Thursday, July 26, 2007

Unit 3: Economic growth, interest rates and inflation in China

This BBC article and video clip explain the conflicting macroeconomic objectives China appears to be facing
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a) What effect will the rising value of the Yuan have on China's exports and imports?
b) What effect should the rise in China's interst rates have on the value of the Yuan?

The economy is said to be overheating and as a result inflation is rising
c) Using an AD / AS diagram, explain the possible cause of this rise in inflation
d) What action should the cental bank take to reduce the rate of inflation?
e) Use an AD / AS diagram to show how this policy should reduce inflation

Unit 1: Demand for products at B&Q

This BBC article outlines reasons for sales at B&Q

a) Explain the positive and negative effects the weather has had on B&Q sales
b) To what extent will increasing interest rates decrease demand for B&Q products?

Tuesday, July 24, 2007

Unit 1: Price elasticity of demand: Sony PS3

The effect of the price cut for the PS3 in the usa can now be seen

a) The original price was $600 and it was cut by $100. Using this information and the information in the story, calculate the PED for the last 2 weeks following the price cut.
b) Explai what happened to Sony's revenue from PS3 sales in these 2 weeks
c) Evaluate the success of Sony's stratagy given the other information in the article and your knowledge of the concept of PED

Monday, July 23, 2007

Unit 2: Consumption with private benefits but with external costs: Motorhomes

From Geoff Riley's blog comes this BBC video clip
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a) What do you think has lead to the increasing demand for motorhomes in the UK in the last 10 years?
b) What are the private benefits and private costs of having a motorhome?
c) If you buy a motorhome, what can you say about your valuation of the private costs and benefits associated woth ownership?
d) What external costs are there asociated with motorhomes?
e) Analyse how the government could internalise the external costs for motorhome owners and evaluate how successful they would be in reducing the number of motorhomes on the road.

Unit 1: Price elasticity of demand: Car parking

The BBC reports rising car parking prices at some hospitals

a) What do the hospitals believe demand for car parking to be?
b) What PED factors explain this?
c) What do you expect to happen to the revenue received from car parking by the hospital?
d) Draw a diagram to show this revenue change

Unit 2: Government intervention to overcome market failure: Raising the age for smoking

A BBC article explaining what the government intends to do to inform people about the forthcoming increase in the minimum age for legal smoking

a) What type of free market failure is present in teenage smoking?
b) What measures are the government taking to try to reduce the market failure?
c) Why are they taking these measures?
d) To what extent do you believe they will be successful in reducing the market failure

Unit 2: Government intervention to overcome market failure : Air safety

The BBC reports an Iranian airline banned from flying in to the UK

a) In what way is the free market failing?
b) Why has the government intervened in the free market?

Unit 1: Increasing demand for Domino's Pizza

A great, short BBC article packed with economics

a) Explain all the factors mentioned in the article that have led to an increase in demand for Domino's pizza, making sure you tie in the factors clearly to the theory of demand

Sunday, July 22, 2007

Unit 2: Alcohol consumption; Market failure and taxation

The Chief Medical Officer believes alcohol should be taxed more heavily

a) In what way does the free market fail?
b) To what extent do you believe increasing tax on alcohol would overcome this market failure?

Unit 1: The price of bread

This BBC video clip and associated article says the price of bread is due to rise in the autumn
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a) Use both supply and demand reasons to explain why the price of bread will rise
b) Draw a S&D diagram to show the S and D changes and the resulting price rise

Saturday, July 21, 2007

Unit 2: The rising inequality of income and wealth in the UK

The gap between rich and poor is at its highest level for 40 years, according to research by the Joseph Rowntree Foundation. This BBC clip explains the problem
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The main conclusions of the report are

1. Deep poverty has declined: Over the last 15 years, more households have become poor, but fewer are very poor.

2. Relative poverty has increased: The overall number of ‘breadline poor’ households increased – households where people live below the standard poverty line (defined as household income below 60 per cent of median income adjusted for household size). This number has consistently been above 17 per cent, peaking at 27 per cent in 2001.

3. Wealth breeds wealth: Already-wealthy areas have tended to become disproportionately wealthier. There is evidence of increasing polarisation, where rich and poor now live further apart. In areas of some cities over half of all households are now breadline poor. Personal wealth held by the richest 1% of the population grew as a proportion of national share, rising from 17% in 1991 to 24% in 2002.

4. The housing boom has impacted on wealth: 23 per cent of households are now wealthy in terms of housing assets.

5. Pockets of deep poverty in urban areas: Urban clustering of poverty has increased, while wealthy households have concentrated in the outskirts and surrounds of major cities, especially those classified as ‘exclusive wealthy’, which have been steadily concentrating around London.

Unit 1: The rising price of farm crops

This BBC clip explains why farm crop prices are rising
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a) Explain the 2 demand side effects on price described
b) Explain the 1 supply side effect on price described
c) Draw a D&S diagram to show these effects on farm prices

Monday, July 16, 2007

Unit 2: Public goods: Flood defences

This BBC article says that after the recent floods, much more needs to be spent on flood defences

a) What are the 2 conditions needed for a public good?
b) Do either or both of these conditions apply to flood defences?
c) How could the problem of free riders be applied to flood defences if they were provided privately?
d) Evaluate the extent to which flood defences are a public good

Sunday, July 15, 2007

Unit 1: Demand and the weather: Magners cider

Retailers and producers often complain that demand for their products is effected by the weather. Last week, Magners said the same thing,,2125583,00.html

Unit 1: Changes in the market structure of the broadband market

These 2 articles from theBBC and Guardian describe a recent takeover in the broadband market,,2126269,00.html

a) From the Guardian article, list the major firms in the industry with the number of customers each has
b) From the information, describe what has happened to the market in terms of competition over the last few years?
c) Explain and justify which market structure model now best fits the broadband market

Wednesday, July 11, 2007

Unit 2: Negative externalities associated with meat eating

This BBC clip makes you think of the true cost of meat eating
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a) What is the private cost of eating meat?
b) What, according to the clip, are the external costs associated with meat eating?
c) How does the meat market therefore fail?
d) Draw a diagram to show this market failure
e) Evaluate the different actions the government could take to reduce this market failure

Unit 2: A cost benefit analysis associated with the UK gas supply

As the UK becomes more dependant upon imported LPG a pipline is needed to connect it to the national gas grid
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a) Identify the private costs and benefits of the pipeline and who they will effect
b) Identify the external costs and benefits of the project and who they will effect
c) What problems would you encounter doing a CBA on this project?

Tuesday, July 10, 2007

Unit 1: Supply and the price of farm products

This article explains the effect of all the recent flooding on farmers

a) Explain what is likely to happen to the price of many crops as a result of the floods
b) Draw a diagram to show this effect

Unit 1: Quantity demanded and price: Banking

This BBC article clearly shows the link between price and quantity demanded

a) Explain the relationship between price and quantity demanded
b) Link it to this example
c) Draw a diagram to show the change explained in the article

Unit 1: Economies of scale Baby food

This BBC article talks about a proposed merger. The result would be a decrease in the average cost of output for the combined group; ie they will experience economies of scale

a) Give examples of the economies of scale that may arise

b) Can you think of any diseconomies that may arise?

c) Draw a diagram to shot the LRATC of production before and after the merger

Unit 1: The demand for music

This BBC clip shows the changing pattern of how the UK buys its music
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a) What economic term would you use to describe CDs and music downloads?
b) Using demand theory, explain the decrease in CD sales
c) Draw 2 diagrams to show the effect on the CD and singles download market
d) It is suggested that the record companies could generate more money from their artists via live gigs and merchandising. In economic terms, what is this relationship?

Monday, July 09, 2007

Unit 2: Food as a demerit good

This clip suggests consumers have imperfect knowledge when the choose what to eat and so sandwiches may be an example of a demerit good

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a) How doea the sandwhich market fail?
b) How could this market failure be overcome

Unit 3: Supply side policy: Information on skills

This BBC article shows the government promoting its supply side policies

Unit 1: Price,quantity demanded and Price elasticity of demand: Playstation 3

This BBC article clearly shows the link between price and quantity demanded for the PS3 in the USA

a) Why are Sony cuting the price?
b) What do they think will happen as a result of the price cut?
c) Draw a diagram to show the effect of the price cut
d) Why might demand for the Playstatioin 3 not rise as Sony expect?

A few days later, Sony announced it would not cut the price of the PS3 in Europe

e) What reasons do Sony give for not decreasing the price in Europe
f) What do the different prices suggest to you about the price elasticity of demand for the PS3 in Europe and the USA?

Saturday, July 07, 2007

Unit 3: The effect of a rise in interest rates

This BBC clip explains the effects of a rise in interest rates
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a) Draw an AD/AS diagram to show the position of the economy as the MPC of the BoE see it
b) Show on the diagram and explain what the BoE believe will happen as a result of the rise in interest rates
c) The interst rate rise produces both winners and losers. Give examples of people in both catagories
d) Interest rate rises particularly hit those with large mortgages. How would the increase in monthly payments from £391 to £477 effect the economy if reflected across the economy?
e) One problem often cited with using interest rates to control the economy is there is a time lag before the full effect is seen in the economy. What evidence is there to support this view in the clip?

Friday, July 06, 2007

Unit 1: Maximum prices and disequilibrium: Zimbabwe

This BBC article clearly shows what happens if the government steps in and sets a maximum price below the free market equilibrium,,2119003,00.html

a) Draw a diagram to show what is happening with the introduction of maximum prices
b) Using the diagram and the article, explain what is happening in Zimbabwe

Unit 1: The demand for wellies!

Summer in the UK sees demand for wellies rise according to this BBC article

a) Use demand theory to identify the 2 factors in the article and use them to explain why demand for wellies has increased
b) Draw a diagram to show the effect of this increase in demand on the market for wellies

Thursday, July 05, 2007

Unit 3: Why interest rates have risen

This BBC article and clip explains why interest rates have risen to 5.75%

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a) What sort of policy is raising interst rates?
b) How is the increase meant to decrease aggregate demand?
c) Draw a digram to show and explain how this increase in interest rates is meant todecrease inflation
d) How do time lags confuse the decision the MPC has to take on setting interest rates?

Unit 1: Supply and Demand: The rise in farm prices

This BBC video clip and article suggests farm prices will rise in the future due to various reasons

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a) Identify the demand factors likely to fuel the rise in prices
b) Identify the supply factors likely to fuel the rise in prices
c) Draw a S&D diagram to show these effects on farm prices

Unit 2: Market dominance and government action: Telefonica

The European Commission has fined Spain's Telefonica $207m [£102.5m) for stifling competition in the broadband internet market says this BBC article/clip

a) How has Telefonica demonstrated market dominance and why is this an example of market failure?
b) How likely is the fine to overcome the market failure?
c) What alternative approach could the EU have taken to overcome the market failure?

Unit 1: The price of oil

The price of oil goes past $73, a 10 month high says this BBC article

a) What is the main reason given for the price of oil rising?
b) What does the phrase "Ongoing anti-government violence in Nigeria has also put an upward pressure on global oil prices" mean in terms of the market
c) Draw a S&D diagram to show these 2 effects on the price of oil

Wednesday, July 04, 2007

Unit 3: The exchange rate of the £

The £ hits a 26 year high,,2116977,00.html

a) Why has the value of the £ risen?
b) Draw a diagram to show how this rise has occured
c) What effect should this rise in the £ have on the current account of the BOP?

Unit 1: Producer surplus and the Apple iphone

The launch of the iphone by Apple is a good example of producer surplus

a) Draw a diagram to show the producer surplus described in the article.
b) Explain why this is an example of producer surplus

Unit 3: The costs of economic growth in China

Thit item from Geoff Riley highlights the negative externalities associated with the rapid economic growth in China

Sunday, July 01, 2007

Unit 2: Using legislation to overcome market failure

This BBC article explains how manufacturers are now responsible for disposing of the electical items they produce

a) Why has this legislation been introduced; ie in which way does the market fail?
b) How successful do you think this will be in reducing the market failure?