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Home > Wednesday Wisdoms: Newsletter > Why is A-level Economics important?

Welcome to the 6th edition of Wednesday Wisdoms by EdGenie!

Every Wednesday I send out actionable tips, tricks and real-world application insights from my 13-year experience coaching students to achieve As and A* in their Economics and Business A Levels.

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Why is A-Level Economics so Important?
​Will Pizza Hut be next giant to disappear from the High Street? 
Infographic of the Week
Chart of the Week
Macroeconomic Data

Why is A-Level Economics So Important? 🎓📈

Did you know that the subject saw a growth rate of 7.2% in A-Level uptake in 2022? 📊📚
...making it the 9th most popular A-Level subject? 🥉🏆

So, why are more and more students choosing to study A-Level Economics? 🤔💡

In this issue, I outline five key reasons, complemented by real-world examples, to help you understand the importance of this subject. 🌍🔍

1) Mastering Decision-Making Skills 🤔💭

A-Level Economics isn't just about supply and demand curves; it teaches students the fundamentals of making choices in various contexts. Understanding the principles of economics helps you better comprehend the choices made by individuals, firms, and governments.

Real-World Example: Remember the toilet roll shortage at the start of the COVID-19 pandemic? 🚽😷 It was a classic case of demand exceeding supply, driven by individual decisions to stockpile. A-Level Economics teaches you why such imbalances occur and how they can be better managed. 📊🛒

2) Influencing Policy and Governance 🏛️📜

Economics has a huge role to play in policy decisions, which in turn can affect entire nations. From the Budget to healthcare policies, understanding the economic implications is crucial for both those in governance and the electorate.

Real-World Example: The Bank of England uses economic data to set interest rates, which have wide-ranging impacts on the economy. 💷📉 The principles you learn in A-Level Economics can help you understand why interest rates might be slashed during a recession or hiked during an inflationary period. 📈🏦

3) Examining Social Issues Through an Economic Lens 🌍👀

Economics is far more than fiscal matters; it's deeply tied to social issues such as inequality, poverty, and education. A-Level Economics gives you the analytical tools to explore these problems and perhaps even find solutions.

Real-World Example: Economics can help explain why educational attainment might be lower in deprived areas. 🏫📉 The lack of high-quality educational resources and opportunities increases the "opportunity cost" of studying, making alternative paths more attractive. 🎓🛠️

4) Acquiring a Global Perspective 🌍🌐

We are increasingly interconnected in a globalised world. An economic event in one country can create a domino effect that impacts economies worldwide. A-Level Economics equips students with the skills to understand these interrelations.

Real-World Example: The trade tensions between the U.S. and China aren't just a bilateral issue. 🇺🇸🇨🇳 Tariffs and trade barriers affect global commodity prices, international supply chains, and even diplomatic relationships between other countries. A-Level Economics helps dissect these complex dynamics. 🌍🔗

5) Enhancing Personal Financial Literacy 💰📚

Understanding economics is crucial for managing personal finances effectively. From grasping how interest rates affect your mortgage to understanding the long-term impacts of inflation on your savings, economic literacy is invaluable.

Real-World Example: Considering buying a property? 🏠💸 Economic indicators like housing market trends and interest rates can guide your decision on whether it's a buyer's or a seller's market, helping you negotiate prices more effectively. 📈🏦

In Summary: 
The importance of A-Level Economics goes beyond getting a good grade. It provides a lens through which we can understand, and even influence, the world around us. 🌏👓 Its rising popularity among A-Level students is a testament to its practical relevance in an ever-changing world. 🌟📈

Thank you for tuning in to this week's issue. 💌📬 Feel free to share it with anyone who might find it helpful. 🤗📤 Let us know what other subjects you're interested in hearing about! 🎤📋

​Will Pizza Hut be next giant to disappear from the High Street?

Summary:

  • Pizza Hut UK is facing a debt crisis after operating for more than 50 years in Britain.
  • The franchise admitted it has been severely impacted by the COVID-19 pandemic, leading to decreased demand for dine-in experiences.
  • The war in Ukraine exacerbated the situation by causing prices of energy, food, and transportation to soar.
  • Pizza Hut was founded in the US in 1958 and opened its first UK outlet in Islington, north London, in 1972.
  • At its peak, the chain employed 10,000 workers across more than 260 restaurants in the UK, serving three million guests a month.
  • The company has faced increasing competition from other fast food chains like Domino's and Papa John's.
  • Pizza Hut UK is currently in talks to refinance almost £31 million of its £73 million debt, which must be repaid by April of the following year.
  • The company warned it may breach its loan agreements under a "severe but plausible downside scenario."
  • Heart with Smart Group, the firm operating Pizza Hut in the UK, also operates the east Asian chain Itsu. It aims to bring in new brands but is focused on growing existing franchises.
  • CEO Jens Hofma said turnover rose 25% in 2022 and current trading shows a 16.8% like-for-like growth in restaurant sales. He remains optimistic despite operating losses and rising costs.

A Level Economics Questions:

Q1: Analyze the impact of the COVID-19 pandemic on the demand for dine-in restaurants, using Pizza Hut UK as a case study. How might a decrease in demand for dine-in services affect Pizza Hut UK's revenue and profitability?
A: The weakening UK economy can lead to a depreciation of the pound as it reduces investor confidence, leading to lower demand for the currency. This can also imply that the economy is not robust enough to handle higher interest rates, which could lead to slower growth or a contraction, so the Bank of England may limit further increases in interest rates.

Q2: Discuss the role of external shocks, like the war in Ukraine, in affecting the cost structure of businesses. How did soaring prices of energy, food, and transportation specifically affect Pizza Hut UK's operational costs?
A: Interest rates and currency value are interconnected. Higher interest rates typically support a currency's value as they offer investors a higher yield, making the currency more attractive. In the recent case of the UK, despite the Bank of England raising interest rates, the pound has depreciated due to concerns over the health of the UK economy.

Q3: Pizza Hut UK is in talks to refinance almost £31 million of its £73 million debt, which must be repaid by next April. Evaluate the pros and cons of refinancing as a financial strategy for companies facing a debt crisis.
A: Pros: Refinancing could lower interest rates on existing debt and extend the maturity, providing Pizza Hut UK with more time to stabilize its operations and finances.
Cons: Refinancing may come with additional costs and fees. Moreover, it's a short-term solution that doesn't address the underlying operational issues facing the company.

Q4: Competition in the fast-food market has intensified, with rivals like Domino's and Papa John's. How can competitive forces in the market affect pricing strategy, market share, and profitability for a firm like Pizza Hut UK?
A: The increasing competition from fast-food chains like Domino's and Papa John's can put pressure on Pizza Hut UK to adjust its pricing strategy. Price wars could erode profitability for all players. Alternatively, Pizza Hut might decide to differentiate itself through quality or service, but this could also come at a cost. Moreover, stronger competitors could chip away at Pizza Hut's market share, compounding the financial stress it is already under.

Possible A Level Economics 25 Marker Question

Evaluate the various economic factors and challenges that have led to Pizza Hut UK's current financial situation. In your answer, consider the impact of the COVID-19 pandemic, the war in Ukraine, competitive market forces, and debt obligations on the company's revenue and profitability.

Infographic of the Week

The BRICS association, originally comprising Brazil, Russia, India, China, and South Africa, announced plans to expand by adding six new members—Saudi Arabia, Iran, Ethiopia, Egypt, Argentina, and the UAE—starting in 2024. While the group's combined GDP and population are projected to marginally increase, its influence in global oil production is set to jump significantly from 20.4% to 43.1%, largely due to Saudi Arabia's inclusion. The expansion will also increase the group's share of global exports to 25.1%. Over 40 countries have expressed interest in joining, although differing political and economic priorities among expanding membership could lead to future tensions within the group.

Chart of the Week

The risk of global economic fragmentation is increasing due to greater trade restrictions and a lack of international cooperation, potentially reducing global economic output by as much as 7%, or about $7.4 trillion, over the long term. This decline is equivalent to the combined economies of France and Germany and triple the annual output of sub-Saharan Africa. New trade barriers have nearly tripled since 2019, and other forms of disintegration like technological decoupling are also contributing to rising costs. The IMF underscores the importance of targeted cooperation to face global challenges and mitigate the impact of economic shocks.

Macroeconomic Data

Whenever you're ready there is one way I can help you.

If you or your child are looking to Boost your A level Economics Grades in under 30 days, I'd recommend starting with an all-in-one support network where you get 24/7 access to a SuperTutor:

→ Join EdGenie 🧞‍♂️: Transform your A-Level Economics essays and exam marks (genuinely) with our comprehensive on-demand learning platform. This carefully curated course blends engaging content with effective exam techniques, the same ones that have empowered over 1,000 of my students to achieve an A or A* over the last 13 years. 
A huge thanks for hopping on board EdGenie's Wednesday Wisdoms newsletter! 
I'm Emre, and I've got a big goal - to make A* education accessible to all A-level students.
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Chief Learning Officer at Edgenie
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