Economics help blog – Page 194

Falling Price of Mobile Phones

22 January 202020 November 2012 by Tejvan Pettinger

The mobile phone market is a good example of how to explain some basic concepts of supply and demand. For example, it shows how improved technology and increased supply – can reduce price, even as demand rises.

According to Evalueserve – Nokia, one of the world’s largest mobile manufacturer, recorded an approximately 39 per cent fall in its average selling price (ASP) between 2005 and 2009.

The good news for users is that over the next five or ten years, the price of mobile phones is forecast to fall. This is primarily due to the increased competition and increased supply from major producers. As markets reach saturation point, demand will increase at a slower rate. (5% a year until 2015)

Supply and Demand Diagram for Falling Mobile Phone Prices

supply-increase-demand-price-lower

This article, suggests that a key factor in reducing prices will be the growth of markets in developing economies, such as India and China. Typically, these economies have smaller disposable income, so there will be greater pressure for manufacturers to price competitively. Combined with improvements in technology, and greater competition, prices could fall up to 70 per cent (4.8 billion of active mobile phones across the globe are below USD 100 by 2015), according to a recent study.

Food Poverty in UK

22 January 202019 November 2012 by Tejvan Pettinger

The past few years have seen a rapid rise in real food prices – especially, fruit, vegetables and meat. At the same time, we have seen falling real incomes for low-income decile groups. The consequence is that those on low incomes have been changing their diet in response to higher prices. With squeezed real incomes, there has been a greater preference for ‘cheap calories’ and lower demand for ‘more expensive calories’ – such as fruit and vegetables. Some fear the poorest are struggling to buy sufficient food.

The consequence of a switch to ‘cheap calories’ (e.g. saturated fats, processed sugar, less fruit and veg) has been to contribute to concerns about the nation’s health. During this period, obesity has continued to increase.

Price is not the only factor to influence the demand for food. But, increasingly, consumers are mentioning food prices and promotions as key factors in determining choice.

Income Decline for low-income groups

food poverty

Median income after housing costs fell 12% between 2002-03 and 2010-11 for low-income decile households – while rising in all other income groups.

Food prices have risen 12% in real terms over the last five years taking us back to 1997 in terms of cost of food relative to other goods.

Is 24 hour, 365 day a week shopping a sign of progress?

22 January 202015 November 2012 by Tejvan Pettinger

Recently a reader asked whether economic growth was increasing living standards and why economic growth was not leading to more leisure time in developed economies. – Is economic growth necessary?

Not only is leisure time not increasing, but it is becoming more common for ‘special holidays’ to become just another retail day.

In the US, stores used to be closed for the whole of Thanksgiving – an important national holiday. Traditionally a time for families to spend time together. However, the day after Thanksgiving is such a retail bonanza that shops are moving opening times earlier and earlier. Now, big stores like Walmart, Gap and Target are opening on Thanksgiving – hoping to benefit from the earliest rush of consumer spending. From a business perspective, it makes sense to capitalise on this boom in retail sales. Shops which stay closed on Thanksgiving missed out on this surge in retail sales. But, the extra time for shopping comes at the cost of workers being pressured to work on national holidays and miss an important chance to spend time with their families.

Companies may point to the fact that some workers don’t mind working on national holidays, and are grateful for the opportunity to earn overtime. However, labour unions argue this ignores the reality that most workers would like to spend time with their family, but feel no alternative but to work.

Triple-dip Recession Could Lead to Lower Credit Rating

22 January 202015 November 2012 by Tejvan Pettinger

Recently, a report suggested austerity can increase debt levels. Now, there is an indication that austerity could cause a decline in credit ratings. This has certainly been the experience of many European countries – who since they introduced austerity measures – have seen a reduction in their credit rating. Austerity hawks have often sold immediate …

Impact of tax avoidance by Amazon

18 November 201715 November 2012 by Tejvan Pettinger

Directors of big multinationals such as Amazon, Google and Starbucks received a challenging investigation by MPs annoyed that big multinationals are avoiding paying corporation tax. An Amazon director was described as being ‘deliberately evasive’ and being unacceptably ignorant of who owned the Luxembourg based Amazon company – used to avoid UK tax. According to Conservative …

Have the Government misled the public on UK debt?

18 November 201714 November 2012 by Tejvan Pettinger

Readers Question: The government keeps claiming that their harsh (but very necessary) austerity policies are working and that they have reduced the national debt by 24%, yet your graphs seem to totally disprove this claim. If anything, your graphs seem to show that the national debt is continuing to rise quite steeply, despite the government’s austerity policies, primarily because tax revenues are down and welfare payments are up because of the rising unemployment across the country (caused as far as I can see by the government’s austerity policies). Is the government painting a misleadingly and unfounded rosy picture to prove their policies are working, or am I failing to read your graphs correctly?

deficit

The government is correct to say that the budget deficit (Annual borrowing) has fallen by 25% since the peak of 2009-10.

debt

This means the national debt (total amount government owe) has increased at a slower rate than it might have done. But, it is still increasing rapidly.

Global Health Care Costs

22 January 202013 November 2012 by Tejvan Pettinger

A look at the contradiction between health care spending and actual treatment. The US which spends more on private sector health care spending, still also has one of the highest levels of government spending on health care per capita. Furthermore, health care costs continue to rise, and place one of the greatest strains on government spending commitments in the developed world.

total health care spending - list of countries

This graph shows total health care expenditure (including both public and private spending). The biggest spender by a long way is the US, which spends over $8,000 per capita. This compares to less than $3,000 per capita for Italy, Greece and Portugal.

Hospital Beds per 1,000 Population density

hospital-beds

Admittedly, the number of hospital beds per 1,000 of the population is not a comprehensive guide to the quality of health care. But, it is still interesting that the US has one of the lowest numbers of hospital beds per 1,000 (3.1) – despite the much higher total spending. Japan has the highest number of hospital beds at 13.7/1000 – yet quite a modest total health care bill.

On other measures, US seems to get poor performance from its spending.

	% of health care spending as % of GDP	Govt spending as % of total health care	Per Capita expenditure 2006 (PPP)	Doctors per 10,000 population	Nurses / midwives per 10,000	Hospital beds per 10,000	Life Expectancy	male obesity
UK	8.2	87.3	2815	23	128	39	80	22%
US	15.3	45.3	6719	26	94	31	78	31%

US v UK health care costs)

Rising Health Care Costs

source: KFF

UK Construction Sector Growth Stats 2012

22 January 202012 November 2012 by Tejvan Pettinger

The UK construction sector remains largely depressed with construction volumes still below pre-recession levels.

In headline figures produced by the ONS, the estimated level of the total volume of construction output in the third quarter of 2012 was the lowest since the second quarter of 1999.

The construction sector is one of the most volatile sectors in the economy, and can be seen as a barometer for the wider economy and economic performance. Although there are signs of some recovery in infrastructure investment, the current outlook looks pessimistic for future economic recovery.

The annual growth of construction volumes mirrors the double dip recession. (economic growth)

The fall in construction during the 2008/09 recession was greater than the previous recession during 1991. Note the boom in construction during the late 1980s was much greater than the limited growth between 2005-08.

Recently, the biggest falls have been in the private industrial and private commercial sectors of construction.