Airbus is pushing Boeing for market leadership in the twin engine aircraft market. Andrew Parker reports from the Paris air show on why a price war might be in the offing -- which would be bad news for the two manufacturers, but good for airlines.This short Financial Times video considers the prospects for a price war emerging in an industry which is often used by teachers and students as a classic case of duopoly.
Monday, 24 June 2013
Thursday, 20 June 2013
Sunday, 16 June 2013
Unit 3: Oligopoly - OFGEM and the energy providers
The energy regulator Ofgem has set out plans to "break the stranglehold of the big six energy suppliers".
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| Six firms generate 80% of Britain's electricity |
The measures require large suppliers and generators to trade fairly with smaller players or face cash penalties.
Centrica (British Gas), E.ON, SSE, Npower, EDF and ScottishPower will also have to post the prices at which they will buy and sell electricity up to two years in advance.
Ofgem says it will increase competition in the wholesale energy market.
The six companies generate 80% of Britain's electricity and supply around 95% of it to their customers.
"Ofgem's proposals will break the stranglehold of the big six in the retail market," said Andrew Wright, senior partner for markets at the regulator.
He added that they should also "create a more level playing field for independent suppliers, who will get a fair deal when they want to buy and sell power up to two years ahead".
The move is part of Ofgem's attempts to shake up the retail market for consumers.
Reforms outlined already will require firms to provide customers with simpler, clearer and fairer tariffs.
But the regulator wants more competition as well, and is seeking ways to ensure new entrants can take on the dominance of the six largest energy suppliers.
Fair play and market making
Under the proposals, the major generating firms will not be able to refuse reasonable requests by smaller suppliers to buy energy.
The major firms will have to sell power at a fair price and negotiate fairly at all times.
There will be deadlines to ensure the larger companies acknowledge requests and respond to them.
Traditionally, firms have tended to restrict sales to smaller suppliers to the near-term.
The biggest six companies currently auction up to 30% of their power in so-called spot market - for immediate usage.
Prices in the forward market - for delivery of energy months or years in the future - have been less transparent.
So the regulator wants to impose an obligation that will require the big six companies to post the prices at which they will buy and sell power up to two years in advance.
Ofgem says this will make it easier for independent firms to buy power for their customers.
It also expects greater price transparency to assist investors seeking to build new power generation plants in the future.
Will it work?
Some smaller entrants have long complained that opening up the spot market did not go far enough.
One of these smaller energy provider First Utility, which has 180,000 customers, says it buys just 1% of its electricity on the spot market. It says that it needs access to longer-term contracts.
"Ofgem's proposals are a positive move and there is no doubt that independent suppliers will be better off as a result, but the concern is that they will be complicated to design, implement and manage and won't completely solve the problem," said First Utility.
The company said it saw the move as a useful first step.
But it believed the long-term solution should be to force the big companies to offer all of the energy they generate for sale to other energy firms on the wholesale market, rather than retaining a big chunk for sale to their own end customers.
'More work to be done'
Other entrants argue that it is not liquidity but predatory pricing by the six largest companies that is the biggest problem.
Responding to the proposals, Angela Knight, chief executive of Energy UK, which represents the major energy companies said: "Effective and transparent wholesale energy markets can deliver benefits for customers, and we understand and agree with the objective of creating a more competitive retail market."
"The energy industry agrees with Ofgem that more work needs to be done on these proposals and is keen to have further discussions."
"The Ofgem proposals are not just a 'big six' issue, but apply to how the eight largest generators sell their energy onto the wholesale market. We need to consider carefully how the proposals join up as some have the potential to increase costs while others may well make it easier to see what is happening in the market," she added.
Ofgem says that it will consult on the license conditions that will bring the reforms into effect in the autumn. The changes are expected to be in place by early 2014.
Tuesday, 11 June 2013
Protectionism - a few thoughts
as far as protectionism is concerned....
tariffs will do the following -
Increase prices (draw diagram to prove)
Reduce consumer surplus and cause welfare loss (Same diagram)
Cause retaliation - (Use China & EU - solar panels and wine)
Short run - possibly tax revenue, although this is a very weak argument for tariffs and is not the reason countries do it.
Long run - damaging for all concerned as it ignores efficiency and comparative advantage
Possible arguments in favour would be for developing countries protecting their infant industries against foreign competition - they could use this protection to improve infrastructure, increase investment and become competitive...then reduce barriers to compete
big problkem with the above is that they need cash to do this and foreign comanies (FDI) and IMF would not allow protectionist barriers.
hope this helps...I have no doubt you are ready...good luck!
tariffs will do the following -
Increase prices (draw diagram to prove)
Reduce consumer surplus and cause welfare loss (Same diagram)
Cause retaliation - (Use China & EU - solar panels and wine)
Short run - possibly tax revenue, although this is a very weak argument for tariffs and is not the reason countries do it.
Long run - damaging for all concerned as it ignores efficiency and comparative advantage
Possible arguments in favour would be for developing countries protecting their infant industries against foreign competition - they could use this protection to improve infrastructure, increase investment and become competitive...then reduce barriers to compete
big problkem with the above is that they need cash to do this and foreign comanies (FDI) and IMF would not allow protectionist barriers.
hope this helps...I have no doubt you are ready...good luck!
Monday, 10 June 2013
VERY IMPORTANT
Right guys,
two of you have made this mistake in last two days so please read...
An increasing fiscal deficit like the ones in Greece, Spain and even the UK is not, REPEAT NOT, exapanionary fiscal policy.
The reason behinbd the increased deficits is the fact that the econies are shrinking (Less tax revenue) and rising unemployment (More benefits spending).
Remember G is only one part of AD.
Just because G is rising, it does not mean AD is rising.
It will slow down the fall in AD (Fiscal Drag), but not enough to stop AD shifting to the left and causing recessions.
Exoansionary Fiscal policy is when govts operate fiscal stimulus packages...ie increase spending on projects they were not going to spoen money on beforehand.
Any questions...mail me!!!!
two of you have made this mistake in last two days so please read...
An increasing fiscal deficit like the ones in Greece, Spain and even the UK is not, REPEAT NOT, exapanionary fiscal policy.
The reason behinbd the increased deficits is the fact that the econies are shrinking (Less tax revenue) and rising unemployment (More benefits spending).
Remember G is only one part of AD.
Just because G is rising, it does not mean AD is rising.
It will slow down the fall in AD (Fiscal Drag), but not enough to stop AD shifting to the left and causing recessions.
Exoansionary Fiscal policy is when govts operate fiscal stimulus packages...ie increase spending on projects they were not going to spoen money on beforehand.
Any questions...mail me!!!!
Unit 4: More essay suggestions
Gabs asked about these two essays...I have jotted down some possible areas you should focus on.
To what extent might a high national debt be a cause of concern?
and
How
might the UK's non-membership of the euro explain the trend (decreasing) in
inwards investment?
ok, first one is about how being in debt is an issue:
focus on -
Bond prices rising
Crowding out
Future tax increase to pay for debt
could be inflationary (although in reality at
moment it wont be)
evaluation
need fiscal debt to kick start
economy
If we don't spen what happens to growth &
employment
second one -
transaction costs - ie Japanese firms in UK have to
pay commission when trading with Eurozone countries
exchange rate uncertainty - leads to lack of
investment
However:
firms more concerned about profiabiltiy
infrastructure
available skilled labour
etc
Unit 4: Essay question on EU enlargement.
Evaluate the significance of EU enlargement to UK macroeconomic performance. (30)
Issues and areas for discussion:
1. the nature of EU enlargement
2. macroeconomic performance
3. economic growth
4. jobs
5. prices
6. the balance of payments
7. indicators of macroeconomic performance
8. a general comparison of the UK with new members’ economies
9. export opportunities
10. import threats
11. significance of outsourcing
12. demand-management policies helping to put the UK ‘house in order’ and maintaining stability
13. supply-side reforms
14. productivity
15. comparative advantage
16. the extent to which de-industrialisation limits economic success within the context of Enlargement
17. the extent of services providing a basis for success within the context of enlargement
18. opportunities/threats beyond the EU
19. immigration
20. other factors complementing the impact of enlargement or vv, i.e. enlargement as just
21. one potential component of improved UK macroeconomic performance
22. the underlying strength/weakness of the UK economy before enlargement
23. the strength of the challenges posed by the new members (Croatia example)
24. the UK business attitudes towards preparing for, and facing up to, the challenges
25. enlargement perceived as much more/much less significant than other factors
Issues and areas for discussion:
1. the nature of EU enlargement
2. macroeconomic performance
3. economic growth
4. jobs
5. prices
6. the balance of payments
7. indicators of macroeconomic performance
8. a general comparison of the UK with new members’ economies
9. export opportunities
10. import threats
11. significance of outsourcing
12. demand-management policies helping to put the UK ‘house in order’ and maintaining stability
13. supply-side reforms
14. productivity
15. comparative advantage
16. the extent to which de-industrialisation limits economic success within the context of Enlargement
17. the extent of services providing a basis for success within the context of enlargement
18. opportunities/threats beyond the EU
19. immigration
20. other factors complementing the impact of enlargement or vv, i.e. enlargement as just
21. one potential component of improved UK macroeconomic performance
22. the underlying strength/weakness of the UK economy before enlargement
23. the strength of the challenges posed by the new members (Croatia example)
24. the UK business attitudes towards preparing for, and facing up to, the challenges
25. enlargement perceived as much more/much less significant than other factors
Examination Questions guesses!
I have given it some thought and here is what I think is most likely to come up:
The EU - What are the benefits and drawbacks of UK leaving the EU (or staying in). Could also be benefits and drawbacks of being in the Eurozone...don't get those two mixed up!.
Austerity Vs stimulus question - what are the benefits and drawbacks of this policy. Rather than just focus on effects on the UK, I suggest you look at effects on Greece et al.
Protectionism - it's on the increase: what are the economic impacts of this (this could be effects on both developed and developing countries). What are the advantages & disadvantages of free trade?
Development - factors hindering development will be there in some form or other. Remember, it is important to look at effects of development on both the developing countries AND the developed. Remember to mention the development models when answering a question on this topic.
Trading Blocs - do they increase globalisation or decrease? (you can argue both ways). Also, remember the rise of bilateral agreements around the world. Is this reducing the importance of the blocs?
Unemployment - when discussing policies to improve this, remember to include what types of unemployment you are trying to improve.
Fiscal, monetary & supply side - please be familiar with these and how effective they are given the current economic climate.
Finally: remember when discussing macroeconomic objectives, be relevant. Inflation and balance of trade are not the most pressing issue at the moment...fiscal debt, employment creation and econ growth are.
The EU - What are the benefits and drawbacks of UK leaving the EU (or staying in). Could also be benefits and drawbacks of being in the Eurozone...don't get those two mixed up!.
Austerity Vs stimulus question - what are the benefits and drawbacks of this policy. Rather than just focus on effects on the UK, I suggest you look at effects on Greece et al.
Protectionism - it's on the increase: what are the economic impacts of this (this could be effects on both developed and developing countries). What are the advantages & disadvantages of free trade?
Development - factors hindering development will be there in some form or other. Remember, it is important to look at effects of development on both the developing countries AND the developed. Remember to mention the development models when answering a question on this topic.
Trading Blocs - do they increase globalisation or decrease? (you can argue both ways). Also, remember the rise of bilateral agreements around the world. Is this reducing the importance of the blocs?
Unemployment - when discussing policies to improve this, remember to include what types of unemployment you are trying to improve.
Fiscal, monetary & supply side - please be familiar with these and how effective they are given the current economic climate.
Finally: remember when discussing macroeconomic objectives, be relevant. Inflation and balance of trade are not the most pressing issue at the moment...fiscal debt, employment creation and econ growth are.
Unit 4: European Union Expansion - Croatia becomes number 28!
Here are some links to resources covering the accession of Croatia to the European Union as the country becomes the 28th member nation of the EU Single Market. This BBC news article tracks Croatia's progress from isolation to full membership of the EU.
On July 1, Croatia will become the 28th member of the European Union, which will open up employment prospects for hundreds of thousands of job-seekers. With low salaries being offered at home, and high competition, Croatia has one of the worst unemployment rates in the region
On July 1, Croatia will become the 28th member of the European Union, which will open up employment prospects for hundreds of thousands of job-seekers. With low salaries being offered at home, and high competition, Croatia has one of the worst unemployment rates in the region
Sunday, 9 June 2013
A2 Economics - Y12 MUN
Unit 4 is a difficult examination. Students must be able to argue their points in a simple, succinct and objective manner. This two week task will not only enable you to learn about the main areas of unit 4, but also understand the arguments against the points you will raise.
Each group will focus their presentation on what of the folowing topic ares:
1. Explain four ways in which economic growth and development might be promoted in developing countries.
2. Explain how reducing the number of people living in absolute poverty sufficient to achieve economic development?
3. Explain the economic benefits of the growth of trading blocs on the global economy.
4. The UK is a member of the European Union but has not adopted the euro as its currency. Explain the benefits of membership of a monetary union such as the Eurozone.
5. Explain how debt cancelation and trade liberalization as an alternative means of promoting economic development in developing countries.
You will produce a thorough, 10 minute presentation on your chosen area. Students will then question each group on any issues they have with the presentation.
Each group will focus their presentation on what of the folowing topic ares:
1. Explain four ways in which economic growth and development might be promoted in developing countries.
2. Explain how reducing the number of people living in absolute poverty sufficient to achieve economic development?
3. Explain the economic benefits of the growth of trading blocs on the global economy.
4. The UK is a member of the European Union but has not adopted the euro as its currency. Explain the benefits of membership of a monetary union such as the Eurozone.
5. Explain how debt cancelation and trade liberalization as an alternative means of promoting economic development in developing countries.
You will produce a thorough, 10 minute presentation on your chosen area. Students will then question each group on any issues they have with the presentation.
Saturday, 8 June 2013
Unit 4: Protectionism and development
All, just thought I'd share an e mail I sent Gabriele to answer the question about how prtectionism can help increase efficiency of firms......
the argument about protectionism increasing efficiency is a valid one. It suggests that (for example) the protection of infant industries allows firms to increase investment without damaging competition hurting their profits.
This is an argument for development as well. ie increase barriers, invest in infrastructure and capital...become competitive, lower barriers......trade :-)
Obviously, the big issue is where do you get cash from in first place? Difficult to get IMF loans, cos they will say, only if you lower barriers!
Thursday, 6 June 2013
Unit 4: China, EU, Dumping & Protectionism
As I posted a few days ago, the Solar Panel argument was just the start of what could be a damaging trade war between China & the EU. This is a story where both superstates will lose out.
Last month, the Chinese government warned the EU that it would "take necessary steps" to defend its national interests, if any duties were levied against its goods. Well, today they did just that, accusing the French of 'Dumping' wine into China!
Observers suggested that Beijing's latest move was a direct consequence of the EU decision.
"This might represent retaliation to what happened yesterday," Davide Cucino, president of the European Union Chamber of Commerce in Beijing, told the BBC.
"There is no interest for both actors to play the protectionism card, and frankly speaking retaliation represents a missed opportunity for China to provide the necessary evidence… in order to carry out a resolution to the photovoltaic case."
Click here to access the full article.
 |
| Demand for wine in China has surged in recent years, making it a key global wine market |
Observers suggested that Beijing's latest move was a direct consequence of the EU decision.
"This might represent retaliation to what happened yesterday," Davide Cucino, president of the European Union Chamber of Commerce in Beijing, told the BBC.
"There is no interest for both actors to play the protectionism card, and frankly speaking retaliation represents a missed opportunity for China to provide the necessary evidence… in order to carry out a resolution to the photovoltaic case."
Click here to access the full article.
Wednesday, 5 June 2013
Unit 4: The Millennium Development Goals
Could be worth brushing up on these before next week. Useful when talking about developing countries and how they are hindered by issues highlighted below.
The Millennium Development Goals (MDGs) are eight international development goals that were officially established following the Millennium Summit of the United Nations in 2000, following the adoption of the United Nations Millennium Declaration. All 193 United Nations member states and at least 23 international organizations have agreed to achieve these goals by the year 2015.
The goals are:
- Eradicating extreme poverty and hunger,
- Achieving universal primary education,
- Promoting gender equality and empowering women,
- Reducing child mortality rates,
- Improving maternal health,
- Combating HIV/AIDS, malaria, and other diseases,
- Ensuring environmental sustainability,
- Developing a global partnership for development.
Unit 4: De-Globalisation Question - Mark scheme
b) Examine the macroeconomic impact faced by a developed and a developing country of this de-globalisation trend. (30 Marks)
Here are the salient points I would include in an essay of this kind:
Define De-Globalisation
Discuss impact of less trade and rising protectionism on countries employment, inflation, current account, econ growth etc.
Issues would possibly include - rising prices due to less efficient production, trade creation within blocs, trade diversion away from developing nations, improved current account for developed, possibly worsening from developing (they tend to be exporters and this could fall), unemployment issues in developing world etc etc
The question should have some sort of comparison between the developed & developing countries. It is likely that developing would suffer more as the developed countries move toward self sufficiency.
You must use examples where appropriate - ie More protected agriculture within the EU will make it even harder for African nations to trade, the Chinese will suffer as exporting to EU & States becomes harder and more expensive. (Solar Panels)
Any comments with additions to what you might want to write will be gratefully accepted....
Here are the salient points I would include in an essay of this kind:
Define De-Globalisation
Discuss impact of less trade and rising protectionism on countries employment, inflation, current account, econ growth etc.
Issues would possibly include - rising prices due to less efficient production, trade creation within blocs, trade diversion away from developing nations, improved current account for developed, possibly worsening from developing (they tend to be exporters and this could fall), unemployment issues in developing world etc etc
The question should have some sort of comparison between the developed & developing countries. It is likely that developing would suffer more as the developed countries move toward self sufficiency.
You must use examples where appropriate - ie More protected agriculture within the EU will make it even harder for African nations to trade, the Chinese will suffer as exporting to EU & States becomes harder and more expensive. (Solar Panels)
Any comments with additions to what you might want to write will be gratefully accepted....
Unit 4: Protectionism & Dumping - so it begins!
So, the European Union has announced that it is to impose anti-dumping levies on imports of Chinese Solar panels, in a move that could trigger a damaging trade war between two of the world largets economies.
Click here for the full article. What might the economic effects of this increase in protectionism be on the two economies?
Click here for the full article. What might the economic effects of this increase in protectionism be on the two economies?
Tuesday, 4 June 2013
Unit 4: Unemployment in the UK & Abroad
Click here for an article on UK unemployment. 'UKtrapped in 'vicious spiral' of falling wages and depressed investment'
It paints a depressing picture of high unemployment and increasing number of long-term unemployed as well. Some solutions are highlighted below (Could use in your exam)
The International Labour Organisation (ILO) calls on the UK to implement measures to encourage job-friendly investment, particularly at "job-rich" small and medium-sized businesses, with schemes such as credit guarantees and tax incentives. It also says executive pay packages should no longer reward short-term goals that can encourage harmful management practices.
Click here for an article on the issue of global unemployment. It also highlights the growing disparity between rich and poor: '
'Soaring stock markets and higher corporate profitability have pushed up executive pay and left companies sitting on piles of cash, but they have failed to create jobs for millions out of work, according to the International Labour Organisation'.
It paints a depressing picture of high unemployment and increasing number of long-term unemployed as well. Some solutions are highlighted below (Could use in your exam)
The International Labour Organisation (ILO) calls on the UK to implement measures to encourage job-friendly investment, particularly at "job-rich" small and medium-sized businesses, with schemes such as credit guarantees and tax incentives. It also says executive pay packages should no longer reward short-term goals that can encourage harmful management practices.
Click here for an article on the issue of global unemployment. It also highlights the growing disparity between rich and poor: '
'Soaring stock markets and higher corporate profitability have pushed up executive pay and left companies sitting on piles of cash, but they have failed to create jobs for millions out of work, according to the International Labour Organisation'.
 |
| Juan, a 50-year old unemployed security guard, begs for money on a Madrid street.
|
Monday, 3 June 2013
Unit 4: Structural Unemployment - a problem that needs a solution!
Click here to access an interesting article from the New York Times digging into perhaps the most worrying legacy of this Great Recession, the problem of hysteresis and structural unemployment. (Look up the word)
It looks at the causes and potential solutions as well as including some great images included below illustrating the concept.
This is a problem you may well have to discuss in next weeks exam. Solutions to one type of unemployment, rather than just a general discussion about unemployment will gain much more credit.The article discusses Supply side policies and protectionism as possible ways to solve the issue....simple and effective policies in which you can evaluate.
"Unemployment is staying high despite the end of the recession because we are now in a historic transition. Because of automation, globalisation, efficiency and other factors, we no longer need the share of people working that we have had in the past. With these trends moving in only one direction, it is clear that the job crisis is permanent and will not go away with better economic times."
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