This podcast is from MSN’s Slate magazine. It is an interview with David Wessel, author of the book In Fed We Trust: Ben Bernanke’s War on the Great Panic. The book and the podcast consider the recent history of the Federal Reserve Bank of America (the USA’s central bank) and its handling of the sub-prime crisis and the credit crunch.
In Fed We Trust: A podcast with author David Wessel MSN Slate (10/8/09)
Questions
- What actions were taken by the Fed as the credit crisis unfolded?
- According to David Wessel, what mistakes were made by the Fed in handling the credit crisis?
- How successful was the Fed in steering the economy through the credit crisis and subsequent recession?
- How is the role of the Fed likely to change in the future?
This podcast is from Times Online and is an interview with Jonathan Waghorn, of Investec Global Energy Fund, who “says the price of oil is set to rise over the long term, as it becomes increasingly difficult to find. This spells bad news for motorists, but good news for investors.”
Podcast: The oil price Times Online (4/8/09)
Questions
- Why have oil prices fluctuated so much over the past year?
- What is likely to happen to the price of oil over the next few months and why?
- Why is the price of oil likely to rise faster than the rate of inflation over the long term?
- How are the price, income and cross elasticities of demand and the price elasticity of supply relevant to explaining the likely long-term trend in oil prices?
- If the price of crude oil goes up by x per cent, is the price of petrol at the pump likely to go up by x per cent or by more or less than x per cent? Explain your answer.
According to both the Lloyds Banking Group’s Halifax price index and the Nationwide Building Society, the annual rate of decline in house prices is reducing and the three-monthly figures now show a small increase in house prices. So does this mean that the housing market is now recovering?
The Centre for Economics and Business Research (CEBR) is forecasting a rise of 2 per cent in house prices between the end of 2009 and the end of 2010. Other forecasters are predicting higher price increases. Part of the reason lies on the demand side, but part also lies on the supply side. The following linked articles explore these determinants of demand and supply.
UK house prices: has the great recovery started? Telegraph (10/8/09)
House prices to fall another 3 per cent this year before modest recovery in 2010 Telegraph (10/8/09)
Edmund Conway: Sorry – the house price crash isn’t over yet Telegraph (10/8/09)
House prices buoyed by property shortage Guardian (5/8/09)
Autumn casts shadow over 1.1% house price rise Times Online (5/8/09)
Surveyors predict house prices this year will end higher than in 2008 Guardian (5/8/09)
Property taxes could help stabilise the housing market Guardian (10/8/09)
Toby Lloyd: Don’t bet the house on it: No turning back to housing boom and bust Compass (April 2009)
House price data can be found at:
Halifax House Price Data Lloyds Banking Group
July 2009 House Prices Press Release Nationwide
Questions
- Identify the determinants of demand and supply that are likely to affect the price of houses in the coming 12 months. Use a diagram to illustrate the effect on house prices.
- What is the relevance of the price elasticity of demand and supply of houses in explaining the magnitude of the predicted price movements?
- What effect is speculation likely to have on the price of houses?
- Assess the suitability of property taxes as a means of stabilising house prices (see the final Guardian article and the Toby Lloyd article).
On 10 August the world sugar price reached a 28-year high. The price has risen by 88 per cent since the beginning of the year and 20 per cent in just the previous two weeks. The following articles explain why sugar prices have soared and examine the implications for the future.
Sugar Rallies 40% in Options Pointing to 1981 Peak Bloomberg (10/8/09)
Sugar hits 18-year high on drought threat Financial Times (10/8/09)
Sugar prices head towards the sky Financial Times (28/7/09)
Sugar price reaches 28-year high BBC News (10/8/09)
Food Companies Ask USDA to Boost Sugar-Import Quotas Bloomberg (7/8/09)
Sugar Monthly Prices Index Mundi
Questions
- Using a supply and demand diagram explain why sugar prices have risen recently. Distinguish between shifts in and movements along the demand and supply curves.
- What is the relevance of the price elasticity of demand and supply of sugar in explaining the magnitude of the price movements?
- What factors are likely to have the biggest influence over movements in the price of sugar over the coming months?
- How is speculation likely to affect (a) the volatility and (b) the level of the price of sugar over the coming weeks?
There are seven Indian airlines: state-owned Air India and six private carriers. Since the onset of recession they have all been making losses and were considering a one-day ‘strike’ when services would be removed. The aim was to force the Indian government to reduce fuel and airport taxes.
Do the losses suggest that there is overcapacity in the Indian airline market? Does it matter if, during the current recession, some airlines go out of business? Are bankruptcies necessary if the surviving carriers are to be stimulated to make cost savings and are to achieve sufficient economies of scale? Or should governments offer support to struggling airlines? Is oligopoly the best market structure for such an industry and, if so, how can collusion be avoided? The following articles consider these questions.
How many airlines do we need? Business Line (The Hindu) (4/8/09)
Indian airlines call off Aug 18 strike Forbes (3/8/09)
When corporations capture the state Rediff Business (7/8/09) (see middle part of article)
Blaming everyone else Indian Express (3/8/09)
India’s air carriers spin loss riddle Asia Times Online (8/8/09)
A strategic vision for Indian aviation The Economic Times (8/8/09)
Flight to value The Economist (6/8/09)
Federation of Indian Airlines
Questions
- Describe the features of the market structure in which Indian airlines operate.
- Is the Federation of Indian Airlines a cartel?
- Should (a) any; (b) all Indian airlines be given government support, and, if so, what form should the support take? Should Air India be treated differently from the other Indian airlines? Explain your answer.
- Is it in Air India’s long-term interests to embark on a price war with the other Indian airlines?
- Is oligopoly necessarily the optimal market structure for a capital-intensive industry?