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Energy bills, switching, and a coconut roulade - YouTube
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welcome to chopping board economics
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where cooking brings economics alive I'm
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Peter or mousey from the University of
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East Anglia join me for an episode of
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everyday economics explain through some
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of my favorite recipes hi do you know
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how much you spend on gas and
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electricity do you even know who your
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supplier is if you have no idea don't
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worry you're not alone in today's
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episode we're going to look at searching
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and switching all in wrapped in a story
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of your energy bill
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when average four percent of people's
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energy consumption relates to cooking so
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the choice of your energy supplier
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affect even the cost of your food which
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is why today we're making a coconut
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roulade something that requires no
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cooking whatsoever but before we start
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let's clear up a few things today the
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everyday UK energy bill is around 1,300
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pounds per year per household this is
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around four percent of total household
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expenses but this proportion is much
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higher for the lowest income households
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so energy is a large chunk of our
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monthly expenses this would suggest that
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we're quite savvy about our energy
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spending right well maybe not so much
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various surveys show that more than half
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world consumers have not changed
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supplier in the last three years or more
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and almost half the consumers don't even
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understand their own energy bills sounds
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quite striking
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just imagine you do your weekly shopping
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and have no idea how much you spend on
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each item or you don't know how much
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your favorite recipe costs you or what
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the ingredients are that will never
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happen right hopefully not in any case
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at least we do know exactly what
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ingredients we need for our coconut
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rolls these coconut rows are really
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versatile so feel free to deviate from
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my ingredients today for the dough I'm
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using five milligrams of digestive
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biscuits a hundred grams of icing sugar
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40 grams of coke
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powder two tablespoons of jam any Jam
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will do some milk and some rum or rum
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essence for the filling I have 200 grams
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of desiccated coconut 100 grams of icing
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sugar 150 grams of butter some cream and
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some vanilla essence now if you haven't
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got some of these ingredients at home
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don't worry let's go and buy them let's
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start with butter you go to a
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supermarket and find the body always buy
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four with two pound 20 will you buy it
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or search for a better deal
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economic theory assumes that people make
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rational decisions about searching for
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good deals so according to theory you
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would instantaneously assess that he
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costs 50 P to drive to the next
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supermarket and because you don't think
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they have the same butter for less than
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1 pound 70 you decide not to search just
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buy the old product now say that you do
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your shopping online and find that bata
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costs to pilot 10 at the other
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supermarket searching in this case
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doesn't cost anything extra so economic
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theory would assume that people would
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switch to the other butter but will they
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well that depends on something called
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switching costs say that you want to buy
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your butter from a different online
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retailer but there's a sign-up fee or
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five pounds that's a switching cost
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moreover there are other non-monetary
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switching costs for example you need
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some cocoa for your coconut rule you
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know you need 50 grams of the brand that
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you've been using then you find that
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there's another brand but you don't know
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whether the same 50 grand is the right
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measure to find out you need to
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experiment and learn and that's another
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switching cost why are switching costs
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so important
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well economists believe that people get
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the best deals where businesses compete
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for their consumers
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but if switching costs are high and
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people don't switch it is as if there
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was no competition and we would miss out
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on all the benefits so according to
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theory if someone tells you that you can
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save 200 pounds a year on your energy
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bill by switching supplier it seems
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obvious that you
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switch so do we really switch energy
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suppliers well we'll see but first of
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all why don't we look at how to make
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these coconut rules
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first of all wrap the biscuits into a
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kitchen towel and bash them into fine
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crumbs put in a bowl add the cocoa the
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sugar the rum and mix it with the jam
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add enough milk to form a damp dough
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that comes together put it on the side
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to make the filling bida butter with the
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icing sugar vanilla and some cream until
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frothy add a coconut and mix it all
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together now spread out the dough on
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some cling film spread the filling on
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the top and roll up very tightly using
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the cling film when load up bat it all
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together to make sure it's very firm and
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put in the fridge for a couple of hours
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before serving making a non bake dessert
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can be a conscious effort to reduce your
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energy bills but when it comes to your
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energy bills
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how much does money really matter let's
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see professor Wadhams has researched
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consumer behavior in the energy market
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for many years her team was able to
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observe and analyze the decisions which
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consumers made when offered a better
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deal in 2012 consumers were invited to
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join a big switch a large collective
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energy switching exercise conducted in
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the UK in this exercise an auction was
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held where energy providers could bid to
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offer the best deal to consumers
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information about the participants
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energy consumption was passed on
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anonymously to the companies who were
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bidding in the auction after the auction
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each participant received a personalised
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offer from the supplier who had won the
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auction and if a cheaper deal was
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available from another company then the
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consumer was shown that deal as well the
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idea in this experiment was to ensure
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that participants didn't have this
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search to find a best deal and it there
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was very little or no extra trouble with
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to actually switch plus participants
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actively opted in to take part in the
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auction so one would have expected them
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to be ready to switch so did they switch
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we were surprised to find that only just
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over a quarter of those who were offered
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savings actually accepted the offer even
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for savings of over three hundred pounds
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a year fewer than half actually switched
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for that offer so it appears that
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consumers are not moving to the better
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deals why is this a problem because
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without switching it is as if energy
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suppliers weren't competing and non
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switching consumers miss out on good
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deals and innovative products as a
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result in the UK less than half the
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people enjoy competitive prices and a
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majority who don't switch pay higher
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energy bills the government's response
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to this they made a pledge in 2017 to
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cap the price of energy bills
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professor Wadhams explains why this
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might be a problem a cap would lower the
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price for the non switching consumers
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but by reducing competition it would
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also increase the price paid by those
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consumers who are active in the market
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now moreover higher average prices will
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be felt most keenly by low-income
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households who already spend a much
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higher proportion of their incomes on
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energy a better solution suggested by
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Professor Williams his team would be to
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hold an auction to supply the sticky
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customers where energy suppliers would
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be invited to make a better offer to
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them as a group this would provide a
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potentially better deal for the
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disengaged whilst harnessing the true
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power of competition there are many
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areas of life that showed that people
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aren't as rational as economic theory
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likes to think but that should not be
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used to justify badly designed policies
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such as an energy price cap which could
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leave many especially the poorest worse
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off right it's time to take our roll out
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of the fridge sprinkle it with the
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leftover coconut and serve it sliced
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make sure to wrap it back up to
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avoided drying out I hope you enjoyed
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today's episode stay tuned for more
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chopping board economics
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