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/unit-3-micro-the-economics-of-solar-subsidies http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-the-economics-of-solar-subsidies#When:22:15:53Z This blog provides a link to a new prezi presentation on the economics of solar subsidies - I have been using it as part of my teaching on aspects of environmental economics for Unit 3 AQA but it might also be useful for unit 1 market failure. I have kept theoretical diagrams out of it and plan to build up relevant analytical concepts such as economies of scale, consumer subsidies, economic and social welfare, government failure et al on a normal whiteboard rather than embed them into the Prezi. I hope it is useful. Follow the tags at the bottom of the blog entry for more recent articles on solar subsidies such as feed-in-tariffs and other environmental economic resources. AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, A2 Micro, AS Micro, Cost Benefit Analysis, Environmental Economics, European Economy, Government Intervention, Subsidies, Market Failure, Merit & De-Merit Goods, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Price Mechanism in Action, Teaching of Economics, UK Economy, 2012-01-18T22:15:53+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-worlds-largest-solar-plant-opens http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-worlds-largest-solar-plant-opens#When:03:51:50Z This autumn the world’s biggest solar plant power station opened in Spain. Comprising 600,000 parabolic mirrors, the Andasol 3 CSP plant is the size of 70 soccer fields and has 88km of piping. The economies of scale are huge and if solar power is going to work and be viable anywhere it is probably here or in North Africa. AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Cost Benefit Analysis, Economic Growth, Economics of Technology, Environmental Economics, Government Intervention, Subsidies, Market Failure, Externalities, Market Equilibrium and Price, Price Mechanism in Action, 2012-01-16T03:51:50+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-sub-normal-profits-bp-leaves-the-solar-industry http://www.tutor2u.net/blog/index.php/economics/comments/unit-3-micro-sub-normal-profits-bp-leaves-the-solar-industry#When:09:32:16Z British Petroleum has decided to exit the solar energy energy industry claiming that the business has become unprofitable because of excess supply and falling prices. In 2011 a number of solar firms have gone out of business including California’s Solyndra and Germany’s Solon. BP will focus instead on investing in other renewable energy sectors including wind power and biofuels. Whilst the decision by BP to exit the industry appears significant, infact total global investment in solar power continues to rise. MidAmerican Energy Holdings owned by Warren Buffett have agreed to purchase a $2 billion solar project under development in California and a 49 percent stake in a $1.8 billion plant in Arizona. Google Inc. and KKR & Co have announced a joint venture to pump money in four California solar power plants with total capacity of 88 megawatts. The powerful search engine business uses a huge anount of energy every year and has committed itself to large scale investment in renewable energy supplies to help power their server farms.   AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, AS Micro, Cost Benefit Analysis, Environmental Economics, Government Intervention, Subsidies, Market Failure, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Teaching of Economics, 2011-12-21T09:32:16+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-2-macro-will-a-youth-jobs-subsidy-work http://www.tutor2u.net/blog/index.php/economics/comments/unit-2-macro-will-a-youth-jobs-subsidy-work#When:11:03:38Z The Coalition Government recently heralded a new scheme designed to address the structural problem of high youth unemployment in the UK economy. Under their “youth contract” plan, employers will be given “wage incentives” worth £2,275 to take on some 160,000 18-to-24-year-olds. But will it have much impact on the problem? The independent Office for Budgetary Responsibility says that the net effect on overall unemployment will be close to zero, because the subsidy incentive will lead to a switch in employment away from older workers. AS and A2 Specifications, AQA Economics Unit 2, EdExcel Economics Unit 2, A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Supply, Government Intervention, Subsidies, Labour Market, Macroeconomic Policies, Supply-side policies, Teaching of Economics, UK Economy, Unemployment, 2011-11-30T11:03:38+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-1-micro-firstbuy-affordability-and-effective-demand-in-property http://www.tutor2u.net/blog/index.php/economics/comments/unit-1-micro-firstbuy-affordability-and-effective-demand-in-property#When:20:51:00Z For hundreds of thousands of first-time buyers, getting a solid foothold on the housing ladder has been tough in recent years. Falling prices and lower mortgage interest rates ought to have improved affordability for would-be purchases of a new house or flat but the barrier of having to save up a deposit in order to qualify for a mortgage has become higher causing many to be frozen out of the market. The number of people renting private accommodation in England has increased by 55% in the past six years as first-time buyers struggle to make purchases. Economists use a term known as effective demand to describe demand that is backed up by a willingness and ability to buy. There are few better case studies in low effective demand than the difficulties facing first time buyers in the UK property market. A new government scheme is designed to offer relief. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Housing Economics, Government Intervention, Subsidies, Market Equilibrium and Price, Nature of Demand, 2011-07-10T20:51:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/do-you-agree-that-the-government-should-provide-support-to-the-uk-car-indus http://www.tutor2u.net/blog/index.php/economics/comments/do-you-agree-that-the-government-should-provide-support-to-the-uk-car-indus#When:09:25:00Z This is a fairly classic A2 macroeconomics question, and one that the European Automobile Manufacturers Association has been considering at their meeting in London last week. Their conclusion? That non-European governments should scale back assistance for their own automotive industries, but at the same time governments in Europe should support the industry’s efforts to cut car emissions. A2 Macro, Emerging Economies, Business Economics, Competitive Markets, European Economy, Government Intervention, Subsidies, Macroeconomic Policies, Supply-side policies, Manufacturing Industry, 2011-06-12T09:25:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/electric-cars-government-failure http://www.tutor2u.net/blog/index.php/economics/comments/electric-cars-government-failure#When:12:37:01Z There was a great in-depth look at activity in the car market in the Sunday Times yesterday with regards to electric powered vehicles. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, OCR AS Economics Unit F581, AS Micro, Business Economics, Competitive Markets, Government Intervention, Government Failure, Regulation, Subsidies, Market Failure, Externalities, Merit & De-Merit Goods, Market Equilibrium and Price, Price Mechanism in Action, Transport Economics, 2011-05-16T12:37:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-eu-aviation-state-aid-and-state-ownership http://www.tutor2u.net/blog/index.php/economics/comments/a2-micro-eu-aviation-state-aid-and-state-ownership#When:16:48:00Z I have put together a short revision exam-style question for AQA Unit 3 (Micro) focusing on some of the issues / problems facing the European Airline industry. Many of the established airlines are part-state owned and the question of nationalisation, government emergency funding / state aid was highly topical this time last year in the wake of the recession and the volcanic ash crisis. The document can be downloaded below and I have linked also to some other A2 micro revision resources EU_Airlines_State_Aid_Nationalisation.pdf AS and A2 Specifications, AQA Economics Unit 3, EdExcel Economics Unit 3, A2 Micro, Business Economics, European Economy, Single Market, Government Intervention, Subsidies, Teaching of Economics, Transport Economics, 2011-04-28T16:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/key-as-micro-terms-taxes-and-subsidies http://www.tutor2u.net/blog/index.php/economics/comments/key-as-micro-terms-taxes-and-subsidies#When:18:41:00Z Here are some key terms relating to taxes and subsidies - two key forms of government intervention. We have also linked to recent blogs on these concepts. AS and A2 Specifications, AQA Economics Unit 1, EdExcel Economics Unit 1, AS Micro, Government Intervention, Indirect Taxes, Subsidies, Market Failure, 2011-04-18T18:41:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/tuesday-talks-the-cycling-city http://www.tutor2u.net/blog/index.php/economics/comments/tuesday-talks-the-cycling-city#When:15:24:00Z A Radio 4 broadcast from yesterday, Bristol: Cycling City, provides the inspiration for today’s extension activity - there is a short synopsis here. This 30 minute audio documentary looks at the way in which £22m has been used over the past 3 years to increase the use of bicycles by residents of Bristol. Cyclists, motorists and local taxpayers seem to think that in general the scheme has not been successful, with only a small increase in the number of cyclists combined with poorly thought-through cycling infrastructure. After listening to the documentary, students could draw up their own cost-benefit analysis of the scheme, and discuss whether the £22m has been used in the most effective way (around two thirds of the funding went towards infrastructure and the remaining third towards education relating to cycling). More details on the specific projects that have been run as part of this scheme can be found here. Able students may want to consider how they would have tackled the scheme differently. Government Intervention, Subsidies, Teaching of Economics, Tuesday Talks, Transport Economics, UK Economy, Regional Economics, 2011-03-08T15:24:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/patent-box-or-innovation-box-as-innovation-stimulant http://www.tutor2u.net/blog/index.php/economics/comments/patent-box-or-innovation-box-as-innovation-stimulant#When:19:54:00Z The UK coalition government does not yet have a growth strategy worth the name but they have invested plenty of capital in the idea of a Patent Box. This involves a lower corporation tax on profits drawn from patented products) and is a supply-side policy to make UK an attractive location for innovative industries. One proposal is that royalties and other profits from patented products and technologies would be taxed at just 10 per cent. But many economists argue that this is at best an ineffective way of lifting the amount of research and development in the British economy. They look instead to the Netherlands where an Innovation Box has had a significant impact - it reflects the view that patents are only a small part of the innovation process - you dont necessarily have to patent an idea to make small scale innovations commercially viable. Channel 4 news tonight visited Sandwich in Kent where the Pfizer research and development facility is set to close. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Supply, Economic Growth, Economics of Technology, Government Intervention, Subsidies, Macroeconomic Policies, Supply-side policies, Manufacturing Industry, Teaching of Economics, UK Economy, 2011-03-02T19:54:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-solar-power-government-subsidies http://www.tutor2u.net/blog/index.php/economics/comments/economics-solar-power-government-subsidies#When:00:02:00Z A timely and relevant video here on the economics of the government feed-in-tariffs (or subsidies) for companies and individuals putting up solar panels on their roofs. Solar power is an industry booming with over 10,000 installations in the first six months since housing associations were given subsidies to install solar panels in many of their properties. The video looks at the costs of installment of a system and the electricity it generates and how much extra electricity is generated into the national grid. How important will solar power be in promoting energy independence? Peak solar output from the UK does not correspond with peak demand for electricity (from 5pm to 7pm on a winter’s evening). How many of the solar panels are made in the UK? Who really benefits from feed-in-tariffs? Rather like the CAP are the major commercial benefits skewed to large businesses willing to put up big-scale solar installations in empty fields? AS and A2 Specifications, AQA Economics Unit 1, AQA Economics Unit 3, EdExcel Economics Unit 1, A2 Micro, AS Micro, Business Economics, Cost Benefit Analysis, Environmental Economics, Government Intervention, Subsidies, Market Failure, Externalities, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Teaching of Economics, 2011-02-09T00:02:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/wto-finds-boeing-guilty-of-using-illegal-subsidies http://www.tutor2u.net/blog/index.php/economics/comments/wto-finds-boeing-guilty-of-using-illegal-subsidies#When:08:23:00Z This is one of the longest running disputes in trade history. Europe and the US have been fighting for more than six years over each other’s subsidies for large passenger aircraft in the duopolistic battle between Boeing and Airbus. Now the World Trade Organisation has found that Boeing received at least $5bn (£3.1bn) in illegal subsidies and was only able to launch its 787 Dreamliner with such support. Airbus has als been found to be in breach of receiving illegal state aid. Reuters provides useful background here. AS and A2 Specifications, AQA Economics Unit 4, EdExcel Economics Unit 4, A2 Macro, Business Economics, Oligopoly, European Economy, Single Market, Global Economy, Government Intervention, Subsidies, OECD Economies, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Teaching of Economics, Transport Economics, 2011-02-01T08:23:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/cutting-up-cotton-subsidies http://www.tutor2u.net/blog/index.php/economics/comments/cutting-up-cotton-subsidies#When:21:45:00Z It’s that time of year again when we’re looking at different markets in AS Microeconomics, and once more trade-distorting subsidies are back in the news- this time in the cotton markets AS and A2 Specifications, EdExcel Economics Unit 1, AS Micro, Agriculture, Emerging Economies, Development Economics, European Economy, EU Farming and Fishing, Government Intervention, Government Failure, Subsidies, 2010-11-15T21:45:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/apprenticeships-for-a-silver-generation http://www.tutor2u.net/blog/index.php/economics/comments/apprenticeships-for-a-silver-generation#When:19:47:00Z The oldest contestant in the new (6th) series of The Apprentice is thirty one! But why should apprentices be concentrated only among those in the early stages of their careers? The number of people aged fifty and over who are applying for and winning places on apprenticeship schemes has more than doubled in the last few years as this BBC news video explains. Apprenticeship programmes for older workers challenges our common preconceptions about their place in the labour market - and this is a good thing as the debate continues about how best to support and encourage people to stay in work during these challenging economic times. Lifelong learning is not merely a vaccuous slogan - it has a real meaning and is hugely important for the British economy in the years ahead. This video reinforces the importance of human capital, the need for flexible skills to avoid structural unemployment. And it raises questions about who should and who can fund apprenticeship schemes and their longer-term economic and social benefits. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Aggregate Supply, Demography, Government Intervention, Subsidies, Labour Market, Market Failure, Factor Immobility, Teaching of Economics, UK Economy, Unemployment, 2010-10-06T19:47:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-cutting-begins http://www.tutor2u.net/blog/index.php/economics/comments/the-cutting-begins#When:14:14:01Z The first round of government spending cuts were announced earlier today amounting to £6.2 billion. Whilst this is not “austerity” of the sort that Greece has been talking about recently, they are genuine cuts, albeit further measures are still required to tackle the huge black hole in the public purse. AS and A2 Specifications, AQA Economics Unit 2, AQA Economics Unit 4, EdExcel Economics Unit 2, EdExcel Economics Unit 4, A2 Macro, AS Macro, Economic Growth, Government Intervention, Indirect Taxes, Regulation, Subsidies, Macroeconomic Policies, Fiscal Policy, Supply-side policies, Keynesian Economics, UK Economy, Regional Economics, 2010-05-24T14:14:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/fair-trade-debate http://www.tutor2u.net/blog/index.php/economics/comments/fair-trade-debate#When:13:51:00Z A hat tip to Harriet Thompson for this heads up - a debate at the Economist on “This house believes that making trade fairer is more important than making it freer.” AS and A2 Specifications, EdExcel Economics Unit 4, A2 Macro, Emerging Economies, Development Economics, Government Intervention, Government Failure, Indirect Taxes, Regulation, Subsidies, International Trade, Macroeconomic Policies, 2010-05-11T13:51:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/end-of-the-road-for-the-car-scrappage-scheme http://www.tutor2u.net/blog/index.php/economics/comments/end-of-the-road-for-the-car-scrappage-scheme#When:18:48:00Z Today marks the end of the UK government’s car scrappage scheme. The scheme offered drivers of cars at least 10 years old £2,000 off the price of a new vehicle with half of the money is paid by the government and half by the carmaker in question. Over the course of the scheme is estimated that the scrappage initiative has been responsible for about a fifth of all new UK car registrations.  And there seems little doubt that the consumer subsidy has provided a shot in the arm for a car industry affected badly by the global financial crisis and subsequent recession. Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders is quoted as saying that it had provided a “much-needed stimulus for the UK motor industry”. A2 Micro, AS Micro, Business Economics, Cycles and Shocks, Aggregate Demand, Consumer Spending, Government Intervention, Subsidies, Macroeconomic Policies, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Teaching of Economics, OCR F585 Economics, Transport Economics, UK Economy, Credit Crunch, 2010-03-31T18:48:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/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/labour-peer-attacks-free-care-for-the-elderly http://www.tutor2u.net/blog/index.php/economics/comments/labour-peer-attacks-free-care-for-the-elderly#When:22:02:00Z This is a really interesting comment piece by the Labour Peer and Economist David Lipsey who attacks the government’s plans for free care for the elderly. It builds the case that offering free care will generate a number of unintended consequences and risks leading to government failure. It could be a useful article to include when teaching health care and government intervention. “Every now and again governments pass laws that make you think they must have lost their marbles. Think of the Poll Tax and Dangerous Dogs Bill. But these errors by past administrations pale into insignificance beside the grotesque folly of the Personal Care at Home Bill, which is being debated in the House of Lords….....You don’t need to be much of an economist to know that if you reduce the price of something to zero, the quantity demanded will rise. As Adass also points out, the effect of free care will be that large numbers of people who are at present managing with the support of friends and relatives will start claiming for paid-for support…..” More here AS Micro, Cost Benefit Analysis, Government Intervention, Government Failure, Subsidies, Health Economics, Market Equilibrium and Price, Nature of Demand, Teaching of Economics, 2010-02-03T22:02:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economics-of-government-subsidies http://www.tutor2u.net/blog/index.php/economics/comments/economics-of-government-subsidies#When:08:46:00Z This new AS economics revision presentation looks at the use of subsidies by government for producers and consumers. Launch interactive presentation on Economics of Government Subsidies Download pdf handout of slides AS Micro, Agriculture, Government Intervention, Subsidies, Market Equilibrium and Price, Price Mechanism in Action, Supply-side policies, 2009-11-19T08:46:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/the-trade-impact-of-car-scrappage http://www.tutor2u.net/blog/index.php/economics/comments/the-trade-impact-of-car-scrappage#When:10:14:00Z As expected, the UK government has announced an extension to the car scrappage scheme which will expand the consumer subsidy to another 100,000 cars. The ‘clash for clunkers’ scheme has at least helped to stabilise domestic car production but four fifths of the new cars sold in the UK are imported from overseas. According to the Guardian “For the year to date, production has declined by 44.6%. But the slight improvement recorded last month has prompted some carmakers to hope that the slump is bottoming out.” So the direct impact on UK car assembly plants is smaller than we might think. Factor in though the multiplier effects on the suppliers of car parts and the boost to retail and distribution businesses. Stephanie Flanders is on excellent form in her latest Stephanomics blog. She argues that the much larger German car scrappage scheme may have had an even bigger effect on our own producers than the UK government’s modest version. The German subsidy is worth ten times that of the UK and around 40% of German car sales last year were imports. More here. A2 Macro, AS Macro, Business Economics, Government Intervention, Subsidies, Manufacturing Industry, Transport Economics, UK Economy, Recession Watch, 2009-09-29T10:14:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/second-hand-car-market-law-of-unintended-consequences http://www.tutor2u.net/blog/index.php/economics/comments/second-hand-car-market-law-of-unintended-consequences#When:14:50:00Z Drive a new car off the forecourt and you it immediately loses a sizeable slice of its value. And, under normal market conditions, second-hand cars lose value by about 15 per cent a year, but this year they are increasing in value – by an average of £600 so far this year – mainly due to a shortage of supply caused by the government’s scrappage scheme. AS Micro, Government Intervention, Government Failure, Subsidies, Market Equilibrium and Price, Elasticity of Demand, Price Mechanism in Action, Transport Economics, UK Economy, 2009-09-13T14:50:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/world-trade-organisation http://www.tutor2u.net/blog/index.php/economics/comments/world-trade-organisation#When:19:06:00Z Whilst unlikely to be fully resolved any time soon, the WTO has got around to producing its (unhelpfully, confidential!) ruling on whether European government loans to Airbus for aircraft development are illegal subsidies or not. A2 Macro, Business Economics, Competitive Markets, Competition Policy, Government Intervention, Subsidies, International Trade, 2009-09-07T19:06:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/businesses-call-for-youth-jobs-subsidy http://www.tutor2u.net/blog/index.php/economics/comments/businesses-call-for-youth-jobs-subsidy#When:10:05:00Z High and rising youth unemployment is one of the most important economic and social policy issues of the day. The CBI has called for extra funding from the government for a youth jobs subsidy - a £2500 per head payment for businesses that offer apprenticeships. The aim is to widen access to apprenticeships and equip school and college leavers with extra skills to improve their human capital and occupational mobility. If the lobbying proves effective, this is a good example to use of an active-labour market policy whose objectives are firmly on the supply-side of the economy. According to CBI Chairman Richard Lambert, ““Young people leaving education this summer face the toughest job market in a generation. We know from previous recessions that a lack of employment after leaving education can damage young peoples’ long-term prospects at a critical point as they move from education to the world of work.” Their 5-point programme for reducing youth unemployment is available here. Given that the government was quick to introduce a £2000 car scrappage incentive (paid paid for by the motor industry) - it might make for interesting discussion in the classroom to weigh up the relative benefits and costs of using a similar pot of cash for a direct subsidy for consumers contrasted with an employment and training subsidy for employers. Who should pay for training? Why is the free-rider problem relevant here? This Guardian article argues that “Apprenticeships are an out of date idea. The only reason that they are back on the agenda is because of the TV show.” A2 Macro, AS Macro, Business Economics, Cost Benefit Analysis, Government Intervention, Subsidies, Labour Market, UK Economy, Recession Watch, Unemployment, Supply-side policies, 2009-08-26T10:05:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/signs-that-scrappage-is-driving-demand http://www.tutor2u.net/blog/index.php/economics/comments/signs-that-scrappage-is-driving-demand#When:22:08:00Z Just over one fifth of new new-car registrations in the UK are being attributed to the government-backed scrappage incentives, according to the Society for Motor Manufacturers and Traders. Hyundai Motor Co led the way in the sales charts for July. The UK version of the car scrappage scheme offers motorists £2,000 in discount on new vehicles when they trade in vehicles that are more than 10 years old. For the moment it is private buyers who are driving sales higher. My local Citroen dealer confirmed to me today that their sales have been boosted by the consumer discount - which is part financed by the government and by vehicle manufacturers. As our charts show new car registrations have moved higher and car production - affected greatly by winter plant shut-downs and extended holidays - is now showing signs of recovery. Sales and output for 2009 will be down as a whole - but perhaps the worst is now over? More on the impact of the car scrappage scheme here from the BBC news site Together with an excellent background section on the challenges facing the car industry during this downturn. A2 Macro, AS Macro, Business Economics, Government Intervention, Subsidies, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Transport Economics, Recession Watch, 2009-08-10T22:08:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/short-time-working-is-a-sign-of-labour-market-flexibility http://www.tutor2u.net/blog/index.php/economics/comments/short-time-working-is-a-sign-of-labour-market-flexibility#When:11:18:00Z The Times reports a sharp increase in the scale of short-time working in the UK economy as businesses respond to the challenges of the recession by offering workers reduced hours (and gross income) in return for a better chance of keeping their jobs. “Some 123,000 workers were working “short-time” between January and March this year, up from 36,000 in the same period last year, the most recent official figures show. Men were the worst affected, with a 286 per cent rise in the number of short-time male workers.” Manufacturing and service industries are both showing a move towards fewer hours, the car industry has been at the forefront of temporary plant closures, reduced shifts and extended holidays. The true test of a flexible labour market is during a downturn. Are workers prepared to be flexible in their pay demands? Do businesses maintain spending and a commitment to training even when finances are tight? Can the newly redundant be sufficiently occupationally and geographically mobile to find work even though the number of unfilled job vacancies has shrunk considerably? The trade unions are lobbying for a government subsidy for short-time working to encourage firms to hold onto their workers rather than make redundancies. A2 Macro, AS Macro, Business Economics, Cycles and Shocks, Government Intervention, Subsidies, Labour Market, Manufacturing Industry, UK Economy, Recession Watch, Unemployment, 2009-07-14T11:18:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/scrappage-scheme-makes-tracks http://www.tutor2u.net/blog/index.php/economics/comments/scrappage-scheme-makes-tracks#When:08:43:00Z It looks like the car scrappage scheme may be starting to bring about a softening in the decline in market demand for new cars. Over 85,000 new orders have been taken under the terms of the subsidy which affects cars more than ten years old. Scrap yards are benefitting from a boost in demand for their services and the car industry (naturally) is looking for an extension to the funding given to the scheme. This BBC video looks at some of the early impact - has the car subsidy given much of a shot in the arm for the British car industry? And this article looks at the pros and cons of car subsidies. AS Micro, Business Economics, Government Intervention, Subsidies, Market Equilibrium and Price, Nature of Demand, Price Mechanism in Action, Transport Economics, 2009-07-13T08:43:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/servicing-the-car-makers http://www.tutor2u.net/blog/index.php/economics/comments/servicing-the-car-makers#When:05:47:00Z Our motor vehicle industry appears to be in a fragile state, rarely a day goes by without one manufacturer or another locked in talks with the government about loan guarantee schemes or other emergency measures designed to prop up production in a sector hit by falling sales and the challenge of an industry with huge global capacity. The Society of Motor Manufacturers and Traders estimate that nigh on 800,000 people are employed in the motor vehicle industry in the UK. But how many of them have jobs on the production line itself, physically assembling the vehicles? The answer is smaller than you might think. A2 Micro, AS Micro, Business Economics, Economies of Scale, Management Issues, Global Economy, Government Intervention, Subsidies, Market Equilibrium and Price, Nature of Supply, Transport Economics, UK Economy, 2009-05-12T05:47:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/sewage-the-fuel-of-the-future http://www.tutor2u.net/blog/index.php/economics/comments/sewage-the-fuel-of-the-future#When:10:53:01Z Waste not want not. Monopolistic water and sewage companies rarely get a good press but here is a fascinating news story in the Times. Severn Trent, one of the UK’s largest water suppliers which supplies water and waste services to 3.3 million households is researching ways in which the hundreds of thousands of sewage sludge that is generated every year in the UK can be turned into a biomass fuel to produce heat and electricity. The economic incentives to consider this have been boosted by a combination of subsidy, taxation and regulation. On the subsidy front, since 2003, Renewables Obligation Certificates — a form of subsidy to accredited generators — have been available for electricity that is generated by burning biomass fuels, which include wood, straw or sewage gas and sludge. On the tax side - the government has gradually increased the size of the landfill tax which covers disposal of waste in landfill sites - the tax is set to increase by 20 per cent to £40 per tonne, up from £32 in 2008. In 2010 it is set to rise again to £48 per tonne. Regulations now ban the disposal of sewage sludge at sea. The Times reports that “About 347,000km of sewers collect more than 11billion litres of waste water in the UK every day. This water is treated at about 9,000 sewage treatment works across the country. Roughly 62 per cent of the country’s sludge is treated and recycled into a type of fertiliser known as biosolids, which is used to fertilise more than 80,000 hectares of British farming land every year.” This is a good example to use in exam questions because the incentives to develop innovative schemes to find economically viable forms of renewable energy often require a combination of policies working in tandem rather than a single ‘big bang’ approach. Government policies towards waste can be found here.   A2 Micro, AS Micro, Business Economics, Cost Benefit Analysis, Environmental Economics, Government Intervention, Regulation, Subsidies, Market Failure, Externalities, Market Equilibrium and Price, Nature of Supply, Fiscal Policy, 2009-05-04T10:53:01+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/electric-cars-subsidise-the-consumer-or-producer http://www.tutor2u.net/blog/index.php/economics/comments/electric-cars-subsidise-the-consumer-or-producer#When:09:33:00Z We can expect a battery of articles in the days and weeks ahead on government incentives to grow the UK electric car market. Gordon Brown is reported as favouring a sizeable subsidy for consumers to purchase electric vehicles - according to the FT, buyers of electric cars will be offered discounts of more than £2,000 – paid for by the state – under plans by Gordon Brown to make Britain a leading centre for manufacturing “greener” vehicles.   A2 Micro, AS Micro, Business Economics, Economies of Scale, Cost Benefit Analysis, Economic Growth, Economics of Technology, Environmental Economics, Government Intervention, Subsidies, Market Equilibrium and Price, Nature of Demand, Nature of Supply, Transport Economics, 2009-04-09T09:33:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/qa-what-is-a-scrappage-subsidy-and-will-it-work-in-the-uk http://www.tutor2u.net/blog/index.php/economics/comments/qa-what-is-a-scrappage-subsidy-and-will-it-work-in-the-uk#When:18:33:00Z A scrappage subsidy is a “pay-to-scrap” scheme where a government offers a financial incentive to car buyers if they scrap a car that has reached a specified age and in its place they are offered a payment towards the cost of a new vehicle. Germany and France both offer scrappage subsidies to consumers and there is a growing number of voices from inside the UK business community and motor vehicle industry clamouring for one to be launched in the UK. The Retail Motor Industry Federation and the Society of Motor Manufacturers and Traders (SMMT) are at the head of the queue lobbying for a scrappage scheme to be introduced as soon as possible. Economics Q&A, Q&A - Market Failure, Q&A - Markets, AS Macro, AS Micro, Cycles and Shocks, Aggregate Demand, Consumer Spending, Government Intervention, Subsidies, Manufacturing Industry, Market Equilibrium and Price, Nature of Demand, Transport Economics, UK Economy, 2009-04-07T18:33:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/fasten-your-seatbelts-scrappage-subsidy-in-germany http://www.tutor2u.net/blog/index.php/economics/comments/fasten-your-seatbelts-scrappage-subsidy-in-germany#When:15:44:00Z The Times reports that new vehicle sales are soaring in Germany partly as a result of their car scrappage subsidy. “Germany is offering €2,500 for drivers who have cars that are over nine years old to scrap them and buy new ones. The scheme is to be extended until the end of the year after fears that the programme would run out of cash by the end of this month because it has proved so popular.” More here The odds on this being introduced in the UK budget on the 22nd April must be pretty high! If the scrappage scheme is as powerful as it seems to have been in Germany it will provide a big shot in the arm to the embattled vehicle industry. A2 Macro, AS Macro, Government Intervention, Subsidies, Transport Economics, 2009-04-02T15:44:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/is-this-how-eu-grants-should-be-allocated http://www.tutor2u.net/blog/index.php/economics/comments/is-this-how-eu-grants-should-be-allocated#When:10:55:00Z The European Commission for Agriculture and Rural Development has made grants of up to £5,000 available to farmers in Northern Ireland to help modernise their farms, improving animal welfare and farm efficiency. But with just £6m available, many farmers are set to lose out. The farmers whose grant applications are successful will be able to buy from a government-approved list of items such as cow mattresses, creep feeders and computerised livestock identification systems, and must add to the amount of money they are allocated from their own funds. Michelle Gildernew, the Minister for Agriculture and Rural Development, says that this is an “important boost to the economy”, because many of the items on the approved list have been made in Northern Ireland. European Economy, EU Farming and Fishing, Government Intervention, Government Failure, Subsidies, 2009-02-17T10:55:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/steel-industry-may-face-meltdown http://www.tutor2u.net/blog/index.php/economics/comments/steel-industry-may-face-meltdown#When:19:51:00Z The excellent Big Question feature in the Independent today turns its attention to the problems of what remains of the UK steel industry “Demand is collapsing as the global recession takes the wind out of both the motor and construction industries. The credit crunch and ensuing recession are wreaking havoc in the motor and building industries in both the UK and Europe, which are Corus’s main markets.” Corus has announced a huge number of redundancies and the steelworkers unions are complaining that competitiveness of the UK steel sector is being undermined by subsidies to manufacturers in other countries such as France. Further background is available here from the Times: Steelworkers demand same government subsidies as European rivals “Facing a precipitous fall in demand for steel from the motor and building industries, Corus said that it needed help to subsidise short-time working at mills that are operating below capacity. Demand in Europe had fallen by 40 per cent while the Corus order book was down 30 per cent.” Jim has blogged about the rise in labour productivity at UK steel plants - but will increasing efficiency be enough to prevent widespread plant shut downs and job losses? Corus will have a tough time riding out this storm. AS students might consider these questions: What are the main demand-side problems facing UK steel producers? What are the main supply-side problems facing the UK steel industry? Explain how an economic recession affects the market price of steel Is there a case for the UK government to offer financial support to the industry at this time? A2 Macro, A2 Micro, AS Macro, AS Micro, Business Economics, Government Intervention, Subsidies, Recession Watch, 2009-01-27T19:51:00+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/diseconomies-of-scale-are-human http://www.tutor2u.net/blog/index.php/economics/comments/diseconomies-of-scale-are-human#When:18:36:21Z One of John Kay’s phrases in his piece in the Financial Times yesterday will stay with me for the remainder of my teaching career. In a piece which focuses on the malign influences of political lobbying by huge economies of scale businesses that have been in relative decline for many a long year, John writes: “That is true of the carmakers, whose problems are of much longer standing than the current downturn. In automobiles as in many industries, economies of scale are technological, the diseconomies of scale human. Human factors in business are generally more influential than technological ones in determining the long run fate of a company.” This is a terrific article to use when discussing the root causes of government failures that can result from subsidies and bail-outs given to companies deemed “too large to fail.” The remainder of John’s article can be found at his excellent web site Some companies are too powerful to fail A2 Micro, AS Micro, Business Economics, Economies of Scale, Management Issues, Government Intervention, Government Failure, Subsidies, Manufacturing Industry, 2008-12-11T18:36:21+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/bailing-out-detroit http://www.tutor2u.net/blog/index.php/economics/comments/bailing-out-detroit#When:18:40:00Z Leander McCormick-Goodhart looks at the perilous state of the US car market Surely nobody would allow Detroit, the backbone of American industry, to go bankrupt? In a last effort to prevent collapse of the US auto industry, Detroit is seeking a bailout. The CEOs of the big three automakers- GM, Ford and Chrysler- have appealed for a $25 billion package. Detroit has come under scrutiny, with accusations of mismanagement and the fundamental inability to reform itself. A2 Micro, AS Micro, Business Economics, Government Intervention, Subsidies, Transport Economics, Recession Watch, US Economy, 2008-11-25T18:40:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/economic-cost-of-fuel-subsidies http://www.tutor2u.net/blog/index.php/economics/comments/economic-cost-of-fuel-subsidies#When:23:58:00Z The Economic Naturalist Robert Frank - writing in the New York Times - criticises the use of explicit fuel subsidies (common in many emerging market countries) and also takes a stab at the hidden subsidies that occur when a government does not tax products that create pollution sufficiently highly to reflect the external costs. Many countries are now reining back on such subsidies - a recent example was Vietnam - where the subsidy cut prompted a spike in oil prices for consumers. It is a well written piece and one that could be used when discussing government intervention, allocative efficiency and possible government failure. “By one estimate, countries with fuel subsidies accounted for virtually the entire increase in worldwide oil consumption last year. Without this artificial demand stimulus, world oil prices would have been significantly lower. Earlier this summer, for example, world oil prices fell by $4 a barrel on news that reduced subsidies would increase Chinese domestic fuel prices by about 17 percent.” The rest of his article can be found here How Fuel Subsidies Drag Down a Nation A2 Micro, AS Micro, Government Intervention, Government Failure, Subsidies, Oil and Gas, 2008-08-17T23:58:00+00:00 http://www.tutor2u.net/blog/index.php/economics/comments/will-the-sunshine-on-this-solar-subsidy http://www.tutor2u.net/blog/index.php/economics/comments/will-the-sunshine-on-this-solar-subsidy#When:20:00:00Z I spotted this article in the Guardian from a little while back - “The largest rooftop solar power station in the world is being built in Spain. With a capacity of 12 megawatts of power, the station is made up of 85,000 lightweight panels covering an area of two million square feet” It brings into play three important economic concepts - renewable energy as a factor resource, economies of scale in production and also the costs and benefits of government subsidy - Spain has introduced subsidies of €0.42 per kilowatt per hour for investment in solar power - though the level of subsidy may be lowered in the months ahead.   A2 Micro, AS Micro, Economic Growth, Economics of Technology, Environmental Economics, Government Intervention, Subsidies, Market Equilibrium and Price, Nature of Supply, 2008-07-18T20:00:00+00:00