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Thursday, 10 April 2014

Unit 1: Elasticity revision notes

Our normal laws of demand suggest that as prices increase demand decreases whilst firms attempt to supply more (with the opposite happening as prices decrease). The concept of elasticity extends this understanding by asking the question ‘by how much does demand and supply change?’

What do I need to know?

1 The definitions of each elasticity
2 Each elasticity formula and confidence in using them and making calculations
3 How to draw the diagrams for curves with different price elasticity
4 The determinants of price elasticity of demand (PED) and price elasticity of supply (PES)
5 Examples of how elasticity can influence the scale of changes in demand and supply and prices

6 Why elasticity is important for businesses and when the government intervenes in markets

Wednesday, 9 April 2014

Unit 4: The Arguments FOR 'Brexit' (Leaving the EU)

I hate the term 'brexit', but looks like it's here to stay. Please find below some economic arguments for the UK to leave the EU. Useful for evaluation when looking at costs/benefits of membership.

1. Britain could join the European Free Trade Association (EFTA) to avoid bureaucratic burdens on business linked to Britain's membership of the EU, saying it could position itself as somewhere between Switzerland and Turkey, neither of which are EU member states.

2. There would be significantly fewer regulations, coupled with greater trade with emerging economies, could provide a real boost for Britain's economy.

3. UK could reallocate the money it saved on contributions to pay down its deficit to enjoy a 10-billion pound surplus.

4. It would maximise the potential for an open, prosperous and globally engaged UK.

5. Economic incentives from an EU exit would include a reduction in the rate of corporation tax, the creation of special economic zones in poorer regions, and a rise in the research and development tax credit for new investors.

Tuesday, 8 April 2014

Unit 3: The 'Big 4' lose market share to cheap (& expensive) alternatives

I just read this very timely article about the supermarket industry. Discount and premium supermarket chains have continued to increase their market share at the expense of the main UK supermarket chains, research firm Kantar Worldpanel has said.

This provides many points for analysing and evaluating the nature of competition in oligopolistic markets.

Q What does this suggest for the way the market competes and how significant this competition is?

Monday, 7 April 2014

Unit 4: Corruption and Economic Growth - Nigeria

Two interesting articles here regarding Nigeria. This one discusses the extent of corruption in Nigeria and how it could hamper economic growth. (Thanks to Aadil for finding)

However, this article discusses how Nigeria has become the biggest economy in Africa, overtaking one of the BRICS.

Useful for evaluation. ie Corruption could/should hinder economic growth, however, in the case of Nigeria, it does not seemed to have hindered growth too much....possibly at the expense of income distribution.

Friday, 4 April 2014

Unit 4: EU - The facts!

Unit 4 Macro: Economic Benefits of EU Membership

Membership of the European Union (EU) has had a big positive effect on average incomes in all but one of its member countries. 

That is the central finding of research by Nauro Campos, Fabrizio Coricelli and Luigi Moretti, to be presented at the Royal Economic Society’s 2014 annual conference. They also find that the more financially developed countries have grown significantly faster after joining the EU.

The study examines data for each EU member to answer the question, ‘what would levels of per capita income and labour productivity be if countries had not joined the EU when they did?’ Among the findings:

* For the average country, average incomes would be 12% lower if they had not joined – and annual rates would have been 1.2 percentage points lower.

* Denmark, Ireland, the UK, Portugal, Poland, Hungary, Estonia and Latvia have benefitted most from EU membership.

* Spain, Austria, Finland, Sweden, Slovenia, Czech Republic, Slovakia and Lithuania have also benefitted financially, but by less.

* Greece is the only country where joining the EU has resulted in lower levels of per capita income.

* The benefits for the UK have slowed down over time, but the benefits for Ireland have not. This suggests that the former benefited more from the single market while the latter did mostly from the euro.

Channel 4 news - does Europe bring each household £3000?:

Thursday, 3 April 2014

Unit 3: OFT, regulation and consumer welfare

Carpet, bed and sofa retailers promise ‘genuine prices’ after OFT investigation

Wednesday, April 02, 2014

According to the Guardian, Carpetright and four other flooring and furniture retailers have promised to clean up their pricing after reaching a settlement with the Office of Fair Trading (OFT). It looks like a good example of the potential for market failurearising out of asymmetric information.

The article reports that the watchdog's investigation last year found widespread misuse of promotions.

Offers advertised for a limited period, often over bank holidays, were used to pressurise shoppers into making instant purchases. But the OFT found that just 5% of products were ever sold at the higher advertised price and many were never sold at that price. The OFT said a pre-discount price was highly unlikely to be genuine and fair if it was only available in a few stores, or if the discounted price was in effect the normal price.

The head of the OFT's goods and consumer group, said: "Retailers advertise bargains and discounts by referring to a previous or future higher price. It's a powerful marketing tool which, when used properly, provides a helpful and easy way to demonstrate to shoppers the value of discounts and savings. We are therefore pleased that these retailers have confirmed their commitment to using genuine prices."

Wednesday, 2 April 2014

Unit 4: Foreign Direct Investment - Cuba's story

Thanks to Klaus for this article from Reuters which discusses Cuba's attempts to attract foreign direct investment. Useful for any question on developing countries trying to grow.