to pay wind farms not to generate energy. Bit teething problems in matching wind farm output and capacity with the ability of the national grid to absorb and utilise their output. Read: Subsidies to wind farms to stop production AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Environmental Economics, GCSE Economics, Government Intervention, Government Failure, 2011-05-04T10:24:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/peter-day-at-the-faber-castell-factory http://www.tutor2u.net/blog/index.php/economics/comments/peter-day-at-the-faber-castell-factory#When:12:49:00Z The humble pencil - I have one in front of me now - is on the surface just about the simplest product one could make. But how is it manufactured? Would you be able to do it? I for one possess virtually none of the skills required to create a pencil but fortunately the wonderful Peter Day from BBC Radio 4’s In Business has been investigating the enduring success of two of the world’s most successful pencil businesses - including a visit to the Faber-Castell factory in Germany. There are some super images from the factory on the BBC Business News Facebook Page - great for visual learners who want to understand more about the production line process. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Business Economics, Economies of Scale, GCSE Economics, Market Equilibrium and Price, Nature of Supply, Teaching of Economics, 2011-04-13T12:49:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/as-micro-revision-banana-prices http://www.tutor2u.net/blog/index.php/economics/comments/as-micro-revision-banana-prices#When:17:51:00Z This revision note covers supply and demand factors that help to determine the world and domestic retail price of bananas. Despite rising world prices, the UK retail price of bananas has actually fallen in recent years. Can students explain why? What effect does intense competition within the UK food retail sector have on the prices we pay? AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Agriculture, Emerging Economies, Commodities Markets, GCSE Economics, Market Equilibrium and Price, Elasticity of Demand, Elasticity of Supply, Nature of Demand, Nature of Supply, Price Mechanism in Action, Price Volatility, 2011-04-01T17:51:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-elasticity-classic-smoking http://www.tutor2u.net/blog/index.php/economics/comments/the-elasticity-classic-smoking#When:11:01:01Z This has to be the most widely used example in classrooms up and down the country when discussing price elasticity of demand. How about this little twist on it? AS and A2 Specifications, AQA Economics Unit 1, AS Micro, GCSE Economics, Market Failure, De-Merit Goods, Market Equilibrium and Price, Elasticity of Demand, 2011-03-09T11:01:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/changes-in-real-prices http://www.tutor2u.net/blog/index.php/economics/comments/changes-in-real-prices#When:22:40:00Z This is a graphic I use each year when looking at changes over time in indices of consumer prices for different goods and services. Using data drawn from the published Retail Price Index since 1988 (the base year) I print this chart out and explore in classroom discussion some of the economic factors behind the divergence in prices for rail fares, cigarettes, household repair services, clothing and electrical items. We discuss the impact of changes in indirect taxes, unit labour costs, economies of scale, trade and globalization effects and the intensity of competition among other factors. Eagle-eyed students spot the upturn in clothing prices and link it to the rising world price of cotton. Others notice the strong seasonality in clothing prices and the annual hike in rail fares! I have copied the latest chart into a PowerPoint file for colleagues who might want to use it Real_Prices.pptx AS and A2 Specifications, AQA Economics Unit 2, AS Macro, GCSE Economics, Inflation and Deflation, Market Equilibrium and Price, Price Mechanism in Action, Teaching of Economics, UK Economy, 2011-01-24T22:40:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/tesco-time-to-start-a-price-war http://www.tutor2u.net/blog/index.php/economics/comments/tesco-time-to-start-a-price-war#When:17:40:00Z Here is some pure gold dust for students of competition and strategy in the food retailing industry! A leading analyst (Dave McCarthy at Evolution Securities) has written a lengthy research document building the case for Tesco to launch an aggressive price war - permanently cutting prices on hundreds of different items. Much of the case for the price discounting is reproduced in this Guardian article and key arguments are that Tesco is better able to withstand the hit on group profits from doing it, and that lowering the returns from the sector will help to bring an end to the land grab and building programme that ultimately may not be in anyone’s interests. Has Tesco lost its way recently? Sainsbury’s was the best performing supermarket over the Christmas period. Its like-for-like sales were up by 3.6%. I have stopped shopping at Tesco partly because the retail experience is so dire (the mega store in Slough is just about the most soulless place on the planet) and also because Sainsbury’s and Waitrose have significantly raised their game in keeping products available on the shelves and in extending their value range. The Waitrose “Essentials” range has been a big success. A new CEO provides a window of opportunity for a change of direction at Tesco and this analyst believes that Tesco needs to exploit first mover advantage before the rivals become too strong to absorb future price wars. Read: Analyst advises Tesco to launch a price war to damage the competition AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, A2 Micro, AS Micro, Business Economics, Competitive Markets, GCSE Economics, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, 2011-01-19T17:40:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-impossible-hamster-and-economic-growth http://www.tutor2u.net/blog/index.php/economics/comments/the-impossible-hamster-and-economic-growth#When:23:13:00Z A new year hat tip to Paul Bridges and Carol Cornell at Tiffin School for pointing us towards this short and snappy animation about food happy hamsters and unsustainable growth. There are plenty of other videos linked in and around this you tube video. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, AS Macro, Emerging Economies, Development Economics, Economic Growth, Environmental Economics, GCSE Economics, Teaching of Economics, 2011-01-18T23:13:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-qa-how-might-rising-food-prices-affect-food-retailers-and-manufac http://www.tutor2u.net/blog/index.php/economics/comments/economics-qa-how-might-rising-food-prices-affect-food-retailers-and-manufac#When:13:09:00Z Food retailers are service sector businesses selling food products to consumers. The leading retailers in the UK are Tesco, Sainsbury’s, Asda (Walmart) and the Co-Op/Somerfield. Although the food retail industry in the UK is dominated by a handful of national chains, there are many others including thousands of small-scale retailers. And discount retailers that have done well in recent years including Aldi and Lidl. Food manufacturers process foodstuffs into new products and they rely on buying raw materials from wholesalers. Good examples to use might be Nestle, Heinz and Sara Lee. The larger retailers manufacture some of their own-label foods although they may choose to out-source this to another manufacturer. And likewise, some food manufacturers have their own chain of retail stores or outlets - for example Gregg’s the Baker or Domino’s Pizza. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Business Economics, Commodities Markets, GCSE Economics, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Price Volatility, Teaching of Economics, UK Economy, 2011-01-16T13:09:00+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/as-economics-diagram-canvas http://www.tutor2u.net/blog/index.php/economics/comments/as-economics-diagram-canvas#When:16:26:00Z Here are the two word-format files to help students create their own micro and macro theory diagrams in word and then integrate into their assignments.   AS Macro, AS Micro, GCSE Economics, Teaching of Economics, 2011-01-07T16:26:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/revision-consequences-of-unemployment http://www.tutor2u.net/blog/index.php/economics/comments/revision-consequences-of-unemployment#When:09:03:00Z Persistently high unemployment create huge costs for individuals and for the economy as a whole. Some of these costs are difficult to value and measure, especially the longer-term social costs. AS Macro, Cycles and Shocks, GCSE Economics, Labour Market, Market Failure, Factor Immobility, UK Economy, Unemployment, 2011-01-01T09:03:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/teach-gcse-economics-2011-a-new-tutor2u-cpd-conference http://www.tutor2u.net/blog/index.php/economics/comments/teach-gcse-economics-2011-a-new-tutor2u-cpd-conference#When:16:31:00Z Lots of bookings coming in now for our first-ever CPD conference dedicated to the teaching of GCSE Economics.  Amy Chapman and Innes Robinson - our two superb GCSE Economics Blog editors - are putting a terrific programme together for the day.  It will be suitable for all exam boards and will cover a range of approaches, resources and teaching ideas to make your GCSE Economics course even more successful and enjoyable.  The day will also be suitable for teachers who deliver the economics elements of business specifications and who wish to discover some new ways of engaging with their students in a fast-changing subject. The first date for Teach GCSE Economics is on Friday 11 February 2011 at the Guoman Charing Cross Hotel near Covent Garden. For online bookings for the conference using this form: Booking Form for Teach GCSE Economics 2011 GCSE Economics, Teaching of Economics, 2010-12-22T16:31:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/samsungs-galaxy-tab http://www.tutor2u.net/blog/index.php/economics/comments/samsungs-galaxy-tab#When:08:07:00Z Joseph Schumpeter would be proud. The creative side of his destruction is still going strong - Samsung have released a “tab” to rival Apple’s iPad - but is it any good or is it just wasteful expenditure recreating the same? On “paper” it seems better with more capabilities than the iPad… but brand loyalty can be a big attractor… See the video clip comparison 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, Business Economics, Competitive Markets, Monopoly, Oligopoly, Economic Growth, Economics of Technology, GCSE Economics, Market Equilibrium and Price, Price Mechanism in Action, Teaching of Economics, 2010-09-03T08:07:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/potash-a-battle-for-grey-dust-that-has-become-gold-dust http://www.tutor2u.net/blog/index.php/economics/comments/potash-a-battle-for-grey-dust-that-has-become-gold-dust#When:14:53:00Z The market for a particularly lucrative gray dust has been thrust into the spotlight this summer with news of a $38.5bn (£25bn) hostile takeover bid from Australian mining giant BHP Billiton for Potash Corp of Saskatchewan in Canada a business coined by some as the “Saudi Arabia of Potash”! AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, EdExcel Economics Unit 3, A2 Micro, AS Micro, Agriculture, Emerging Economies, Development Economics, China Economy, Indian economy, Commodities Markets, Environmental Economics, GCSE Economics, Global Economy, Market Equilibrium and Price, Elasticity of Demand, Nature of Demand, Nature of Supply, Price Mechanism in Action, Price Volatility, Teaching of Economics, 2010-08-26T14:53:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/capacity-utilisation http://www.tutor2u.net/blog/index.php/economics/comments/capacity-utilisation#When:08:07:00Z Capacity utilisation is a macroeconomic term that is now commonly used in AS macro exam questions. It measures how much of the productive potential of the economy is being used at a given point in an economic cycle. Capacity utilisation falls during a recession because of falling aggregate demand for goods and services. The result is that scarce resources of land, labour and capital are not being used to their full extent. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, OCR A2 Economics Unit F585, AS Macro, Cycles and Shocks, Aggregate Demand, Aggregate Supply, GCSE Economics, Macroeconomic Policies, Teaching of Economics, UK Economy, Recession Watch, 2010-04-25T08:07:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/india-raises-interest-rates http://www.tutor2u.net/blog/index.php/economics/comments/india-raises-interest-rates#When:15:37:00Z Sean O’Grady writes here about the decision by the Reserve Bank of India to raise interest rates once more to combat retail price inflation that hovers just below the ten per cent mark. A volcanic hat tip to John Richards from Tonbridge for spotting this one. John points out that the article covers some really interesting macroeconomic aspects: namely the use of policy interest rates to control a booming economy, changes in reserve asset ratios (remember them?) as a tool of monetary control (limiting new bank lending), And also the high importance of food in the inflation basket for Indian consumers and the uneven impact of growth on the poorest parts of Indian society. “The World Bank has said that faster economic growth has seen rising disparities between urban and rural areas in India, prosperous and lagging states, and skilled and low-skilled workers. India’s richest states have incomes that are five times higher than those of the poorest states – a gap that is higher than in most other democratic countries, and may damage social cohesion.” AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, A2 Macro, AS Macro, Emerging Economies, Indian economy, Economic Growth, GCSE Economics, Global Economy, Macroeconomic Policies, Monetary Policy, Teaching of Economics, 2010-04-22T15:37:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/robert-peston-on-the-money http://www.tutor2u.net/blog/index.php/economics/comments/robert-peston-on-the-money#When:21:52:00Z Here are two clips from the new Robert Peston series How do banks work? Why Am I Paid What I’m Paid? Probably more relevant to GCSE students I guess having viewed the clips GCSE Economics, Teaching of Economics, 2010-04-05T21:52:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/small-businesses-and-financial-economies-of-scale http://www.tutor2u.net/blog/index.php/economics/comments/small-businesses-and-financial-economies-of-scale#When:07:33:00Z The latest Bank of England survey on financial and credit conditions finds that smaller businesses are finding it tough to get the credit they need to finance an upturn in sales and production. Interest rate spreads on new loans are rising and it is larger firms that seem to be benefitting from lower borrowing costs. A Times article explains that “larger groups are enjoying a reduction in the cost of borrowing and improved access to credit as banks favour lower-risk custom.” - the main commercial banks continue to adopt a risk averse approach to new lending and this may hamper prospects of recovery. Unsecured loans for consumers have also become harder to get and more expensive despite the ultra-low interest rate policy of the Bank of England. In 2006, the top 10 average rate for a £3,000 personal loan was 6.49%, but today it is 14.92%, analysis by price comparison website moneysupermarket.com has shown. A2 Micro, AS Micro, Business Economics, Economies of Scale, GCSE Economics, Macroeconomic Policies, Monetary Policy, UK Economy, Credit Crunch, 2010-04-02T07:33:00+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/recession-hits-vulnerable-low-income-families http://www.tutor2u.net/blog/index.php/economics/comments/recession-hits-vulnerable-low-income-families#When:12:13:00Z Recessions have macroeconomic effects - a topical discussion at the moment is the impact of the slump on the UK economy’s productive capacity and underlying growth rate - but the effects on individuals, families and local groups can often be over-looked by the broader macroeconomic debates. This news article refers to new research highlighting the damage caused by the recession on younger people whose pay and jobs are vulnerable. These groups 1/ Are at higher risk of having to accept cuts in their money and real wages 2/ Are more exposed to a reduction in working hours and therefore lower weekly gross incomes 3/ Many have a personal inflation rate higher than the published data for CPI and RPI 4/ Have higher levels of unsecured household debt on which interest rates have risen in recent years and not fallen It also focuses on just how little people on below-average incomes can afford to save. “More than half of people on low incomes have less than one month’s salary saved and 40pc are not saving into a pension, while 53pc have unsecured debts, averaging £5,200.” More here: Younger workers hit hardest by the recesssion, says think tank A2 Macro, AS Macro, GCSE Economics, Standard of Living, Teaching of Economics, UK Economy, Recession Watch, Unemployment, Credit Crunch, 2010-03-08T12:13:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/margins-and-risk-the-spiralling-cost-of-credit http://www.tutor2u.net/blog/index.php/economics/comments/margins-and-risk-the-spiralling-cost-of-credit#When:15:49:00Z There has never been a strong link between the policy rate decisions of the Bank of England and the interest rates charged to customers who take out unsecured loans using their credit cards. But withbase rates at 0.5% and lilkely to remain well below their neutral rate for some time to come, the chasm between this and the average of 18-19 per cent annual rate on unpaid credit card balances has rarely been wider. The lenders claim that rising debt default levels from borrowers suffering from the recession and rising unemployment has increased the risks of loans and that higher rates are the inevitable result of this. Consumer watchdogs take a less benign view and argue that the financial companies are exploiting consumers and whacking up their profit margins even during these difficult times. This BBC news video from Brian Milligan provides food for thought on the credit card issue and makes a good resource to use when teaching monetary policy and personal finance. The BBC Radio 4 Today programme also covered this issue during the week. A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Consumer Spending, Financial Markets, GCSE Economics, Teaching of Economics, UK Economy, Recession Watch, Credit Crunch, 2010-02-20T15:49:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/made-in-the-north-east http://www.tutor2u.net/blog/index.php/economics/comments/made-in-the-north-east#When:20:09:00Z On the day that Corus starts to mothball the steel plant at Redcar, there is important positive news for Tyneside with an announcement that a Windfarm blade plant is to open on Tyneside with the prospect of creating 500 new jobs in the next six or seven years. And this article from the Times is also optimistic for the region if they can develop and build a new expertise and competitive edge in creative industries, tourism and low-carbon eco-jobs. A2 Macro, AS Macro, Environmental Economics, GCSE Economics, Manufacturing Industry, Teaching of Economics, UK Economy, Regional Economics, Recession Watch, Unemployment, 2010-02-19T20:09:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/find-a-stock-market-game-that-works http://www.tutor2u.net/blog/index.php/economics/comments/find-a-stock-market-game-that-works#When:10:38:00Z For some time I have been searching for a real time stock market trading game that works, one where 99% of the hard-graft is done by the software rather than teachers having to input every change. And also one that is intuitive to the students and which gives them a full array of trading options. VSE Marketwatch has provided a neat solution and within a week of a launch, 152 teams of Year 10 and Year 11 students are trading away in our 2010 stock market competition. AS Macro, Business Economics, Financial Markets, GCSE Economics, Market Equilibrium and Price, Price Mechanism in Action, Teaching of Economics, 2010-01-24T10:38:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/soaring-cocoa-prices-as-supply-fails-to-keep-pace-with-demand http://www.tutor2u.net/blog/index.php/economics/comments/soaring-cocoa-prices-as-supply-fails-to-keep-pace-with-demand#When:08:45:00Z There is an excellent article in the Times today about the surge in the world price of cocoa. Cocoa prices have hit a 30-year high as poor weather threatens to drive the price of chocolate up again for Western consumers. Cocoa has reached $3,412 a tonne in New York as concerns deepened about demand outstripping supply for the first time since 1968. This is a really good article to use to consolidate students’ understanding of how shifts in supply and demand can lead to price volatility. And also the importance of price elasticity of demand and supply in shaping price changes. “The surge in price also indicates that cocoa is increasingly being used for financial investment rather than merely sold to industry” * What factors are limiting cocoa supply? * Why is demand from western economies rising - even though many are still in recession? * Will cocoa farmersd necessarily gain from higher world prices? AS Micro, Emerging Economies, Development Economics, Commodities Markets, GCSE Economics, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Price Mechanism in Action, Price Volatility, 2009-10-25T08:45:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/downturn-drives-hotel-rack-rates-lower http://www.tutor2u.net/blog/index.php/economics/comments/downturn-drives-hotel-rack-rates-lower#When:21:33:00Z Here is a super short article from BBC news on the impact that the recession has had on average hotel room rates in different locations across the UK. Demand and supply side factors impact on room rates in specific towns and cities. More detailed information can be found from this press release from Hotels.com. “UK hotel prices fell 16% on average making the first six months of the year a great time to staycation. Prices in London were down 12% to £101 on average, in Bournemouth by 14% to £66 on average and in Southampton by 33% to £57 on average.” It might be worth having a discussion about the reasons for these regional price variations: Bath £111 London £101 Edinburgh £91 Jersey £90 York £86 Blackpool £59 Southampton £57 Plymouth £57 Nottingham £53 AS Micro, Business Economics, GCSE Economics, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Price Mechanism in Action, Recession Watch, 2009-09-15T21:33:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/signs-of-a-returning-feel-good-factor http://www.tutor2u.net/blog/index.php/economics/comments/signs-of-a-returning-feel-good-factor#When:08:32:00Z The search for green shoots goes on! There are some tentative signs that sentiment among consumers is beginning to rebound albeit from a very low level. Household saving is rising and the annual growth of consumer borrowing continues to slide - indeed in recent weeks the amount of consumer credit has started to fall for the first time since 1993. Personal borrowing fell by £600m in July 2009 - a figure that looks large but pails compared to the aggregate level of accumulated consumer debt. Sentiment about our own financial situation is also improving. There is plenty that can go wrong from here, not least the impact of further hefty increases in unemployment and forthcoming tax rises. But the unprecedented macroeconomic policy stimulus has at least provided a floor to the collective collapse in consumer confidence that took hold a year or so ago. The latest Nationwide consumer confidence indicators reinforces the idea that households are rebuilding their finances and are at least considering making a major purchase such as a new car or television. The car scrappage scheme has boosted new vehicle registrations and heavy price discounts and bundled offers (e.g. a new blu-ray player with each new TV) seems to have encouraged people into the audio-visual showrooms. A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Consumer Spending, Saving, GCSE Economics, UK Economy, Recession Watch, Credit Crunch, 2009-09-03T08:32:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/housing-the-global-economic-crisis http://www.tutor2u.net/blog/index.php/economics/comments/housing-the-global-economic-crisis#When:15:50:00Z Lecture slides from the recent Housing Markets and the Global Financial Crisis presentation at the LSE are available here GCSE Economics, Credit Crunch, US Economy, 2009-07-23T15:50:00+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/petrol-diesel-price-difference-narrows http://www.tutor2u.net/blog/index.php/economics/comments/petrol-diesel-price-difference-narrows#When:16:35:00Z Crude oil prices are heading towards $75 a barrel as speculators bet on a stronger-than -expected global economic recovery and naturally prices for fuel on the forecourts are heading northwards too. But an interesting feature of the latest price changes is the narrowing of the price premium that drivers with diesel-fuelled vehicles must pay. Apparently the closing of the gap is due to a relative abundance of diesel fuel stocks on the international market. The name comes from German inventor Rudolf Diesel, who built the first diesel-powered engine in 1892 AS Micro, GCSE Economics, Market Equilibrium and Price, Nature of Supply, Price Volatility, 2009-06-30T16:35:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/exchange-rates-quiz http://www.tutor2u.net/blog/index.php/economics/comments/exchange-rates-quiz#When:15:00:00Z Do you know your dongs from your ringgits?  And what currency do they use in Belarus?  Try this starter quiz to test your knowledge on foreign currencies. A2 Macro, AS Macro, Exchange Rates, GCSE Economics, Teaching of Economics, 2009-06-27T15:00:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/corus-culls-jobs-as-global-steel-output-slumps http://www.tutor2u.net/blog/index.php/economics/comments/corus-culls-jobs-as-global-steel-output-slumps#When:16:49:00Z Hundreds of workers will lose their jobs in a huge jobs cull by steelworker Corus as a result of the slump in global steel demand. AS Macro, Business Economics, GCSE Economics, Unemployment, Recession Watch, 2009-06-26T16:49:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/changing-balance-of-economic-power http://www.tutor2u.net/blog/index.php/economics/comments/changing-balance-of-economic-power#When:06:18:00Z Spotted in the Telegraph yesterday “The Centre for Economics and Business Research (CEBR) is forecasting that because of the downturn and China’s economic resilience, the combined contribution from the US, Canada and Europe to world GDP will be 49.4pc in 2009, down from 52pc in 2008” More here And a link to the CEBR newsroom     A2 Macro, AS Macro, Emerging Economies, Development Economics, China Economy, Economic Growth, GCSE Economics, Global Economy, 2009-06-02T06:18:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/cadburys-cocoa-and-coconuts http://www.tutor2u.net/blog/index.php/economics/comments/cadburys-cocoa-and-coconuts#When:12:00:00Z Here is a terrific example of how a long established business sees an emerging economy not just opportunity for growing sales and profits but also as a centre for production. AS Micro, Emerging Economies, Indian economy, Business Economics, GCSE Economics, Global Economy, Market Equilibrium and Price, Nature of Demand, Nature of Supply, 2009-06-01T12:00:00+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/economies-of-scale-for-wind-farms http://www.tutor2u.net/blog/index.php/economics/comments/economies-of-scale-for-wind-farms#When:09:25:00Z The scale of the new farm project at Eaglesham Moor near Glasgow is stunning but projects of this type inevitably create a huge furore especially for those living in the area. My own personal view is that wind farms as a source of renewable energy are things of beauty - this BBC video provides an aerial view of the Glasgow project and might be a good one to use when teaching about the economics of renewable energy, cost benefit analysis and economies of scale. The UK Government has a target of providing 15.4% of all electricity supply from renewable sources by 2015. Jim recently blogged about the London Array here   A2 Micro, AS Micro, Cost Benefit Analysis, Cycles and Shocks, Aggregate Demand, Capital Investment, Environmental Economics, GCSE Economics, Government Intervention, Market Failure, Externalities, Merit & De-Merit Goods, 2009-05-23T09:25:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/rip-rpi http://www.tutor2u.net/blog/index.php/economics/comments/rip-rpi#When:07:09:00Z A headline in today’s Times “Threat of deflation as retail price index falls to lowest-ever level” I am confident that every AS and A2 economics student in the land will spot the obvious error in this headline! There is a world of difference between the general level of prices and the annual rate of change of prices! Here Hugh Pym considers whether wage freezes or pay cuts will become a more frequent feature of the labour market during the recession.   A2 Macro, AS Macro, GCSE Economics, Inflation and Deflation, UK Economy, Recession Watch, 2009-05-20T07:09:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/uk-minimum-wage-to-rise http://www.tutor2u.net/blog/index.php/economics/comments/uk-minimum-wage-to-rise#When:06:25:00Z The Low Pay Commission has recommended a small increase in the national minimum wage covering hundreds of thousands of Britain’s lowest paid workers and yesterday the government announced that Britain’s minimum wage will rise by 7p, or 1.2%, to £5.80 an hour. The new adult rate for workers aged 22 and over will come into effect in October. The rate for 18- to 21-year-olds will rise from £4.77 to £4.83, while for those 16 and 17, the statutory rate will go up to £3.57 an hour from £3.53. The increase means adults working a 40-hour week will receive at least £232 before taxes and other deductions. Retail and hospitality, account for 44 per cent of all minimum wage jobs. The next largest industries, social care and cleaning, each account for 6 to 7 per cent. In the light of current economic circumstances should the NMW have been frozen? RPI inflation has fallen into negative territory but CPI inflation remains well above the 2% target - so any NMW freeze would have meant a real wage cut for people at the bottom of the pay ladder. Indeed the rate of inflation experienced by such people is highly unlikely to be either of the two officially published inflation figures. And decisions on the NMW have important implications for equity and efficiency in the labour market. The TUC argues that low paid workers have done nothing to cause the credit crunch and the subsequent economic crisis - so why should they pay the price with a wage cut? Supporters of a statutory pay floor would also argue that wage cuts could have a damaging effect on worker morale and productivity. The minimum wage is not a living wage and thousands of people dependent on it have seen their hours cut as employers move to shorter-time working. In a related story affecting restaurants and many other consumer service industries, employers will be banned from using tips to bring workers’ pay up to the minimum wage from October.   A2 Micro, AS Micro, Business Economics, GCSE Economics, Government Intervention, Minimum Prices, Labour Market, Poverty and Inequality, Unemployment, 2009-05-13T06:25:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/weathering-the-storm-china-in-pole-position http://www.tutor2u.net/blog/index.php/economics/comments/weathering-the-storm-china-in-pole-position#When:07:10:00Z Two articles on China today. Alastair Darling writes in the times about the importance of capital flows between the UK and China ahead of an important economic summit between the two countries. His article conveniently ignores the fact that only 2 per cent of our exports find their way into the Middle Kingdom - a missed opportunity. “The UK is the largest European investor in China. Some 6,000 British-invested projects there span the country in a number of sectors: Vodafone in telecommunications, BP in energy, AstraZeneca for pharmaceuticals, HSBC and Standard Chartered in financial services, to name a few. And the UK is the second top European destination for Chinese inward investment. Nearly 400 companies have set up in our country, and more than 60 are listed on our stock exchanges. They offer high-skilled jobs in engineering, telecoms and financial services.” More here Stephen King in the Indpendent finds that China is better placed than most to use fiscal policy as a counter cyclical policy to stabilise output and jobs. “China is better placed than most. It has a large balance of payments current account surplus which, in turn, implies that there is no shortage of domestic savings from which the Beijing government can raise funds to spend on infrastructure projects.” More here A2 Macro, AS Macro, Emerging Economies, China Economy, Economic Growth, GCSE Economics, Global Economy, 2009-05-11T07:10:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/corus-steel-and-the-multiplier-effect http://www.tutor2u.net/blog/index.php/economics/comments/corus-steel-and-the-multiplier-effect#When:20:38:01Z Corus steel, Redcar plant, unemployment, multiplier effect, recession The giant steel plant at Redcar has dominated the industrial landscape on Teesside for decades. I last went round the site on a school Geography Field Trip in the spring of 2006 and, although it felt a bit like being landed back in the 1970s, there was no denying the scale of the operations and the commitment to quality in producing high-value precision steel. This BBC article focuses on the economic and social consequences if the Redcar plant closes - it is excellent for students wanting to understanding a little more about structural unemployment and also the negative multiplier effects that come from heavy job losses in a local area. The danger is that the loss of jobs may be permanent and that the region will suffer from an irreversible loss of skills. The article states that “So as well as the 2,000 Corus jobs at risk, there’s a supply chain equivalent to maybe 10,000 people spread around the region.” More here A2 Macro, AS Macro, GCSE Economics, Market Failure, Factor Immobility, UK Economy, Recession Watch, Unemployment, 2009-05-10T20:38:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/revision-consumer-borrowing http://www.tutor2u.net/blog/index.php/economics/comments/revision-consumer-borrowing#When:08:27:00Z Most of us at some time in our lives need to borrow money to finance spending. From taking out a mortgage to making frequent use of bank credit cards, borrowing is a normal feature of life and not necessarily something to be worries about. What matter is whether building up debt is sustainable – in other words, can those who rely on debt pay it back? Credit means being able to buy now and pay later. The credit market for individuals is complex at the best of times and there is plenty of scope for individuals to end up in trouble if they borrow irresponsibly or are subject to mis-selling of loan products from the financial services industry. AS Macro, Cycles and Shocks, Aggregate Demand, Consumer Spending, GCSE Economics, Market Equilibrium and Price, Nature of Demand, UK Economy, Monetary Policy, 2009-05-04T08:27:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/revision-aggregate-demand http://www.tutor2u.net/blog/index.php/economics/comments/revision-aggregate-demand#When:08:22:00Z The components of aggregate demand form of the core of much of the AS macroeconomics syllabus. Students need to understand the domestic and external components of demand and how changes in AD feed through to affect output, prices and employment. This revision note covers the basics on AD. AS Macro, Cycles and Shocks, Aggregate Demand, Consumer Spending, GCSE Economics, UK Economy, 2009-05-03T08:22:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/hmv-diversifies-into-cinemas http://www.tutor2u.net/blog/index.php/economics/comments/hmv-diversifies-into-cinemas#When:11:11:00Z Here is a great example of business diversification and growth through joint venture.  HMV is entering into a joint venture with cinema chain Curzon Artificial Eye to open a cinema called hmvcurzon above its Wimbledon store. A2 Micro, AS Micro, Business Economics, Competitive Markets, Oligopoly, GCSE Economics, 2009-04-28T11:11:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/amazon-benefits-from-a-weaker-pound http://www.tutor2u.net/blog/index.php/economics/comments/amazon-benefits-from-a-weaker-pound#When:06:27:00Z Amazon UK released some pretty strong sales, revenue and profit figures yesterday suggesting that the internet retailer continues to enjoy a purple patch despite the recession at home. Clearly the weaker pound is helping as customers sat in their villas in southern Europe or across in recession-hit Ireland take advantage of improved purchasing power to order their DVDs, flat-screen TVs, Nexpresso machines, Apple accessories and digital cameras from the UK website. This story from the Telegraph also reveals the battle that Amazon has had with the EU Commission over the directive on the disposal of consumer durables when they reach the end of their life. “Until last month Amazon had banned European customers from purchasing electronic items from Amazon.co.uk because it refused to sign-up to the European Commission Waste Electrical and Electronic Equipment (WEEE) directive, which imposes a levy on all retailers for recycling electronic products.” Amazon continues to expand and achieve internal economies of scale and scope. The business now has four huge warehouses in Glasgow, Fife, Bedfordshire and most recently Swansea, where it opened its largest centre to date last year, at more than 800,000 square feet of storage space with some 1,000 staff. A2 Micro, AS Micro, Business Economics, GCSE Economics, 2009-04-25T06:27:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/you-tubes-losses http://www.tutor2u.net/blog/index.php/economics/comments/you-tubes-losses#When:16:05:00Z Is there a better daily source of insight and cracker-jack examples to use in the classroom than the Lex column in the Financial Times? One of today’s pieces focused on Google - described as a one-trick pony - and also the loss-making You Tube. You can dominate a market and be regarded as a huge success - but make eye wateringly large losses at the same time. A2 Micro, AS Micro, Business Economics, Monopoly, GCSE Economics, Market Equilibrium and Price, Nature of Demand, 2009-04-17T16:05:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/qa-are-there-countries-not-in-recession-this-year http://www.tutor2u.net/blog/index.php/economics/comments/qa-are-there-countries-not-in-recession-this-year#When:09:58:00Z The simple answer is yes! Although the world economy is forecast to experience a recession this year (Deutsche Bank have pencilled in a 1.9% contraction in global GDP for 2009 and the G7 nations will see output slump by 4.5%), there will always be countries at different stages of the business cycle and those who for one reason or another manage to avoid the worst of the fall out from the global financial and economic crisis. Using forecasts for 2009 from the economics team at Deutsche Bank here are some of the countries expected to avoid a full-blown recession: Economics Q&A, Q&A - Macro, A2 Macro, AS Macro, Emerging Economies, Brazil Economy, China Economy, Indian economy, Russia Economy, Cycles and Shocks, Economic Growth, GCSE Economics, Global Economy, Credit Crunch, UK Economy, Recession Watch, 2009-04-13T09:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/very-tentative-green-shoots http://www.tutor2u.net/blog/index.php/economics/comments/very-tentative-green-shoots#When:09:15:01Z This summer you can expect many column inches devoted to searching for green shoots of economic recovery. There must come a time when the unprecedented policy stimulus applied to the UK economy will start to bear fruit and evidence emerges of a turning point in the business cycle. A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, GCSE Economics, UK Economy, Recession Watch, Credit Crunch, Fiscal Policy, Monetary Policy, 2009-04-13T09:15:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/cash-incentives-for-healthy-options http://www.tutor2u.net/blog/index.php/economics/comments/cash-incentives-for-healthy-options#When:09:44:01Z I often use Stephen Landsburg’s famous quote which claims that the whole of Economics can be summed up in four words “people respond to incentives” - so it was interesting to read in my morning newspaper that the Department of Health is considering rolling out a wider programme of cash incentives for people who can demonstrably show that they are making progress towards a healthier lifestyle. Nicholas Timmins writes in the Financial Times that “In Dundee, smokers are being offered £12.50 a week by the NHS if carbon monoxide testing shows they have quit. In Essex, pregnant women can claim a £20 food voucher from the NHS after stopping smoking for one week, £40 after four weeks and another £40 at the end of a year if they have still quit. Brighton offers children £15 for quitting smoking for 28 days, while overweight patients in Kent are also being offered incentives for losing weight.” This short paragraph could form the basis of an excellent discussion about different forms of government intervention designed to affect health outcomes. I try to focus on three key words when teaching the impact of government intervention. Policies tend to work best when they are EFFECTIVE, EFFICIENT and EQUITABLE. So what roles can direct financial incentives from the taxpayer for people to quit smoking, lose weight or eat better have both in the short term and over a longer time horizon? If such incentives work what will be the longer term benefits for the health service and for the tax payer? Are they better than regulations, taxation and attempts to improve information? Is it fair to appear to reward unhealthy behaviour? What of those tax payers who do not smoke, maintain a healthy diet and weight and who make few if any claims on the health and welfare system? Can the law of unintended consequences come into play? If you pay teenagers to stop smoking, will more of them start in the first place? How will the cash payments be used? A2 Micro, AS Micro, Behavioural Economics, Cost Benefit Analysis, GCSE Economics, Government Intervention, Government Failure, Health Economics, Market Failure, Externalities, Information Failure, Market Equilibrium and Price, Nature of Demand, 2009-04-11T09:44:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/selling-cheese-to-the-chinese http://www.tutor2u.net/blog/index.php/economics/comments/selling-cheese-to-the-chinese#When:09:31:01Z Savvy businesses target the emerging middle class in emerging market countries whose income elasticity of demand for consumer goods and services is strongly positive. The FT reports today that “British dairy producer Milk Link owner of the Stilton brand, has signed a two-year deal with Yili Group to export Stilton – the first direct exports of the cheese to China. The cheese will be sold in supermarkets along the Chinese east coast, including branches of Tesco, Wal-Mart and Carrefour , while quarter-wheels will also be sent to upmarket hotel chains.” Two balance of payments aspects here 1/ The direct export of tangible products to the Chinese economy - China accounts for only 2 per cent of total UK exports overseas at present 2/ The use of Tesco (UK), Wal-Mart (USA) and Carrefour (France) as distribution channels - made feasible by direct investment into the Chinese economy Also worth mentioning that Milk Link is a cooperative of dairy producers - so successful export promotion into emerging markets will provide a flow of extra revenue for UK farmers who are licensed to make Stilton. There is still a long way to go! Total cheese exports from the UK to China – mostly (processed) cheddar – accounting for just three tonnes in 2008. More cheese please Gromit   AS Micro, Emerging Economies, China Economy, Business Economics, GCSE Economics, International Trade, Market Equilibrium and Price, Nature of Demand, Nature of Supply, 2009-04-11T09:31:01+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/causes-and-consequences-of-russias-shrinking-population http://www.tutor2u.net/blog/index.php/economics/comments/causes-and-consequences-of-russias-shrinking-population#When:11:00:00Z This excellent BBC news article considers the background to Russia’s shrinking population. “By 2050, Russia’s population could shrink from the current figure of 142 million people to 100 million, according to a United Nations sponsored study published last year.” Staggeringly high mortality rates (life expectancy for males barely touches sixty) and low birth rates lie at the heart of this particular demographic time bomb. Students might be asked to consider the likely demand and supply-side effects of a long term decline in the size of the population. And also which policies are likely to be most effective in reversing it. AS Macro, Emerging Economies, Russia Economy, Economic Growth, GCSE Economics, Labour Market, Supply-side policies, 2009-04-07T11:00:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/recession-provides-boost-to-vitamin-demand http://www.tutor2u.net/blog/index.php/economics/comments/recession-provides-boost-to-vitamin-demand#When:10:59:00Z A cyclical hat tip to Chris Freeman for spotting this excellent article in the New York Times which looks at the rising demand for vitamin pills and other health products as recession bites. “Sales of vitamins and nutritional supplements, which have grown consistently for years, have surged in recent months, rising as the stock market has fallen. People are clearly cutting back on many items, from bread and milk to designer jeans and flat-screen televisions, but they are stocking up on pills that they think can spare them expensive doctor visits.” Lots of interesting economics here: 1/ The power of emotion in driving demand - are sales of fish oil tablets linked to how many times people read stories about the growing incidence of early dementia? 2/ Utility and price - is the utility that people say they get from nutritional tablets linked to the price they pay? Some behavioural economists have pointed to studies about the impact on perceived benefit that consumers report when they are told the price of a product - including placebos! 3/ Sales of vitamins are up but sales of pain-killers are down - what might this say about consumer preferences? 4/ Cross price elasticity of demand - the price of health care goes up - causing some consumers to look for supplements to reduce the risk of needing health treatments later on in life A2 Micro, AS Micro, Business Economics, GCSE Economics, Market Failure, Information Failure, Merit & De-Merit Goods, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Inter-related Markets, Recession Watch, 2009-04-07T10:59:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/calories-you-can-believe-in http://www.tutor2u.net/blog/index.php/economics/comments/calories-you-can-believe-in#When:17:23:01Z On first glance it seems like a neat way of giving consumers helpful information on the calorific consequences of their meal choices. By the end of April, 18 national food chains, including Burger King, Prêt A Manger, Pizza Hut , Subway, Sainsbury and Tesco cafes, Wimpey, Marks & Spencer cafes, KFC, Harvester pubs and a number of workplace canteens will print on menus and/or menu-boards the calories contained in many of their most popular dishes. AS Micro, Behavioural Economics, GCSE Economics, Government Intervention, Market Failure, De-Merit Goods, Information Failure, Market Equilibrium and Price, Nature of Demand, 2009-04-06T17:23:01+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/around-the-world-in-80-trades http://www.tutor2u.net/blog/index.php/economics/comments/around-the-world-in-80-trades#When:22:35:00Z There us what looks to be a very promising series launching on Channel 4 next Thursday - With £25,000 in his pocket from the sale of his flat, Conor Woodman travels across four continents, trading in all kinds of products with the aim of doubling his money - Around the World in 80 Trades. This potentially could be an excellent resource to use alongside your teaching on international trade, commodity markets and globalisation. There is also a new book to accompany the series.   A2 Macro, Emerging Economies, GCSE Economics, Global Economy, International Trade, Teaching of Economics, 2009-04-03T22:35:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/usa-triples-the-tax-on-cigarettes http://www.tutor2u.net/blog/index.php/economics/comments/usa-triples-the-tax-on-cigarettes#When:10:28:00Z I will resist the temptation to roll out the usual cigarette puns .... smokers fuming over tax rise etc etc ...but the news that the Federal tax on puffing away has risen so much remains of interest to economists…. The US government has introduced a huge rise in the tax on cigarettes - reported here by the BBC. For a 10-pack carton, the tax leapt to 10.06 dollars from 3.90 dollars. It is a good example of how large scale increases in indirect taxes are needed to have a significant impact on demand and the timing of the tax hike is also interesting - is it better to raise taxes during an economic slump when household budgets are under great strain? Does this give people just the right incentive when they might be considering cutting back or stopping altogether? Note too that the article mentions how the extra tax revenue will be used - to pay for health care for uninsured children - an example of ‘earmarked’ or hypothecated taxation at work. Always assuming of course that the tax jump does lead to more revenue coming in. Keep in mind that this is a federal tax and that individual states can (and do) levy their own supplementary duties on packets or cartons of cigarettes. With the combined city, state and recently raised federal tax, smokers in New York City pay about $10 per pack - $4 higher than in many southern states and a clear incentive for smuggling! Higher taxes, health warnings, bans on smoking in public has reduced per capita consumption in the USA from almost 4,300 annually in 1965 to below 1,700 now but the market remains highly profitable. AS Micro, GCSE Economics, Government Intervention, Indirect Taxes, Health Economics, Market Equilibrium and Price, Nature of Demand, Nature of Supply, 2009-04-03T10:28:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/thrifty-days-are-here-again http://www.tutor2u.net/blog/index.php/economics/comments/thrifty-days-are-here-again#When:15:32:00Z Just when we thought that saving had gone out of fashion for good, along comes a fresh set of numbers on the economy indicating that the British consumer is more than happy to start paring back their debts saving more of their incomes. A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Consumer Spending, Saving, GCSE Economics, UK Economy, Recession Watch, 2009-03-31T15:32:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/infrastructure-and-growth-2 http://www.tutor2u.net/blog/index.php/economics/comments/infrastructure-and-growth-2#When:16:15:00Z A hat tip to my colleague Jon Mace for spotting this rather good BBC news article that considers the role that investment in infrastructure can have in sustaining and promoting economic growth. It is a good example of how government spending (fiscal policy) can affect both aggregate demand and long run aggregate supply. And it raises important questions about how such projects are funded. A2 Macro, AS Macro, Cost Benefit Analysis, Cycles and Shocks, Aggregate Demand, Capital Investment, Economic Growth, GCSE Economics, US Economy, Fiscal Policy, Supply-side policies, 2009-03-25T16:15:00+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/qa-what-is-a-keynesian-stimulus-and-will-it-work http://www.tutor2u.net/blog/index.php/economics/comments/qa-what-is-a-keynesian-stimulus-and-will-it-work#When:10:12:00Z A Keynesian–style stimulus happens when policy-makers deliberately seek to stimulate one or more of the components of aggregate demand to boost output, jobs and incomes during an economic recession. Economics Q&A, Q&A - Macro, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, GCSE Economics, Macroeconomic Policies, Fiscal Policy, Keynesian Economics, UK Economy, Unemployment, 2009-03-25T10:12:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/revision-presentation-uk-housing-market-2009 http://www.tutor2u.net/blog/index.php/economics/comments/revision-presentation-uk-housing-market-2009#When:08:57:00Z A new revision presentation on the state of the UK housing market in early 2009This updated revision presentation profiles the UK housing market considers the links between the housing market and the UK economy. Asset prices have become hugely important in driving macroeconomic activity - although policy makers in the Treasury and the Bank of England have probably made serious errors in allowing the property bubble to go on for too long before that asset price bubble burst in spectacular fashion. Launch interactive presentation on UK housing market A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Consumer Spending, GCSE Economics, Housing Economics, UK Economy, Recession Watch, 2009-03-25T08:57:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-power-of-relativity-a-doritos-dilemma http://www.tutor2u.net/blog/index.php/economics/comments/the-power-of-relativity-a-doritos-dilemma#When:21:32:00Z One of my students Arno Albici contributed this interesting post to our internal student forum this week - I feel it deserves a broader audience Anyone who’s read the first chapter of Dan Ariely’s Predictably Irrational will immediately be familiar with what I’m about to discuss. The first chapter is entitled “The truth about relativity”, and in it Ariely sets out to show how the our perceptions of objects and concepts are defined by how we can compare them to similar things. The example given are these three subscription choices for The Economist: Economist.com yearly subscription - $59.00 Print subscription - $125.00 Print and web subscription - $125.00 In this example we are incited to think that either there is a stupid misprint, or that the “print and web subscription” is a steal. It’s just like getting the web subscription for free! Isn’t it? Something similar happened to me this week. I went to our local school store to buy myself one of those 45p packs of Doritos (Chilli Heatwave flavour, they’re my favourite), and to my dismay they were now priced 50p! To be fair a 5p difference isn’t going to change my life in any way, but with UK inflation supposedly under 3% (according to recent CPI index figures) I just wasn’t going to have it. Then I had this idea, why not buy the bigger pack instead?   AS Micro, Behavioural Economics, GCSE Economics, Market Equilibrium and Price, Elasticity of Demand, Nature of Demand, Price Mechanism in Action, 2009-03-07T21:32:00+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/qa-what-is-the-accelerator-effect http://www.tutor2u.net/blog/index.php/economics/comments/qa-what-is-the-accelerator-effect#When:15:44:00Z What is the accelerator effect? The accelerator effect describes a principle where how much a business chooses to spend on capital investment will be influenced by how quickly demand is growing for their products. Economics Q&A, Q&A - Macro, A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Capital Investment, Aggregate Supply, Economic Growth, GCSE Economics, 2009-02-22T15:44:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/qa-in-what-type-of-market-does-the-ipod-operate-in http://www.tutor2u.net/blog/index.php/economics/comments/qa-in-what-type-of-market-does-the-ipod-operate-in#When:15:10:00Z Q&A: iPod and Market Structure: In what type of market does the iPod operate in? In this answer I will assume that we are discussing the market for personal digital audio and video media players. Keep in mind that music can be downloaded (legally and illegally) in numerous ways such as the iPod, smart phones and standard laptops. Economics Q&A, Q&A - Markets, A2 Micro, AS Micro, Business Economics, Monopoly, Oligopoly, GCSE Economics, Market Equilibrium and Price, Nature of Demand, 2009-02-22T15:10:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/defining-our-times http://www.tutor2u.net/blog/index.php/economics/comments/defining-our-times#When:11:19:00Z As all good students of Economics know, every answer should start with a definition! David Smith’s regular article in the Sunday Times may cloud the issue, as he offers some alternative views of how to define a ‘recession’ other than the conventional “two consecutive quarters of negative GDP growth” For example, the National Bureau of Economic Research in America defines it as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales”. On this basis the US economy has been in recession since the end of 2007. While for the economist Christopher Dow, recession worthy of the name was one featuring a “clear absolute fall in GDP between one calendar year and the next”, usually but not always followed by a second fall. David Smith goes on to examine difference interpretations of what constitutes a ‘depression’ and how we will know whether we are in one or not, drawing some comparisons with recessions and depressions from the past – which might make useful reading for those students starting to think about their entry for the RES Young Economist of the Year competition. Charts used in this blog US_Charts_0209.ppt A2 Macro, AS Macro, Cycles and Shocks, Economic History, GCSE Economics, Teaching of Economics, Recession Watch, US Economy, 2009-02-17T11:19:00+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/what-will-be-left-of-uk-manufacturing http://www.tutor2u.net/blog/index.php/economics/comments/what-will-be-left-of-uk-manufacturing#When:22:20:01Z There is a real danger that over twenty per cent of the output of UK manufacturing industry might be lost before this recession is over. The Guardian reports that “closures, short-term working and the mothballing of plants led to a drop of more than 5% in UK manufacturing production in the final quarter of 2008, according to data from the Office for National Statistics.” Manufacturing output has now fallen by 10.5% in 10 successive months from the peak in February 2008. The signs of a deep downturn in what remains of our industrial heartlands are all there to see. Profitability has been squeezed – the net rate of return is already lower than it was during the 1990-91 recession. Employment is contracting and at some time this year the number of people classified as working in manufacturing will dip below 3 million – just 12 per cent of the employed labour force. The net trade deficit in manufactured products has continued to widen despite the possible benefits of a cheaper pound. One problem is that the weaker currency increases the costs of importing component parts but in a recession, producers find it difficult to pass on these costs to their own customers, hence a decline in profit margins. Manufacturing production accounts for just 18 per cent of UK real national output. Student handout UK_Manufacturing_Recession_Feb_2009.pdf A2 Macro, AS Macro, GCSE Economics, Manufacturing Industry, UK Economy, Recession Watch, 2009-02-06T22:20:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/february-2009-uk-policy-rates-cut-to-historic-low-of-1 http://www.tutor2u.net/blog/index.php/economics/comments/february-2009-uk-policy-rates-cut-to-historic-low-of-1#When:18:11:00Z The Bank of England’s Monetary Policy Committee (MPC) has lowered the Bank Rate by 50bps to 1.00%. A2 Macro, AS Macro, GCSE Economics, UK Economy, Recession Watch, Monetary Policy, 2009-02-05T18:11:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/video-case-study-problems-for-iconic-japanese-manufacturers http://www.tutor2u.net/blog/index.php/economics/comments/video-case-study-problems-for-iconic-japanese-manufacturers#When:17:34:00Z Iconic Japanese manufacturers feel the pain of the global downturn Sony, Toshiba and Panasonic are iconic global manufacturers but they are all suffering to a greater or lesser extent from the combination of a rising Yen and the impact of falling global demand. These two video clips provide an illustration of the impact of changes in the exchange rate and the world economic cycle. Download the video case study handout Video_Panasonic_Sony.pdf A2 Macro, AS Macro, Exchange Rates, GCSE Economics, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Teaching of Economics, 2009-02-05T17:34:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/video-case-study-is-chinas-export-boom-over http://www.tutor2u.net/blog/index.php/economics/comments/video-case-study-is-chinas-export-boom-over#When:23:02:00Z China’s export-driven growth is slowing down with exports of manufactured goods showing a marked decline over the last six months. Despite this, the trade surplus continues to rise partly because of a large fall in imports of primary products such as mineral fuels and iron ore. Download the case study question sheet China_Export_Slowdown.pdf AS Macro, Emerging Economies, China Economy, GCSE Economics, Global Economy, International Trade, Teaching of Economics, 2009-02-04T23:02:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/nfl-salary-cap-and-us-sporting-socialism http://www.tutor2u.net/blog/index.php/economics/comments/nfl-salary-cap-and-us-sporting-socialism#When:19:05:00Z The Arizona Cardinals, one of the oldest franchises in the NFL came within a whisker - actually just 35 seconds - of winning the SuperBowl having spent a long time among the also-rans. Can you imagine Stoke City doing the same at the end of a long Premier League season or Castleford Tigers storming to victory in the Super League Grand Final ..... it does stretch the imagination (and I speak as a hardcore Leeds Rhinos fan!). Mihir Bose reports from America’s biggest cultural event - the SuperBowl final - and considers the way in which the structure of the NFL maintains genuine competition by a set of measures deigned to level the playing field for each team:   1. The draft system with the bottom teams each year having the pick of the new influx of college football stars   2. Revenue sharing   3. Tough regulations on debt and franchise finances   4. Salary cap - for each of the teams in 2010 the salary cap will be $123m Can the Premier League in Soccer and the Premiership learn from the NFL’s sporting model? Might they have to move in this direction because of the recession? With income from sponsorship and TV rights set to decline, and ticket sales squeezed by the recession, dont bet against some really significant changes in the structure of top class professional sport before this recession is out. A2 Micro, AS Micro, GCSE Economics, Market Equilibrium and Price, Price Mechanism in Action, 2009-02-03T19:05:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/exchange-rates-student-handout http://www.tutor2u.net/blog/index.php/economics/comments/exchange-rates-student-handout#When:00:29:01Z I am discussing the macroeconomic effects of exchange rate movements with my AS students this week. The suddeness and severity of the recent depreciation of sterling, both against the US dollar and the Euro as well as on a trade weighted basis provides plenty of ammunition for a good lesson which seeks to develop their understanding of the transmission mechanism of exchange rate fluctuations together with a chance to develop their evaluation skills. I have made the AS macro student handout available for download below - it contains up to date charts on sterling together with a short exercise for students on how different stakeholders might be impacted by a sterling depreciation. Student handout Effects_of_Exchange_Rate_Movements.doc A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, Exchange Rates, GCSE Economics, Teaching of Economics, UK Economy, Monetary Policy, 2009-02-02T00:29:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/manufactured-landscapes http://www.tutor2u.net/blog/index.php/economics/comments/manufactured-landscapes#When:22:06:26Z Edward Burtynsky and Jennifer Baichwal’s film Manufactured Landscapes is now available in DVD format in the UK and it contains some tremendously powerful images and takes which underline the depth of impact on our landscape that rapid economic development, globalisation and mass production can have. A2 Macro, AS Micro, Environmental Economics, GCSE Economics, Teaching of Economics, Development Economics, 2009-01-10T22:06:26+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/dell-relocates-nissan-downsizes http://www.tutor2u.net/blog/index.php/economics/comments/dell-relocates-nissan-downsizes#When:00:35:33Z On the day that Nissan opted to cull a quarter of its workforce at the ultra-efficient car plant on Tyne and Wear, the story that caught my eye was across the Irish sea. Dell’s decision to close its manufacturing capacity in Limerick and transfer production to a low-cost location in Lodz in Poland will come as a severe blow to the Irish economy…. A quite astonishing statistic from this news article today.  It claims that Dell’s operation in Ireland accounted for 5% of the country’s GDP.  Dell is Ireland’s largest exporter too.  So the loss of around 1,900 jobs (add another 3-4,000 on top from suppliers to the factory) will deal a crippling blow to the local economy.  This is a good example of the multiplier effect - where a change in output and jobs in one business or market can have important second-round effects in related supply-chain industries or the local or regional economy. It has been estimated that the knock-on effect could be between one and three jobs lost elsewhere in the region for every one lost at the Dell plant directly. A2 Macro, AS Macro, Business Economics, Management Issues, Cycles and Shocks, Aggregate Demand, European Economy, GCSE Economics, UK Economy, Recession Watch, 2009-01-09T00:35:33+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/apple-introduces-variable-pricing http://www.tutor2u.net/blog/index.php/economics/comments/apple-introduces-variable-pricing#When:22:17:31Z As a regular customer of the iTunes digital music store, I have become accustomed to clicking “buy song” and spending my hard-earned seventy nine pence to download another single. So too have the 75 million customers who have over the last six years bought around six billion songs from the iTunes store. A2 Micro, AS Micro, Business Economics, GCSE Economics, Market Equilibrium and Price, Nature of Demand, 2009-01-07T22:17:31+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/waterford-wedgwood-potters-towards-the-brink http://www.tutor2u.net/blog/index.php/economics/comments/waterford-wedgwood-potters-towards-the-brink#When:18:00:59Z Another day and yet another venerable institution falls. The Waterford Wedgwood (WW) group had been in talks with US private equity groups for some time before those talks collapsed last Friday, and the Bank of America decided it could not extend its credit deadlines to the company any longer. In October WW reported losses of 63 million Euros, with debts of 450 million Euros, and it had been struggling since May 2005 to restructure the company, cut costs and shift to more capital intensive production, in order to survive a growing lack of demand for these high prestige crystal and china products. A2 Micro, AS Micro, Business Economics, Management Issues, European Economy, GCSE Economics, Market Equilibrium and Price, Nature of Demand, UK Economy, Recession Watch, Credit Crunch, 2009-01-07T18:00:59+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/negative-equity-in-the-used-car-market http://www.tutor2u.net/blog/index.php/economics/comments/negative-equity-in-the-used-car-market#When:10:54:15Z 2008 was a year of sustained price deflation in the used car market. As our chart shows, the index of prices for second hand cars fell sharply and, in a second illustration of the weakness of the market place, there was a huge fall in the proportion of original new car price retained. By December 2008 this rate of depreciation had fallen to 33% for a car averaging 39 months and 42,100 miles - in other words, a new car lost two thirds of its original showroom value within three and a half years. Activity is strong in the motor auction halls as thousands of used cars come up for sale having been ditched by their owners. Some of these fire-sales are the result of a slashing of spending on fleet cars by larger businesses including car rental companies. Others are attempts by motor finance companies to claw back some of the bad debts that they have made with car buyers having reneged on their vehicle purchase loans. Negative equity in the car market is becoming more frequent. This article from the Telegraph explains the problem “Buying a car is often a family’s biggest financial transaction apart from home purchase. Thousands of motorists try to spread the bill through a system known as Personal Contract Purchase. This entails putting a deposit down and then paying monthly installments for two or three years, before having the option to buy the car outright. The final payment – known as a balloon payment – is based on what the car is expected to be worth at the end of the contract. But the collapse of the second hand market has meant that the amount demanded by finance companies is often far more than the car is actually worth.” A strong and active used car market is important for sellers of new vehicles because prospective buyers of a shiny new car want to know that the value of their big-ticket purchase will not collapse like a deck of cards within a few months. But with wholesale and retail credit for financing car purchases much harder and more expensive to maintain. And with unemployment on the rise and consumer confidence remaining exceptionally low, there is little chance of a recovery in demand and prices for used cars during this year of recession. Thousands in negative equity on their cars Thousands of drivers who bought cars on hire purchase face ‘negative equity’ A2 Micro, AS Micro, Cycles and Shocks, Aggregate Demand, Consumer Spending, GCSE Economics, Market Equilibrium and Price, Nature of Demand, Credit Crunch, 2009-01-07T10:54:15+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/apprenticeships-and-economic-performance http://www.tutor2u.net/blog/index.php/economics/comments/apprenticeships-and-economic-performance#When:12:32:11Z My Monday morning edition of the Financial Times carried an important article on the prospects for apprenticeships during the economic downturn. The broad thrust of the piece was encouraging - a number of Britain’s biggest companies have said that they do not plan to curtail the number of apprenticeship programmes on offer to school and college leavers. It is not simply a case of altruism - a number of studies have shown that investing in the human capital of the workforce can achieve a positive payback in just a few years. “Recent studies have shown that investing in an apprentice is often cheaper than recruiting qualified workers from rivals and then having to retrain them in the procedures of their new employer…...BT had “calculated a net financial benefit of over £1,300 ($1,910) per apprentice a year when compared with non-apprentice recruitment”......A more recent study by Warwick university for the taskforce’s successor, the Apprenticeship Ambassadors Network, found that it cost £28,762 to train an engineering apprentice but the “employer’s investment was, on average, paid back in less than three years”. Why is the success of apprenticeship schemes important for the longer-term health of the UK economy? Many of the benefits of vocational programmes show through on the supply-side of the economy: A lower risk of structural unemployment through lower occupational immobility Less pressure on the welfare benefits system resulting from long term unemployment A reduction in the number of unfilled vacancies for skilled workers Higher productivity and better paid jobs - which then boosts aggregate demand Ultimately - higher profits for businesses with successful apprenticeship schemes Reduced dependence on inflows of migrant workers Better skilled workers will improve the quality of work and provide a stronger platform for greater innovation in their chosen fields Improved customer service e.g. in industries such as gas supply, plumbing and construction The FT article can be found here The website of the Apprenticeship Ambassadors Network is also worth visiting A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Supply, Economic Growth, GCSE Economics, Labour Market, Market Failure, Factor Immobility, UK Economy, Unemployment, Supply-side policies, 2008-12-29T12:32:11+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/falling-investment-as-accelerator-effect-kicks-in http://www.tutor2u.net/blog/index.php/economics/comments/falling-investment-as-accelerator-effect-kicks-in#When:13:25:07Z Here is a fresh sign of the impact of the economic downturn. The real value of capital investment spending by businesses fell sharply in the 3rd quarter of 2008 - investment demand is now on a steep downward path as our chart illustrates. This is evidence for what is known as the accelerator effect. The demand for capital goods such as new machinery, factories and technology is linked to the actual and expected rate of growth of final demand for a firm’s products. When market demand slows down or falls as it is across many sectors of the economy, so the amount of spare productive capacity increases and leads to a reduction in planned investment spending. Many businesses are scaling back their investment programmes or postponing capital projects because they have lowered their expectations of future demand, revenue steams and anticipated profits. Only this week we learned that an £88m investment at car maker Toyota’s Flintshire factory has been put on hold because of the economic downturn. Manufacturers, retailers and construction companies are all holding back from going ahead with projects - the lack of demand is the main factor. Capital investment is a volatile component of aggregate demand and in total contributes around 16-18 per cent of the UK’s real national income in any given year. The drop in investment is a portent of difficult times to come and we can expect to see further cuts in capital spending (capex) as we move into 2009. The UK economy will suffer a deep recession next year and the availability of finance to fund capital spending is severely curtailed by the ongoing credit crunch The result will be a reduction in demand for capital goods and related inputs - bad news for those industries whose own fortunes depend on a steady flow of capital projects from the business sector. Can government investment spending help to fill some of an increasing void? BBC: UK businesses cut back investment A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Demand, Capital Investment, Economic Growth, GCSE Economics, UK Economy, Recession Watch, Credit Crunch, 2008-12-20T13:25:07+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/wispa-and-consumer-sovereignty http://www.tutor2u.net/blog/index.php/economics/comments/wispa-and-consumer-sovereignty#When:11:20:53Z In a world of consumer sovereignty, needs and wants of consumers are revealed in their preferences in the market place. Producers then respond to changing demand by supplying the goods and services we are willing and able to pay for. is the long awaited permanent relaunch of the wispa an example of consumer power? AS Micro, Business Economics, GCSE Economics, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, 2008-12-18T11:20:53+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/opecs-biggest-cut http://www.tutor2u.net/blog/index.php/economics/comments/opecs-biggest-cut#When:22:00:27Z The oil export cartel OPEC has announced the biggest ever cut in planned production in a bid to rebalance supply and demand in a market where crude oil prices have fallen by over two-thirds (> $100) within the space of a few months. OPEC is reducing output by 2.2 million barrels per day – on top of the 2 million contraction in supply announced earlier on this autumn. The total cut in production is equivalent to lowering global oil production by around 15 per cent. OPEC – which accounts for forty per cent of world oil production – has a supply target of 24.845 million barrels per day It was significant that Russia – the world’s biggest oil producer outside of OPEC was invited to attend the meeting. But in the immediate aftermath of the announcement they said that they will not join the attempts to restrict supply and that they do not wish to consider joining OPEC at this stage. The first reaction of international commodity markets to the OPEC supply cut was to reduce prices still further! Demand and supply forces OPEC’s attempts at stabilising the price through lowering output quotas will only have a marginal impact on the world price. Demand-side factors have taken over as the dominant driver of the price of crude oil in the short term and with the global economy set to suffer a recession in 2009 there is precious little that OPEC can do for the moment. Price and marginal cost – the value of extracting oil from the ground This short quote from the Saudi oil minister reveals some important microeconomics: “You need every producer to produce and marginal producers cannot produce at $40 a barrel.” Extreme price volatility in the markets for primary commodities such as oil, gas and iron ore creates headaches for producers who must commit huge and expensive resources to exploring, drilling, extracting and then refining their basic output Marginal cost is the change in total cost resulting from supplying one extra unit to the market – in our example, the marginal cost is the expense of extracting an extra barrel of crude oil from below the ground. It is a widely held belief among economists who specialize in commodity prices that the long-run market price of something is determined fundamentally by the marginal cost of production. The resources that can be tapped at lowest cost are often done so first, and then as it becomes progressively harder to unearth such resources the market price must rise to provide an economic incentive to do so. One immediate problem is that, because oil is a non-renewable resource lying in geological structures that vary enormously in location, weather, depth and many other variables, the cost of extracting new supplies is hard to determine. Many OPEC countries – especially Saudi Arabia – have access to relatively cheap and elastic supplies of oil. But the same cannot be said of crude oil producers in Canada’s tar sands and oil companies who have sunk huge amounts of money into exploiting the oil available in deep-water facilities off the west coast of Africa or in Brazil. The fact is that for many oil-exporting countries, the price for each barrel of crude oil extracted needs to be higher than the marginal cost of production for national governments to generate sufficient income to pay for ambitious public spending projects. So whereas the Saudi government can expect to balance its budget when world oil prices are hovering at around $55 per barrel, prices need to be closer to $70 a barrel for the Russian government to earn enough oil revenues to pay for their state spending. And that figure rises to more than $95 a barrel for countries such as Iran and Venezuela. If prices fall below the marginal cost of production will we see a sharp contraction in supply?  Economic theory would suggest yes for, if crude oil prices slump to below $60 or $50 a barrel, petroleum companies with above-average production costs may decide that the price has fallen below the short run shut-down point and opt instead to mothball oil wells, because pumping oil out of the ground has become a licence to lose money. Indeed the fall in production may be much larger than this – because exploration and development is an expensive business. Oil companies need to know that the price they can command in the market will be persistently above the marginal extraction cost in order to cover the fixed costs of production and the expected rate of profit demanded by shareholders. It looks like OPEC is targeting a price of $75 a barrel as a ‘fair price’ for oil producers. Given the weakness of the world economy, that might take some time to happen. Suggestions for further reading: The Times: OPEC makes largest ever cut to oil production BBC: OPEC agrees record oil output cut A2 Micro, AS Micro, Emerging Economies, Russia Economy, Commodities Markets, GCSE Economics, Oil and Gas, 2008-12-17T22:00:27+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/barclays-boss-says-housing-downturn-his-only-half-done http://www.tutor2u.net/blog/index.php/economics/comments/barclays-boss-says-housing-downturn-his-only-half-done#When:13:00:29Z The CEO of Barclays Bank John Varley has painted a pessimistic picture of the likely path for UK house prices over the coming year. In an interview with Sky News he forecast that average prices still had a long way to fall with a fifteen per cent decline likely over the next twelve months. AS Macro, GCSE Economics, Housing Economics, Market Equilibrium and Price, Price Mechanism in Action, UK Economy, Credit Crunch, 2008-12-16T13:00:29+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/economics-of-fishing http://www.tutor2u.net/blog/index.php/economics/comments/economics-of-fishing#When:18:38:46Z The BBC today has two stories on the economics of fishing. Firstly the government has announced a £5m plan to fund the de-commissioning of some of the UK’s in-shore fishing fleet in a bid t oreduce what the government regards as fundamental excess capacity in the industry. £5m fund to scrap fishing boats This BBC video looks at the background Secondly the rising stocks of cod in the north sea has led in part oa rise in the size of the annual cod quota given to scottish fishermen by the European Union as part of their common fisheries policy. But the thorny issue of discarding excess fish remains unsettled. The quotas refer to landed cod which encourages fishing vessels to dump much of the fish they have caught before they reach home in order to avoid fines for over-fishing. The result is a deadweight loss of scarce resources in an industry already suffering from the long term decline in fish stocks. Fishermen land cod deal at talks See also “Scots anger over discarded fish”   A2 Micro, AS Micro, Business Economics, Commodities Markets, European Economy, EU Farming and Fishing, GCSE Economics, Government Intervention, Market Equilibrium and Price, Nature of Supply, Price Mechanism in Action, 2008-12-10T18:38:46+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/car-parts-and-derived-demand http://www.tutor2u.net/blog/index.php/economics/comments/car-parts-and-derived-demand#When:10:54:00Z Wagon Automotive is a car parts business that supplies a cluster of the biggest volume car manufacturers in the UK. With sales of new cars slumping by over a third, the fall in demand for vehicles inevitably has a negative impact on the demand for component parts - economists call this the derived demand effect. The slump in demand allied to problems in agreeing a fresh line of finance from the banks is likely to cause Wagon Automotive to go into administration this week with the prospect of hundreds of job losses. Expect many more examples of supply-chain demand and employment effects to hit the headlines in the coming months. AS Macro, AS Micro, Business Economics, Cycles and Shocks, GCSE Economics, Market Equilibrium and Price, Nature of Demand, Inter-related Markets, Recession Watch, Credit Crunch, 2008-12-08T10:54:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/collapsing-crude-and-prices-at-the-pumps http://www.tutor2u.net/blog/index.php/economics/comments/collapsing-crude-and-prices-at-the-pumps#When:11:35:01Z The price of crude oil has collapsed by more than a quarter this week – Brent crude is trading close to $40 a barrel less than a third of the level earlier on this autumn. Petrol and diesel prices have come down (there is an asymmetry of media coverage – we hear less of price declines and more of price rises) but, although the price of crude is now at a four year low, the price of diesel has decline only to a level seen at the start of 2008. In the United States where diesel and gasoline is taxed less heavily, the retail price of fuel responds much more quickly to world prices. AS Micro, Commodities Markets, GCSE Economics, Government Intervention, Indirect Taxes, Market Equilibrium and Price, 2008-12-06T11:35:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economies-of-scale-giant-wind-farms http://www.tutor2u.net/blog/index.php/economics/comments/economies-of-scale-giant-wind-farms#When:19:49:01Z This BBC article on the granting of permission for a giant wind farm off the coast of North Wales might be a good example of the importance of economies of scale in making renewable sources of energy more cost efficient. And heading to the web site of the Gwynt y Môr Offshore Wind Farm accesses some resources on the potential costs and benefits of a scheme that might provide electricity for up to 500,000 homes. If construction goes to plan, the wind farm will start to produce power from 2012. A2 Micro, AS Micro, Business Economics, Economies of Scale, Cost Benefit Analysis, Cycles and Shocks, Aggregate Demand, Capital Investment, Environmental Economics, GCSE Economics, Market Failure, Externalities, Market Equilibrium and Price, Nature of Supply, 2008-12-03T19:49:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/strong-dividends-at-the-co-op http://www.tutor2u.net/blog/index.php/economics/comments/strong-dividends-at-the-co-op#When:01:04:01Z The Co-Operative movement is a super mini case study to use when discussing different forms of business ownership and the principle-agent problem endemic in many quoted companies. This article from the BBC reports a strong rise in profits for the Co-Operative group, many of whose members have donated their dividends to charitable / social causes. The Co_Operative movement is the UK’s largest mutual retailer with a strong brand awareness and market share in sectors such as retail pharmacy, funeral services and independent travel. Business Economics, GCSE Economics, 2008-11-27T01:04:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-rise-of-cyclical-unemployment http://www.tutor2u.net/blog/index.php/economics/comments/the-rise-of-cyclical-unemployment#When:20:31:01Z Across the country and on a daily basis you will read of stories where workers are facing the threat or the reality of losing their jobs. The economy is in recession and this brings about a fall in the aggregate demand for labour and a rise in cyclical unemployment. In many of the examples I have shown below, the root cause of the labour shedding is a decline in demand in a related industry – for example a cement factory that is finally shutting down because of the severity of the slump in new house-building. Or the employees at a local newspaper in Guernsey in the Channel Island affected by the steep drop in demand for traditional forms of media advertising. A2 Macro, AS Macro, Cycles and Shocks, Aggregate Demand, GCSE Economics, Unemployment, Recession Watch, 2008-11-26T20:31:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/that-was-the-wonder-of-woolies http://www.tutor2u.net/blog/index.php/economics/comments/that-was-the-wonder-of-woolies#When:20:06:01Z Is this the day that the chill winds of recession really start to hit what is left of the traditional high street? ThatWAS the wonder of Woolworths. At 6pm tonight the Board of Woolworths met to confirm what had long been on the cards – which the cash-strapped business, laden with over £150m of net debt was bowing to the inevitable and heading into administration. Deloitte, the appointed administrator must now try to find a buyer for some or all of the Woolworths chain. But the sad fact is that hundreds of stores will close and thousands of staff must face losing their jobs. The Times reports that up to 30,000 jobs are at risk if the 800 plus stores close for good. And the Telegraph suggests that a firesale of unsold stock by the administrators could prompt an aggressive price war on the high street in the run up to Christmas. A2 Micro, AS Micro, Business Economics, GCSE Economics, Recession Watch, Credit Crunch, 2008-11-26T20:06:01+00:00