Unit 3: Monopoly and regulation - Google

Thanks to Safiyah for this excellent post on monopoly and regulation. Click here for the article from the Economist. It highlights many issues, such as contestability, barriers to entry, restrictive practices, government regulation, on line vs off line......fantastic stuff.

We will discuss this on Sunday/Monday....be ready!

Questions I will be asking will be:

How contestable is this market?
Should the EU be regulating all online monopolies?
How could they regulate them?
What will be the impact on the customer?

Unit 3: Will OPEC cut oil supply - Cartels in action

Thanks to Mr Barfoot for this excellent article on what OPEC (an overt cartel) might do to the supply of oil, to combat the 30% fall in prices since June.

Lots of useful and relevant material for Unit 3 questions. Such as:

Price Leadership - Saudi Arabia
Cartel busters - many OPEC members
Competitive pricing - Saudi Arabia
Limit Pricing - Saudi again.

Important to read and understand........

Unit 4: Current Account - Surplus Vs Deficit

The table below shows the trade balances for eight countries. They are ranked in order from the country whose trade deficit makes up the largest percentage of its GDP  to the country whose trade surplus makes up the largest percentage of its GDP. The blue bars represent the value of the deficit or surplus of each nation. Try and think about the questions that follow this diagram.

Discussion Questions:

1. Identify and define the four components of a nation’s current account balance.
2. According to the data, which three countries are the most import dependent? Which three countries are the most export dependent? Which country has the most balance trade in goods and services? Which has the most imbalanced trade?
3. For one of deficit countries above, answer the following two questions:
   1. Assuming its currencies’ exchange rates is floating, explain how persistent current account deficits will affect a country’s exchange rate over time?
   2. Summarize and explain the likely effects of a current account deficit on the following: a) the financial account balance, b) domestic interest rates, and c) national debt.
4. For one of the surplus countries above, answer the following two questions:
   1. Assuming its currencies’ exchange rates is floating, explain how persistent current account surpluses will affect a country’s exchange rate over time?
   2. Summarize and explain the likely effects of a current account surplus on the following: a) domestic savings rates, b) the financial account balance.
5. What are the various methods a country can take to reduce a current account deficit? What is the benefit of having a balanced current account as opposed to a large deficit or surplus?

Unit 1 & 4: Labour Markets and pay

The ONS published the Annual Survey of Hours and Earnings today, which contains some very useful data.

For the first time, they have produced an interactive tool to help explore some of the new figures. It graphically illustrates the occupations with the highest and lowest earnings, allows the user to see which occupations have similar salaries, and incorporates a couple of quick quizzes comparing. It highlights some of the issues around gender pay gaps, different pay rates for different occupations and elasticity of supply of labour.

For example, which of these would you expect to be the highest earners:

• Senior Police officers
• Medical Practitioners
• Airline pilots
• IT directors
• Air traffic controllers

And at the other end of the scale, which of these do you think earn the least:

• Nursery nurses
• Hairdressers
• Retail cashiers
• Bar staff
• Cleaners

Unit 4: Bi-Lateral trade agreements - Australia & India

Another article from Elliot (Click here) - Useful for questions on free trade/trade blocs and protectionism.

You should think about the arguments in favour of these agreements, the benefits of bi-lateral agreements v's being in a trading bloc (EU, NAFTA, ASEAN etc).

What could the economic impact of this agreement be, both for the two countries involved and others in the area not involved.

Unit 4: Indonesia raise fuel prices by 30%

Thank you to Elliot for this interesting article on how the Indonesian government is trying to achieve certain objectives at the expense of others.

You will no doubt be aware that the main govt objectives are:

Low Inflation (Stable prices)
Low Unemployment
Sustainable Economic Growth
Healthy Balance of Trade
Strong Government fiscal position.

Governments will put certain objectives before others depending on circumstances. It ios clear that the Indonesian government (much like most of the developed world in recent years) are putting stable govt finances as a priority this year.

The question you would be asked to look at could be:

How will this policy affect the economy both in the short and the long run?

Unit 3 & 4: Oil prices continue to fall.

Once again I am out on a school trip (sorry), so we will put on hold the work on Oligopoly and do something constructive and relevant for Unit 4.

Oil prices are likely to continue falling well into 2015, the International Energy Agency has said. 

Click here to read the article and answer the following questions:




Unit 3 - Why are oil prices falling? (8 marks)

(this could be linked to Unit 3 - supply/demand/cartel issues)

Unit 4 ; Assess the economics effect on both a developed and a developing country of the predicted fall in oil prices. (30 marks)

Unit 3: Lesson plan for Economics group

This message is for Luke's group. I am not in class tomorrow (Thursday P6). Please split yourselves into 3 groups.

Group A - Complete question 9 part a & b from Jun 13 paper. (it's about eggs)

Group B - Complete question 9 part a & b from Jun 12 paper. (it's about supermarkets)

Group C - Complete question 10 part a & b from Jun 11 paper. (its about Thorntons chocs)

Please leave you completed packs on my desk.

Thank you.

Unit 4: Comparative advantage & Income inequality

The poor countries should catch up with the richer ones, in theory, at least. And between 1988 and 2008, global inequality, as measured by the distribution of income between rich and poor countries, has narrowed, according to the World Bank. But within each country, there has been widening inequality in many poor places.

According to The Economist this can be seen in the Gini index, a measure of inequality. (If the index is one, a country’s entire income goes to one person; if zero, the spoils are equally divided.) Sub-Saharan Africa saw its Gini index rise by 9% between 1993 and 2008. China’s soared by 34% over 20 years. It has hardly fallen anywhere.

The article explains why this is a puzzle, given economists’ confidence in the concept of comparative advantage. Economies export what they are relatively efficient at producing. Take America and Bangladesh now. In America the ratio of highly skilled to low-skilled workers is high. In Bangladesh it is low. So America focuses on products requiring highly skilled labour, such as financial services and software. Bangladesh focuses on simpler products such as garments. Comparative advantage predicts that when a poor country starts to trade globally, demand for low-skilled workers will rise disproportionately. That, in turn, should boost their wages relative to those of higher-skilled locals, and so push down income inequality within that country.

Economists have wondered why this hasn’t been happening.

A (simplified) account of their findings is that the latest wave of globalisation has jumbled workforces: high-skilled workers in poor countries can now work more easily with low-skilled workers in rich ones, leaving their poor neighbours in the lurch. Take “intermediate goods”, the semi-finished products that account for about two-thirds of world trade. The production processes outsourced by big companies in factories or call-centres are by rich-world standards unskilled. But when jobs are sent offshore, they are snapped up by relatively skilled ones in poor countries. According to research, the typical call-centre employee in India has a university degree.

In the modern, interconnected world, such workers come into more regular contact with less-skilled people in the rich world. The result of booming trade in intermediate goods is higher demand and productivity for skilled poor-country workers. Higher wages ensue: multinationals in developing countries pay manufacturing wages above the norm for the country. One study showed that in Mexico export-oriented firms pay wages 60% higher than non-exporting ones. Another found that foreign-owned plants in Indonesia paid white-collar workers 70% more than locally owned firms. Globalisation, though, does not boost wages for all. The least skilled cannot “match” with skilled workers in rich countries; worse, they have lost access to skilled workers in their own economies. 

The result is growing income inequality.

Unit 4: Primary Product Dependency: Mauritius

Morning all!

Thank you to Riz for finding this interesting article on Mauritius and the issue with relying on one main agricultural crop - sugar.

Lots in the article for application marks for Unit 4 essays. Fluctuating prices, decreasing terms of trade, primary product dependence, low value added product, poor savings ratio and small inefficient farms all contribute to difficult development conditions.

Question for discussion: Is the tourism industry big enough for them to develop based on this alone?