I am not altogether sure how relevant this post will be, but since VBC (Virtual Business Challenge) is a Hwa Chong- initiated entrepreneuship game that intends to simulate the real business world, I would like to talk a little bit about it. Having played both the preliminary round and semi-final round, I think there is much to be learned from the economic's point of view. The following address is the link to a VBC forum where the leading team shared their invaluable insights over maket analysis. So just in case if you are interested (http://www.hcine2twork.org/vbc/main.php?topic=17).
Okay, back the original topic. The learning points of VBC: 1. Cartel In the preliminary round of the game, there existed a cartel that basically co-monopolised all four makets. Since free trading of technology was allowed, the cartel was working well in the sense that once one of the cartel members buys develops technology, it can share with the rest in no time, which means that the whole cartel can enjoy cutting-edge advantage in R&D while only one fifth of the money is spent (five of them took turns to buy tech in the game). So together, they were able to monopolise the market and earn supernormal profit. However, in the game/and most probably in the real world, ideal situation never occurs. I noticed that it is usually the case when one company develops a new tech and only shared with its cartel members after it had 'owned' the market for some time. So does it violate the agreement inside the cartel? I am not sure, but you may want to dig out more from law books. (maybe?) At the same time, the idea of cartel may not work well in all circumstances. Firstly, there will be an optimum number of members for the cartel. That is because the more the members, the smaller market share each company is to have, as well as the less profit it is to enjoy. Also, a large cartel means that it is more difficult to oversee all its members' activities, so violating the agreement due to tempetation to earn greater maket share (by lowering its price) may be possible. That is to say, a cartel will only work well when all its members are cooperative.
2. Optimum profit Optimum profit is not gained when you own the market, but when you achive the point where MC=MR. In VBC, we were not required to draw graphs to see where MC=MR, but rather to find an optimum point for profit from price and quantity. I am not altogether sure whether that is what happened in the real world as some companies seem wish to expand itself continously. One possible explanation is that its start-up cost is so high that it has a far-reach downward slope for its LRAC/LRMC. That is why the type of companies I mentioned just now are mainly low cost industries like fast food industry.
3. Small companies Even though for the both rounds, the markets were monopolised quite early in the game (around one third of the total game period). However, that does not necessarily mean the end of the game for small companies like us. Indeed, in times when the markets are monopolised, most of the companies are facing the same situation as us, so whether to win or lose largely depend on how one switches its focus. Econs notes teaches us that in such situations, small companies need to differentiate their products so that they enjoy a niche market that few companies can compete with them. That is the same for VBC. Since the big companies have already developed various technologies, it is almost impossible for us to compete with them technologicalwise, meaning the tech we develop may not win us back enough money to compensate the amount it is paid at the first place. So what we did was to adjust promotion rate to optimum (something like differentiate product).
by Paul A. Samuelson 1970 Laureate in Economics 5 September 2003 intro
From one point of view my studying economics was the result of accidental blind chance. Prior to graduating from high school I was born again at 8:00 a.m., January 2, 1932, when I first walked into the University of Chicago lecture hall. That day's lecture was on Malthus's theory that human populations would reproduce like rabbits until their density per acre of land reduced their wage to a bare subsistence level where an increased death rate came to equal the birth rate. So easy was it to understand all this simple differential equation stuff that I suspected (wrongly) that I was missing out on some mysterious complexity.
Luck? Yes. And all my life I have been at the right place at the right time. Chicago was at that period the top center for old-fashioned neoclassical micro-economic study. But I didn't know that; my reason for entering there was simply because the University of Chicago was close to my high school and home. Later when I was bribed to leave the Eden of the Chicago womb, choice boiled down to either the Harvard or the Columbia Graduate School. My revered Chicago mentors--Frank Knight, Jacob Viner, Henry Simons, Paul Douglas, ...--without exception said, "Pick Columbia." Never one to blindly accept adult advice, I picked Harvard. I picked it by miscalculation, expecting that it would be a little oasis on rolling green hills.
Thanks in part to the evils of Adolph Hitler, my 1935-40 sojourn at Harvard coincided with its economics renaissance under Joseph Schumpeter, Wassily Leontief, Gottfried Haberler, and the "American Keynes" Alvin Hansen. (Also, for me, I was able to become the sole protegé of the polymath Edwin Bidwell Wilson, who had himself been the sole protegé of Yale's great physicist Willard Gibbs.) Contemporary Harvard graduate students came to match in brilliance the new Harvard faculty. Richard Musgrave, Wolfgang Stolper, Abram Bergson, Joe Bain, Lloyd Metzler, Richard Goodwin, Robert Triffin, James Tobin, Robert Solow,... --all of them my pals--became the 1950-2000 era stars in world frontier economics. Harvard made us, yes. But as I have written many times, we made Harvard.
The Duke of Wellington said, "The battle of Waterloo was won on the playing fields of Eton." I can say, "World War II was won in the seminar rooms of Cambridge, Princeton, and Los Alamos."
Perhaps more important than the causal role of casual luck was the salutary fact that economics was just right for me. This field was then entering a mathematical phase in both theory and statistics. As a precocious youngster I had always been good at logical manipulations and puzzle-solving IQ tests. So if economics was made for me, it can be said that I too was made for economics. Never underestimate the vital importance of finding early in life the work that for you is play. This turns possible underachievers into happy warriors.
1932 was the bottom point of the Great Depression. That was a good time to be not yet in the labor market. Just when I had completed my advanced training, World War II came, followed by fifty years of exploding college economics enrollments. My generation had a strong wind at its back. My famous teachers had become full professors only after 40. Wunderkinds in my generation could become anointed before age 30. Outside the Ivory Tower, economists were sought out by governments, corporations, Wall Street traders, and textbook publishers.
One comes to understand the importance of biography in a scholar's research contributions. Before university, I never opened the copy of Adam Smith on my father's bookshelf. But I did experience first hand, in my virtual infancy, the disappearance of the horse economy, the arrival of indoor plumbing and electric lighting. After that radio waves through the air or TV pictures left one blasé.
More important it was to see with my own eyes the First War's induced boom in the U.S. Steel-planned Gary, Indiana: East European workers were overjoyed to be able to work 12-hour shifts, seven days a week. I saw, too, and my family learned the hard way, how recession follows the boom the way sparrows used to follow the horse. Also, when I was age 10 and we lived in Miami Beach, Florida, I experienced first hand what a real estate mania was like. And what it was like when the bubble burst.
All that prepared me for the Great Depression and for post-war inflations. My Chicago-trained mind resisted tenaciously the Keynesian revolution; but reason won out over tradition and dogma.
Hello, here is the wordsearch (Sorry I just discovered that I mixed up "crossword" and "wordsearch") So here is the wordsearch Iwrote about previously. It's not very clear though. I've uploaded a copy of it in the class e-group.
This wordsearch is based on the key concepts of internal and external economies & diseconomies of scale. There are a total of 12 words/ phrases inside. ( Hint: MRFAT)
UPPOSE that, five years ago, George Bush had asked every American household to stump up $25,000 to pay for an imminent war on Iraq. How would they have responded?
That money, suitably husbanded, would have paid for arming, provisioning and remunerating the troops; treating the wounded; and restoring the army's strength in the aftermath. It would have paid just compensation for the death and injury of American servicemen and contractors, and it would have covered America's outlays on reconstruction. It would also have allowed America to subsidise the price of oil by $10 a barrel—offsetting the disruption to Iraq's supply.
Mr Bush never asked, of course. But this hefty sum is nonetheless just part of the toll the war may take on America by the time it is over, according to a new book by Joseph Stiglitz, a Nobel prize-winner in economics, and Linda Bilmes, a budget and public finance expert at Harvard's Kennedy School of Government.
How do the authors arrive at the $3 trillion figure of the title, and the still bigger numbers they report inside? To the administration's own requests for money they add other costs to the taxpayer that either appear elsewhere in the budget (such as the bonuses required to attract recruits put off by the war) or do not yet appear at all (such as the future disability claims of wounded veterans). They put a dollar figure on the American lives lost or damaged by debilitating injury. And they also estimate the damage the war has done to the American economy, by raising the price of oil and diverting spending from domestic investment to foreign adventures.
Along the way, they accuse the administration of both mortgaging the nation's future and short-changing the troops and of deceiving the public and deluding itself. The administration still treats a five-year war as an unforeseen contingency to be paid for by an extra, emergency appropriation outside its regular budget request. And it has indulged in false economies that shave the cash requirements of the war today—by, for example, hesitating to purchase mine-resistant vehicles—only to store up much bigger burdens for the future, such as the cost of caring for veterans injured by roadside bombs.
Critics have questioned some of the authors' estimates, since these were first rehearsed in an academic paper in 2006. The head of the non-partisan Congressional Budget Office, for example, thinks that paper overestimated the burden of brain injuries, overstated the cost of replacing munitions and equipment, and misattributed other military expenses. But the authors have taken pains to answer those quibbles, and they disclose their sources so that readers can add or subtract as they see fit.
They go on to pursue the war's trail through every twist and turn of the macroeconomic labyrinth. Here, their reasoning is a bit too ingenious. They argue, for example, that the government's spending abroad prevented it from giving America a needed fiscal boost at home. Even if you believe America has suffered from a shortfall of demand in the past five years, surely the blame cannot be pinned on the Iraq war. It must lie instead with the Federal Reserve, which is supposed to maintain full employment as best it can.
Indeed, what is remarkable is how small a macroeconomic price America has paid for its adventure. Not only has the war been financed by borrowing rather than taxes, but also the borrowing has been dirt cheap. Neo-imperialists worry that America has the responsibilities of a global superpower, but an electorate unwilling to shoulder them. For better or worse, though, the combination of volunteer soldiers, hired guns and Asian creditors has lightened the load.
Unlike some other economists, Mr Stiglitz and Ms Bilmes do not weigh the cost of the war against the obvious counterfactual: the cost of containing Saddam Hussein. (They do subtract the cost of enforcing the no-fly zones over the country). Keeping a big force in the region—big enough to cow the dictator into letting weapons inspectors do their job—would not have been cheap, although with hindsight the strategy looks like a bargain. Nor do they pay much attention to the benefits of the invasion, however meagre. For example, the world now knows for sure that Saddam will never lay his hands on weapons of mass destruction. That knowledge may not be worth $3 trillion. But it is surely worth something.
The book mixes the patience of an auditor with the passion of a polemicist; it combines forensic intelligence with prosecutorial zeal. This reviewer responded more to its quieter virtues. As the authors say, the book is not just about the big number on the cover. More importantly, “by examining the costs, we come to understand better the implications of the war.”
Great powers almost never pay for their wars up front. Even in America's war of independence, the revolutionaries printed money to finance their campaign. But a government contemplating war should surely provide a credible advance estimate of the final bill, akin to what Mr Stiglitz and Ms Bilmes have done. If they cannot, it is a good sign they have not fully weighed the implications of their venture. If so, perhaps they should not undertake it at all.
Economics focus Feet, dollars and inches Apr 3rd 2008From The Economist print edition The intriguing relationship between height and income Summary - It talks about the the relationship between height, and income (or standard of living, to be more precise). The study is sparked off by Britain's factory laws in the 1800s, where medical inspectors had to certify that a child was old enough and strong enough to work. To cut costs, manufacturers tried to propose a cheaper shortcut: measuring a child's height to establish age and stamina.
However, the variation of height across individuals means that it cannot be used to identify the individual, or to make any further inference. "Mr Roberts could say that the average height of 11-year-old boys was 52½ inches, but not that this boy of 52½ inches was 11."
Yet, two recent studies have shown that the "tallest quarter of the population earns 9-10% more than the shortest quarter", so the manufacturer's were somewhat right to say that taller people were on average more employable. This is true even in today's knowledge-based economy in developed countries like America.
It seems that height adds to income, and the converse applies as well. There are, however, exceptions, such as when Uganda citizens are compared to those in India, where the former are poorer and taller than the latter. The article explains this by saying that height rises with prosperity, but at a diminishing rate, tracing an arc as income rises. "Stature is hence a good measure of deprivation but not of opulence", since "earning enough to buy plentiful calories and protein makes a big difference to stature", but once this is reached, the marginal increase in income makes less of a difference. It seems that height is also positively related to equality among Man.
Analysis/Reflections: I thought this was a really interesting article, on many economics-related levels actually. Firstly, height-income arc reminds me of the Law of Diminishing Marginal Returns! Like, the extra unit of income results in decreasing marginal increases to height, like how the extra unit of the variable factors results in decreasing amounts of marginal product. However, in this article's context, the marginal 'returns' will not be negative, just decreasing.
Secondly, it's an interesting facet of Economics, using economic data to correlate with biological, physical data. This article does exemplify cross-discipline research, and it seems even more important for us to acknowledge the existence of such research/studies since we are Science students taking an Arts subject, even though this demarcation is quite arbitrary. Maybe seeing the (possible) relevance of Economics in the fields we seem to be more inclined to/interested in currently will inspire us to study Econs even more! Haha.
Thirdly, the whole cause-effect relationship that is attempted to be stablished here between height and income/standard of living is a quite an important concept in Economics. Look at Theory of Demand and Supply, it's all about cause and effects. In Size of Firms, the advantages acrrued to firms when they are big or small are both the causes and effects of their size. For example, being big allows you to increase revenue, since you can sell higher quantity of output, so this is an effect of being big. However, this is also somewhat a cause/incentive to be big, since increased revenue helps you to increase quantity sold through product innovation (R&D) and advertisements and such.
Hence, this article may seem a bit frivalous and maybe pointless. And you may be wondering why on earth is it in The Economist. Well, I hope my few thoughts may have helped to enlighten you and help us see things from a different perspective! :)
Hello, I’ve found a write-up discussing how the Beijing Olympics will have an impact on China’s economy. Enjoy:)
Article: Economic Impact of Beijing Olympics
The Olympic Games will affect the Chinese economy in the following way.
Increase in Tourism. This is a short term effect but will help increase spending in the economy. It will come from the athletes, spectators and media who will travel to Beijing. It is argued the Olympics will also provide a long term boost in repeat tourism; this could be quite significant for China as the tourist industry is largely underdeveloped.
Increased Investment in Infrastructure. To prepare the economy for the Olympics, the Chinese authorities have attempted to improved infrastructure and transport links, these will have some effect in increasing the productive capacity.
Macro Economic Effects of the Olympics
Higher Economic Growth. The increase in spending related to the Olympics will help to boost Aggregate Demand and economic growth.
However, the increased spending will only represent a relatively small % of GDP. Some estimates suggest around 0.5% of GDP. Also the Chinese economy is already growing very quickly so it is debatable whether a further boost will help. Inflation. The extra spending could help fuel inflation, which is already a problem in the Chinese economy. The Olympics will certainly create some localised inflation.
Exchange Rate. The influx of tourists could put more upward pressure on the Chinese Yuan. The government have been trying to hold the exchange rate down, but the influx of foreign visitors will only cause further increases in demand.
How Significant will the Olympics be?
From a macro economic point of view it is not clear how important the Olympics will be. There is a definite increase in AD, but, it remains a relatively small % of total GDP.
There could be a multiplier effect though and the initial increase in AD could be magnified. Similarly, the investment improvements could lead to future economic growth.
Problems of the Olympics. -Does nothing to address the regional inequality in China. It is the Northern regions of China which need investment and growth not Beijing and the South - Inflation. -Cost. The cost of the Olympics is very high and it is not certain whether they will get their investment back
Recently, there has been a debate going on about whether the Beijing Olympics will be more of a benefit or a burden to China’s economy. In the write-up above, it focused more on describing the economic benefits that the Beijing Olympics will bring to China.
Firstly, by hosting the Olympic games, Beijing will be able to earn revenue through tourism, since athletes, spectators, and tourists from all over the world will gather in Beijing, China to witness the Olympic games. Thus, there will be an increase in business of the tourist sector in China, and consumption of tourist goods and services will increase, hence increasing the total revenue. This is beneficial to the country’s economy since more taxes will be paid through the consumption of the goods and services, and its increase will allow more revenue to be earned by China.
The article also mentioned that this boost to the tourism industry is a long-term one. I feel that an explanation to this statement is that being the host city of the Olympics increases the repuation of China and fame of Beijing as the capital of China, which will make an indelible mark in the people’s minds. Also, by attracting more people to go to China, the various Chinese products will be more well-known to the people, and people may still buy these products even after Olympic games have ended.
Indeed, throughout history, the Log Angeles Games is the first-ever money-making Olympics. (1) Other hosting countries, such as Athens in 2004, have spent an amount that far exceeded that of the budget, resulting in a large loss made. (1) So will Beijing Olympics suffer from the same fate?
According to National Bureau of Statistics spokesperson Ye Zhen, over the next seven years, Olympic effects would add an average of 0.3 to 0.4 percentage points a year to national gross domestic product (GDP). (1) Since the main cost of hosting Olympics comes from building the infrastructures, the numerous investments from other countries should have helped to lessen the burden of the costs. Sponsorships are also provided by large companies to build some of the facilities. Also, the large amount of revenue earned from the tourist and investment industry will hopefully make up for the cost. Moreover, the long term benefits of hosting Olympics will benefit the economy as well.
In addition, the mascot of Beijing Olympics, “Fuwa”, will allow the Beijing Olympics Committee, who are the ones producing it, to be at a monopoly, as it is currently only sold in China. This allows the product to be also relatively inelastic as there is no close substitutes. Thus, price can be increased to increase revenue, and hence profits assuming that production costs remain the same.
Organising the Olympic games is an invaluable learning experience for China. This Olympic games has created a platform for people of different nationalities to come together for a friendly competition, and enhance interactions across cultures. This is definitely an important advantage that Olympic games brings.
I think there's lots to learn from this video :) It sure explains a lot about the formation of cartels & the considerations that the government & other organisations take when dissolving cartels. Perhaps more to consider when writing about oligopolies & monopolies! It's a little different because he's working with a horizontal MC, but that's a assumption that makes everything easier.
Cartels only really work when everyone's working together and there's a pretty small group so they can enjoy the supernormal profits more. But the lure of undercutting the agreement is really huge and with the number of people increasing, the share of profit gets smaller and it gets much harder to police.
This should apply to most other cartels. With the OPEC, though, I don't really see how the product's differentiated but with the power they yield and market share they hold they're pretty powerful. They can enjoy the benefits of working as a cartel & having their slice of the pie. It's beneficial to all producers (but really in this case not consumers!) and with the OPEC they actually work together.
I think a cartel's a pretty clear-cut case for when monopoly's NOT beneficial to the consumers because they're really going to be cutting down output for the sake of raising up prices and maximising their profits. But they are beneficial for the welfare of the workers in the company if the profits mean good wages for the staff. So it might have some benefit after all!
I find that there are lots of these cool videos on Youtube :) You can check out the channel that this is on for other really helpful videos.
Here's an article about the effect of rise in rice prices on Singapore:
What price, rice! For many restaurants and food stalls, recent global spikes in rice prices come on top of other cost increases. -ST
Sun, Apr 06, 2008 The Straits Times Written by: Alex Liam
For many restaurants and food stalls, recent global spikes in rice prices come on top of other cost increases.
But a Sunday Times survey of 100 restaurants and hawker stalls across the island found that while 20 have increased their prices, the other 80 intend to absorb the price hike for now. Most cited loyalty to regular customers, maintaining their brand name and staying competitive as their key reasons.
Rice-eaters have two other reasons to cheer - 96 of the 100 polled said they have not cut back on the amount of rice served, and 99 said they have not downgraded the quality of rice being used, at least for now.
Global rice prices have shot up by more than 30 per cent to more than $1,000 a tonne, and major producer countries have cut back on exports.
At home, NTUC FairPrice has increased the prices of its in-house rice brands by 10 to 15 per cent. The Government has repeatedly assured Singaporeans that the supply is adequate. Meritus Mandarin's Chatterbox, famous for its Hainanese chicken rice, will keep the prices of its rice-based dishes unchanged.
Said Ms Cindy Lim, the hotel's assistant communications manager: 'We feel rice is a staple, so regardless of the price hike, there has been no change in our portions and prices.' Its chicken rice remains at $21.50.
Crystal Jade Group's spokesman Daphne Chang said it will keep the prices and servings of rice and rice-based dishes unchanged for now.
The 20 eateries which have increased their prices blamed it on too many costs going up at the same time. RiceTable Indonesian Restaurant Singapore, which has three branches, is one of them. Director Kevin Sih said: 'Everything has increased, from gas to oil to food like fish and chicken. And the rising price of rice was the final straw. It was a decision that had to be taken.'
Its buffet lunch now costs $23.90, up from $19.90 two months ago. The extent of increase varied but most fell within the range of 20 to 50 cents. Some 37 restaurants and food stalls said that if no relief was in sight, they would up the prices of rice and rice-based dishes.
Another four would reduce the amount given and three would serve rice of lower quality. Twelve would retain the same pricing while the rest declined to comment. The Big Bird Restaurant in Bukit Timah said it would rather raise prices of other goods. 'Rice is an important staple and we will not touch its price. If we are under pressure from rice price hikes, we will increase the prices of other dishes such as fish,' said manager Betty Chen.
The owners of two stalls in People's Park Complex selling chicken rice and economical rice respectively felt that raising prices will upset regular customers.
The rise in operating budgets is, however, not uniform across the board. Boon Tong Kee Kway Chap and Duck Rice said its costs have gone up by up to 20 per cent while Hong Kong Jin Tian Roasted Rice and Noodles' increased by 5 per cent. The difference is largely because of different quantities of rice used.
Higher prices will hit those who usually ask for more rice. Mr Hong Shao Chun, 39, a supervisor with Hyundai Engineering, said: 'I ask for extra rice quite often and additional rice used to cost 30 cents. Now it costs up to 70 cents at some places. If it rises to a dollar, I think I will forgo it.'
Victoria Junior College student Ian Tan, 16, was pragmatic about the current situation. He said: 'If rice becomes costly, I might turn to wheat-based noodles. But if even that rises, I guess we'll just have to live with it.'
Analysis: Now that rice prices have risen, should food stall owners rise the price of the food they sell?
Since Singapore is well-known to be a food haven, there is a very large number of food stalls in Singapore, providing Singaporeans and tourists with a large variety of food to choose from. It is very easy to buy food in Singapore since there are restaurants, coffee shops, markets,food courts and fast food restaurants almost everywhere. Hence the demand for food(meals ) in Singapore can be considered to be price elastic since there are many available substitutes. This means that a rise in price of meals would lead to a more than proportionate decrease in demand. In this case, it is not advisable for food stall owners to raise the price of the food they sell unnecessarily.
The recent rise in rice prices has led to an increase in cost of producing food items and meals. When this happens, most food stall owners would try to increase the price of their food to maximise their profits as well as to cover the rise in cost. However, I feel that since demand for food is so price elastic in Singapore, it is not advisable to raise the price of the food some customers may be turned away by the higher price. This would affect demand for the food and in turn lead to a decrease in total revenue earned by the food stall owners.
I feel that it is more important to maintain loyalty to regular customers and maintaining their brand name. This is a form of product differentiation and can help to make the demand more price inelastic. The lower price and better quality of the meal can help to attract more customers and increase demand. This can help to maximise total revenue.
However, in cases where the rise in rice prices results in food stalls owners making great losses, food stall owners have not much other choice but to raise the price of the food. In these cases, the food stall owners will have to come up with ways to attract more customers and make the demand for the food the stall is selling more price inelastic.
There was recently a furore over SIAs decision to change its US flights to Business Class only. Initially, these flights had an Executive Economy Class, where passengers could enjoy larger leg room and wider seats and a price just slightly higher than Economy Class. However, recently, SIA has decided to abolish the Executive Economy class and offer full Business Class on non-stop flights to the US.
SIA has said that the airline has switched to offering full business class only flights due to consistently high demand from the premium market. Return business- class tickets on non-stop flights from Singapore to New York cost $11,500, while those on the LA route cost $10,500. Executive economy seats cost about $3,200 and $2,600 respectively.
"SIA currently operates two daily non-stop flights to Los Angeles and Newark, New Jersey, on five Airbus A340-500s. From mid-May, the aircraft's two-class, 181-seat arrangement will be converted in phases to 100 'business class only' seats. The change for the New York route will be completed by the end of June, and Los Angeles by late September. "
I feel that SIA has switched to offeing Business class only non stop flights to the US as at present, the economy is doing well, thus people's incomes are increasing. As a result, by increasing its supply of luxury goods, such as Business class flights, which are expensive and have a high level of service, it will increase its revenue as the demand for luxury goods will increase due to the economic boom and consumer's income increase.
In addition, SIA can offer Business Class only non stop flights to the US as the good lacks any close substitutes. The only other SIA flights heading to the US have stopovers in Frankfurt, Tokyo or Taipei, with travelling times as much as six hours longer than the direct flights. Thus, these are much longer than direct flights. This means that these flights with stopovers are not close substitutes for the direct flight.
As a result, there is price inelastic demand for these non stop flights to the US. Thus, when price increases, demand will decrease less than proportionately. thus when price is raised, the firm will still enjoy an increase in total revenue. As a result, in order to increase revenue, SIA should increase the price, so as to enjoy a higher revenue.
Thus, it is beneficial for SIA to switch its non stop flights to US to All business class flights in order to increase revenue.
THis is because flights to US are very long and fatiguing, thus any short reduction in the number of hours is of relief to the passengers. Thus, this will make the demand more price inelastic.
However, as the price increase from Executive Economy to Business class is very wide, from $3000 to $10 000, it is highly likely that the consumer base lost by SIA is very high. And many ex consumers of SIA are very angry that they are now left with a ticket on Economy Class on a stopover flight and not one on a non stop flight. THis would mean that the increase in revenue will only be significant if enough consumers want to switch from SIA executive economy class to business class, and not to other airlines which also offer direct flights.
THus, this is quite a risky move the SIA management is taking. However, overall, i feel that this move is to gain more revenue for SIA in this economic boom.
Revered by Tibetans, reviled by China NOT long after calling him a “devil” with a human face and the heart of a beast, Chinese officials are talking again to representatives of the Dalai Lama. But in the Indian hill town of Dharamsala, the seat of Tibet's government-in-exile, few believe China's own heart has changed. “The basis of their attitude towards Tibet is...distrust and fear,” the Dalai Lama told The Economist a day after a meeting on May 4th in the southern Chinese city of Shenzhen between two of his envoys and two senior Communist Party officials. It was the first contact between the two sides since unrest broke out in Tibet and other ethnic Tibetan regions of China in March. Both sides are anxious not to appear to be closing the door. Lodi Gyari, one of the Dalai Lama's representatives at the talks, described them as a “step in the right direction” and said more would be held, though no date has been announced. China said there could be further contact as long as the Dalai Lama showed “sincerity”. China's surprising decision to offer renewed talks seemed aimed at deflecting foreign criticism of its handling of Tibet ahead of the Beijing Olympics in August. But officials in Dharamsala are wary. They deny the Shenzhen meeting was a continuation of six rounds of confidence-building discussions held between 2002 and July 2007. Rather, it was an “emergency conversation” about the present crisis. Mr Gyari said only the next round of talks would count as the resumption of a formal dialogue.The Tibetans had several demands: an end to the clampdown in Tibet, including the withdrawal of security forces from monasteries; no more “patriotic education” requiring monks to denounce the Dalai Lama; an investigation by an international body into the causes of the unrest; the release of political detainees; and fair trials for those accused of rioting. None of this will be heard sympathetically by China. The state-controlled press is still vilifying the Dalai Lama and the authorities have maintained a tight grip on Tibetan regions. Visits by foreign journalists remain largely banned and foreign tourists are barred. Late last month, at secret trials in Lhasa, 30 people were sentenced to prison terms of between three years and life for their role in rioting in March. Human Rights Watch, a monitoring organisation in New York, said lawyers in Beijing who offered to represent them were warned by the Ministry of Justice that their licences might be revoked. The Dalai Lama tries to sound conciliatory. Tibetans, he says, should be proud that China is hosting the Olympics (though, with a characteristic chuckle, he says he does not know whether they will be happy when the Olympic torch is paraded in Lhasa in June). He says he fully supports a “one-China policy”, but that the future of Taiwan should be decided by its own people—which is anathema to China. The Dalai Lama says he is not so concerned about redrawing Tibet's political boundaries to include all ethnic Tibetan areas adjoining it (an idea he once backed strongly, to China's horror). The priority, he says, is to protect the culture and environment of Tibetans. But China will want a stronger retraction than this. It believes the Dalai Lama is still intent on carving out a single Tibetan territory covering a quarter of China's land area. According to the Dalai Lama, Chinese officials accepted in 2006 during the fifth round of talks that he was sincere in his insistence that Tibet should be part of China. But by the sixth round last year their attitude had hardened. Some of the Dalai Lama's officials say China took fright at signs of his continuing sway over Tibetans in China and his readiness to use it—for example, to persuade them to stop wearing the skins of endangered animals and worshipping Dorje Shugden, a cultic deity. China's crackdown on the recent unrest in Tibet may limit the Dalai Lama's flexibility in dealing with China. The streets of Dharamsala in the Himalayan foothills are full of Tibetan flags flown in sympathy with Tibetans in China. Ubiquitous gruesome pictures show Tibetans shot by Chinese security forces. The Dalai Lama says there has been “a lot of criticism” of his conciliatory negotiating stand with China. He says he remains fully committed to his approach in spite of recent events. So too, however, does China. Analysis: I personally feel that the Western media pays too much attention to this matter. As the 2008 Beijing Olympic Games approaches, the human right in China is being discussed again and again. Admittedly, China has problems in many ways. However, it takes time to solve all these problems. However, the Western, especially the US is criticizing China’s the human right issue all the time. It seems to me that they are using human right to achieve their own purpose and interfere China’s internal issues. China is still a developing country and its structure is surly not perfect, but the government is working very hard to improve the situation. The booming economy has proved to the world that the Chinese has the ability to manage their own country well and there is no need for the western to comment on the way our government do things all the time. I do not believe that, say, if one day Utah want independence and the US government will say yes, it is your human right and we give you the freedom to choose which country you belongs to. We do not mind help from other countries, but the help with ill intensions to affect our political stability and international reputation is surly unwanted.On the other hand, I do feel that the China government can be more open. For example, in the case of Tibet, it is the Dalai Lama's followers who were using violence towards the Chinese soldiers and the Chinese soldiers were actually doing nothing except self-defence. Many Chinese soldiers were injured severely but they did not use force at all. However, the China government refused to reveal what was happening in Tibet to the world thus many Western media could only guess what was happening or get information from unreliable sources. This results in many unreliable news prevailing and place the China government in a very difficult situation. Therefore, I think that it will be better if the government makes the process more transparent.
THE PROBLEM STARTS WHEN… Propelled by mounting anxieties over soaring oil costs and climate change, biofuels have become the vanguard of the green-tech revolution, the trendy way for politicians and corporations to show they're serious about finding alternative sources of energy and in the process slowing global warming. The U.S. quintupled its production of ethanol--ethyl alcohol, a fuel distilled from plant matter--in the past decade, and Washington has just mandated another fivefold increase in renewable fuels over the next decade. Europe has similarly aggressive biofuel mandates and subsidies, and Brazil's filling stations no longer even offer plain gasoline. Worldwide investment in biofuels rose from $5 billion in 1995 to $38 billion in 2005 and is expected to top $100 billion by 2010, thanks to investors like Richard Branson and George Soros, GE and BP, Ford and Shell, Cargill and the Carlyle Group. Renewable fuels has become one of those motherhood-and-apple-pie catchphrases, as unobjectionable as the troops or the middle class.
THE UNDESIRABLE OUTCOME… An explosion in demand for farm-grown fuels has raised global crop prices to record highs, which is spurring a dramatic expansion of Brazilian agriculture, which is invading the Amazon at an increasingly alarming rate.
Several new studies show the biofuel boom is doing exactly the opposite of what its proponents intended: it's dramatically accelerating global warming, imperiling the planet in the name of saving it. Corn ethanol, always environmentally suspect, turns out to be environmentally disastrous. Even cellulosic ethanol made from switchgrass, which has been promoted by eco-activists and eco-investors as well as by President Bush as the fuel of the future, looks less green than oil-derived gasoline.
Meanwhile, by diverting grain and oilseed crops from dinner plates to fuel tanks, biofuels are jacking up world food prices and endangering the hungry. The grain it takes to fill an SUV tank with ethanol could feed a person for a year. Harvests are being plucked to fuel our cars instead of ourselves. The U.N.'s World Food Program says it needs $500 million in additional funding and supplies, calling the rising costs for food nothing less than a global emergency. Soaring corn prices have sparked tortilla riots in Mexico City, and skyrocketing flour prices have destabilized Pakistan, which wasn't exactly tranquil when flour was affordable.
The basic problem with most biofuels is amazingly simple, given that researchers have ignored it until now: using land to grow fuel leads to the destruction of forests, wetlands and grasslands that store enormous amounts of carbon.
Backed by billions in investment capital, this alarming phenomenon is replicating itself around the world. Indonesia has bulldozed and burned so much wilderness to grow palm oil trees for biodiesel that its ranking among the world's top carbon emitters has surged from 21st to third according to a report by Wetlands International. Malaysia is converting forests into palm oil farms so rapidly that it's running out of uncultivated land.
Deforestation accounts for 20% of all current carbon emissions. So unless the world can eliminate emissions from all other sources--cars, power plants, factories, even flatulent cows--it needs to reduce deforestation or risk an environmental catastrophe. That means limiting the expansion of agriculture, a daunting task as the world's population keeps expanding. And saving forests is probably an impossibility so long as vast expanses of cropland are used to grow modest amounts of fuel. The biofuels boom, in short, is one that could haunt the planet for generations--and it's only getting started.
AND, HERE COMES THE NEW REASONS TO BE SUSPICIOUS OF ETHANOL… OFFICIALS in Tampa, Florida, got a surprise recently when a local firm building the state's first ethanol-production factory put in a request for 400,000 gallons (1.5m litres) a day of city water. The request by US Envirofuels would make the facility one of the city's top ten water consumers overnight, and the company plans to double its size. Florida is suffering from a prolonged drought. Rivers and lakes are at record lows and residents wonder where the extra water will come from. They are not alone. A backlash against the federally financed biofuels boom is growing around the country, and “water could be the Achilles heel” of ethanol, said a report by the Minneapolis-based Institute for Agriculture and Trade Policy. The number of ethanol factories has almost tripled in the past eight years from 50 to about 140. A further 60 or so are under construction. In 2007 President George Bush signed legislation requiring a fivefold increase in biofuels production, to 36 billion gallons by 2022. This is controversial for several reasons. There are doubts about how green ethanol really is (some say the production process uses almost as much energy as it produces). Some argue that using farmland for ethanol pushes up food prices internationally (world wheat prices rose 25% this week alone, perhaps as a side-effect of America's ethanol programme). But one of the least-known but biggest worries is ethanol's extravagant use of water. A typical ethanol factory producing 50m gallons of biofuels a year needs about 500 gallons of water a minute. Most of that goes into the boiling and cooling process, which is similar to making beer. Some water is lost through evaporation in the cooling tower and in waste discharge. All this is putting a heavy burden on aquifers in some corn-growing areas. The good news is that ethanol plants are becoming more efficient. They now use about half as much water per gallon of ethanol as they did a decade ago. New technology might be able to halve the amount of water again, says Mike Fatigati, vice president of Delta-T Corp, a Virginia company which has designed a system that does not discharge any waste water. But others are sceptical. “There are things you can close loop [ie, recycle efficiently] and things you can't,” says Paul Greene, a senior director for biofuels with Siemens Water Technologies, designers of the water-purification technology used in ethanol factories. Perhaps ethanol just isn't as bio-friendly as it looks.
A TALENT SHORTAGE HITS GREEN START-UPS ON MAY 1st applications closed for the first intake of a novel kind of executive-education programme. Set up by a bunch of venture-capital firms and other companies in New England, the three-month course will teach its “fellows” about renewable energy. To qualify for a fellowship, applicants must be successful entrepreneurs from other industries, such as IT or health care, and be zealous about profiting from greenery. “A lack of talent, especially entrepreneurial talent, was one of the biggest bottlenecks to growth we identified in the clean-tech industry,” says Peter Rothstein of Flagship Ventures, a venture-capital firm that is one of the programme's founders. That bottleneck worries investors, who have been pouring cash into everything from solar energy to hybrid electric cars: last year global investment in renewable-energy businesses alone rose by 60%, to $148.4 billion, according to New Energy Finance (NEF), a research firm. Although the prospect of minting money while helping to save the planet has attracted a stream of executives from other industries to clean-tech start-ups, few of them have much experience of their new field. In a recent global survey of 75 senior executives involved in clean-tech firms conducted by NEF and Heidrick & Struggles, a headhunter, over 90% cited top-level recruitment as a serious concern. Counting on converts from other industries is risky, because some of the skills needed to run clean-tech companies are very different from those required to, say, launch a website. For one thing, the bosses of renewable-energy start-ups need to understand enough about the science to be able to pluck scientists from obscurity. For another, they need a grasp of project-financing techniques for costly prototype power plants. They also need to be able to deal with capricious regulatory and fiscal regimes. “If you've never done anything in the energy space, it can be intimidating,” says Bill Davis, the boss of Ze-gen, a start-up that generates electricity from waste. Hence the New England bootcamp's goal of helping 25 aspiring green entrepreneurs a year to make the transition. As well as giving them an overview of the latest scientific research, the course also includes sessions on project finance and government regulations. Start-ups also face a battle for engineers and scientists. And as small firms take advantage of a growing enthusiasm for greenery in East Asia and the Middle East, they also need more staff with international experience. Tracking down such rare pearls can be a distraction for busy bosses. Like the bosses of many other clean-tech firms, Ms Cormack is using headhunters. They like the clean-tech business because wages, on which their commissions tend to be based, are rising fast. Not so long ago, executives would do meaningful green jobs for menial pay. But in recent years, wages have soared as the industry has grown and attracted big utilities and private-equity firms. Now what matters to the geeks is a different kind of green. “Good people can set their own price tag,” says one recruiter, “and they want jam tomorrow, not in five years.” It looks like they'll get it.
Acknowledgements: • Ethanol and water--Don't mix, Feb 28th 2008 MIAMI, The Economist • Clean-technology firms--Labour pains, May 1st 2008 SAN FRANCISCO, The Economist • CHINA'S QUEST FOR RESOURCES--A ravenous dragon, Mar 13th 2008, The Economist • The Clean Energy Scam, Thursday, Mar. 27, 2008 By MICHAEL GRUNWALD, Time.com • The New Green Leaders, May 5th 2008, NewsweekSounds Good, But…, May 5th 2008, Newsw
Hello Here's an article on the rising rice prices.
HONG KONG: Rice prices may have moved in the same trajectory as other grain prices, but the equation of production, consumption and trade of Asia's leading staple is actually quite different from other grains.
Its characteristics suggest that rice's relative value will increase, forcing many poorer consumers with no choice but to rely on alternatives like wheat, corn, sorghum, cassava or potatoes. Some of the immediate causes of the price spike for rice are similar to that of other crops. The cost of fertilizer, closely related to energy, is the most obvious. Futures speculation by financial intermediaries may also have played a part - though rice futures trading is small compared with other major crops.
But biofuels cannot be blamed because rice is not used for them. Nor has there been any major harvest setback among the top Asian producers. Instead, we are now seeing the impact of a series of longer term trends, some of which probably cannot be reversed. In no particular order these are:
Almost zero growth in land suitable for rice production. Soybeans, corn and wheat acreage can expand in South America or in North America and Europe. Rice - which ideally requires flat land, lots of water and a warm climate - has no equivalent. Indeed, rice bowl areas of China, South Asia and Southeast Asia are losing land to urbanization and in some cases to salination caused by dams built for hydroelectric purposes and other reasons.
Rising sea levels would compound this problem for countries like Bangladesh and Vietnam. Australia's water shortages are likely to permanently end its role as a significant exporter. Consumption subsidies by governments. Subsidies in countries as diverse as India and Malaysia divert money from agricultural investment while discouraging consumption of alternative foods. The assumption that cheap rice is a necessity everywhere has led to rice becoming the norm in areas, like eastern Indonesia, where other crops more suited to the conditions were once the staple. This problem may now be compounded by governments subsidizing rice production at the expense of more suitable crops.
The narrow base of world trade in rice. The world trade in rice is less than 10 percent of global production. For only two countries, Thailand and Vietnam, is rice export a key business. China and India have small export surpluses but policy in both countries is focused on self-sufficiency. Although in theory both countries could produce bigger surpluses, they, like consumers, are likely to be reminded by the current situation of the importance of keeping large stocks and avoiding domestic price spikes.
Production subsidies by the United States, and to a lesser extent the European Union, for long helped depress international prices. Meanwhile consumer-country complacency led to a 50 percent fall in global stocks over just four years.
Rapid growth of demand in countries with big oil revenues and huge rice production deficits - Iran, Saudi Arabia etc. - which can afford rice at almost any price. At the same time, rice has become widely consumed in countries in Africa like Ghana which were lulled by years of low rice prices and U.S. subsidized exports to become import dependent, or which saw a consumption shift from traditional local crops to easy-to-prepare rice.
Low growth in productivity, now running at around 1 percent. This has a variety of causes ranging from inadequate investment in irrigation (for example in India) to insufficient attention to new varieties. Productivity growth in rice has long lagged that of wheat and soybeans. The Green Revolution is now a distant memory. High fertilizer prices are exacerbating the problem. The high labor content in rice production - a seldom acknowledged factor. The back-breaking work of rice production is a disincentive in countries like China where new urban job opportunities are opening up or there is a market for higher value-added farm products like vegetables and poultry. Advanced Asian countries like Japan and Korea can achieve high yields with mechanized systems and huge inputs of fertilizer and pesticide. But the cost is enormous and requires huge subsidies to producers and import restraints which have discouraged competitive exporters.
The situation is not all gloomy. Per capita rice consumption tends to fall as societies get richer and diets more diverse. High prices will stimulate production. One day Myanmar will reemerge as a major exporter. But the current hand-wringing by international agencies and grandstanding by politicians is worthless without a better understanding of the factors behind the rice situation and the anti-market forces that have held back production and enhanced consumption.
Analysis: I have been wondering about the reasons for the rise in rice prices for quite some time before reading this article. What are the reasons for this rise in rice prices? Is it a sudden increase in demand or a sudden drop in supply due to natural disasters?
This article has suggested many reasons that have contributed to the rise in rice prices. The main reason for the rise in rice prices is the general drop in supply and the rise in demand. This has lead to a shortage and thus leading to a rise in rice prices.
Why would there be a decrease in supply : 1. The area of land allocated for the production of rice is limited. Furthermore, more land that is suitable for the production of rice is used for other purposes due to increased urbanisation. This has lead to a decrease in supply of rice grains.
2. Labor intensive The production of rice is labour intensive. As countries such as China get more developed, less people are willing to work in the rice farms since they may be able to get jobs that provide them with better pays. This leads to lower growth in productivity of rice and thus causes a drop in supply.
3.Withholding supply Some countries like China and India are limiting rice exports and keeping stocks in the country to prevent domestic price spikes. This contributes to the drop in supply as well.
Why would there be a increase in demand?
1. There is a rapid increase in demand for rice in countries that have big oil revenues and huge rice production deficits such as Iran and Saudi Arabia. These countries import a large amount of rice since it is a type of staple food. These countries are able to afford higher rice prices since they are generally rather rich due to the oil revenues. This has lead to the shortage of rice in other parts of the world.
2. US (and maybe EU)subsidies for rice production has resulted in low rice prices for the past few years as well as subsidised exports. As a result, many countries such as Ghana are increasingly import dependent. Hence there is a increasing rise in demand for rice.
So this overall rise in demand and decrease in supply has lead to a shortage, leading to the rise in prices.
I think rice should be considered as a rather price inelastic good since it is a type of stable food and almost a type of necessity for most families. Furthermore, many types of food(such as bee hoon) require rice grains. Hence, in the short term, thought there is a rise in rice prices, the demand for rice would not fall too much. Most people would require some time to switch to the consumption of other types of staple food such as potatoes. However, in the long term, the demand for rice would most likely fall as more people get used to consuming other types of stable food. Hopefully this would in turn lead to a drop in rice prices, according to the law of demand. The write of the article has also predicted such an outcome. According to the writer, "Per capita rice consumption tends to fall as societies get richer and diets more diverse." Hence, there is a slight glimmer of hope for all people who love eating rice.
Hi, here's an idea for an econs game called "Industrial Tycoon" It is a card game where players can build architectures every turn or produce energy and there are resources available for this.
well basically, it works like this, the game has three type of cards: 1.The architectures 2.Workers 3.events( I will elaborate later on )
Every player will start with a fixed amount of capital points (15) which they can invest in producing architectures or hiring worker cards from their hand and start by drawing 5 cards and 1 card on each turn. Each deck is to contain 60cards. Architectures can be used to harvest resources or produce goods for export, and both cost capital points. Workers are needed for such actions and each architecture's ability will state the number of workers required.
Architects are divided into 3 types: production, Research and harvest Production architects produce goods at capital costs and can export goods for revenue research architects add effect to production Harvest architects can help gain mineral resources every turn need for production.
You may build as many architects or hire as many workers as you like every turn but architects only come onto the game field after the number of turns stated on the bottom right corner of the card. You can choose to produce any type of good(s) and each architect can produce only the type of good stated on it. The goods available are:
The price elastic quartz™ entertainment system The Price inelastic salt Starchaser™ crystals
Basically, the first good tends to generate good profits due to its low cost of production and fast rate of production but players may tend to produce this good more and in that case, if both players produce this good, they will have to adjust their price and output.
The salt is a good which is cheap to produce but requires huge set up capital and is slow. But in the long run, players may produce it to generate supernormal profits.
Star chaser crystals are special in a sense that their demand changes with each turn depending on the economy status which is determined by a dice roll each turn. values above 3 will cause demand to increase and values below 3 will cause demand to decrease and players can vary their output for the good.
Eventually, there will be a table for each type of good stating the demand value and matching it to supply value will determine the price. Or set a price and supply value to determine quantity demanded. Ultimately, the aim is to generate as much profit as possible when both players run out of cards. Event cards basically modify turn events.
Genetically modified crops get mixed response in Asia
Article sourced from http://www.channelnewsasia.com/stories/afp_asiapacific_business/view/346971/1/.html ---------------------------- The soaring prices of food have challenged the import of food, especially to countries that are highly dependent on food imports. This can be attributed to the idea that they have too large a population as compareed to the availability of food in the nation, or that the nation is not involved in agriculture activities. To these countries, a shortage of food will arise in near future as food distribution (affected by imports and availability) cannot keep up with the demand of food to satisfy one's hunger.
However, advancement in food technology has seen the start of the search for alternative food sources.
"There has been a lot of talk about developing high-yielding crops and crops that can cope with climate change using GM seeds," said Daniel Ocampo, a genetic engineering campaigner with the environmental group Greenpeace.
As regards to Ocampo's commentary, I do share the same view that that is one of the very few ways to cope with food scarcity in future. However, it cannot be assumed that everyone is agreeable to GM food just yet. If GM food is sold in the market as ordinary food products, without being labelled as "GM Food", consumers will be consuming such products as they would with natural products. However, imagine if the product is being labelled "GM Corn", how will it's demand change?
In Japan, "companies have been reluctant to test the market for consumer-ready GM food because of labelling requirements and public safety worries." This suggests the high possibility that Japanese are not ready to accept GM food, possibily due to the concern over the methods used in growing such crops. This often includes the usage of chemicals. Also, "while Japan does not ban GM farming, strict regulation has discouraged corporate investment in the area." This further reveals the Japanese government's awareness of the public's concern over GM food.
On the other hand, GM food is viewed differently in countries such as the Philippine, where the government is "subsidising the production of GM corn". It believed that this is the way to rectify the problem of food shortage.
The whole idea of the feasibility of GM food consumption boils down to whether or not the public is ready to accept it as an alternative/substitute to the daily food products they consume. In other words, consumers' taste and preference. If consumers are willing to accept GM food, then its demand will increase, vice versa.
In view of increasing demand, effective advertisements can be carried out to promote GM food as a healthy alternative. Also, experts can promote the benefits of consuming GM food so that consumers are more willing to accept it.
However, we cannot assume that consumers are not aware of possible harms involved. Consumers are also knowledgeable in the process of production of GM food, which involves the use of various chemicals and modification to the original product for high-yielding seeds. With this in mind, they can understand the dangers of these chemicals (if applicable) if they were to enter the body. This will thus deter consumption.
Hence, the public has to be favourable of GM food before the government and the various industries involved can embark on the journey of its development into an alternative future food source to rectify the problems of food shortages and increasing prices.
Article The silent tsunami: food prices are causing misery and strife around the world. Radical solutions are needed from The Economist print edition
PICTURES of hunger usually show passive eyes and swollen bellies. The harvest fails because of war or strife; the onset of crisis is sudden and localised. Its burden falls on those already at the margin. Today's pictures are different. “This is a silent tsunami,” says Josette Sheeran of the World Food Programme, a United Nations agency. A wave of food-price inflation is moving through the world, leaving riots and shaken governments in its wake. For the first time in 30 years, food protests are erupting in many places at once. Bangladesh is in turmoil; even China is worried. Elsewhere, the food crisis of 2008 will test the assertion of Amartya Sen, an Indian economist, that famines do not happen in democracies. Famine traditionally means mass starvation. The measures of today's crisis are misery and malnutrition. The middle classes in poor countries are giving up health care and cutting out meat so they can eat three meals a day. The middling poor, those on $2 a day, are pulling children from school and cutting back on vegetables so they can still afford rice. Those on $1 a day are cutting back on meat, vegetables and one or two meals, so they can afford one bowl. The desperate—those on 50 cents a day—face disaster. Roughly a billion people live on $1 a day. If, on a conservative estimate, the cost of their food rises 20% (and in some places, it has risen a lot more), 100m people could be forced back to this level, the common measure of absolute poverty. In some countries, that would undo all the gains in poverty reduction they have made during the past decade of growth. Because food markets are in turmoil, civil strife is growing; and because trade and openness itself could be undermined, the food crisis of 2008 may become a challenge to globalisation.
Analysis The world food price has gone up significantly. We can explain the phenomenon using the demand and supply theory. The demand of food has increased due to a gentle upward pressure from China and India as their people consumer more grains and meat as they grow rich. There is also a significant fall in supply of normal food. This is attributed to a sudden surge in demand for biofuel raw materials (e.g. corn). As resource is scarce—there is limited land, human resource available—farmers have to make a choice between producing normal food or biofuel sources. Because of the higher profit margin promised by biofuel source, many farmers have switched to producing corns instead of normal food like rice. Consequently, the increase in demand and decrease in supply have pushed the world food price to a much higher level. By right, the increasing price for food would mean farmers earning supernormal profits, therefore current farmers would expand operating capacity, more entrants will be attracted into the industry and output shall increase. The market would be very responsive to the change in price and quickly restore the system to equilibrium. However in reality that is not the case. There are many reasons for this. First of all, generally farming industry is sticker to price change as compared to industries like toy or clothing. This is because it always takes a season to grow crops. Even though the price is high currently, by the time the new planted crops are harvested, the price may no longer be high. Therefore, a 10% increase in price may not lead to a proportionate increase in output. Secondly, it is difficult for farmers to expand operating capacity in the short run. Farming industry is segmented to large farms and smallholders. We shall evaluate the large farms first. For the large farms, they are not likely to increase their productivity in the short run as it takes quite some time to upgrade their irrigation system, and there is limited fallow land easily available. Also, they have encountered the situation of diminishing marginal returns. The increase investment in fertilizers, pesticides or machinery will not be economically worthy. If the large farms are unlikely to expand, for the smallholders, they are unable to. The smallholders are mainly concentrated in the less developed countries. They are unable to afford the fertilizers, pesticides or fancy seeds, let alone constructing an advanced irrigation system or buying modern machineries. Hence, it is not likely that the smallholders will increase output significantly.In conclusion, the soaring food price will be a problem for some time. We need collective commitment from the globe to solve the issue.
Since our class has done a research on the sub-prime market in the US and some of us still need to present on this topic next term, i just want to share some ideas on the situation of the US' current economy now.
US former Fed-chief Greenspan has expressed a pessimistic view on the US economy that 'the United States has slipped into an awfully pale recession and may continue to languish for the rest of the year. ' He maintains that recovery will not begin until home prices stabilise. Some more signs of recession include declines in manufacturing and housing industries, successive cutting of interest rates ( to encourage consumption as well as lending) , slower rate of growth ( at a 0.6 per cent annual rate over the last two quarters, the slowest pace since the 2001 recession). A benevolent sign might be a slight drop of unemployment rate down to 5.0% from 5.1%.
However, opinions are divided among European economists over the future of the US economy. Britain's central bank suggested that the credit crisis was easing. Basically they see that confidence and risk appetite are returning.
The International Monetary Fund has estimated that the ultimate cost will reach nearly US$1 trillion (S$1.36 trillion) in write-downs and credit losses in the current crisis. But this estimate, based on imperfect information and models, may turn out to have been unduly pessimistic, the BOE said.
However, some other economists have maintained that even if conditions in the financial markets improved, the wider economic fallout from the credit crisis would persist for many months to come. Stastistically,banks worldwide have written off more than US$300 billion since the collapse of the US sub-prime mortgage market.
Many of us may have noticed that these two months have been filling with various concert. Quite sad that cannot go for choir concert last night coz of training. But I heard it was awesome!! Hope they will perform even better tomorrow!
I was just amazed by the numbers of concert held these two months in our school only, ranging from Drama to Dance, from instrumental to vocal. Besides our internal performances, we also see a lot of promotions of performances from other schools such HC-RJ joint production of Shakespear 24 as well as Straitstime Pocketmoney fund. However, the problem lies with the purchasing capability of the students. For the majority of the student body, they do not have particular preference towards any performing arts. (this is an assumption because either string or band won’t make much difference to me as it is just a chance of enrichment of arts) On the other hand, I think we go for various concert mainly to support our friends in their CCAs. However, as some of my friends have complained they are nearly bankrupt already this month because they are forced to buy too many concert tickets. In a performing arts CCA myself, I’m just wondering how the situation can be improved and earn maximum revenue next year.
Assuming the students buy various concert tickets without particular preference but only to support their friends in various CCAs, we can say these concerts are close substitutes with one another. Since the buying powers of the students are limited, students will run out of pocket money soon in a month since most concerts are cramped together. Hence the first suggestion we can draw is that performing arts societies can spread their concert over the whole year rather than confined to term II only. However, it is very practical since students have Block Test in Term III whereas Promo in Term IV. On the other hand, there is not sufficient time for practice is the concert is scheduled in term I. Hence, it seems we can do little about the time period and all the concerts (product of different CCAs) have to come to our HC market at the same time and compete with each other.
Another interesting point to note is that some concert sells their ticket at much higher price than their competitors ( maybe the tone of the word is not so correct =) Generally, concerts held outside school and renting external theatres have higher prices as their cost is higher. These concerts have larger scope of audience since they are held in public places. In addition, concerts held in Victoria Hall or Esplanade convey the idea that they are superior, I assume so. Hence they can attract more high-end customers, is it? Since some concerts are able to charge higher prices whilst secure their ‘market share’, it proves that our concert market is not perfect competition since the products are not identical. Some concert also enjoys better fames so they have developed their ‘brand loyalty’, making the demand for their concert more price inelastic.
When Huang Cheng (Chinese Drama) first came into the market, it charges very high prices yet they sold out all the tickets for three performances at the Victoria Theatre. I attribute their market success to following reasons: 1. Early introduction. By the time Huang Cheng is introduced, it was the first concert(production) in our school. With no outstanding competitors, Huang Cheng was more like a monopoly at that time and clear out its stock very soon. 2. Introduction to the market at the perfect time. Huang Cheng debuted in March, when most students were largely free since not many tests were coming out. 3. Official promotion. Our college was formerly known as Huang Cheng and video of Huang Cheng CCA was displayed during Orientation. The school has given much attention to Huang Cheng as well. Hence most students feel both proud and obligatory to go to watch Huang Cheng. You may like to note that both Huang Cheng and Choir sell their ticket at different prices whereas other concerts charge uniform prices. Intuitively I think it is a form of price discrimination. However, this does not satisfy several conditions of PD. For example, there is not distinct segmentation of market since everyone is eligible to buy the ticket at whichever price he likes. No measures could be carried out to prevent seepage of tickets. On the other hand, it is a form of price differentiation since tickets with higher prices are in exchange of better seats or better timing of a concert. Even though the cost of the chairs and cushions are the same, seats in front and on the ground floor render better views (better services). So they should definitely be charged at higher prices. Similarly, we can explain why concert on Saturday night is dearer than other those held at other time.
Yup, some more point to add. MAD(Music and Dance) and Chinese Dance will have their joint production next week. Wish they have a successful performance as well! I’m not suggesting the MAD and CD are not competitive, but I think a joint production make both more viable. It is like a merger of two firms, which results a larger company that can compete more effectively. Of course, we can expect their ‘concert’ is more multifaceted since they have mixing of traditional dance and modern pop! And I think this is applicable to several other CCAs as well, for example, Guitar and Harmonica, String and CO and have joint production as well. Even inter-school CCA concert! Since a larger scope of audience is expected, the concert may be held twice or thrice. But each CCA does not need to practise so many pieces of songs. Hence, students in performing arts may not need to stay at school beyond 7 pm as Mr Ang has promised during principal dialogue. =]
I also expect the CCAs will hold promotions as their concerts are approaching. However, this does not happen even though the audi/theatre was not fully seated in the end. For those concerts held inside our campus, marginal cost selling the ticket to one more student is low since only a simple booklet needs to be provided. Hence why not cut down the price, attract more customers and generate more revenue? Bulk purchase is also possible. A class with more than 10 ordering may enjoy a discount, for instance. Anyway is such kind of promotion forbid by school or such behaviours will make the concert appears inferior?
Oops, I don’t expect to write so much…so tired after coming back from training today. Good luck to all upcoming players in their concert, including me as well!
Lofty talk or invasion of the aural kind? By Karamjit Kaur, Aviation Correspondent
SINGAPORE Airlines made aviation history when its first Airbus A-380 took to the skies last October. Another first, at least for the airline: Passengers logged 600 minutes or 10 hours of calls using the phones fitted in the superjumbo. One reason: Journalists were filing their stories down to earth. But the chances are that the ordinary passenger would not be rushing to make mid-air calls. SIA said only a few calls are made per flight. Nothing to shout about. It's not just the cost - from US$5 (S$6.80) to US$11 per minute - that puts people off mid-air chit- chat. They also don't like having to swipe their credit cards in the machines, and airphones cannot receive calls or transmit text messages. They are nowhere as fuss-free as cellphones, banned because they interfere with the aircraft's electronics during flight - until March 20, that is. That was when the very first authorised cellphone call from a commercial aircraft was made from an Emirates A340-300 Airbus flying from Dubai to Casablanca, Morocco. The Dubai-based carrier is spending US$27 million to fit its fleet of 115 aircraft with the technology supplied by AeroMobile - a joint venture between Swedish- based mobile communications company Telenor and Arinc, a transport communications provider. The cellphones connect to a base station on board the aircraft, which in turn is connected to the plane's satellite system. Signals are then sent to a satellite dish on the ground. From there, they are routed through telephone networks to the phones being contacted. With the base station on board, calls can directly target a satellite system, preventing cellphones from causing havoc to flight instruments or ground networks by sending out signals indiscriminately. Charges are about US$3.50 per minute, and users are billed by their respective service providers. An Emirates spokesman said half the passengers would switch on their phones during flights, although not all of them use the service. Passengers send and receive text messages more often than they chit-chat. The system, activated only when the aircraft is at cruising altitude, is designed such that cabin crew can block voice calls at certain times. Besides AeroMobile, OnAir - a partnership between Airbus and Arinc competitor Sita - has also developed technology to allow cellphones to be used in flight. It is a technology that is in its nascent stages. The system cannot support more than six calls at any one time now because of satellite capacity, said an AeroMobile spokesman. Text messaging is a different matter. The system can handle every passenger sending a text message at the same time. Now that Emirates has adopted the technology, other carriers are waiting in line. Air France-KLM has launched trial in-flight phone services on some European routes. British Midland Airways, Portugal's TAP, Turkish Airlines and V Australia are also planning to offer similar services later this year. Budget airline Ryanair intends to make money out of it by taking a cut from the charges levied by cellphone service providers. Australia's Qantas plans to allow the use of cellphones on main trunk domestic routes - but only for text messages. No voice calls will be allowed until the airline is convinced passengers want it - a prudent move indeed. A recent poll by German carrier Lufthansa shows air travellers are against cellphone chats in flight. In an industry as competitive as commercial aviation, airlines are apt to jump on the bandwagon when a new product or service appears. Whether it is a flat bed in business class, extra big personal entertainment screens or the latest in-flight entertainment systems featuring the best sound and picture quality, if one airline has it, the rest will want it too. The US$27 million Emirates is spending on the technology is small change for big airlines - just enough to buy half a single-aisle plane. While nobody can quarrel with being given added services which he can choose to use or reject, in this case, the passenger can't quite block out the myriad ringtones that are likely to permeate aircraft cabins. It would be like sitting on a bus and being unable to turn TVMobile to 'mute'. Asked if SIA would follow suit, its spokesman said the airline was still evaluating the concept and technology, adding that research shows many passengers have different views on the matter. But even if airlines are happy to let passengers chat away in the air, not all regulators may approve. Australia and Dubai have given the go-ahead. The European Commission cleared the way last month for cellphones to be used in the skies above Europe - but not for international flights. Making calls across international borders is a tricky affair because airlines may need to comply with the rules of the countries they fly over. Many countries in Asia, for example, do not authorise calls in their airspace. In the United States, the Federal Aviation Administration and the Federal Communications Commission are evaluating the issue. Some people are so dead set against people using cellphones on planes that the US Congress has introduced what is called The Hang Up Act. They argue that Americans do not want to be subject to people talking on their phones on an already over-packed plane. If approved, this Bill would make it illegal to talk on a cellphone when flying a US carrier. Using a cellphone on a plane is an exciting new development for air travel. But with some serious regulatory and social hurdles to overcome, whether mid-air chit- chat will really take off is still up in the air. karam@sph.com.sg
Analysis
For these passengers who are affluent enough to take such a luxurious flight, the high cost of mid-air cost should be no issues. What put them off are the technical constraints like not being able to receive calls and send sms. These constraints make the service an inferior but expensive one compare to the telecommunication services on the ground. So why not wait for a few more hours to make a call and save quite some money?
It is understandable that many airline companies rush to the service taking high risks of low return. This is a highly competitive industry as the air fare takes up a large portion of income for most people and high substitutability of the airlines makes branding difficult. Positive and large cross elasticity of demand is the force behind for the companies to strive to differentiate their services.
Companies like Emirates adopt the new technology to brand their service as high-end service and thus attract well-heeled customers who look for novelty and luxury. For these companies, they are even willing to make loss on introducing the service because it is only a strategy to edge on other airlines that aiming at high-end service and make customers feel that this airline is more prestigious than the others, especially when the installation cost is not high for a airline company. Thus the company can cut a higher share of the market.
However budget airlines like Ryanair intends to make money out of it by taking a cut from the charges levied by cellphone service providers. Therefore once the company finds that the service is making loss, it will stop the service immediately. It is actually predictable that the service is going to make loss as the customers of budget flights are very unlikely to make phone calls at such a high cost.
Mid-air chit-chat is a novel idea indeed but its feasibility is doubtable. Many people are against the idea not only because of the high cost and imperfect service but also because of the mindset that phone calls on the plane is unnecessary. To make the idea take off the companies have so much legal and social obstacles to overcome so prudence of some companies is plausible. But once even the CEO of Apple thought there was no one willing to watch videos on a palm-sized screen. Look at the craze for ipod video clips today. Nothing is impossible.
FOUR MONTHS AFTER FARE HIKE Cabbies' earnings up despite initial fears Ridership also up as commuters return to taking taxis By Maria Almenoar
THE chorus of complaints that came from the taxi industry after fares were raised in December last year seems to have died down. Although some customers initially stayed away from taxis, there has been a turnaround, and with it fears that the earnings of cabbies would drop seem to have eased, according to surveys done by the country's two biggest taxi companies. ComfortDelgro, the largest taxi operator here with about 15,000 of the country's 24,000 taxis, saw a 16 per cent increase in takings for a cabby's full day of work. For a full-day shift, cabbies are earning $187.92, up from $162 before the fare revision, after deducting the cost of fuel and renting the cab. SMRT, which has about 3,000 cabs on the road, said cabbies saw a 20 per cent increase in gross income in the first quarter of this year, compared with the last quarter of last year. The data came from a survey of about 300 taxi drivers. In a bid to alleviate a taxi shortage and raise the drivers' earnings, the six taxi companies increased their starting metered fare from $2.50 to $2.80 in December. The meter was also adjusted to tick faster, with 20 cents charged for every 385m up to 10km travelled, instead of 10 cents for every 210m. However, commuters were most peeved by a revised peak-hour surcharge which was tweaked from a flat $2 to 35 per cent of the metered fare. The surcharge for picking up passengers in the city centre also went up from $1 to $3. After first avoiding taxis in favour of public transport, more commuters seem to be going back to them. The average daily ridership for taxis for January was 855,000 while February's went up to 934,000. Last year, the average daily ridership was 945,000. Said 55-year-old cabby Haniff Mahbob, who has been on the job for 20 years: 'After fares went up, we had few customers. But luckily the new fares offset our lost business. Now, business is definitely picking up. I'm sure more drivers have bigger smiles on their faces.' Call bookings are also on the rise this year, according to ComfortDelgro. The company will also soon offer a service which allows passengers to book a cab by sending an SMS message with their postal code and pick-up location. The Taxi Operators' Associations, which represents drivers' associations of five of the six taxi companies, said: 'The situation seems to have stabilised and improved, but we are still quite concerned that rising fuel cost may eat into our drivers' income.' Oil prices hit a record US$117.50 (S$160) a barrel this week. On average, taxi drivers on a full-day shift spend close to $40 on diesel and about $90 on cab rental.
ANALYSIS
In mid-December last year, the taxi company’s pricing policies incurred a lot of panicking and complaints. Yet the policy came with good reasons.
Ever rising cost of fuel adds on the cost of operation for the taxi drivers. Their income dwindled. As a result, fewer were willing to take passengers and this led to a shortage of cabs especially in the night. Proliferating surcharges and selective taking of passengers distorted pricing mechanism and caused great inconvenience for the commuters.
These reasons have been discussed in detail in ILP by some groups. The focus of this article will be on the reaction of the commuters towards the fare hike, both in short run and long run. The article will also analyse the objects of the pricing policy and if they have been met.
The hike in price is mainly intended to raise income of taxi drivers. It also aims to improve proficiency of taxi service. In the short run, the number of commuters decreases from 945,000 to 855,000 due to the increase in price. The demand is price elastic for lower-income people and people who do not mind taking bus or MRT instead of taxis. People may be forced back to other means of transportation. Some may even consider buying their own cars. The fare hike affects especially the people who take taxis regularly before the hike. However, for some people, taxi service is a necessity. For example some people would take only taxis to work everyday due to convenience and comfort a taxi ride could provide. Their demand for the taxi service is inelastic. This is especially so for some middle- and upper-income people because the increase in fare only takes up a small portion of their income. The higher fare turned taxis into a boutique service, not supermarket-type socialized commuting. The main riders are business people and shoppers whose demand for taxis is likely to be inelastic as business people find taxis efficient and shoppers are unwilling to carry goods. Therefore the demand for taxis is generally inelastic. This is evidenced by the fact that taxi drivers’ earnings have risen by up to 20 percent, despite fewer passengers. Lost business has been offset by higher fare. As mentioned in the newspaper article, the demand for taxis bounced back from 855,000 to 934,000. Given time, consumers have gradually adjusted their pattern of consumption and become more acceptant of higher taxi fare especially with inflation looming in the price of almost everything. What is more important, with a satisfactory income taxi drivers provide a more satisfactory service. The riders spend less time on waiting for taxis coming and there is no longer proliferation of surcharges. Some commuters who were initially scared off by the hiking fare started to turn back to taxis for its convenience. Therefore the policy alleviated the shortage of taxis and raised drivers’ income. The quality of the service and reputation of the profession have been improved through a higher price. Both objects of the pricing policy have been met. It benefits both the drivers and the commuters who really need the service. So far the pricing policy has been a success.
Hello :) I personally find it quite hard to remember the various economies of scale and diseconomies of scale. To make the learning and remembering more fun, I've decided to make a crossword puzzle on it :) I will post it on the yahoo groups and if anyone is interested do try it :) All the types for economies of scale and diseconomies of scale should be inside. There should be a total of 12 word/phases. There would not be any spacing between phases. Eg: for a phase like "nice dog", it would appear as "nicedog" in the crossword :)
The following is a cool economic link I would like to share: http://www.mhhe.com/economics/econgk.mhtml The EconGraph Toolkit is a specialized drawing application for economics on the web. The Toolkit gives you all the pieces you need to create any graph required for any question asked in the principles of economics course. When the graph is done you can print it out or send it by e-mail to prove that you have done your homework. Nice right?:))))
Ang Qi Yan
Chan Yi
Chew Yi Peng Lisa
Chiu Howard
Chua Xin Yu
Dong Yang Zi
Ee Ying Hui Dina
Han Nuomin
Hu Yiqing
Hwang Yi Kun
Lee Jun Jie Jonathan
Lee Ying Mao Eugene
Li Wen
Lim Jia Wei
Lim Ying Zhen Sylvia
Lim Yu
Shao Yue
Sun Mengyuan
Tan Wei Han
Tran Thi Xuan Hong
Wang Sicheng
Wei Huayi
Wu Hong
Ye Xiaoyang
Zhang Jia Qun
