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Thursday 28 June 2012

Unit 1: Market Failure & Drink Driving

On a class trip to an advertising and media company today, a group in UK were shown an ad campaign that bore a strong resemblance to the Smoking Kids campaign that I posted a few days ago.


In this case it was the idea that if people were reminded about the consequences of driving drunk then they would be less like to do so. In particular, people were not prepared to let someone else drive their car if they were drunk so were (hopefully) less likely to do so themselves.

A bit of further investigation showed that the two adverts were made by the same agency - Ogilvy and Mather, but looks like there was a bit of sharing of ideas across continents. The “Smoking Kids” advert was from Thailand, this one came from Brazil.



Sunday 24 June 2012

Unit 1: Market Failure & Cigarettes

This advert is an excellent study in 'Behavioural Economics'. Adults know cigarettes are bad for them, so why do they still smoke.....



Question: Is this a better way than taxing cigarettes? (If it is, why?)

Wednesday 20 June 2012

IGCSE & Unit 3: Competition Policy in the UK


IGCSE - Y10: Biz/ed - Market Power, Competition and Regulation: Anti-Competitive Behaviour - Activity | Biz/ed

Click on the link below to access an activity for Year 10 Economists -

Biz/ed - Market Power, Competition and Regulation: Anti-Competitive Behaviour - Activity | Biz/ed

The project will ensure you have a good knowledge of how competition policy works in the UK.

To be handed in before the summer holiday....

Tuesday 19 June 2012

More on exam

Also trade deficits....they have fallen in UK recently..why?

1. recession means we are buying less imports
2. china is now buyiong more high value added stuff..which we are good at

therefire is it such a big issue...no

Remember, big macro issue is govt debt, unemployment & EU...it is not inflation (even though we have inflation above 2%, this is seen as temperary...cost push, oil / gas / food will fall....so questions on the economy should focus on increasing AD and LRAS......

Unit 4: Exam prep

Dear all...

Case Studies - what about a question on EU, lots of macro economic stats, showing divergence. Problems of Eurozone, FDI, eastern europe attracting more recently.

Essays - protectionism...it's back, what are the advantages and disadvantages and are they effective...whatever you say, evaluate by saying its a short term thing, long term countries still want free trade.

Case study/essay: - development, why Brics, whats long term issue for brics (rising wages etc means they haver to move away from low wage economy and move to innovation and high tech stuff.....this is where africa benefits from more fdi.

Supply side/demand management...what/how can governemnet make UK more competitive.....

Unit 4: Quantiative Easing

Click here for a quick BBC link to explain Quantitative easing.....surely going to be on the exam tomorrow.....

Unit 4: The Eurozone Debt Crisis

Below is an interview with Harvard Professor, Niall Ferguson points out that, a long term problem was setting up “monetary union without any of the other institutions of a federal state” which “is proving to be a disastrously unstable combination.“



At present, the unemployment rates, growth rates and trade positions are diverging rather than converging undermining the stability of the Euro.

“According to the IMF, GDP will contract this year by 4.7 percent in Greece, 3.3 percent in Portugal, 1.9 percent in Italy, and 1.8 percent in Spain.

The unemployment rate in Spain is 24 percent, in Greece 22 percent, and in Portugal 14 percent.

Public debt exceeds 100 percent of GDP in Greece, Ireland, Italy, and Portugal. These countries’ long-term interest rates are four or more times higher than Germany’s.”


Yesterday, the former Prime Minister Gordon Brown warned that larger EU states like France, Spain and Italy are more vulnerable to higher interest rates, and a significant loss of confidence, if Greece goes.

Even if Germany did stump up cash to bail out Southern Europe, these states still face significant difficulties paying for imported goods, and servicing government debts not just now, but in the future. Yet these same governments have conflicting pressures from voters to revive stagnant economies, to cut dole queues, to stabilise prices, to limit tax increases; yet they need to convince lenders that debts and interest on loans can be paid.

There is no ideal solution to the Euro’s problems but you should try to consider what might happen to growth, to employment, to prices, to trade and economic stability not just in Europe but beyond.



Unit 4: Brics nations to increase contribution to IMF resources


An interesting article on how the emerging economies are now key players in the funding of the IMF. Useful context for any development question.

The IMF has been seeking the help of emerging economies to boost its resources
The Brics economies have said they will increase their contribution to the International Monetary Fund (IMF).

Brics refers to, Brazil, Russia, India, China and South Africa, five of the fastest growing emerging economies in the world.

The move comes as the IMF has been looking to boost its finances to help prevent any future financial crisis.

The Brics nations have also asked for a greater say at the fund.

"These new contributions are being made in anticipation that all the reforms agreed upon in 2010 will be fully implemented in a timely manner, including a comprehensive reform of voting power and reform of quota shares." the Brics economies said in a statement on the sidelines of the G20 summit in Mexico.

The nations added that they expect their contributions would be used only after the existing resources had been "substantially utilized".
'Deeply worrying'

“There is concern that the firewall available may not be adequate to deal with contagion”

The IMF has been called upon to lend money to countries such as Greece that have been affected by the ongoing sovereign debt crisis in the eurozone.

There are concerns that the fund may need to step in again if the debt crisis worsens and spreads to the region's bigger economies like Spain and Italy.

To prepare for this eventuality, it has been seeking to shore up its reserves so that it can provide help when needed.

Two of the Brics members, India and Russia, said they will enhance their contribution by $10bn (£6.4bn) each.

"There is concern that the firewall available may not be adequate to deal with contagion," said India's Prime Minister Manmohan Singh.

Mr Singh added that a faltering global recovery and slowing growth in emerging economies had made things more complicated.

"The global economic situation is deeply worrying."

Meanwhile, the Reuters news agency cited a source as saying that China will contribute $43bn to boost the fund's firepower.



Friday 15 June 2012

Unit 4: The Euro Crisis (Jun 2012)

What are the possible ripple effects of the euro crisis? There are a myriad of different opinions about what might happen and how far it might go.

This interactive graphic from the BBC website is a neat summary of just some of them - it starts with Greece itself, with comparisons to the debt crises in Spain, Portugal and Ireland then looks at the potential contagion effects of a collapse of confidence in Italy.

This may spread to banking meltdown in France, the UK and the ECB, with a Euro break-up rippling through the German and wider EU economies. As a result of the interdependence of the EU and its worldwide trading partners, global meltdown follows - which explains why Christine Lagarde of the IMF has been calling for more leniency towards Greece and other borrowers, and more action in Europe to boost growth.

Is there some way in which such negative multiplier effects can be avoided? Can macroeconomic policies be used somehow to protect domestic economies from the fallout? If they cannot, what next? This resource only presents one set of ideas, but might just help students to tease out some of the convoluted and complex issues which dog the EU and global economy at present.



Wednesday 13 June 2012

Unit 4: Evaluating Government Spending

Excellent piece, please, please read...it will give you some context and evaluation ideas when attempting questions/essay on fiscal policy.

When Robert Skidelsky gave his talk on Keynes here in Madrid last October, he spoke at length about the importance of effective government spending emphasising that the focus of the spending should be on capital rather than current.

ie, When aggregate demand is lacking, the government should increase spending on capital projects, even if that means deficit spending, in order to kick start the economy with the accompanying multiplier effect on output, jobs and growth.


This New York Times article takes up the Keynesian argument concerning the economic benefits of starting an “accelerated program of infrastructure repairs” throughout the US and and urges both Obama and the Republican hopeful Mitt Romney to listen up.

Apart from the impact such a program would have on jobs, $335 in annual damage per vehicle on the road caused by substandard roads would be saved. According to a report by the American Society of Civil Engineers, there’s more than $2 trillion in long-overdue repairs. These add to business costs, not to mention injuries and deaths caused by the roads, therefore by fixing them up, the government will also be improving the supply side even if that means increasing indebtedness.

“When prudent investment opportunities arise, families, businesses, and governments can and should spend more than they take in. “

An excellent article which can help A2 pupils when looking for some context when answering questions related to this topic. This also reminds me of this Q&A blog post from Geoff a while ago as it includes some great analysis and the following evaluation points of such infrastructure projects (relating to road building in the UK):

Read this!!!!

1. Skills shortages and spare capacity– the effectiveness of the investment might depend on whether the UK road building industry has sufficient skilled workers and spare capacity to successfully bid for and deliver the contracts to build new roads. If there are persistent skills gaps perhaps due to structural unemployment, wages will be bid higher and firms may have to depend on net inward migration.

2. Government spending on capital projects will help raise AD but needs to be supported by other policies to improve the human capital of the workforce and improve their job prospects

3. No one can be sure about the likely size of the fiscal multiplier effect – for example the propensity to consume domestically produced goods and services of the people and businesses employed to build the new roads

4. The medium term effects of increased government borrowing to fund major roads – might interest rates and taxation have to edge higher – putting a squeeze on the economy?

5. There might be more effective policies in the medium term – for example spending the same money to fund student enrolment at college or university so that they build up their skills?\

6. Long time lags on transport investment projects - see the comment below on the impact of planning objections and delays



Friday 8 June 2012

Unit 1: The Price Mechanism

Here is a slide share presentation on the price mechanism in action:

Unit 1: Price Elasticity of Demand

A presentation on the Price Elasticity of Demand:


Unit 1: Price Elasticity of Supply

A slide share revision presentation on price elasticity of supply






Unit 1: Externalities

Here is a short revision presentation on externalities streamed using Slide Share:



Unit 1: Government Intervention

Here is a short 35 slide revision presentation on government intervention in markets designed for AS microeconomics revision.