Tejvan Pettinger

Tejvan studied PPE at LMH, Oxford University and works as an economics teacher and writer.

Safety of The Dollar

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The US Dollar is often viewed as a safe haven currency. It is still the world’s reserve currency and the thinking is that if the dollar goes bust the rest of the world will be in an even worse situation. Therefore, during the worst of the economic turmoil, the dollar remained relatively strong because investors …

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Recession Makes It Difficult For Students

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Joking aside (previous post), this year will prove a very competitive year for getting into university. Because of the recession and rising unemployment, there is increased demand for going to university. Especially amongst mature students, doing a degree is seen as a way to avoid the difficult jobs market – hoping conditions will have improved …

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Economic Snapshot Budget 2009

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The Chancellor used the Budget speech to cut his growth forecasts. The economy is now expected to contract by 3.5pc this year, but grow 1.25pc in 2010. This would mean growth starting towards the end of this year. The IMF are more pessimistic forecasting negative growth in 2010 of -0.4% (see – slow economic recovery) …

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Why do Airlines Overbook Flights?

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On Saturday morning I was returning to the UK from JFK via American Airlines. For some reason the flight was in chaos. American Airlines had managed to overbook the flight by 37 people. There were 37 angry people who had bought a ticket but not having a seat. The previous night a flight had been …

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When Do Recessions End?

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A recession is a period of negative economic growth. Falling output leads to higher unemployment, and this rise in unemployment causes a negative multiplier effect. e.g. those made unemployed will spend less causing even less demand in the economy. Thus there are many factors which make it difficult to get out of a recession. What …

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Why Firms wish to Merge

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Readers Question: “Merger activity represents a major force for structural change in competitive markets. Examine the principal objectives underlying such strategic developments and consider the degree of success enjoyed by firms in pursuit of those objectives.”

This question is a rather complicated way of saying:

  • Discuss why firms wish to merge.
  • Using examples, discuss whether firms have actually benefited from mergers.

Why Firms wish to Merge

  1. Increase Market Share. A merger enables a firm to have more market share and therefore it is in a position to set higher prices and make more profit. Increasing market share may be necessary in a declining market with falling profitability.
  2. Economies of scale. A merger can enable greater efficiency because the larger firms can share fixed costs. This argument is important for industries with high fixed costs such as car manufacture. It is less important for industries with low economies of scale e.g. cafes.
  3. Profit for Research and development. A merger enables a firm to make more investment. This is important for risky investments in industries such as oil exploration.
  4. Greater prestige from working in a bigger firm.
  5. Higher salary from working in a bigger firm. Managers may expect an increase in salary if they work for a bigger firm.
  6. Greater political and social influence. For an industry like newspapers, the motive for a merger may not be just economic, but to have greater political and social influence.
  7. Prevent a firm going bankrupt. For example, at the height of the banking crisis, Lloyds TSB were allowed to merge with HBOS to help absorb the losses of HBOS and reduce the burden on the government. (see: monopoly power in banks)

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Benefits of Water Meters

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Water is a valuable commodity; with global warming it appears to be even more scarce. A report suggested that British rivers could see an 80% decline in water volumes during the summer months because of global warming and increased demand. With most scarce commodities like electricity and gas, you have to pay depending on how …

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2009 – G20 Economic Summit

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The G20 summit held in London is occuring against a backdrop of the worst global downturn since the Great Depression. The OECD warned that GDP for its 30 member countries is likely to fall by a record 4.3 per cent this year, against the 0.4 per cent drop that it forecast last November.

The group also warns that unemployment will reach 10 per cent by next year in most developed nations.

The G20 member states cover 85% of the World’s GDP and 80% of the worlds trade.

Economic Issues at Stake

  • Fiscal Stimulus. Gordon Brown has been keen to encourage global commitments to extra government spending to boost the global economy. However, the UK is having difficulties with its borrowing requirements already (failed gilts auction). Nevetherless there is hope that countries such as France and Germany may try to do more.
  • Global Finance Regulation. French president N. Sarkozy has argued for a global finance regulator. Few others seem interested in this idea. Instead UK and US are calling for greater co-operation of national regulators.
  • Free Trade. The Great Recession has raised the spectre of protectionist policies – tariffs on imports and government subsidies. There is hope the leaders may make commitments to avoiding a repeat of the protectionism that characterised the Great Depression

Other Issues

Environmental. Forecasts for global warming have become increasingly dire. But, in recession, many feel environmental issues have become increasingly marginalised – especially given how important they are

List of G20 Nations

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