International Trade

Economic Cycle

Unemployment

Economies and Disecnomies of Scale

In January 2006, the market for postal services was opened up to competition thus ending the monopoly of the Royal Mail in the delivery of letters to households and businesses. Attention is now focusing on some of the likely rivals to the Royal Mail in the newly competitive market. One such business is TNT logistics. TNT Express Services was established in the UK in 1978, the company has developed its dominant position in the time-sensitive express delivery market through organic growth and, with an annual turnover in excess of £750 million. TNT employs 10,600 people in the UK & Ireland and operates more than 3,500 vehicles from over 70 locations. TNT Express Services delivers hundreds of thousands of consignments every week - in excess of 50 million items per year.
(Source: TNT investor relations web site)
This is a simple example of the economy of scale. Why the economy of Scale is important to the TNT company ? In the competition of delivering services, the most important point to be successful is fast, and cheap. By increasing amount of employees, vehicles in a large area, TNT they can improve their speed and amount of delivering, make them become more competitive. They might to exploit the technical and marketing economy of scale, to increase their competitive

Competition and Monopoly

Economic Growth and Development

Combining of Information Failure, Poverty, and Factor Immobility

Market Failure and Government Failure

320.b
321.a
322.b
323.a
324.c
325.d
326.c
327.a
328.d
329.c
330.b
331.a

Flow of Income and Spending

Questions :

1- A fall in business confidence among UK manufacturing firms. A fall in expectation of investors will make them tend to withdrawl capitals >> It's the leakage in the circular flow and also contract the the ouput of country.

2- The pound rises by over 5% against the US dollar in the global currency markets. The rise in exchange rates will increase the price of exports >> It's the injaction into the flow and extent the national income.

3- The government announces an above-inflation pay rise for nurses in the NHS. In this situation, this is the spending of government to encourage people to take off welfare, and to take a job instead. It's the injection to the flow of income and also extent the National Income

4- Nissan decides to reduce investment spending at their main Sunderland plant and shift some car production to the Czech Republic. The withdrawl of Investment is the leakage in the circular of Income and Spending >> A Contraction of National Income

5-The government announces a fall in the rate of taxation applied to the interest paid on savings in bank accounts. This announcement will decrease the money from saving of consumer in order to spending or invest. It's the injection into the flow and the extent in National Income.

6- The UK reduces the size of an import tariff imposed on imports of Chinese clothing and footwear. A decrease in tax for import will make the price of import cheaper, and the consunption of import will increase. It's the injection to the flow of income and spending to China whereas the leakage to the flow in UK.

7-The annual rate of economic growth in the United States increases following a fall in US interest rates. It is the injection from government to boost into the flow of Income and Psending >> The extention in US National Income

8- The government decides to increase the UK road-building programme by £600m . The increase in government expenditure is one factor that inject into the flow >> causes an extention in National Income

9 -The Bank of England‘s Monetary Policy Committee decides to cut interest rates from 5% to 4% . With the reduction in IR, consumer tend to save less and spend more >> an injection into the flow of Income and spending, and also the extent in National Income

Consumer Surplus

Buffer Stock

Minimum Prices

Aggregate Demand

Small questions about AD :
State whether each factor is likely to increase or decreases the level of aggregate demand for the UK economy (other factors remaining the same).

1 - The government decrease the rate of income tax from 22% to 20% . The lower income tax will boost the power of buying of consumers, so it will increase the most important component of AD - consumption >> It will increase the level of AD
2 - There is a 20% fall in average UK house prices over a two year period. The reduction of house prices will cause the fall in Consumer wealth, reduce the power of buying >> It will decrease the level of AD
3 - There is a consumption boom in the countries of the Euro Zone. The increase of demand in exports will inflow the demand into circular flow of income and spending >> Increase the level of AD
4 - The exchange rate between sterling and the Euro appreciates by 15% (i.e. goes up in value) over the course of a year . The lower level of exchange rate will make the price of export cheaper >> Reduce the AD
5 - A new survey finds that business confidence has hit a 5-year low. The lower of expectation of the producer will narrow the amount of small firms, reduce level of capital investment>> Lower level of AD
6 - The government announces a £400m plan to build a series of wind farms across the UK . The more increase in Capital Investment, the more increase level in AD
7 - Consumers decide to increase their savings ratio . Reduction in consumption will decrease the level of AD
8 - Bank of England signals rise in interest rates of ½% . The rise in IR will decrease the borrowers to invest >> decrease in Capital Investment >> Decrease in AD level
9 - The government increases government spending by £1 billion but raises the amount it takes in income tax by £1 billion . It's uncertain to consider the change in AD.
10 - Chancellor announces tax exemption scheme on new investments for small to medium sized businesses. The encourage of the government to boost the investments will increase the level of AD.

Mind Map of Maximum Price

Smoking ...

Smoking ….
Even though the government tried many ways to restrict the increasing in the amount of smokers, they are still increasing. Over 80,000 people die from smoking-related disease in England every year. Treating smokers costs the NHS in England £2.7bn a year, compared with £1.7bn a decade ago, a report claims. After many policies like increasing tax, Tobacco’s package must has “Smoking Kills”, and not allow to sell tobacco to person who under 18, the government still seems to do more. They are considering to ban smoking in the Public Places. This solution cause arguments between economists. It's may be really benefit to the social. A lot of people who doesn’t smoke died because some diseases related to smoking. Furthermore, this will bring a lot of profit to pub, bar, places having smoking area. Because that people they can’t smoke in the street or park, they will tend to go to pub, bar to smoke and drink there. In other aspects, some economists critic this solution. They agree that will decrease amount of money that NHS must spend, but it will cause the lack of freedom. More than 20 millions adults in UK smoke, and they must stop their habit everyday for the social benefit. One more reason, restaurant, pub, night club … they must narrow the size of space to build the smoking area for consumers, that will cause a reduction of profit of them.
Turning to the article about the 50 pounds penalty for the bus driver, it will reduce the market failure. In the small view, the bus driver, he spent more than 50 pounds for a pack of cigarette, while an statistic shows that the social cost for a pack of cigarette is approximately 2 pounds. The social benefit is more than the private benefit – external benefit, and it will reduce the market failure. But if we put this in the larger view, this penalty, not only affect on the bus driver, it also affect on other smokers – especially bus driver smokers. Other people will see that the law of the government is strict, more people may be more respecting the law. Less people under 18 smokes, more people will smoke at the right place for smoking , more students of EF will not smoke at table tennis …. All of this will contribute to the reduce of social cost, and also lower the market failure ..

Obesity ......

-Obesity is being a big problem that the UK council must deal with. Obesity could cost NHS in England £6.3bn by 2015 if no effective action is taken says the Department of Health. Not only in the health care case, but also in others social services. Due to the increasing of obesity people, there will be a lot of changes in public services. The furniture for pupils will become larger for bigger pupils. Or Ambulance equipments might be changed to suitable with fat victims. According to Chief Medical Officer Sir Liam Donaldson, "Without action this could rise to nine in 10 adults and two-thirds of children by 2050 in UK”. It seems to be the market failure if we put it in economic considering. Obesity has the negative externality. The consumers who buy fatty, high quantity sugar food, they just pay for the cost of the food they bought. In this case, the social cost is more than the private cost. They didn’t pay for the cost that the council pay for the re-equipped in furniture at schools.

For Lehman Brothers

The Lehman Brothers investment bank declared itself bankrupt more than 1 month, but this will exist for a long time as a lesson for future generations. Let’s go through this problem.Lehman Brothers is ranked 2nd biggest bank in the USA. With a history of more than 150 years, and employment of more than 9000 people, this bank was never expected to collapse. But what made this bank die? It can be explained by 3 reasons
-First of all, the risk decisions.
I talked about one kind of the credit crunch in my last entry – the sub-prime. Because of the high profit of lending money with high rates to people to buy houses, Lehman Brothers spent billions of dollars in this market. And finally, after the recession of US economy, this bank lost an enormous amount of money .In fact, Lehman’s managers predicted the terrible affect of the recession on mortgages, so that they tried to reduce a large amount of money from this investment. But it was too late for them.One more point that we should know about this bank is that the president of Lehman Brothers is Dick Fuld, who has been with the company for more than 40 years, and holding the highest position of this bank for 14 years. He is very careful. But why did he decide to take risks and ultimately cause the end of the company. It can be explained by the fast growth of the world’s economy. Because of this, Lehman had to extend their range, so that they needed lots of capital. And the high rates from lending money to people to buy mortgage was the solution.
-Secondly, the lack of flexibility in Negotiation...
In fact in the recession of the US economy, it is not only Lehman Brothers that fell into this storm, but also has many famous names : UBS, Citi, Merrill Lynch, Bear Steans, Morgan Stanley, Freddie Mac and Fannie Mae. All of them had lost an incredible amount of money, which totaled hundreds of billions of dollars. But why did just Lehman collapse? Lehman had at least one opportunity to save themselves. They could have been captured by the Korean Developing Bank or Barclays to help themselves, but they couldn’t do that because of the disagreement in price.
-Finally, due to ‘luck’
We can see that after Lehman died, the government spent 85 billion dollars to save AIG, but why they didn’t do that with Lehman? Lehman was dying at the same time with some big names: Merrill Lynch, Wamu and AIG. So if the government spends money to save all of them, they will encourage the continuing of risk investment – sub prime. Furthermore, the United State is in the process of choosing a new president, and if Bush is using money taken from the tax payers to rescue all of these banks, it will not be good for John McCain, so one of them must suffer, and the government chooses the ones to stay and the ones to go.

Credit crunch

Credit crunch …

We spent all of the previous week talking about the credit crunch, and we heard an interesting presentation from Dima about this problem. Let's summarize it: What is it mean, how does it occur and what is the final effect of it on the economy? Let’s have a look.

Credit crunch, what does it mean??In simple terms, it is the extension of the recession of the economy. Credit crunch is the situation where the rates for borrowing are raised, making it more difficult, maybe impossible for people, or companies to borrow money. There can be three reasons to explain this:

- The fear of the lender in a time when there are too many bankruptcies

- The increase in the rates of the State Bank

- The sub-prime

What does sub prime mean? Sub-prime is the money borrowed to buy houses (mortgages) from people who can’t pay back the money. The borrowers may be poor or unemployed people. Most of the sub-prime is borrowed by immigrants, but otherwise, the rates of borrowing are very high, and it can make a big profit for banks if they are lucky. Even though banks know that it is a risk to lend money, they still do it.

And finally, when the recession occurs, the price of houses falls dramatically and for people borrowing money, it is nearly impossible to give the money back to the bank… It caused an enormous loss for the bank. This situation caused the collapse of one of the biggest banks, the 158 year old bank in Wall Street – The Lehman Brother, in September 2008. Overall, a credit crunch can do a lot of damage to the economy by reducing the economic growth through decreased capital liquidity and the reduced ability to borrow. Or it will make the recovery of an economy slower.

The determinant of Demand In Market

I’m having the presentation in this week. This is what I will talk about in the presentation. Hope everybody read it and prepare question 2 me …..
The determinant of Demand In Market

First of all, we must avoid the confusing between two definition : Demand and Quantity Demand is DIFFERENT
Quantity demanded is amount of good or service that buyers desire to purchase at a particular price during some period. Quantity demanded changes according to the price. Quantity demanded is basically a point on the demand curve, while demand is the actual curve
Change in Demand: when the demand curve shifts left or right due to a change in one or more of the determinants of demand. A change in demand means that for the same price, customers are now willing to buy more of a certain product.

Change in demand may be caused by these following determinants of demand (TOIESS):
-Taste ( or the consumer preferences) . For example, in a same store, there are two kinds of juice, orange juice and apple juice. If the consumers tend to prefer orange juice more than apple juice, it will cause the shift in the demand curve : shift to the right in orange juice demand curve and to the left of apple juice
-Other Related goods. We all know about the complement and substitute in cross elasticity . ( negative value for complement and positive value for substitute goods).
1- Substitute : the increase in price of a product will increase the demand of the other product. Ex : the increase in price of play station 3 will make the demand of xbox360 shift to the right.
2-Complement : the increase in price of a product will decrease demand of the other.
Ex : the increase in price of oil will cause the reduce in quantity demand of cars using oil as fuel.
-Expectations:
The expectation of higher price in the future will make the consumer buy more right now. And vise versa, if the expectation of lower price in the future will cause the reduce in demand. Investors predicting a higher price of a product in future, so they will tend to buy it and sell it to gain profit.
-Income :
The change in income will cause the change in demand because the power of buying of the consumer is higher. It will have two situation
The demand curve will shift to the right with normal good : (which have positive YED value) . If you have higher wages, you may be change a new car, or change the newest cell phone
The demand curve will shift to the left with inferior good : (which have negative YED value). If you earn more, you will not buy second hand goods, or don’t want to buy cheap food.
-Size of Market
More potential consumers make a greater potential demand for certain products.
The demand for machinery to construct building increase in Iraq, Afghanistan because
-Special Circumstances
Natural disasters or any unexpected situations that might affect demand
Ex: During summer, a chill comes along for a week, disrupting the sale of ice creams
Ex: News report toxic material found in corn canes, as a result, consumers stop buying corn canes

Elasticity Mindmap

(Did i have mistakes ? I wondered that is there elastic and inelastic in inferior goods )

WHy is there a light in refrigerator but not in the freezer ?

-Why does it have a light in the fridge ? Because that in the night, if you want to take some thing from the fridge, you wont need to turn on the light of the kitchen - it may be disturb people in house, or may be it will be harder to find the button of the light than the fridge . But I think that hardly to find someone get up in the middle of the night to get ice cream or cold-food . But in fact, nowaday, producers is tend to satisfy every kind of customer, so it will not be amazed if you have a freezer with a light ...

-It is some information that i got :

1. Because the temperature in a freezer is much lower than of a refrigerator, a much more expensive shatterproof bulb would have to be used. In fact, if you put a common household bulb in the fridge, it will be fine. But put it in the freezer, and it should crack after a few hours (or days, depending on the temperature you freezer operates at).
2. Because there is less demand for illuminated freezers and yet midnight snacking almost exclusively demands a refrigerator lamp, lamps are often only fitted on the higher end models.
3. Standing freezers often use closed-off pull out drawers. In order to effectively illuminate the entire fridge, a lamp would be required behind each shelf. Each of these would need to be shatterproof. (www.fluther.com)

P.S : i'm wondering that which question i will do tomorow ... I'm so full of everybody idea .... Gud night ... +.+

Why are whales, not chickens, in danger of extinction. ?

(It looks like a whale, doesn't it ?)

First of all, it's obvious that the supply of chicken is much more higher than the supply of whales. They are feeding chicken to take meat but no one feeding the whales in order to take meat from them. Further more, a whale took much more time to have a next generation, but a chicken just take a week..... Let's trying to explain like an economist ( ... ) . The supply of whales is inelastic. May be some one takes money to create a big pool to have some whales for taking meat. It will make the price of whale higher because of the increase in productivity cost, but it just increase a little amount of whales in the market. So anyways, the amount of whales also less than chickens very much. And the whales, not chicken, in danger of extinction

Why are colour prints so much more expensive than black and white ?

I think the different in ink's price make the unequal in pr inting. And the higher price of producing colour inks make it more expensive. In arting, you are easy to have black or white colour. But if you want to have other colour, you must mix it together. For example, if you want to make green, you will have to mis yellow and blue, or to make purpil, you will mix blue and red. One more reason that i think it makes the price of ink colour more expensive is that, the supply of ink colour is much more less than black and white. In a paper, more than 80 percent is for black and white, and the rest of it is other colours. So you can finished a bottle of black ink in a week, but you might not finish bottles of different colour in a month (except you use other colour to text, not black) :)

Why do theatres discount prices on square tickets just before a performance whereas airlines and rail companies raise prices for last minute customers

Get the last tickets for a film at the cinema is quite different from getting a ticket for a flight at last minutes. Who is buying tickets at last minutes for a film ?. Some of them are people who dont have the plan to see that film, so that if the price of the tickets reduce, the demand for the tickets will increase, and the theatre will get more profit. Or customers who buy those tickets may be lated, and they dont want to miss any scenes of the film, so they may tend to wait for another times to watch this film. This is many substitues for this situation (restaurent, or cofee).

But the customers who buy last tickets for a flight is different. People usually buy tickets before a week at least, so that people who want to buy tickets last minute before the flight is very need it. Some bussiness man can buy it with any price for being on time at a conference. It makes the price of flight tickets become inelastic. So of course, the flight company will increase the price of tickets to earn more profit in this situation.