Haulier closes down
This ninety second video clip from BBC news is a short but powerful clip to show when discussing the effects of rising fuel prices on the profitability of a business - no bells and whistles, just a face to face interview with the owner of a haulage firm who has decided to quite because of the cost of diesel and his inability to pass on costs to consumers, the result, 21 redundancies and a firesale of the assets of the business.
The external costs of food waste
Over 4 million apples and over a million and a half bananas are thrown away in Britain every day. This video from Newsnight is excellent on the external costs of the food we throw away - estimated by some to be worth around £8 billion a year. Should we actively encourage food scavengers? What are the strategies we should be adopting to reduce the amount of food thrown away? This is a good topic to use to teach evaluation skills for AS microeconomics.
Chart of the Day: Imported Inflation into the UK
Our chart for the day is linked to the news that the pound has fallen to an historic low against the Euro. One of the consequences of a depreciating currency is that the prices of many of the goods and services we import from overseas goes up potentially leading to a fresh burst of cost-push inflation.
read more...»Oasis Airlines - Don’t Look Back in Anger
A rash of low cost airlines have crashed out of existence in recent weeks as new carriers struggle to break into markets and cope with the added turbulence of steep rises in fuel costs and a weakening of global economic growth. The latest casulty is Oasis Hong Kong Airlines which collapsed into financial liquidation yesterday and suffered the same fate as Skybus, Aloha Airlines, ATA and Maxjet Airways.
It was always going to be tough for Oasis Airlines to compete effectively with the likes of Cathay Pacific, British Airways and Virgin Atlantic flying long haul to Asian destinations out of Gatwick who have effectively sown up the business class revenues. Industry experts claimed that the airline had too little in the way of start-up capital and that its cost base was little difference from the major established carriers. One criticism was that Oasis devoted 25% of its seating capacity to business passengers reducing the total number of seats available. Seat prices from London to Hong Kong starting at £65 were simply uneconomic and some reports estimate that the business built up operating losses in excess of 1 billion Hong Kong dollars during its short existence.
Fast economic growth in Asian emerging market countries will mean that market demand for airline travel will continue to grow strongly in the years ahead, no doubt there will be other new entrants into the market looking to establish a foothold.
Chart of the Day: EU Wheat, Bread and Cereal Prices
Our chart today links what has been happening to international wheat prices with the cost of basic groceries such as bread and cereals in the shops in the UK. Globally, wheat prices have been surging higher over the last few years - look at the movements in European Union milling wheat prices since the start of 2006. Changes in raw commodity prices invariably feed through into the prices of products on the supermarket shelves albeit with a time lag. (Can you spot any in the chart). And certainly in recent months, the CPI for breads and cereals has moved sharply higher as food manufacturers have passed on some of their higher costs. The CPI data suggests that bread and cereal prices have risen by over 12% since the start of 2005, yet milling wheat prices have jumped by more than 250%? How can you explain this difference? And who gains from the spike in grain prices - good news for farmers perhaps? Not if you are rearing cattle and having to find the money for more expensive grain as feed.
Revision: Short run production and costs
At A2 level there is a hefty chunk of analysis to do with production and short run costs – this revision note takes you through the key points. Check through your notes and make sure you understand the ideas. You can then check your understanding by using the revision multiple choice tests on the Economics VLE. I have attached a 3 page word file which revises this topic and looks at the key concepts and diagrams.
Revision document
Revising_Production_and_Costs.pdf
Revising_Production_and_Costs.doc
Economies of Scale
How can old media (such as newspapers) compete in the digital age?
Perhaps by seeking to take advantage of serious economies of scale.
News International has recently opened a new printing press in Hertfordshire which covers an area the size of 23 football pitches - and offers quieter and faster (70,000 papers per hour) production of both broadsheets such as The Times and Sunday Times, as well as Britain’s favourite tabloid, The Sun. In addition, the headcount of people needed to run the new plant is 200 - compared to 600 with the old facilities. It is perhaps the least labour intensive printing facility in the world.
