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Scooped by
Graham Watson
onto Microeconomics: IB Economics December 4, 2024 3:20 AM
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The rail operators will be renationalised in May, as part of the government's manifesto promise.
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An internet craze for American-style chicken has come to the UK, but what does it mean for traditional chippies?
Graham Watson's insight:
Changing consumer tastes as the UK pivots away from burgers and pizzas in favour of fried chicken.
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Animal Equality says two surprise inspections in three years suggests ‘embarrassingly poor’ level of scrutiny
Graham Watson's insight:
It seems as though the Scottish farmed salmon industry may be being under-regulated, although you might also want to revisit your understanding of what the equilibrium level of regulation is.
You should regulate an industry up until that point where the marginal cost of regulation is equal to the marginal benefit. In this case though a Freedom of Information request by Animal Equality UK, into the regulatory activity of the Animal and Plant Health Agency (APHA) has revealed that they only made two unannounced inspections of salmon farms, and that the sector as a whole generated 35 million unexpected salmon deaths. Does that sound like the equilibrium level of regulation to you?
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A whiff of familiarity in Mandelson’s 2009 collusion with the banks | Peter Mandelson | The Guardian
For Labour veterans of the financial crisis the Epstein files revealed a betrayal – but 16 years on, is the City calling the shots?
Graham Watson's insight:
Apart from the potential illegality of a Cabinet minister passing privileged information on to an external party with a vested interest, the Epstein files appear to show not only the strength of lobbying undertaken by the banks, and the possibility of there having been regulatory failure in their oversight.
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Concerns were raised by a subcommittee including potential price rises and the future of cinemas.
Graham Watson's insight:
Another merger, seemingly in trouble on this occasion, with the proposed merger between Warner Brothers' streaming arm and Netflix being interrogated by the Senate antitrust subcommittee.
It seems that the committee are concerned about the implications of consolidation in the sector, not least for the price of subscriptions, consumer choice and employment in the entertainment industry.
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The company said the two brands reflect the consumer's switch from alcoholic beverages to "adult soft drinks".
Graham Watson's insight:
Very British merger story here, with the news that the makers of Irn Bru - Scotland's national drink and rival to Coca-Cola - have bought two other drinks brands, Fentimans and Frobisher's. The move is designed to tap into the move away from alcohol consumption and in favour of adult soft drinks.
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Pump price changes will have to be shared in a government database within 30 minutes.
Graham Watson's insight:
A part of its reform of the petrol retail market, the Competition and Markets Authority has introduced greater price transparency by requiring all petrol stations to share their pump prices, and how they change, within 30 minutes. The hope is that this will spur competition in the sector and give consumers better information allowing them to shop around for the cheapest petrol.
Of course, there's an opportunity cost associated with this, but, on balance, the government believes that there's a net benefit.
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Gold has fallen from recent highs but there are several reasons investors are still finding refuge in the precious metal.
Graham Watson's insight:
Analysis of the demand and supply-side factors that have driven the price of precious metals - notably platinum, gold and silver higher in recent months.
Fairly straightforward stuff.
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Great Western Railway service recharges in three and a half minutes between trips on west London line
Graham Watson's insight:
The UK is launching its first battery-powered train albeit only on a small section of track in West London. The train is reported as being able to travel 200 miles on a single charge and the converted underground train will travel between West Ealing and Greenford.
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Average bills to go up by 5.4% in April, with Ofwat approving record spending plans amid outrage over sewage spills
Graham Watson's insight:
Households are in the firing line again, with water bills going up by an average of 5.4% a month, to £639. OFWAT has approved record levels of spending, and critics argue that the billpayers are on the hook for the failings of previous management and its inability to invest sufficient sums into the water infrastructure and preventing sewage spills.
I'm a harsh critic but I wonder how many retired water executives ever wonder whether their lucrative pensions are really merited, or whether shareholders received too much in dividends rather than using the money to fund infrastructure investment.
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The government sets out proposals as data finds vet prices rose at nearly twice the inflation rate.
Graham Watson's insight:
It looks like the Competition and Markets Authority is 'getting its teeth' into the veterinary sector, by recommending a number of changes to current practice.
In the first instance, they are going to ensure that vets publish prices of common treatments such as vaccinations, to stop the possibility of of first- or third-degree price discrimination, as well as getting practices to disclose who owns them. 60% of practices aren't owned by vets, but many are owned by private equity groups, which on its own suggests that there's money to be made in the sector.
As if always the case, the vets themselves don't think these changes will have much of an impact on the price of treatment.
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Latest BRC figures show year-on-year rate of increase was 3.9% in January, up from 3.3% the month before
Graham Watson's insight:
Quite a nice article for revising the impact of cost changes on prices - even though the issue of food price inflation is ostensibly a macroeconomic one.
However, Year 13 economists might wish to read the article and differentiate between fixed and variable costs and think about how this might alter the profit-maximizing equilibrium of grocery retailers. There's a difference in how the react depending upon which type of cost increases, and, of course, prices needn't go up at all if they can cut other costs or are prepared to accept lower profit margins.
Then you might think about how the existing market structure is likely to determine what's going to happen to prices. The market is an oligopoly, so this might also suggest that there's going to be co-ordinated change in prices across the sector.
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Researchers say event described as ‘major tipping point’ for clean energy in era of destabilised politics
Graham Watson's insight:
Good news for the global economy, with the latest data suggesting that renewable energy has overtaken fossil fuels in terms of electricity generation across the EU. Is this a 'tipping point' - and what does this mean in terms of the cost of energy both currently and into the future, as well as air quality and climate change targets.
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Donald Trump's plan to impose import taxes over Greenland pushed investors toward precious metals.
Graham Watson's insight:
D&S, XPED, the global economy and uncertainty all feature in this brief BBC piece that notes that the price of precious metals has gone up again, after President Trump announced tariffs over Greenland. |
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After weeks of talks mining companies say they cannot reach a deal that delivers value for shareholders
Graham Watson's insight:
I read the other day, that this is the third time that Rio Tinto and Glencore have discussed merging since 2008. There might now be a fourth at some point in the future, given that talks have stalled.
The official word is that the deal won't provide value for shareholders: perhaps suggesting that the only people who've derived any value from the talks have been the investment bankers engaged to advise them.
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Company publicly denied allegations that primary forests were being cut down to fuel UK’s biggest power plant
Graham Watson's insight:
It seems as though the green credentials of the UK's biggest power plant have been overstated, with evidence emerging that it's bought some of its biomass pellets from a Canadian source that got some of its inputs from some of Canada's oldest forest.
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Novo Nordisk is facing "unprecedented" price pressures, "intensifying competition" and patents expiring.
Graham Watson's insight:
Novo Nordisk, the maker of weight loss drugs Wegovy and Ozempic is concerned that steep price cuts have significantly reduced profit and that this is likely to be sustained in the wake of government intervention in the market, increased competition and the prospect of patents expiring.
The fact that profit is mentioned means that you can't immediately infer anything about PED, although you might give the concept some thought in this regard. A simpler approach might be to consider how the factors outlined will have affected the position and slope of the demand curve, and the implications of this for the firm.
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The snack conglomerate is cutting the price of products including Doritos, Cheetos and Lays
Graham Watson's insight:
I could easily put this on the Business Management board as an example of marketing, but I'll put it here to highlight the implications of cutting the price of snacks.
Arguably, the article implies that weight loss jabs, and the cost of living crisis might have reduced the demand for snacks, making a cut in prices a logical step. However, you might also think about the PED of snacks - is the PED of a branded snack elastic or inelastic. And then think about the revenue implications this weekend, Superbowl Sunday, a particularly lucrative day for US snack manufacturers.
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Britons cut back in January after record grocery spending in December, turning to own-label products
Graham Watson's insight:
I'm not going to focus on food price inflation slipping back to 4% here, but other details in the latest Worldpanel data.
In the first place, it seems that, unsurprisingly, there's a shift in consumer tastes in January towards a healthier lifestyle, not least with cottage cheese purchases up by 50%. However, it's also interesting to see the latest market share data in the sector, with the discounters, notably Lidl, gaining ground at the expense of Asda and Co-op.
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Motorists benefit as industry offers deals of up to 18% off to attract buyers for petrol, diesel and electric models
Graham Watson's insight:
This story has been doing the rounds for a while, but it seems like it's a good time to buy a car, with the average discount on showroom prices being over 10%.
However, what's good for the consumer isn't good for the manufacturers who are warning that such a level of discounting is unsustainable. You might ask your Year 13 economists to draw a an equilibrium position for a car manufacturer that shows it to be loss-making in the short-run but not yet having to shutdown, and then ask them to speculate why they would choose to continue to trade in these circumstances.
It's more nuanced than you might think, not least in the market for electric cars where they are have specific sales targets and are fined for not achieving them. In this case, it simply be the fact that the marginal cost of the discount is less than the marginal cost of the fine!
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Experts say factors including Trump’s aggressive policies and pressure on the dollar are pushing investors toward ‘safe haven’ of precious metals
Graham Watson's insight:
A Guardian explainer of why the price of gold and silver has increased in the past year, noting that the demand for the metals is as a store of value in uncertain times, with ongoing geopolitical issues and, of course, the uncertainty associated with President Trump's policymaking encouraging investors to seek safe havens.
I'll just put this out there - I wonder if the President's family themselves bought gold and silver ahead of him taking office. I'm not saying that they have but if it transpires that they have, well, draw your own conclusions.
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With almost one in five firms breaching targets, the watchdog’s new get-tough approach on capital levels seems to be anything but
Graham Watson's insight:
This might seem a slightly niche article at first, dealing as it does with the balance sheets of energy companies, hardly something to set the pulse racing.
However, Nils Pratley makes the a number of genuinely insightful points about the nature of regulation and the costs of regulatory failure. Starting from the premise that the collapse of a number of energy companies in 2021-22 cost every billpayer £94, he notes that OFGEM lax enforcement of capital targets is unfair at best, in that in allowing them to continue to take on new customers, they may be doing so with an unfair cost advantage.
A more general point though is that not enforcing this sort of seemingly 'minor' regulatory requirement seems to signal that regulation isn't going to be robust and at worst, this might trigger another crisis in the sector which billpayers, and potentially taxpayers, will end up paying for rather than the companies themselves.
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The airline said the fact there were no bags available for less than £5.99 meant the claim was not misleading.
Graham Watson's insight:
Another article about information and transparent prices, with the Advertising Standards Authority (ASA) banning an EasyJet advert for implying that customers would be able to book their carry-on bags for £5.99.
The reality appeared to be somewhat other - with the airline claiming that this was the price on some flights, on some routes, the authorities discovered that there was little to no evidence of this. Hence the ban.
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Questionnaire completed by 10,000 people finds sobriety on rise, with women slightly more abstemious than men
Graham Watson's insight:
A lovely example of changing consumer tastes, with the number of teetotal consumers on the rise. A survey of 10,000 people conducted by the Institute of Alcohol Studies suggested that around a quarter of all adults no longer drink.
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Gold is seen as a so-called safe-haven asset that investors buy in times of uncertainty and low interest rates.
Graham Watson's insight:
I've already talked about this a couple of times - just an application of D&S, with the macroeconomic environment determining the demand for gold as a safe haven.
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The government says the industry will have "nowhere to hide", but campaigners say the reforms do not go far enough.
Graham Watson's insight:
The government has published a White Paper outlining how its going to change the regulation of water companies, bringing in oversight for each company, inspections for each company and MOT-style checks on infrastructure and other measures including compulsory water efficiency labels.
However, critics of the government suggest that far from being a once-in-a-lifetime change, it's going to be more of the same. And even then you need to couch this in cost-benefit terms. The equilibrium level of regulation will occur when the marginal cost of regulation equals its marginal benefit. |
It seems that much like buses, you wait for one then three come along - in this case the news that South West Trains is going to be renationalised has been swiftly followed by the news that C2C and Greater Anglia are also going to be be renationalized in 2025.
The train-operating companies contracts are not going to be renewed but taken over by the government on the basis that in real terms private sector rail operators cost the government more than a nationalized rail sector did up to privatization. However, you shouldn't be cocksure that this is going to result in better performance of the sector - the profit motive is a powerful incentive for firms to improve their service.