UK GDP Growth Shrinks in Q4 2012 The UK economy has shrunk by 0.3% in line with many economists’ predictions. The fall is mainly due to a slowdown in North Sea oil extraction, excluding oil and gas extraction the economy shrank 0.1%. This comes after a previous 0.9% growth in GDP during Q3. Nick Clegg has blamed a lack of capital Read more about UK GDP Growth Shrinks in Q4 2012[…]

Network Rail Investment The article shows plans by Network Rail (the government owned firm which is responsible for maintaining the railway networks in the UK) to invest £37.5 billion in infrastructure over the next 5 years. The effect of investment is to shift long run average supply curve rightwards. Investment should improve the speed and capacity of Read more about Network Rail Investment[…]

Why is Competition Good?

Firms have to be competitive in order to keep profits up and to remain in business. If they didn’t keep prices low then other firms could enter the market and undercut the incumbent firm, thus taking away its market share and supernormal profit. Alternatively rivals may do the same. These low prices benefit consumers and Read more about Why is Competition Good?[…]

Big Mac Index

The Big Mac Index is published by the Economist and is used to demonstrate the idea of Purchasing Power Parity (PPP) and is a method of showing whether a currency is under or overvalued in relation to the US Dollar. The theory behind PPP is that all currencies should be equal, not in nominal terms, Read more about Big Mac Index[…]

Pension Deficit Falls The article above shows the effect that the BoEs Quantitative Easing (QE) policy has had for pension funds. By undertaking QE the yield on government bonds (Guilts) has fallen. This is because the Bank of England purchases Guilts off of financial institutions (banks, insurance firms, pension funds, hedge funds, private investors, equity funds etc) Read more about Pension Deficit Falls[…]

Limitations of the Concentration Ratio

An evaluative point to the use of the concentration ratio is that there may be problems defining the market. If a competition watchdog used the ratio to measure whether or not a firm is defined as a monopoly (if the ratio produces a result greaterthan 25%) how does it decide the width and depth of Read more about Limitations of the Concentration Ratio[…]

Why Average Revenue is the same as the Demand Curve

In Unit 3 Business Economics we are told that D = AR, but why is this? AR is average revenue, and the calculation for average revenue is Total Revenue / Quantity. Total Revenue = Price * Quantity Therefore AR = Price * Quantity / Quantity => Price (as the Quantity is cancelled out) Hence AR Read more about Why Average Revenue is the same as the Demand Curve[…]