50 economics ideas you need to know

Edmund Conway, economics editor of the Telegraph, is serialising his book, 5o economics ideas you really need to know.

This is a great resource for students of economics. So far, the extracts cover the following central concepts in economics:

The 'Invisible Hand'
The Malthusian trap
Comparative advantage
Keynesianism
Monetarism

Click here to access the series.

A2 students should read Conway's account of the importance of comparative advantage and the criticisms of Rcardo's idea. AS students can get ahead of the game by taking a look at Conway's explanation of Adam Smith's great insight into the power of markets, the 'Invisible Hand'.

AS economics revision

Here is a quick revision link on economic stability, courtesy of Economics Student:

http://rapidrevision.co.uk/economics-student/2009/05/10/economic-stability-as-a-macroeconomic-objective/

AS business studies revision

Here are some links my AS business studies students might want to use in your final days of revision:

BUSS2 (Managing a Business) - revision checklist
BUSS2 (Managing a Business) - calculations and formulae
BUSS2 (Managing a Business) - help on evaluation

BUSS1 (Planning and Financing a Business) - key terms revision sheet
BUSS1 (Planning and Financing a Business) - evaluation questions

Hope these are of some help ...

Economic growth

This presentation from Biz/ed will be of use to both Year 11 and Year 12 students who have been looking at economic growth in the past few weeks:

Publish at Scribd or explore others: Academic Work Business world development

Dear Ed

It takes only a whiff of socialism to get Ed Longinotti (U6) into his chain mail and on his horse, lance at the ready.

Imagine his state of readiness reading this piece in The Times.

So here is Ed's letter to the Editor of The Times followed by my challenge (alternatively, you can now read Ed's letter on The Times website by clicking here):

Dear Sir,
Naomi Klein feels vindicated because ‘she did warn us’. Anyone with a basic understanding of free market economics and history could have warned us. A free market economy will always suffer from recession, as Joseph Schumpeter put it ‘they are the winds of creative destructive’ [I think Ed means 'creative destruction'], reallocating resources from inefficient to efficient firms. Such a process has been experienced in every free market economy, for example ‘tulipomania’ in 17th Century Amsterdam. To suggest that the current recession represents the collapse of the free market system is an unjustified leap; it is merely an integral process of the capitalist model. Klein asserts that any gap left by the apparent failure of free market economics must be filled by the left – or else fascism will ensue. However there is no alternative proven system to that of individual liberty and free market economics. The left has never been able to propose a practical alternative, as the experiences of the 20th century and the Soviet Union show. Indeed, socialism and fascism have strong connections, for socialism depends on the sort of collectivisation and centralisation of control that in the words of Adam Smith puts governments in a position where ‘to support themselves they are obliged to be tyrannical’. Socialism is not the path to freedom, for it is inherently authoritarian. Such criticism of this kind is not to be confused with dogmatic support for laissez faire economics, but is based on the concept that where individual competition can be created, it is a better way of guiding the allocation of efforts and resources than any other. It does not deny, but indeed emphasizes that for competition to work beneficially a carefully thought out legal framework is required – perhaps more carefully thought out than the current framework.
Yours faithfully,
E. Longinotti, King’s School Chester, Upper Sixth.

My challenge
Best response to Ed (starting 'Dear Ed') will be published on the blog.

Testing times for the euro

Year 13 economics students have just under a fornight to wait before they get the results of their January synoptic exam. They spent much time getting to grips with whether membership of the euro area was in the long term interests of an economy and the sustainability of the euro. Year 11 students have also explored the pros and cons of the euro in their recent poster work.

The Telegraph has a useful article covering the trials and tribulations of the Irish economy, not long ago hailed as the Celtic Tiger, or the 'miracle' economy of the euro area. According to the article "Ireland's 'miracle' economy has turned terrifyingly sour - and as it strains against the inflexibility of the euro, its next crisis may shake the entire EU. "

Recommended reading for all economics students and for Year 11 GCSE students. Click here to access the article.

Sterling silver lining?

Some of my Year 11 students are fully signed up members of Citreon C4 Picasso admirers club. My own Picasso won't be getting its second outing to its homeland this summer because of the collapse of sterling - the Waltons will be holidaying in the UK.

It seems that holiday companies Pontins and Butlins are banking on more of us doing the same. Pontins are investing £50 million in their UK holiday facilities after a 20% increase in summer bookings. And Butlins is moving up market, opening a 'boutique hotel' in Bognor Regis (boutique in Bognor?). Families planning a trip to Cornwall could be disappointed as many holiday cottages are reportedly fully booked. Good illustrations of the impact on business of changes in the exchange rate.

The collapse of serling (the trade-weighted index is down almost 25% from its peak in 2007) is also worth Year 12 economics students exploring. One of questions posed in recent lessons was the relative importance of each of the components of aggregate demand (AD). Inevitably, most attention focused on the importance of consumer expenditure. Such a dramatic fall in the exchange rate, though, can have a significant expansionary impact on AD. Economists have a rule of thumb that each 1% fall in the exchange rate has the same effect on the economy as 0.25% cut in interest rates. If this is right, the collapse of sterling is equivalent to a whopping 6% cut in interest rates. On top of the interest rate cuts announced by the Bank of England, the expansionary impact is incredible.

As the full effects of both the falls in sterling and the interest rate have yet to fully feed through to output, maybe there is a silver cloud on the horizon?

My challenge
What are the parallels between this story and the UK's exit from the Exchange Rate Mechanism (ERM) in the early 1990s?