Wednesday 30 December 2009

No 49: New type of poll and Revision of Efficiency

TO YOUR right you can see a new poll. |t is a MCQ taken from a Module 1 examination. I have chosen it because the topic of efficiency is key to being successful in the exam.

Markets (free) are efficient when they work well, providing both the correct amounts of goods required (allocative efficiency) and causing production to happen with the lowest possible amount of resources which is often the same as producing with lowest costs (productive efficiency).

The ability of a free market to self-correct and reach equilibrium can lead to allocative efficiency. Competition drives down costs and may cause productive efficiency.

Markets fail when certain problems (monopoly power, externalities, information failure, etc) stop them from being efficient. When this happens governments may take action to try and correct the problem.

UNDERSTANDING THIS IS ABSOLUTELY CRUCIAL TO DOING WELL AT MODULE 1

No 48: The Economic Future of Russia and China




THE SUNDAY Telegraph printed this article about the economic prospects for China, Russia, the USA and India.

As always, there is the opportunity for you to improve your economic analysis here, if you agree to take the challenge young Jedi.

For Russia, the article suggests possible difficulties may come from over-reliance on oil and gas exports, and resistance to required reform. Think about how you would explain these problems in the context of an essay.

For China, problems may arise from the economy continuing to grow too quickly, particularly increasing inflationary pressures and asset bubbles. Again, think about how you would explain these difficulties if you were writing about them.

Let me know what you think about the article and/or the future economic prospects for your country....

No 47: If you have 2 minutes to spare....

YOU can watch this video from the Times showing their predictions about 2010.
The heat map feature also on this page is useful way of reading brief  summaries of the main stories, as shown below :
 

No 46: If you have a minute to spare....


YOU can watch the artist for the Guardian newspaper draw this cartoon about the UK banking crisis.

Monday 28 December 2009

No 45: The key Unit 1 (Microeconomics) Question?

I DO NOT have any special knowledge at all about which questions will be in your January exams. However, it seems to me that for Unit 1 we must remember the title of the module - "Markets and Market Failure".

One of the many results of the Credit Cruch has been a lot of doubt about arguments in favour of free markets. In the past 15 or so years, the common belief was that financial markets should be as free from government intervention as possible. You only have to look at the current economic situation to see why many economists have argued that market failure has resulted.

Additionally, we all know that environmental considerations are key issues of our time. For these problems, there is a debate about whether free market or government led solutions will be the most effective.

Therefore, being able to discuss the advantages and disadvantages of free markets, and the advantages and disadvantages of government action, should be an important part of your Unit 1 revision.

Here is a sample of a question related to this topic:

Using the data and your economic knowledge, evaluate the effectiveness of using the market mechanism to solve environmental problems.

I suggest we try and work on this question together, so please comment below on how you would try and answer this.

No 44: Monetary Policy Presentation

HERE is a link to an excellent Tutor2U presentation on monetary policy for AS level:

AS Monetary Policy

I've captured a few of the most important slides below. Firstly, it's very important to remember that monetary policy decisions are made now on what conditions are predicted to be in the future, due to time lags:


Next, here is an extremely useful list of points to remember when evaluating the effectiveness of monetary policy:


Finally here is a list of key concepts that if you use in your exam will present an advnaced level of analysis:


However, don't be lazy, read the whole thing!

Friday 18 December 2009

No 42: More about market power and Cadbury

HERE is a report from the Tutor2U website:

Embroiled in what looks likely to be a protracted takeover bid from Kraft, Cadbury’s has suffered a blow with the news that its share of the UK confectionery market has dipped below 30 per cent for the first time in a while.  

The Times reports that Cadbury’s chunk of the chocolate market by value slipped 1.7 per cent to 29.8 per cent last month, the first time that it has fallen below 30 per cent all year. Market share of Mars, its biggest rival, slipped 0.6 per cent in the period. 

There are signs that aggressive pricing of basic chocolate bars by discount retailers such as Aldi and Lidl is having an effect; so too is the growth of sales for own-brand bars offered by Tesco, Sainsbury’s and the ongoing battle for customers between Waitrose and Marks and Spencer. 

Some customers have complained about a 75% rise in the price of a 230g bar of Dairy Milk in the last 12 months. High world cocoa prices have explained some of the price hike but Cadbury’s tactic of launching a new 100g bar priced at £1 had led some to claim that their are deliberately trying to anchor their prices at a higher level to raise profit margins as a defence against the takeover bid. The decline in market share suggests that chocoholics are more price sensitive than Cadburys might have forecast. 

It seems to me that part of the skill of being an economist is to be able to quickly identify the connection between real-world events (such as described above) to as many economic ideas as possible. The comment below lists the concepts I think are in the article. Before you look at the comment, see which ones you can identify yourself.

An excellent economics students is able to take the suggestions of just a few sentences of data and write a 3 page essay about it.

Thursday 17 December 2009

No 41: Decline of Internet Explorer

IN AS classes we have been talking about Microsoft and monopoly power. Here is a chart showing changes in the browser market:



This raises a number of questions:
1) What are the key changes shown in the diagram?
2) Which problems could arise from one company having such a large market share?
3) What are some economic explanations for the decline in IE's market share?
4) Can problems with monopoly power be best solved by using government intervention or by relying on the free market?

All of these are possible exam questions, so if you are doing one soon, you may want to consider your answers and perhaps leave a comment below.

Friday 11 December 2009

No 38: Friday Fun Returns



IN the Spottygao household, much time last night was spent playing this - "Oiligarchy".

http://onemorelevel.com/game/oiligarchy

I began by disapproving of the terrible way I was behaving in the game: destroying the environment, putting oil wells in people's villages or the untouched oceans, paying politicians to promote the interests of oil, and authorising secret operations to take over Iraq. By the end I had turned into a profit crazed oil tycoon.

Thursday 10 December 2009

No 37: Your country compared to US states

DID you know California has the same GDP as France and Ohio the same as Australia? Here is a map which shows the states of the USA and which countries match their GDP levels:



(Click on the map if you want to make it bigger.)

It comes from one of my favourite blogs - "Strange Maps" http://strangemaps.wordpress.com/ .

The USA is not the biggest country in the world nor the richest. But, as the map shows, it is certainly the richest big country.

(By the way, if you need to know the real names of the US states, go to this http://www.onlineatlas.us/map/united-states-map.gif )

No 36: Poor Darling!

If you never thought you'd feel sorry for Mr Darling, look at this cartoon:

http://news.bbc.co.uk/1/hi/business/8402362.stm

Of course I'm sure by now all of you have read about what he proposed in yesterday's Pre Budget Statement, but in case you haven't, this summarises the main comments and proposals he made:

http://news.bbc.co.uk/1/hi/uk_politics/8403636.stm

We were discussing in afternoon A2 class which of these are the most important, and decided on:
1. The tax on bankers' bonuses
2. The raise in National Insurance
3. The commitment to halve the budget deficit by 2013
4. The return of VAT to 17.5%

In general, he seems he is favouring raising taxes over cutting spending, perhaps since the latter is particularly dangerous just before an election.

However, we all know that the most important of all is ............................ the reduction of tax on BINGO!



Sunday 6 December 2009

No 35: Useful Stuff from the Guardian 2

NEXT, explanation of what QE is and how it works:

http://www.guardian.co.uk/business/2009/aug/06/quantitative-easing-questions-and-answers

And this shows Bank of England interest rates from 1694 (!) onwards:

http://www.guardian.co.uk/business/interactive/2008/nov/05/interest-rates-history


Finally, not from the Guardian but somewhat of an explantion for the need to expand the money supply....................

No 34: Useful Stuff from The Guardian 1

FIRSTLY, a graphic that shows how Quantitative Easing increased during the first part of the year:





No 33: Diamonds Aren't Forever

Q: WHICH business has seen its profits this year fall by 99%?

A: DeBeers, the world's largest producer of diamonds such as worn here....



This article explains what has happened:


There are a couple of economics ideas you should keep in mind when reading. First, there are obvious effects here due to a high income elasticity of demand, remembering that income and thus demand, can fall as well as rise.Second, there has been increased competition from countries like Russia, Canada and Australia.

Remember as economists we don't take the side of a particular company but try to assess if changes in a market are good or bad for the economy, its efficiency and overall welfare.

Tell me what you think below....

No 32: Bellerbys Nobel Prize for Economics

THE WINNER of the Bellerbys Nobel Prize for Economics for November 2009 is Hsin Qin (Tang) for his work about Keynes (see post 10).

As you can see, he was very pleased to receive an excellent prize along with temporary possession of the Bellerbys Nobel Prize Medal (formerly a football medal I won in 1997):



Now, I am sure you are all very jealous of Tang here, so I am expecting many many entries to December's Nobel Prize competition, which will be revealed very soon.

Thursday 3 December 2009

No 31: Countdown to December 9th

SINCE this will be when Alistair Darling makes the very important Pre-Budget report, announcing the latest government plans to try and help the economy recover.

The Daily Telegraph has a special section dedicated to what might happen:

http://www.telegraph.co.uk/finance/financetopics/budget/

which gives us an excuse for a silly picture


I met Mr. Darling last summer (that is not a picture of it by the way). He was getting into a car at the back of Brighton station as I was walking to school. I asked him to come to my 9 o'clock class but he said he couldn't. Nevertheless, he seemed like a nice man. His haircut looked very expensive and neat. Also, even though he had 6 helpers with him, he was carrying his own bag.

(Note: all of the above paragraph is actually true, apart from one sentence.)

No 29: The history of economics in video

HERE it is, the entire history of economics since 1914.

I highly recommend that all economics students try to watch this.

True, the entire "Commanding Heights" series runs to 6 hours, but if you manage to watch all before next June's exams, you will have gained an invaluable overview that will help you be even more successful.......

http://www.pbs.org/wgbh/commandingheights/hi/story/index.html


No 28: GDP Comparison Tool

OF all the activities I do with you guys, the one that seems to get the most response is when we compare countries' GDP. This is a great way to do this:

http://snippets.com/what-is-the-gdp-per-capita-for-every-country.htm


Tuesday 1 December 2009

No 27: Busy time at the moment.....

... end of term tests and reports to do, speed of new posting may be a little slower next couple of days, sorry!