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Scooped by
Graham Watson
onto Microeconomics: IB Economics July 17, 2018 4:31 PM
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An inferior good is a good or service where your demand goes down when your income goes up, and vice versa
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The ‘border adjustment mechanism’ aims to create a level playing field while also encouraging decarbonisation
Graham Watson's insight:
This article looks at the introduction of the EU's Carbon Border Adjustment Mechanism (CBAM) that looks to offset different levels of environmental regulation and encourage decarbonisation. It means that, for example, imports of Chinese steel will be subject to an environmental levy in an attempt to create a level playing field, and make EU steel producers more competitive as a result.
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Millions of households in England, Wales and Scotland are seeing a slight rise in energy bills in the new year.
Graham Watson's insight:
Today sees a marginal increase in energy prices, with the average household expecting to pay an extra £3 per year for their energy as a result of the Energy Price Guarantee.
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The consumer watchdog says weak competition between retailers is keeping profit margins up.
Graham Watson's insight:
A Competition and Markets Authority report into the state of the petrol retail market has concluded that profit margins in the sector are still high by relative standards, despite the falling price of petrol.
Of course, the retailers themselves contest this - with the Petrol Retailers Association suggesting that falling prices are indicative of "healthy competition", and rising costs elsewhere.
However, have a think about the nature of the market - it doesn't resemble a perfectly competitive market, and the competition authorities are going to try to stimulate more competition via the creation of a fuel finder scheme that will indicate where the cheapest fuel can be bought.
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Baidu's Apollo Go robotaxis have already accrued millions of driverless rides in cities worldwide.
Graham Watson's insight:
The prospect of autonomous taxis on London's streets appears to have become closer, with the news that Uber and Lyft are partnering with Baidu to trial the vehicles.
But is this a good thing? Will the technology work as planned and might it also increase pollution in the capital?
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Ministers hint at further relaxation of zero emission mandate but say will not follow EU move to dilute 2035 petrol cars ban
Graham Watson's insight:
It seems as though the UK is about to follow the EU in relaxing EV sales targets, and is bringing forward its review of the sector to next year, in the hope of improving clarity and plotting a way forward.
The hope is that there might be further allowances made for selling hybrid vehicles as well as EVs, although the current pledge is that they won't be diluting the 2035 petrol car sales ban.
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Pump prices ‘stuck’ despite cost of oil falling amid prospect of peace in Ukraine, say experts
Graham Watson's insight:
Aha! The return of accusations of rocket and feather pricing, with petrol retailers not reducing prices as the price of oil falls below $60 per barrel. The suggestion is that, as Keynes suggested, prices are sticky downwards, as firms look to eke out extra profit as their costs fall.
They, of course, will argue that price will stay higher because they've forward bought the fuel that's currently being sold at a higher price, but this rather implies that they want to have their cake and eat - and shift all of this risk onto the consumer.
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Bus and train initiative comes as government struggles to survive corruption and sexual harassment allegations
Graham Watson's insight:
Spain's following the German lead in introducing a flat fee to use public transport, with a 60 euro a month flat charge for middle distance and suburban trains and national buses. The government claim that it's going to revolutionize public transport and reduce monthly travel costs by up to 60% for some. The one downside? The plan's not been publicly costed yet.
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Investment Association, influential group of shareholders, urges pay committees to avoid ‘benchmarking’
Graham Watson's insight:
One of my favourite topics - executive pay - is in the spotlight again, with the Investment Association warning that firms should avoid benchmarking to justify increasing executive remuneration. Their warning is supported by the High Pay Centre, who clearly feel that far from being the competitive market that we try to portray, it's far from that.
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Could geothermal soon overtake nuclear power? Vijay Vaitheeswaran, our Global energy & climate innovation editor and winner of the Energy Writer of the Year Award 2025, speaks to Alok Jha, host of the Babbage podcast, about long-neglected geothermal energy and the new suite of technologies that could finally see it rolled out across the world.
Graham Watson's insight:
The Economist looks at how new technology could revolutionize geothermal energy production, and see it become a viable source of power. At present, it contributes less than 1% of global energy but this could be on the point of changing and make it more widely available. Currently, it's a major source of power in Iceland, but nowhere else.
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Christmas treats are getting eaten away by 'shrinkflation' and the Grinch even has an eye on the cocoa content.
Graham Watson's insight:
Shrinkflation and the derived demand for cocoa feature prominently in this BBC article that looks at why a number of chocolate biscuits are, well, no longer permitted to be called chocolate biscuits.
It highlights why rising costs force manufacturers to reduce the size of their products to keep costs down and respond to market conditions. Extreme weather in the cocoa growing areas of West Africa have led to a reduction in supply and pushed up global cocoa prices.
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An official report lays out different scenarios for the cost of transitioning away from fossil fuels to net zero by 2050
Graham Watson's insight:
The Guardian looks at the cost of the green transition, and tries to pick a path through the various assessments of its cost, and, the extent to which this will be borne by consumers.
The other thing worth noting is the cost of not tackling climate change, with Greenpeace's Head of Climate suggesting that the global cost of climate damage has been equivalent to £13 million per hour for the last 20 years. I'd like to see the methodology here though...
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The price of the precious metal has topped $60 an ounce for the first time ever.
Graham Watson's insight:
Demand and supply, with a side serving of monetary policy, and an interesting application of XPED. The price of silver is rising because of increased demand, with investors anticipating an US interest rate cut this week and the returns on holding money in bank accounts failing. Interestingly, given that silver is often largely a by-product of other types of mining, you might also mention the concept of joint supply too.
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The Hollywood battle to buy Warner Bros Discovery is shaping up to be a blockbuster.
Graham Watson's insight:
Hold on to your hats; Paramount has upped the ante by launching a rival cash bid for all of Warner Bros. There should be two things that you should immediately note: firstly, the concept of the winner's curse now looms large, and, in lieu of my earlier article, you might note who the Paramount Chief Executive is. It's David Ellison, son of Larry, and Republican mega donor. The stock market have given the various moves a mixed reaction, with Paramount and Warner Bros stock up, and Netflix down.
I suspect we've got a way to go, and I suspect the President won't be able to keep out of it. |
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After biggest loss for producers since 2020 the slide could continue, with global output expected to remain high
Graham Watson's insight:
If you read this article, you should be able to work out the demand and supply-side factors that contributed to the 20% fall in oil prices over 2025.
And yet, it seems as though petrol prices have failed to keep up, something that the regulator has already shown an interest in, and will continue to do so.
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Metal ‘needed in many industrial processes’, says Tesla boss as supply fears grow over price surge and new rules
Graham Watson's insight:
A genius has spoken; we should all pay heed. That said, in this instance, Elon Musk is right that the increasing price of silver is problematic in that it increases costs for a number of tech firms - not least because the price of metal has leapt from $29 per ounce to $79 per ounce over the course of the year.
The demand for silver as an asset has surged, meaning that the derived demand for silver as a factor input now faces price increases. It is part of a commodity cycle that has seen platinum prices rise by 170% over the year.
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Investors are flocking to precious metals amid geopolitical tensions and expectations of more US interest rate cuts.
Graham Watson's insight:
D&S, markets in action, and proof that assets provide a substitute for other forms of investment when the macroeconomic environment is uncertain.
Indeed, as the article, notes the gold price has gone up by 68% this year, as demand for the precious metal has significantly increased.
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Editorial: The European Commission’s proposals to water down a 2035 ban on new petrol and diesel cars will store up major problems for the future
Graham Watson's insight:
The Guardian's take on the decision to slow the adoption of the Zero Emission Vehicle mandate and ban the sale of new petrol and diesel cars suggests that the European Commission is in hock to a car industry that's struggling to compete in the EV market with Chinese rivals. They suggest that relaxing the ban might be counter-productive in reducing the incentives for them to change and will only allow a legacy industry to linger on in a form that's not compatible with climate change objectives.
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Warner Bros will reportedly advise its shareholders to vote against the offer as early as Wednesday.
Graham Watson's insight:
It seems as though the Warner Bros saga isn't going to be speedily resolved with the news that the company are advising shareholders to reject the Paramount bid, and some suggestions that the backers of the original bid, including the President's son-in-law, Jared Kushner, might have pulled out of the bid too.
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Move lets 10% of cars escape zero-emissions ban beyond 2035 after heavy pressure from car industry and some EU states
Graham Watson's insight:
No surprise here, with the EU watering down its 2035 ban on the sale of petrol and diesel cars, so that it will permit 10% of new cars to be non-electric. One wonders whether this is driven by economics, or by lobbying, given the lack of competitiveness of established European manufacturers in this particular part of the market.
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Only 10,000 out of economic bloc’s 6m trucks are electric and are more likely to be operating on short routes
Graham Watson's insight:
It seems as though there's no chance of the EU's trucking industry meeting its commitment to zero emissions given the small number of electric trucks in the bloc: 10,000 out of 6m trucks are electric; there's only 1 HGV charging point in the UK, for example.
The data is stark: "Under current targets, 43% of Europe’s HGV fleet must be electric by 2030, 65% by 2035 and 90% by 2040, with fines for manufacturers who fail to meet fleet-wide CO2 targets. At the moment, fewer than 2% of new HGV registrations are electrically chargeable trucks."
Realistically, there's no chance of achieving these targets at present.
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City watchdog the FCA announces plans to help first-time buyers and self-employed get on the property ladder
Graham Watson's insight:
This could be Micro- or Macroeconomic but I'm looking at the demand and supply factors that are likely to increase house prices next year, with falling mortgage rates likely to boost demand and, potentially, the prospect of the economy picking up mean that demand for housing will increase, and so will prices.
This increase in affordability might also perk up consumer confidence and drive wider economic growth too.
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Artificial intelligence could make income inequality even worse and create a new underclass. Governments and society must take action
Graham Watson's insight:
This article looks at one of the ongoing economic themes of the moment, the future of AI and its influence on the economy. Steven Greenhouse looks at whether it's going to be a substitute for labour or complement it.
He, and influential others, including Nobel laureate, Daron Acemoglu fear that firms are, naturally, going to be incentivised to do the former rather than the latter because the profit motive will impel them to do so. In the short-term, he thinks that this implies significant job losses, and economies might experience both rising unemployment and worsening inequality.
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Analysis marking 10 years since Paris climate agreement underscores effectiveness of strong government policies
Graham Watson's insight:
On the plus side, the Energy and Climate Intelligence Unit (ECIU) have produced a report to mark the 10th anniversary of the Paris climate accords that suggest that the trade-off between economic growth and carbon has changed, with there having been a decoupling of the two.
The best performing countries, include Norway - unsurprisingly - and the UK, but it's worth noting that even notorious polluter China has started to decouple the two. Consumption-based emissions were up by 24% between 2015 and 2023, which is less that half of its 50% economic growth over the same period.
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Latest package in dismantling of environmental rules also suggests repealing hazardous chemicals database
Graham Watson's insight:
The relaxation of environmental standards in the EU is being portrayed as indicative of the trade-off between economic growth and the environment by critics. And it may well be, although, I'd need to look into this further.
Might it not also just be good economics, in reflecting on certain aspects of policy and deducing that its marginal cost is greater than its marginal benefit? I don't know why there's an assumption that any policy - including environmental policy - is necessarily good, so backtracking might not be a bad thing.
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Miner will have to do things by the book after ditching plan to pay bosses millions in bonuses after Teck deal
Graham Watson's insight:
Hats off again to Nils Pratley for being critical of Anglo-American's attempt to pay its Chief Executive an inflated merger bonus, and in doing so, subvert its own remuneration scheme, and turn long-term performance-related pay scheme.
It's hilarious how some company's seem to think that finding convoluted ways to pay their Chief Executives more is justifiable, and not just indicative of the fact that it's not. As a thought experiment, how would you react if I suggested that as an Economics teacher, I wasn't paid a salary by the school, but a firm set up by me to control my image rights, received image rights for appearing in school publications if that meant I paid a lower rate of tax.
If you think that would be 'cunning' or a good thing, then you have a different view of how I should be paid than I do. |
More excellence from Marginal Revolution University: inferior goods. What are? And do they actually exist? There's little evidence for them.