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Graham Watson
onto Microeconomics: IB Economics April 11, 2018 5:40 AM
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The increase will affect 4.1 million customers who will see average bills rise by £60 a year.
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The Swedish furniture retailer is cutting prices across a range of products, including the popular Billy bookcase.
Graham Watson's insight:
Excellent Microeconomic article about price determination, with some nice applications to demand theory and PED. IKEA is looking to cut costs because they think that the cost of living crisis has reduced consumer demand, but they are also hoping to drive prices down through cost savings, which of themselves would be likely to result in lower prices.
Of course, the effect of this on total revenues and profits is also dependent upon the PED for Billy bookcases, among other things.
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Amazon responded to the lawsuit, arguing the US Federal Trade Commission "misunderstands" their ad market.
Graham Watson's insight:
The Federal Trade Commission allege that Amazon has adopted anti-competitive practices in selling advertising, to the detriment of their customers and they, and 22 states, are seeking redress. It comes after the company has also been fined for the way its renewed a number of Prime subscriptions.
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Investment in climate-resilient irrigation enables this year’s haul to rise 6% on 2025’s already bigger-than-usual yield
Graham Watson's insight:
D&S and the price of berries, with a bumper berry harvest likely to mean lower prices of strawberries and raspberries, along with a bumper season for oilseed rape and vineyards. On the flip side, cereal production is down by nearly 15% and salad and vegetable growers have also suffered.
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Exclusive: Buckinghamshire and Bedfordshire sites predicted to emit 4.5m tonnes a year when fully running
Graham Watson's insight:
Is this the next environmental blackspot? Data centres.
Analysis by non-profit group Foxglove apparently reveals that the UK carbon emissions will exceed those of ExxonMobil in the UK. The two gas-fired data centres have been expedited through the planning regime via the government’s nationally significant infrastructure project (NSIP) regime
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World’s largest streaming services have also increased subscription costs repeatedly in US, research finds
Graham Watson's insight:
A story that gets right to the heart of demand theory - both in terms of the levels of demand and PED, and YED, as well as in relation to the market power, and price setting ability of streaming services in Western Europe.
High levels of demand, a sense that these goods are now more 'necessary' than before, and thus have a lower YED, and the ability to set price in Western Europe markets all give streaming services, such as Netflix, Disney+ and Amazon greater price setting power than they might be expected to have in other markets.
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European regulators have imposed billions in penalties on US technology companies due to privacy, competition and digital market rules
Graham Watson's insight:
Dutch competition authorities have fined Uber $966m for suspending driver accounts without adequately informing them. It's apparently the second largest fine under Europe’s General Data Protection Regulation (GDPR).
The company, of course, is appealing, and no doubt President Trump will see this as yet another European unfairness...
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French firm says the acquisition of Huel will help it grow in the nutritional sector.
Graham Watson's insight:
Danone's takeover of Huel is probably best described as conglomerate merger, with the merged company expanding into the nutrition sector, and hoping to gain economies of scope.
The deal has been cleared by the Competition and Markets Authority seemingly because no concerns have been raised over its impact on competition in the sector.
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The consumer watchdog said they were trying to find out if the three companies were not showing full prices upfront to customers.
Graham Watson's insight:
The Competition and Markets Authority has announced that it is going to investigate three firms - Trainline, Virgin Atlantic, RED Driving School - for so-called drip pricing. This occurs when firms don't disclose the entire price of their products up front and instead add-on other charges once the consumer seems committed to the product.
Those of you with knowledge of behavioural economics will appreciate that the companies are exploiting the concept of loss awareness, and that having got a product into their online basket, they will be reluctant not to follow through with the purchase.
Of course, it's exploiting the consumer in making them pay more and hence its being investigated.
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Firm wants to run up to 20 daily journeys to Europe but it must get additional approval for overseas tracks.
Graham Watson's insight:
I'm starting to prepare material on market structure, and this is a good introduction to how competition changes markets. In the first instance, granting Virgin the right to run trains through the Channel Tunnel removes an artificial barrier to entry and increases the number of firms operating in the market.
However, Virgin still need regulatory approval to operate, but it could be the start of further competition, with Italy's FS Italiane Group subsidiary Trenitalia France also looking to start operating in 2029. Both will obviously increase choice, and put downwards pressure on price, although with a limited number of rivals, might the market tend towards price stability.
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Exclusive: Campaigners say millions are missing out on key rights including sick pay and protection against unfair dismissal
Graham Watson's insight:
It seems as though the new Prime Minister is keen to protect workers' rights and is looking at increasing worker protections in the gig economy. It's undoubtedly likely to be popular is some circles, but there's an opportunity cost: it's also likely to mean higher prices in these markets too. Unless firms are prepared to accept lower profit margins, then this is almost inevitable.
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Ofwat has given provisional approval for 13 water companies to charge customers more to pay for investments.
Graham Watson's insight:
The water regulator OFWAT has decided to allow water companies to increase their bills by more than expected to finance increased investment in infrastructure. It's controversial because it runs against the current push to keep down the cost of living.
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The FT's chief data reporter John Burn-Murdoch explains how housing shortages reached a crisis point, and what we can do about it
Graham Watson's insight:
This extended FT clip looks at the housing shortage across the developed world, and the implications of this for their economies. It looks at the purported "housing crisis" - the increased demand for household, the impact of the "superstar" cities and how they affect house prices.
In particular, this is problematic in places like Dublin which has seen a 40% increase in demand for housing and only a 20% increase in housing provision.
It then goes on to look at alternative strategies to tackle this - noting that rent ceilings are good for those people on the housing ladder, but not terribly good for those looking to rent
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Falling water levels linked to weather system are expected to limit number of slots to transit shipping lane
Graham Watson's insight:
One of the more unusual applications of D&S analysis, with the fee to use the Panama Canal rising in response to higher levels of demand for passage, and above average congestion, as well as concerns about water levels and the supply of slots to transit the shipping lane.
However, these prices are only in the daily auction for slots to cross the canal: ordinarily, cpmpanies pay a flat fee to use the waterway. |
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Savings grow as energy prices in Great Britain rise and cost of panel installation falls, analysis finds
Graham Watson's insight:
Guardian research suggests that solar panels an save all British households money on their energy bills, even in the cloudiest areas. However, that has to be offset against the installation cost of the panels...
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Project in Zambia shows how teaching young women to negotiate better can have a long-term impact on their prospects
Graham Watson's insight:
Excellent Heather Stewart article with lots of applications, that highlights the fact that female empowerment is beneficial both for the women themselves, and the economies where they live. Giving Zambian girls six two-hour lessons teaching them to negotiate with greater confidence improves their economic status, and it's to be hoped that a similar programme in Afghanistan will have the same effect.
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A household using a typical amount of gas and electricity will pay £60 a year more, regulator Ofgem says.
Graham Watson's insight:
OFGEM have announced that the average household energy bill is going up by 4% in October, reaching £1,723 in October, its highest level for 3 years. Not only is it going to increase fuel poverty, and the extent to which people are in energy debt, but it may have knock on effects in terms of consumer confidence, and subsequently consumer spending.
The rise in prices is being attributed to rising natural gas prices, in large part triggered, surprise, surprise by the conflict in the Middle East.
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Once a cheap store-cupboard staple, sardines are fast becoming a luxury food item.Last year, #SardineGirlSummer saw influencers promoting the health benefits of sardinemaxxing, while sardinecore became the must-have fashion trend. Now, demand is accelerating just as Morocco’s sardine stock has collapsed, causing shortages on supermarket shelves.
Graham Watson's insight:
This clip looks at changing consumer tastes, with the growth in popularity of sardines, with a tin of sardines having moved from being a "poverty sardines" to being more of a luxury good.
The article also highlights the implications of higher levels for fishing for the sustainability of the fish stocks that provide the sardines, highlighting the fact that they are a common access resource.
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Report says ‘solar bonds’ could fund wider access to clean energy, reducing household bills
Graham Watson's insight:
Think tank, Common Wealth is looking for the government to encourage the uptake of solar panels by establishing a market for solar bonds to lower installation costs. You should be able to depict this on a D&S diagram and also evaluate it relative to other possible interventions.
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Competition and Markets Authority on message with PM’s planned purge of hidden fees and add-on charges
Graham Watson's insight:
Nils Pratley congratulates the Competition and Markets Authority's (CMA) pro-active approach to tackling drip pricing from three firms - Trainline, Virgin Atlantic and RED Driving School. Not only is it in keeping with the Prime Minister's desire to tackle the cost of living, but it sends out a precautionary message to other firms who might be doing the same.
He also notes that it puts Trainline in the headlines, at a time when the launch of Great British Railways might see a publicly-owned alternative emerge.
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Expected quarterly rise if 4% highest likely to wipe out Burnham’s VAT cut on electricity bills
Graham Watson's insight:
Prominent consultancy, Cornwall Insights, is forecasting that the government's energy price cap is going to rise by a further 4% this winter, taking the bill for the average household to "the equivalent of £1,729 a year through the last three months of 2026".
In essence, it will more than offset the government's VAT cut, and contribute to both fuel poverty and the ongoing cost of living crisis.
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Researchers find capacity stunted by pollution restored after introduction of ultra-low emission zone
Graham Watson's insight:
Evidence suggesting improved lung capacity in children implies that the ultra low emissions zone (ULEZ) is improving respiratory health in London. However, to what extent can we draw a causal connection? Surely, some of this would have happened anyway because of the rise in the number of electric vehicles, and what other factors might also feed into this.
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Low river levels have stalled German freight traffic and forced closure of nuclear plants in France
Graham Watson's insight:
Another lovely example of the opportunity cost of the recent European heatwave - whilst it might have increased employment in hospitality and tourism, it's also had adverse effects as detailed in the article.
Across Europe, nuclear power stations have been operating below full capacity because of a lack of river water to cool them down, notably in France, freight has been disrupted along the River Rhine - which carries the bulk of inland water freight in Germany, wildfires in Spain and Italian reliance on tourism mean that all these economies are facing a slowdown.
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Suppliers could factor water scarcity into charges as part of Ofwat proposal to reduce consumption
Graham Watson's insight:
I fear that the headline is more eye-catching than the story itself, although it reveals that water companies and regulator, OFWAT, are looking at how water is priced and whether anything can be done to incentivise both better maintenance of the infrastructure, and encourage consumers to have more of an interest is altering patterns of consumption.
However, the possibility of surge pricing will raise hackles, and in economic terms, you'd expect prices to rise if a resource became scarcer, so this is clearly the headline to grab attention.
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Labour's employment rights bill crackdown on zero hours contracts could cost businesses up to £2.9bn a year, new official analysis has found.
Graham Watson's insight:
The government's proposed reform of labour law, giving increased worker protections, most notably for those on zero hours contracts, appears to be likely to have counter-intuitive effects. The problem is that the move will increase costs by somewhere between £300m and £2.9bn and this is going to reduce the incentive to hire workers, potentially increasing unemployment.
This is likely to fall most heavily on young workers who lack human capital and experience, and further worsen youth unemployment.
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Event expected to hit solar power just as fifth heatwave of summer increases use of air conditioning and fans
Graham Watson's insight:
Another D&S based story, with tonight's solar eclipse potentially triggering a shortage of electricity, as "between 300 megawatts and 1,100MW of solar power" is taken offline and the demand for power - given the heatwave - remains high.
As a result, the article notes that "The price of electricity for Wednesday evening rose to more than £211.40 per megawatt-hour at 7pm, its highest level since 30 June.", with potentially higher prices being offered to gas power plants to take up the slack. |
More criticism for another underfire sector, as British Gas have announced price rises. Watch to see if others in the sector follow, a classic feature of oligopolistic markets. Additionally, it does seem as though the larger firms in the sector are attempting to game the threat of a price ceiling by raising prices as close as they possibly can to their view of a proposed price cap.
This, of course, raises the spectre of the law of unintended consquences making a re-appearance.