Once in the lifetime experience

284 days to go!

On 27 July 2012 Olympic Summer Games will be held in London. The eyes of the world will turn at the UK. It is a unique opportunity for success not only for the sportsmen and sportswomen but also for the Londoners. The Olympic Games are expected to attract approximately 5.5 million daytime visitors and 900,000 overnight visitors but is everybody going to make a profit?

London restaurateurs warned that the 2012 Olympic will be bad for business (and a repeat of the ‘wash-out’ Royal Wedding in 2011). They claim that regulars and cultural tourists will stay away from the Olympics and fans attending events will not dine out in central London. Moreover, business customers will attend special corporate events hosted by the Games organising committee’s sponsors and partners.

Another problem is that transport disruption, such as road closures, will cause problems not only for consumers but also for suppliers. As written in the Independent on Sunday, the Games in London mean “incredible opportunities, but those in affected areas needed to start planning now.”

How can the companies cope with these problems? For example, they could have a special Olympics website page with all information translated into foreign languages or they could offer customers the opportunity to dine at different times to fit around the sporting action. Additionally, they could enable people to watch televised events while they eat or hire the restaurant.

A good news is that some of the capital's top attractions and restaurants have signed up to a charter promising fair prices during 2012. According to the London Visitor Charter, it is done, “to protect the long term reputation, image and international perception of London as a premier visitor destination.”

One thing is obvious, it will be an unforgettable experience for all Londoners. 

That’s what I think,

MANU

We don't need no education!

What information failures are there in the market for higher education places?

Students, while choosing their future university, have imperfect information about their choices available and differences between them. As written in the Browne’s report, ‘stundent choice will drive up quality’, but how can they make rational decisions if they do not have access (and possibilities) to get the accurate information about the universities. The main information failures in the market for higher education places are:

1. The quality of teachers (their engagement, experience, skills and teaching abilities). Students do not choose their tutors, they do not even know them (their names) before deciding which university to apply to.

2. The way of teaching. Every university, every college, every tutor has a different approach to the teaching methods and every student prefers a different method of learning. They have no influence on that.

3. The choice of subject. Many students choose their subjects by coincidence (advice, lottery). They do not know what they are going to learn before their classes start. Every university has a different set of subject taught in a course and most students are not aware of that while choosing their school.

There are many more information failures concerning higher education places, including accommodation, teaching and learning resources and extra-curricular activities, but I have decided to describe only the main problems and dillemas.


What externalities are involved in higher education and will this lead to an over or underprovision of higher education in a pure market system?
Positive externalities:

def: the external benefits that may result from a course of action. Sometimes they are called spillover effects because they bring some benefit to a third party, someone who is neither a producer nor a consumer of the product.

1. Better qualified labour force

2. Lower unemployment

3. Higher future incomes à higher spending…

4. Social benefits (less crime, poverty and homelessness)

Negative externalities:

def: occur when an economic activity affects third parties, i.e. people other than the producers or the consumers, in some way which reduces their quality of life.

1. Higher costs for the government (and indirectly the citizens)

2. Bigger social inequalities

The externalities involved in higher education could lead to overprovison in a pure market system.

Apart from externalities and information asymmetries, what other market failures apply to the market for student places in HE?
def: Market failure – occurs when market imperfections lead to an allocation of which is less efficient than it might be:

· public goods

· externalities

· labour immobility

· lack of information

· poverty

· imperfect competition


Apart from externalities and lack of information (information asymmetries) there is also imperfect competition between universities (e.g. some of them are thought to be more prestigious), and students. Additionally, poverty is also an important issue. Poor students are not able to afford higher education are, therefore, locked in a poverty trap.


What are the arguments for subsidising non-STEM subjects (as well as STEM ones)? Should these subsidies vary from course to course and from university to university?

+ The chosen does not determine the future job. Many people after graduation work in another area of interest/knowledge.

+They also improve people’s knowledge and there is a possibility of a development.

+ They are needed. People are becoming more and more ‘social’.

+There should be equality between STEM and non-STEM students. Poorer students would have bigger incentive to choose STEM even if they prefer other courses. That could lead to lower efficiency.

+Poorer students would not go to university if their course is not subsidised.

In my opinion, the state should subsidy the courses that prepare students for most-wanted (and needed) jobs. For example, in Poland, there are subsidies (students even get high scholarships) for science and engineering courses (basically STEM but more specific aim). The subsidies should be based on number of students attending the course, but should not vary from university to university.


What is the best way of tackling the problem of unequal access to higher education?

I believe that everybody should have access to higher education without the distinction between student with rich and poor parents. There should be more subsidies for gifted students, because, as written in the report: ‘Higher education matters because it drives innovation and economic transformation. Higher education helps to produce economic growth, which in turn contributes to national prosperity.’ Moreover, the possibility of taking a loan and paying it back after finding a well-paid job would also allow more people to go to university and decrease inequalities in access to higher education among people. 

“This report displays no real interest in universities as places of education; they are conceived of simply as engines of economic prosperity and as agencies for equipping future employees to earn higher salaries.”

http://www.lrb.co.uk/v32/n21/stefan-collini/brownes-gamble



That’s what I think,

MANU

The Browne report in full:

http://www.telegraph.co.uk/education/8058285/The-Browne-report-in-full.html

Quantitative WHAT?!

What is 'quantitative easing'?

Def: Quantitative easing was proposed in 2008 as a way of providing an additional monetary stimulus to reduce the impact of recession. Interest rates had already been reduced as far as they could be, and banks were still finding it difficult to maintain lending. Early in 2009, the Bank of England began buying bills and bonds, exchanging them for cash which would increase bank deposits. This has the effect of increasing the money supply and giving banks more liquidity. Many other central banks implemented similar policies at the same time. (In the US it is called credit easing.)

This is sometimes described as printing money and, if carried too far, it could lead eventually to inflation. But at the time it was introduced there was a significant risk of deflation occurring, which could turn out to be even more problematic.


IF YOU ARE STILL CONFUSED...

Look at this interactive graphic!


http://www.ft.com/cms/s/0/8ada2ad4-f3b9-11dd-9c4b-0000779fd2ac.html#axzz1aPdTCTu8


Quantitative easing is a government monetary policy occasionally used to increase the money supply it increases the money supply by flooding financial institutions with capital, in an effort to promote increased lending and liquidity. Under this policy, the authorities buy up bonds either from banks or from the commercial sector. There are two potential benefits. The higher the price of a bond, the lower the interest rate the borrower has to pay; so the "yield" – the interest rate – on government bonds falls. Since many interest rates, including mortgage rates for example, are set with reference to gilt yields, QE should therefore help to drive down borrowing costs. Investors are likely to use the extra money from QE to buy something else – shares, for example. That should push up the price of a whole range of assets, boosting wealth and creating demand right across the economy.



Did it work? Will it work? The Bank of England recently published research suggesting that the initial £200bn bout of QE, starting in 2009, boosted GDP by around 1.5 percentage points – though given that the UK still experienced its worst recession in living memory, it was hard to feel the benefit at the time. But other economists, argue that QE1 – combined with the effect of a much larger programme of asset purchases in the US – just handed banks lots of extra money which they used to speculate on commodities such as oil, boosting their price, pushing up inflation and making life even harder for cash-strapped consumers. 

The chancellor, George Osborne, said at the conference in Manchester that the Treasury was drawing up measures to increase the supply of credit to small and medium-sized businesses, which have repeatedly complained that they are missing out on loans from the crisis-hit banks. Ed Balls will gleefully remind Osborne that while in opposition, he described QE as "the last resort of desperate governments".

In my opinion, quantitative easing is not the best way of helping the economy, because the 'printed money' will be 'lost in the banks' and there will be no significant credit easing. There are more efficient, direct ways of creating growth, e.g. creating new jobs and investing in job bureaus.

That's what I think, 

MANU

Don't worry, be happy! :)

Gross National Happiness (GNH) measures the quality of a country in more holistic way and believes that the beneficial development of human society takes place when material and spiritual development occurs side by side to complement and reinforce each other.

Four Pillars of GNH:

1. Sustainable Development

2. Preservation & Promotion of Culture

3. Conservation of Environment

4. Good Governance

This is absolutely amazing!

That’s what I think,

MANU

GOOOOOAL!

Do you remember playing football in your garden or in the backyard? How many times after your strong kick the ball flew in a wrong direction? And… Score! Who cares about the broken window!? I assume that your parents were not very proud of you and there was no need to explain or excuse. The game was over.

Now, let’s think about it from another point of view. Your parents had to pay for the new window and buy glass and call assistance. The window company has earned more money. The owners could have buy better machinery so another company gained profit and so on…

What’s my point? Was breaking the window beneficial and helpful to encourage more people to exchange goods and services and, consequently, effect in a possible economic growth? Does destroying one thing causes further, uncountable benefits? Should people break their windows during a recession to boost the economy?

The answer seems to be obvious. That cannot be true! So how to explain it?

Imagine the situation when you miss the window. Your parents do not have to spend their money on repairing it and are able to buy you a bicycle instead. The bicycle company buys  more helmets (REMEMBER: SAFETY IS VERY IMPORTANT!) and etc. Everything looks similar but your window is in one piece.  Agreed?

That’s what I think,

MANU

FOR RENT!

Using a supply and demand diagram, explain the trend we have seen in the rental market, thinking about the impact on demand, supply and hence on price. How does this explain why sealed bids have been used to combat the increased competition?

The rental market in Britain has changed dramatically during and after the recession. People, who were not able to afford buying a house or taking a mortgage, decided to rent a property instead and keep on saving. The demand curve shifted to the right causing prices to rise. With limited supply, rents increased by up to 35% in 2010

Which factors have affected (a) the demand for rental properties and (b) the supply of rental properties? How is the elasticity of demand and supply relevant here in terms of the impact on price?

a)      Factors, which affected the demand for rental properties:

Difficulties in getting mortgages

High house prices

Higher education fees (“However, rises in university fees will see student demand come down - though foreign student demand will remain strong, thanks to the pound's weakness. ”)

b)      Factors, which affected the supply of rental properties:

Lower demand for buying houses (people decided to let their properties)

 “The supply of buy-to-let mortgages is improving and new lenders have joined the market, but there have not been enough new entrants to replace those that were pushed out during the credit crunch.”

 (http://www.seek4media.com/money/10346-is_the_buy-to-let_market_on_its_way_back.html)

To what extent is a sealed bid format fair on potential tenants? Who does such a strategy favour?

A sealed bid format is fair on potential tenants  because it is the price that matters. Landlord is more likely to make his decision according to your proposal. It is not so important if you are a student, have children or a pet. Moreover, a potential tenants will not end up in a situation, when a landlord suddenly changes his mind, because he has received a better offer.

Richard Davies, head of lettings of Chesterton Humberts, said that there was no mystery in the sealed bid process.

"If we do have more than one offer for a property, what we do is give a deadline for people to submit their best and final offers. All those offers go to the landlord who will decide who to go with"

(http://www.bbc.co.uk/news/business-11796277)

This strategy favours property owners who become more likely to receive bigger profit, because of higher competition. Additionaly, "The only people who like sealed bids are vendors who have most probably achieved a figure way above their asking price," says Tim Le Blanc-Smith, Director of John D Wood & Co., South Kensington.

How could this sealed bid strategy be an example of price discrimination?

If a potential tenant offers a much higher price than the value of the property it a discrimination against average people who propose a reasonable price.

What is likely to happen to your consumer surplus if you have to submit a sealed bid?

After submitting a sealed bid in highly competitive market consumer surplus is likely to fall and reach 0.

That's what I think,

MANU

Oily oil

Explain why oil prices have been rising. Use a diagram to illustrate your answer.

The main reasons for oil price increase are:

-       Higher demand for oil caused by population growth and technological development, especially in the developing countries (e.g. China).

-       Weather conditions, such a heavy snow falls or low temperatures, not only increase demand, but also result in more difficult delivery conditions, which causes an increase in oil prices.

-       Increased fuel duties and the higher VAT rate

-       Declining dollar encourages people to buy oil as an alternative investment.

-       Political situation, mainly in the OPEC – 40% of oil production, because they can easily control the market and prices.

-       Natural disasters (e.g. earthquake and tsunami in Japan)

How can the concepts of price elasticity of demand, income elasticity of demand and price elasticity of supply help to explain the magnitude of oil price movements?

PED (Price elasticity of demand) – Demand for oil is inelastic because there is no common substitute of this resource. If the price of oil goes up, people will still buy it.

YED (Income elasticity of demand) – Higher oil prices would affect people on a low-income. If the income falls people are more likely to buy less oil or to choose public transport.

PES (Price elasticity of supply) – The oil resources are limited (peak oil theory) and the lower is supply, the bigger is the price. However, the current oil prices are not cause by the shortage of this resource, but by the reasons mentioned above and speculations.

Examine what is likely to happen to oil prices over the coming months. What are likely to be the most important factors in determining the direction and size of the price movements? Distinguish between demand-side and supply-side effects in your answer.

Demand-side: The oil prices will depend on weather conditions. Many people will pre-buy oil to ‘be prepared for the cold winter’ and, consequently that will increase oil prices. It also will depend on current situation in the Eurozone, because oil often becomes a ‘safe investment’ in bad times.

Supply-side: Oil prices depend on OPEC forecasts, i.e the situation in the Middle East.

What are ‘crude futures’? Explain how actions in the futures market are likely affect spot prices.

Spot price - the current price at which a particular commodity can be bought or sold at a specified time and place (investopedia.com)

“Futures contracts are financial instruments and carry with them legally binding obligations. Buyer and seller have the obligation to take or make delivery of an underlying instrument at a specified settlement date in the future. ”

http://www.telegraph.co.uk/finance/newsbysector/energy/2790647/Oil-price-QandA-What-are-oil-futures-and-how-are-they-traded.html

Excessive speculations have a significant impact on oil prices.

WATCH: Playing the oil prices money game

To what extent can OPEC control oil prices?

OPEC controls production levels (i.e. has a possibility to increase production to avoid a surge in oil prices or the other way around). Moreover it prepares demand forecasts, which are also very influential.

If crude oil prices go up by x%, would you expect petrol station prices to go up by approximately x%, or by more than or less than x%? Explain.

If crude oil prices go up by x%, I would expect petrol station prices to go up more than x%. Crude is the primary raw material used to produce gasoline and other petroleum products. If its price would go up the petrol station would rise more due to transportation costs and the cost of refining the oil into gasoline.

Why have central heating oil prices risen by around 70% of over the past three months? What are the implications of your answer for the type of market structure in which central heating oil companies are operating?

In the last months of 2010 oil prices have risen by around 70%, which was caused by the profiteering from the cold weather. Central heating oil companies increased their prices in the consequence of higher demand due to cold winter. They knew that people would still buy it to heat their homes. People with oil heating suffered from the lack of close substitutes and the oligopolistic oil market.

That's what I think, 

MANU