Holiday Prep

1. Review Econ 3 Tutor2U Revision day material (links on right)

2. Read Econ 4 Overview notes

3. Continue with Econ 3 + Econ 4 Workbooks (answers on right)

4. Develop Econ 3 and Econ 4 vocabulary using Economics A-Z

5. Review topics using Blog

christmas cracker

business economics - definitons and diagrams

tutor2u revision day material econ 3

contestable markets

pj holden

evidence of intervention

use of cookie for price is discrimation - the economist june 2012 + bbc article nov 2012

legal aspects of cartels and regulation

OFT Website + compliance interactive wheel

competition commission website

cartels and game theory

oft cartel booklet

price fixing
lg samsumg 2012

opec










game theory overview (lse 2001)

theory of games and economic behavior von neumann

market structure review board

oligopoly 2012

Case Studies

airline industry report (us 2012)

The Banking Industry
The breaking of the credit crunch through 2007-2008 and continued problems within the financial sector has led to significant structural change within the banking industry in the UK (and elsewhere) this has thrown up many aspects of theory of the firm that could be explored:

Market Share (OFT 2012)

• Lloyds Group 30% (HBOS takeeover + part nationalised 2008)
• RBS 16% (part nationalised 2008)
• HSBC 14% (Strong emerging market business model)
• Santander 13% (Spanish owned)
• Barclays 12% (attempted takeover of Lehmans 2008 / Diamond in executive pay bonus issues with shareholders 2012)
• 85% - 5 firm concentration ratio - highly concentrated

Key issues

• exit of unsuccessful firms leading to greater control for remaining firms
• bail out of unsuccessful firms (nationalisation v priviatisation) and consideration of moral hazzard - encouraging high risk strategies looking for high short-run profit safe in the knowledge that banks are "too big to fail" thus taxpayers will cover any downside risk
• how or should State owned banks be re-privatised?
• clegg share givaway (bbc june 2011)
• northern rock sold to virgin money (bbc nov 2011)
• ethics of bonus/ dividend culture in State owned banks and indeed the banking sector as a whole "fat cat bankers" and Fred "the Shred" Goodwin (RBS)
• barclays shareholder revolt (bbc april 2012)
• allowing merger and takeover due to unique circircumstances that during normal times may be considered "NOT IN THE CONSUMER INTEREST"
• lloyds approves hbos takeover (bbc nov 2008)
• whats wront with takeover lloyds hbos (telegraph 2008)
• divorce of ownership and control and firms objectives -
• princple agent problems of the public limited company (plc) as a model for ownership and the ways around these issues. 
• Complextity of institutional investors also focused on short run returns through share price or dividend rather than long run sustainable strategies.
• roles of regulators - regulation v deregulation
• FSA - Bank of England separation in 1997 was wise?
• growing complexity of financial innovation makes this a market impossible to regulate?
• separation of retail and investment banking "firewall" Glass Seagal Act from 1930s repealed under Clinton in US allowed recreation of bubble conditions through leverage not seen since the Great Depression.  Should these reglations be put back in place - Frank Dodds Act 2010 recently in US attempt to recreate greater scrutiny over financial markets
• peston discusses issue in UK banking 

Some links to develop awareness:

• economicsonline banks overview + oligopoly overview notes (excellent with video support)
• big banks running an oligopoly (telegraph Jan 2011)
• time to end banking oligopoly (ft may 2012)
• coop to takeover 632 lloyds branches (mirror dec 2011)

nationalisation v privatisation

economicsonline notes economicsonline notes - regulation

the guardian short history of privatisation march 2012

case study bird and fortune on privatisation royal mail

price discrimination

t2u notes paj holden video

monopoly

paj holden video

monopoly issues welker + worksheet

yale monopoly notes - extension level

barriers to entry + monopoly

tutor2u posts on monopoly

perfect competition

beware diagram in above video not correct... shows long run equilibrium in momopolistic competition... if perfect the AR curve would be perfectly elastic for the firm

video tutor:
perfect competition video (holden)

revenue curves perfect v imperfect (Holden)

flash based diagrams:
http://www.flashecon.org/profitA/profitA_main.asp - perfect competition

http://www.flashecon.org/profitB/profitB_main.asp - imperfect competition

video case study:  daffodil farmers

technology

Explain how technological change can affect a firm's costs of production and its methods of production?
15 marks

what do we mean by technological change?

• invention + innovation leads to new products and new ways of doing things usually stimulated by R&D expenditure
• quality and quantity of capital influencing productive capacity
• new opportunities in product markets or dismantling of barriers to entry

two areas of discussion

1. affect on costs
2. affect on methods of production

costs

• definition: payments made to factors employed
• technology reduces costs?
• perhaps technology raises productivity of labour (output per worker reducing variable cost or raises value of output per worker)
• could lower productivity? facebook at work (bbc)
• illustrate lower cost
• may raise fixed costs due to investment costs

methods of production

• technology encorporated into capital
• capital intensive v labour intensive
• knowledge intensive labour (highly skilled and high training requirements) or
• deskilling?
• possibility of scale and scope economies
• 24 hour production 365 days a year
• weakening unions

links

• tutor2u economics blog on technology
• tutor2u notes on technology

presentation on invention and innovation (t2u)

innovation and business strategy




kodak case study
kodak in pictures

kodak bankruptcy

bbc click on kodak (jan 2012)

pearson articles and questions

latimes video on kodak

firms objectives - growth

Motives for Takeovers and Mergers from tutor2u

Problems of Takeovers and Mergers including Integration from tutor2u

Factors Influencing the Success of Takeovers and Mergers from tutor2u

Impact of Takeovers and Mergers on Performance of Businesses Involved from tutor2u

Government Intervention in Takeovers and Mergers from tutor2u

Introduction to Acquisitions

View more presentations from tutor2u

worlds biggest companies (the economist)

evan davies on growth

cadbury kraft case study
cadbury kraft


orange t-mobile case study
Orange TMobile (BBC)

Orange TMobile (Channel 4)

government clears orange t mobile deal (ft 05/03/10)




tesco growth and profits

tesco interactive

tesco investor relations

objectives of the firm

objective reviewed (holden)

principle agent problem - lehman brothers case study






older material

enron affair (bbc 2002)

enron affair (bbc jan 2002)

nick leeson ten year on (bbc 2004)

profit maximisation

profit presentation

profit positions work sheet

prfit max exercises

costs in the long run - economies of scale

productive efficiency and economies of scale
Real World Economics - Economies of Scale by Blessed_Hope

paj holden e of s








united biscuits production line

big is back article (economist aug 2009)

costs in the short run

cost curves paj holden

tutor2u notes on short run costs

welker nots on costs

diminishing returns

notes of the behavour of costs

costs quiz (bized)

industry trends -skateboarding

what is social science?

labour and equity in social science

income clasifications

via chartsbin.com

debt crisis explained

nairu explained

the uk economy 2012 explained

exchange rate concepts for econ 4

with the euro dominating the news exchange rate topics look to be a good bet for econ 4 here is a brief overview

regimes (choice of types of exchange rate systems); specialisation and trade leads to the needs to convert domestic prices into international ones and vice versa. currency is in derived demand to trade

float - demand and supply

positive - partial adjustment for trade imbalance

one less thing for monetary authority to worry about when conducting policy

negative - volatility and uncertainty when creating international contracts over time but this may be reduced by hedging with futures to guarentee rates but extra cost involved

fix - peg reduces uncertainty by setting a price over time and can act as an anchor for inflation

• soft peg - price guarentee scheme price is maintained through intervention buying and selling by the central bank plus use of interest rates to influence currency demand
• buffer stock of commodity is international foreign currency reserves and gold used to buy domestic currency to support price

• examples of soft pegs
• UK ERM 1992: where 2.95 peg against Deutsch Mark deemed too high by market, waves of selling forced Bank of England to spend billions and hike interest rates from 10 to 15% in one day in the middle of a recession before giving up and letting the currency float
• Swiss Franc 2011: Swiss Franc fell 10% in one day as Central Bank looked to print and sell its own currency to bring the price down as safe haven status in face of euro crisis had led to a 25% appreciation in real terms
• hard peg- a more sophisticated committment to fix one currency against another achieved in two ways
• currency board: peg currency is held in reserve to back every unit of domestic currency in circulation eg Argentina 1991-2002 1 to 1 against US Dollar.
• dollarization: adoption of another currency completely and removal of domestic currency, the Eurozone is an example of this

Exchange Rate Regimes may exist in a range of intermediate forms that offer the advantages (and disadvantages) of the polar extremes

• dirty float - demand and supply with the odd tweak from a central authority when deemed too high or too low
• acceptable range: ceilings and floors set out highest and lowest values with float between and soft peg intervention when challenging top or bottom
• adjustable peg - soft peg with intermitant movement of fix price to reflect changing market fundamentals
• 
  

Exchange Rate movement are key to influencing macro economic performance - growth issues in the sense that (X-M) is a component of AD

• X is total revenue from exports (Px Qx)
• M is total revenue from imports (Pm Qm)

Clearly a fall in the exchange rate (depreciation) will make exports cheaper and imports more expensive but it truth the impact on revenue flows is dependent on the elasticity of demand for exports and imports ie whether the Marshal Lerner Condition applys (combined elasticities for X and M must be greater than 1 for a fall in the exchange rate to have a positive effect on the trade balance).

The J-curve is a graph illustration of the Marshal Lerner Condition in action

Exchange Rates are a great way to combine micro and macro analysis - synoptic styles which lead to high marks use ADAS to analyse employment and inflation impacts - remember a depreciation will lead to pressure on costs as well and injecting competitiveness

econ 4: Dropin sessions

there is an opportunity to drop-in and discuss issues relating to the econ 4 exam

• Friday 15 June 2012 - 2.15 until 4.15 meet at Econ Office
• Tuesday 19 June 2012 - 12.15 at Econ office + 2.15 until 4.15 at Econ Office

of course twitter (@ppceconbus) and email links at still open at any time over the coming week

econ 4: key diagrams

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econ 4: diagrams foundation econ 2

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econ 4: vocab

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econ 4: macro context

key context documents:

• macro overview ppt
• macro evaluation key comments 2012
• putting things into context 2012
• revision sheets econ 4 context 2012

Bank of England Inflation Report 15 May 2012 video + page

BBC Economy Tracker

  global overview imf bbc discussion(sept 2011)

preparing for econ 3

the blog will guide you as to the key areas of study

 

all the entries in May (16 of them) relate to key notes, definitions,

diagrams and finally the latest on context which are important for econ 3

 

the econhelp guide plus the economics online presentations (available

from links in the right hand column of the blog) provide core notes

 

econ 3 is about market failure just as econ 1 is - all we have done is

unpack the idea of monopoly as a market failure and hung it on a new

theoretical framework called the "Structure Conduct Performance" paradigm

(SCP)- essentially what we are doing is asking the same questions as econ

1:

 

• how would the market work without intervention?
• is this acceptable in terms of efficiency? (productive allocative dynamic)
• what options are open to the government in terms of intervention and
• what would be their impact - improve the situation or government failure?

 

labour markets are the same but considering perfect / imperfect markets

and equity / mobility issues

 

market failure in its other guises would be tested with regards to

information failures and externalities and their solutions.

 

so keep it simple to start think the same as econ 1 market failure and

intervention - and build the complexity from there

 

 

econ 3 key theme 2 - Banking and Oligopoly

The breaking of the credit crunch through 2007-2008 and continued problems within the financial sector has led to significant structural change within the banking industry in the UK (and elsewhere) this has thrown up many aspects of theory of the firm that could be explored:

Market Share (OFT 2012)

• Lloyds Group 30% (HBOS takeeover + part nationalised 2008)
• RBS 16% (part nationalised 2008)
• HSBC 14% (Strong emerging market business model)
• Santander 13% (Spanish owned)
• Barclays 12% (attempted takeover of Lehmans 2008 / Diamond in executive pay bonus issues with shareholders 2012)
• 85% - 5 firm concentration ratio - highly concentrated

Key issues

• exit of unsuccessful firms leading to greater control for remaining firms
• bail out of unsuccessful firms (nationalisation v priviatisation) and consideration of moral hazzard - encouraging high risk strategies looking for high short-run profit safe in the knowledge that banks are "too big to fail" thus taxpayers will cover any downside risk
• how or should State owned banks be re-privatised?
• clegg share givaway (bbc june 2011)
• northern rock sold to virgin money (bbc nov 2011)
• ethics of bonus/ dividend culture in State owned banks and indeed the banking sector as a whole "fat cat bankers" and Fred "the Shred" Goodwin (RBS)
• barclays shareholder revolt (bbc april 2012)
• allowing merger and takeover due to unique circircumstances that during normal times may be considered "NOT IN THE CONSUMER INTEREST"
• lloyds approves hbos takeover (bbc nov 2008)
• whats wront with takeover lloyds hbos (telegraph 2008)
• divorce of ownership and control and firms objectives -
• princple agent problems of the public limited company (plc) as a model for ownership and the ways around these issues. 
• Complextity of institutional investors also focused on short run returns through share price or dividend rather than long run sustainable strategies.
• roles of regulators - regulation v deregulation
• FSA - Bank of England separation in 1997 was wise?
• growing complexity of financial innovation makes this a market impossible to regulate?
• separation of retail and investment banking "firewall" Glass Seagal Act from 1930s repealed under Clinton in US allowed recreation of bubble conditions through leverage not seen since the Great Depression.  Should these reglations be put back in place - Frank Dodds Act 2010 recently in US attempt to recreate greater scrutiny over financial markets
• peston discusses issue in UK banking 

Some links to develop awareness:

• economicsonline banks overview + oligopoly overview notes (excellent with video support)
• big banks running an oligopoly (telegraph Jan 2011)
• time to end banking oligopoly (ft may 2012)
• coop to takeover 632 lloyds branches (mirror dec 2011)

Econ 3 Key theme 1 : Olympic CBA

Introduction:
Hot topic and possible to consider within the Econ 3 Cost Benefit Analysis (CBA) Framework:

  

Economic Concepts
Private Cost: Direct costs of the project (estimated involved between £9bn and £12bn on construction venues, staffing and policing the event.
External Cost: Third party effects of the games such as increased congestion and other disruptions to normal routines during the construction and hosting of the games.
Private Benefit: Direct value extracted from the consumption of a good or service eg enjoyment from being there when Bolt runs the100m final
External Benefit: third party gains from the decision to produce and consume.  Multiplier effects of construction and investment, legacy notions of facilities and a new generation of fitter healthier people
Secondary Markets:  touts selling tickets above face value

Analysis;

• secondary markets

• External Costs

   
• External Benefits

video olympics legacy

 Evaluation

• In reality the picture is complex with the creation of :
• short and long run externalities
• of consumption and production
• of a positive and negative nature. 
• Identifying them and attaching a value to them is an extremely difficult task.
• Ulitmately the costs could be considered to be relatively short term whilst the benefits in terms of the legacy of the games is relatively long term.
• Regionality of impacts is another issue all together.

Links:

• ft in depth: 2012 olympics
•  
• bbc 2012

econ 3 vocab and diagrams

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income wealth and poverty

monopsony employers

wage determination

privatisation and deregulation

efficiency and equity

competition policy

monopoly

perfect competition

theory of a firm

costs and revenue

econ 3 revision sheets - market contestability

macro context material

key context documents:

• macro overview ppt
• macro evaluation key comments 2012
• putting things into context 2012

Bank of England Inflation Report 15 May 2012 video + page

BBC Economy Tracker

  global overview imf bbc discussion(sept 2011)

Econ 3 Key Diagrams

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econ 4 definitions

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west v rest

manufacturing and innovation

exam technique a2

Improving your Economics Exam Score

View more PowerPoint from Geoff Riley

A2 Economics Exam Technique - Weesteps to Evaluation

View more presentations from tutor2u

Macro Overview + data

bbc macro overview (excellent)

Externalities and CBA

econ 1 externalities tutor2u

econ 3 environment tutor2u

cost benefit principle

Revision Reminder

The links below go to the short revision summaries AS and A2

• econ 1


• econ 2


• econ 3


• econ 4

Remember the revision presentations in the right-hand column. They are more detailed and up to date these guides above a merely bare bones.

Monetary Policy and the Central Bank

An excellent series of lectures from Ben Bernanke Vhairman of the Federal Reserve, US focus:







bank of england - meryvn king

budget 2012

HM Treasury

ft overview

telegraph overview

back to macro

externalities and environment on prezi

econ 1 externalities tutor2u

econ 3 environment tutor2u

www.prezi.com

rail prices

contestable markets

pj holden

hedge funds and the credit crunch

the story of economics

privatisation

tutor2u notes on privatisation





bbc on royal mail

regulation - market abuse and FSA

government intervention - OFT

OFT website

cartels and game theory

oft cartel booklet

price fixing
lg samsumg 2012

opec

oligopoly

airline industry report (us 2012)

store wars

store wars the guardian

barriers to entry brand profileration + patents

patent smart phone wars (bbc 2012)

s and d review

Perfect Competition

beware diagram in above video not correct... shows long run equilibrium in momopolistic competition... if perfect the AR curve would be perfectly elastic for the firm
flash econ animation

paj holden

Technology and Business

presentation on invention and innovation (t2u)

innovation and business strategy




kodak case study
kodak in pictures

kodak bankruptcy

bbc click on kodak (jan 2012)

pearson articles and questions

latimes video on kodak

growth internal and external

Introduction to Acquisitions

View more presentations from tutor2u

worlds biggest companies (the economist)

evan davies on growth

cadbury kraft case study
cadbury kraft


orange t-mobile case study
Orange TMobile (BBC)

Orange TMobile (Channel 4)

government clears orange t mobile deal (ft 05/03/10)

supermarket case study

tesco growth and profits

tesco interactive

tesco investor relations

tesco annual report 2009


financial industry case study

alternative objectives

objective reviewed (holden)

principle agent problem - lehman brothers case study






older material

enron affair (bbc 2002)

enron affair (bbc jan 2002)

nick leeson ten year on (bbc 2004)

rogue trader film trader

societe general rogue trader (bbc jan 2008)

economies of scale

productive efficiency and economies of scale
Real World Economics - Economies of Scale by Blessed_Hope

paj holden e of s








united biscuits production line

big is back article (economist aug 2009)