Microeconomics: Pre-U Economics
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Microeconomics: Pre-U Economics
A brief overview of relevant articles for Pre-U economists relating to microeconomic issues
Curated by Graham Watson
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Non-Opec countries agree to cut oil output - BBC News

Non-Opec countries agree to cut oil output - BBC News | Microeconomics: Pre-U Economics | Scoop.it
Oil-producing countries that are not Opec members agree a global plan to cut output and boost price.
Graham Watson's insight:
This little article suggests that the OPEC price cuts are more likely to hold than I suspected. However, I doubt that it will have much effect - there are one or two obvious omissions.

The US? Canada?

For my money, traditional oligopoly theory still holds sway.
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London's 'gig economy' has grown by more than 70% since 2010

London's 'gig economy' has grown by more than 70% since 2010 | Microeconomics: Pre-U Economics | Scoop.it
Thinktank reveals number of casual workers in capital’s transport and storage sector soared to 65,300 in 2016
Graham Watson's insight:
More on the gig economy - with the latest data suggesting that the size of this sector of the economy has grown dramatically since 2010.
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Sumitomo to buy banana company Fyffes - BBC News

Sumitomo to buy banana company Fyffes - BBC News | Microeconomics: Pre-U Economics | Scoop.it
Irish fruit distributor Fyffes says it has agreed to be bought by Japan's Sumitomo Corporation.
Graham Watson's insight:
Another merger - this time horizontal integration between Sumitomo and Fyffes. Although we might see the former as more of a tyre manufacturer, it has been a major player in the Japanese banana market.

Fyffes itself has recently grown as a result of merger with Canada's All Seasons Mushrooms - and Sumitomo are looking to exploit the diversity of products and markets that the group are now able to offer - a clear risk-bearing economy of scale.
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Capita to replace staff with robots to save money

Capita to replace staff with robots to save money | Microeconomics: Pre-U Economics | Scoop.it
Outsourcing giant to axe 2,000 jobs and use ‘proprietary robotic solutions’ after clients cut spending following Brexit vote
Graham Watson's insight:
This is an interesting piece that highlights the extent to which there's substitution between capital and labour, with outsourcing giant Capita looking to replace workers with robots.

Bear in mind though that the relationship between capital and labour doesn't always involve substitution. Labour and capital can be complementary too.
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Children's online junk food ads banned by industry - BBC News

Children's online junk food ads banned by industry - BBC News | Microeconomics: Pre-U Economics | Scoop.it
Online ads for food and soft drinks high in fat, salt or sugar aimed at children are to be limited.
Graham Watson's insight:
Information is an important part of what makes markets work, or in this case generate market failure. This BBC piece flags up the fact that new advertising rules are going to restrict the ability of producers of unhealthy foodstuffs, high in fat, salt or sugar are not going to be allowed to advertise online.

However, critics argue that these measure don't go far enough and are likely to have limited, if any, effect. It's worth a read, if only for data about the extent of childhood obesity, and that might get you thinking about the external costs of this for society. 
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Drax moves away from coal to bid on Opus Energy and gas plants

Drax moves away from coal to bid on Opus Energy and gas plants | Microeconomics: Pre-U Economics | Scoop.it
Producer shifts focus to supplying end consumers and providing backup power to complement growing renewable output
Graham Watson's insight:
Proof, if it were needed that markets do move as a result of changing prices. Electricity producer, Drax, currently promoted a lot on Twitter, are moving away from coal-fired and into gas. This reflects a re-orientation of the company in line with producing 'cleaner' energy.
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Adele tickets appear online for £9,000 despite singer's efforts to stop touts

Adele tickets appear online for £9,000 despite singer's efforts to stop touts | Microeconomics: Pre-U Economics | Scoop.it
Music industry figures raise concerns that proposals to clamp down on industrial-scale touting are inadequate
Graham Watson's insight:
In looking at price controls yesterday, the issue of ticket touts was raised, and I posed the question 'Does ticket touting improve economic efficiency?'

It's an interesting dilemma - this article looking at tickets for Adele's concerts at Wembley next summer, and uses the emotive phrase "real fans". To an economist, this phrase makes little sense: a real fan is the one who is prepared to spend the most money to see the singer.

Or am I taking the application of economics too far? 
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Train fares to rise by average of 2.3% - BBC News

Train fares to rise by average of 2.3% - BBC News | Microeconomics: Pre-U Economics | Scoop.it
Train fares in Britain will go up by an average of 2.3% from 2 January, the rail industry announces.
Graham Watson's insight:
Train fares are set to increase by more than the rate of inflation next year, which must be little comfort for public sector workers faced with a pay freeze. This has brought muted protests from commuters and closer scrutiny of what determines fares.

A decade of fare rises from 2004 and largely attributable to a change in the way that fares are paid, with an ever smaller proportion of fares being financed out of the public purse, and a greater proportion coming from users of the rail service.

In addition, the nation's creaking rail infrastructure is also in need of considerable investment given rising demand for train travel.
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AB InBev taps craft beer boom by opening first London pub under Goose Island brand

AB InBev taps craft beer boom by opening first London pub under Goose Island brand | Microeconomics: Pre-U Economics | Scoop.it
The brewing giant behind Budweiser is to roll out its first European chain of pubs based on its popular US craft beer brand Goose Island.
Graham Watson's insight:
This article shows how even large MNCs react to changes in consumer tastes with AB InBev looking to grow a chain of craft ale pubs under its Goose Island brand, the Chicago-based brewery.

The craft ale movement has had a significant effect on all brewers, with large companies responding with similar offering of their own such as Fuller's craft lager "Frontier".
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Four major cities move to ban diesel vehicles by 2025 - BBC News

Four major cities move to ban diesel vehicles by 2025 - BBC News | Microeconomics: Pre-U Economics | Scoop.it
The leaders of four major global cities say they will stop the use of all diesel powered cars and trucks by the middle of the next decade.
Graham Watson's insight:
It seems that diesel car owners, like me, will soon see their access to the world's major cities curtailed if all cities follow the example of these four - Paris, Athens, Mexico City and Madrid. 

The reason for introducing this measure is because although diesel cars emit less CO2, they emit larger quantities of particulate matter and nitrous oxide (NOx). Thus, in banning the cars the measure should reduce pollution levels. It's a bold step - the ban effectively says that the size of the market failure is greater than the welfare diesel car drivers get from their vehicles in the city.
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House price inflation slows to a 10-month low - and it's set to stay that way

House price inflation slows to a 10-month low - and it's set to stay that way | Microeconomics: Pre-U Economics | Scoop.it
The annual rate of house price growth fell to a 10-month low in November, dipping to 4.
Graham Watson's insight:
The Telegraph looks at the current state of the UK housing market and forecasts that the market is likely to stay relatively flat in the months ahead as stagnant incomes are forecast for 2017.

However, on the supply-side, it's still going to be the case that demand will outstrip supply.
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Oil price: fluid, pumped up or sticky? - BBC News

Oil price: fluid, pumped up or sticky? - BBC News | Microeconomics: Pre-U Economics | Scoop.it
Opec proved it's still got clout with an unexpected deal between political rivals to push the price up. It won a short-term victory over the USA on market share, but the longer game is much more complex.
Graham Watson's insight:
Douglas Fraser summarises the latest oil price deal, as someone reporting for BBC Scotland might.

However, this is an excellent summary of the past couple of years in the sector and the implications of, initially, lower and now, potentially, higher oil prices. A good read. 
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Oil prices rise further after Opec agrees output cut - BBC News

Oil prices rise further after Opec agrees output cut - BBC News | Microeconomics: Pre-U Economics | Scoop.it
Oil prices have continued to rise after Opec oil producing countries agreed to cut output.
Graham Watson's insight:
It seems that some players in the oil market are fairly confident that the latest output cut is going to stick. For now.

I'm with Neil Wilson though; the claim that non-OPEC members are going to be prepared to cut production doesn't look that watertight to me. As Wilson says "Russia says it will cut 300,000 barrels per day... but we don't know where the other 300,000 barrels a day from other non-OPEC members is going to come from." Self-interest suggests that tit might be difficult getting them to fall into line
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Coke names new CEO with focus on reducing sugar and calorie counts

Coke names new CEO with focus on reducing sugar and calorie counts | Microeconomics: Pre-U Economics | Scoop.it
New CEO James Quincey said company would also concentrate on its sparkling beverage business, push into other drink categories and continue to innovate
Graham Watson's insight:
Interesting to note that the changes at the helm of Coca-Cola might see more of a focus on 'healthier' drinks with lower sugar and fewer calories.

In theory, this should reduce the negative externalities associated with consuming Coca-Cola's drinks, although don't think that this is altruism on the company's part; I suspect that consumer tastes have shifted and this is profit-maximizing behaviour.
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Uber is treating its drivers as sweated labour, says report

Uber is treating its drivers as sweated labour, says report | Microeconomics: Pre-U Economics | Scoop.it
Earnings are often less than minimum wage and ‘barely sufficient to sustain existence’, according to MP Frank Field
Graham Watson's insight:
The Guardian highlights the low wages being earned by Uber drivers, suggesting that they are often earning less than the minimum wage, leading Frank Field to characterise them as "sweated labour".

Worth a read, to stay abreast of developments in the gig economy.
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21st Century Fox in bid approach for Sky - BBC News

21st Century Fox in bid approach for Sky - BBC News | Microeconomics: Pre-U Economics | Scoop.it
US media giant 21st Century Fox has made a takeover approach for Sky, the UK-based satellite broadcaster.
Graham Watson's insight:
A mega-merger in the media, with 21st Century Fox making a bid for Sky - although I'm not sure whether it is horizontal integration or a conglomerate merger, given the extent of the interests of the two groups. You might also argue that if Fox produces the content and Sky broadcasts it, there are vertical elements to this too.

Any way you look at this, it's a sizeable merger with implications for media plurality in the UK, and Brexit may have played a factor - with the depreciation of sterling making the deal cheaper for 21st Century Fox.
 
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UK luxury homes market slumps after Brexit vote

UK luxury homes market slumps after Brexit vote | Microeconomics: Pre-U Economics | Scoop.it
Sales of properties costing between £5m and £10m down 51% from 2015, with new-builds sold for more than £5m in London falling 83%
Graham Watson's insight:
Another nice application of D&S theory - the market for luxury properties has been adversely affected by Brexit, according to the Guardian. This, it is argued, it likely to affect the market lower down and also adversely affect government Stamp Duty revenues.
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Fitbit confirms Pebble takeover deal - BBC News

Fitbit confirms Pebble takeover deal - BBC News | Microeconomics: Pre-U Economics | Scoop.it
Fitbit is buying smartwatch-maker Pebble's intellectual property but not its hardware business, which is closing.
Graham Watson's insight:
An interesting merger in the hi-tech wearables sector with Fitbit and Peeble engaging in a sort of merger. The software arm of Pebble has been bought by Fitbit and the hardware side of the firm is closing. It strikes me that, given the travails of both firms, this is a last throw of the dice in the face of an increasingly congested hi-tech wearables market.
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Pfizer fined record £84.2m for overcharging NHS - BBC News

Pfizer fined record £84.2m for overcharging NHS - BBC News | Microeconomics: Pre-U Economics | Scoop.it
Drugs giant Pfizer has been fined a record £84.2m by the regulator for overcharging the NHS.
Graham Watson's insight:
Proof that regulators sometimes do have teeth, with Pfizer and distributor, Flynn Pharma, fined for overcharging the NHS for an anti-epilepsy drug.

My view? Any chance of a jail term for the executives involved. Isn't this sort of think 'fraud' - it's certainly an instance where the taxpayer has been robbed, and it's been done so knowingly. And why don't the Competition and Markets Authority name and shame the executives involved? And why aren't they banned from holding board level positions?

I'm just suggesting that this might focus corporate minds a little bit more...
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Ofgem issues warning shot to small power generators ahead of subsidy auction

Ofgem issues warning shot to small power generators ahead of subsidy auction | Microeconomics: Pre-U Economics | Scoop.it
Small power plant developers seeking Government subsidies to help keep the lights on have been warned they face losing a large chunk of their income that could render them uneconomic.
Graham Watson's insight:
Only a tiny article in the Telegraph, which doesn't think it important enough to hide behind its 'Premium' firewall, but, I think an important one. It suggests that the nature of the energy market is on the cusp of a major change with the government looking to promote cleaner sources of power generation and remove subsidies for small diesel generators which have enabled them to provide the electricity network's spare capacity up until now.

It might mean that the sector is looking to become ever-cleaner.
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UK petrol prices set to rise after Opec deal

UK petrol prices set to rise after Opec deal | Microeconomics: Pre-U Economics | Scoop.it
Surge in oil price could add up to £5 to cost of filling up a family car and push up household energy bills
Graham Watson's insight:
The Guardian details an obvious consequence of higher oil prices: petrol prices will rise, although market watchers might observe that the petrol companies will have forward bought their fuel, and that they don't reduce price with such alacrity when oil prices fall. 
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Terms of the Opec agreement | Markets

Opec has won a deal that should, if properly implemented, go a long way towards easing the supply glut of global oil. A lot will depend on whether Opec members will adhere to their production commitments.
Graham Watson's insight:
This FT clip itemises the nature of the latest OPEC deal to cut production noting the clever way that the deal has been structured with Saudi Arabia and its allies shouldering most of the burden, Libya and Nigeria being exempt because of conflict and supply outages, and Iran being given a quota at the same level as its pre-2005 ban level and marginally less than current production.

I'm a cynic - Economics helped move me in that direction - and whilst oligopoly theory suggests the deal will struggle to hold - this sort of structure gives it the greatest chance, especially if the Saudis are in a position to be a credible threat to anyone who reneges on the cuts.
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Ofcom to investigate rising landline prices amid concern for elderly

Ofcom to investigate rising landline prices amid concern for elderly | Microeconomics: Pre-U Economics | Scoop.it
Providers have raised line-rental charges even as costs come down, with customers who rely on landlines hit hardest
Graham Watson's insight:
Another OFCOM story - and a fairly simple one. The regulator wants to investigate why landline charges have risen by 28 to 41% in recent years whilst wholesale costs have fallen. It doesn't strike me that this is evidence of a competitive market operating in the consumer's best interests.
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Ofcom chief backs new powers to block takeovers after Brexit

Ofcom chief backs new powers to block takeovers after Brexit | Microeconomics: Pre-U Economics | Scoop.it
Britain should assume new powers after Brexit to impose conditions on takeovers that boost the Government’s developing industrial strategy, the chief executive of Ofcom has suggested.
Graham Watson's insight:
Another interesting story, attributing comments about the need for changes to merger policy in the wake of Brexit from an insider, the head of OFCOM, Sharon White. She's seemingly arguing that regulatory policy needs to be thought of as part of wider industrial policy and this may mean inserting clauses blocking more mergers on public interest and strategic grounds.

I just wonder whether Brexit really has anything to do with this: if she's thought this for a while, she might have spoken out earlier.
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Nestle says will cut sugar in chocolate by 40% - BBC News

Nestle says will cut sugar in chocolate by 40% - BBC News | Microeconomics: Pre-U Economics | Scoop.it
Kitkat-maker Nestle says it has discovered a way to make chocolate with much less sugar.
Graham Watson's insight:
A really interesting example of how markets operate to generate innovation, and in doing so, solving market failure. In this instance, Nestle have patented a way of structuring sugar differently so that they will be able to replicate the same sweet taste with 40% less sugar.

What's not to like - the chocolate should taste the same. A red letter day for Bridget Jones, I guess. 
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