The Economist Articles — Week of 19 Mar 20162 min read

Every week I read through The Economist to pick out articles that may be useful for teaching in the classroom. I’ll be sharing some of my notes and the discussion prompts I’ve come up with in these weekly posts. For students, they can serve as guide-rails for your reading. For teachers, I hope they will be helpful for your teaching.

1. Measuring inflation — How much is that doggy?

Consumer Price Index: “At the moment, calculating America’s consumer-price index (CPI) involves sending people into shops to note down prices. The basket is based on a survey of consumers which is updated only every three years or so.” Explain briefly how the CPI is computed.

Limitation of economic indicators: “The DPI… tracks 1.4m goods, compared with the CPI’s 80,000… based actual purchases rather than advertised prices.” “The new index completely misses changes in offline prices and spending on things like petrol and rent.” “It does suggest… official statistics may… be missing big price movements” — This can be a good evaluation point for standard of living or policy or decision making type questions. Because if inflation is lower than officially recorded, then it means central banks and economic agents might be employing the wrong information in their decisions.

2. TLTROs — Money for less than nothing

Unconventional monetary policy: “The new TLTRO II scheme is supposed to increase the incentive to lend… those that raise their lending above a certain target will be paid as much as 0.4% to borrow from the ECB” Explain the likely impact of such a policy on the eurozone economies.

3. Taxation and oil companies — Oiling the wheels

Applications of elasticity: “Governments in resource-rich countries were able to extract ever more money from oil companies through a range of levies…” Explain why before the large fall in oil prices, governments could ‘extract ever more money’ from oil companies through a range of taxes.

4. Tesla’s mass-market ambitions — On a charge

Product differentiation: “eye-catching falcon-wing doors… powered by a battery… electric cars that appeal to rich folk… environmentally aware techies.” Explain how Tesla is able to compete with larger firms in the car industry.

Barriers to entry: “littered with wrecks of new entrants unable to take on the established carmakers” “Tesla has shown that the barriers to entry… are far lower than widely assumed” What are some of the barriers to entry in the car market?

Costs of production: “It tackled high costs by stringing together hundreds of small, mass-produced laptop batteries.” “Tesla’s total capital spending and outlay on research… so far is one-seventh of what Volkswagen spends” Discuss how Tesla’s “extreme vertical integration” could reduce costs of production.

5. Air cargo — Too little freight, too much space

Revenue & Demand: “volume of goods travelling by air has risen marginally over the past year but airlines’ cargo revenues have fallen from a peak of $67 billion in 2011 to around $50 billion a year now.” With the aid of a suitable diagram, explain why revenues from airlines’ cargo have fallen.

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