Hai~ Long

Examiner report for Unit 1 (Jan 2008)

2009-04-26T17:49:00.002+01:00

Unit 1 In January 2008 :

Question (a) : Using an example in each case, identify two different factors of production which may be needed for the production of pizzas that are delivered to homes
Comments of examiners: A small number of candidates gave land as an example of a factor of production but then gave a wrong example that did not refer to the site or raw materials characteristics.

Question (b) : State and explain two possible determinants of the increase in demand for high quality pizzas
Comments of examiners : The best answers usually referred to a change in income/disposable income as a possible determinant. A lot of candidates drew extensively on the first five lines of the case study. The majority of these answers, however, did not recognise the reasons given as being the taste / fashion determinant of demand. Another weakness was that this same so-called determinant was used for a second time.

Question (c) i : With reference to the data, use a supply and demand diagram to show how the global price of mozzarella cheese has increased.
Comments of Examiners : The original intention of this question was to award a mark for answers that explicitly recorded $1940 and $3000 on the vertical axis, hence the line reference.

Question (c) ii : Explain how the global market of cheese might change with the release of US stock piles
Comments of Examiners : This question caused problems for many candidates for the reason stated above. Given the context, it is difficult to see candidates confusing ‘stockpile’ with ‘stocks’, as used to describe a synonym for shares. So not as many candidates as might have been expected gained four marks for some simple market analysis of the sudden release of the additional supply of US cheese onto the market. Although not required, a diagram could achieve three marks.

Question (d) ii : Explain the significance of the price elasticity for mozzarella cheese producers

Comments : There was considerable confusion between revenue and profits when referring to the effects of an increase or decrease in price. Only a handful of candidates stated that the 0.2 estimate indicates that there are seemingly few close substitutes for mozzarella cheese. Rather more candidates explained that the statistic was an estimate and that producers should bear this in mind when making pricing decisions.

Question (e) : Using evidence provided, comment on the extent to which the market for high quality pizzas may be considered to be one of monopolistic competition

Comments : To obtain marks though, it was essential that the written answer was applied to the high quality pizza market.
As in previous examinations, there were some weak answers from candidates who wrote about ‘monopolistic’ and not ‘monopolistic competition’. These answers did not gain marks due to the confusion with monopoly. Two marks were most typical for commenting that the market was most likely an oligopoly due to the dominance of well known brands. Rather more comment was needed for full marks; for example, that data was needed to make a proper assessment or further information was needed on some of the other characteristics of an oligopoly

Question (f) : Discuss the extent to which the increase in the global price of mozzarella cheese is really of serious concern to all pizza producers

Comments : The main way that most candidates used to reach Level 4 was to distinguish between large and small pizza producers. This was usually done by considering how larger firms could benefit from economies of scale, particularly through the bulk purchasing of mozzarella cheese. Other possibilities were to make assumptions about the price elasticity of demand for pizzas or to discuss how other variable costs might be reduced. Some answers recognised correctly that all producers would have to bear the costs and that the market structure could have a bearing on pricing decisions. A high mark on this part required a discussion of more than one of these aspects.

Why does the aggregate demand has the downward slope ?

2009-04-22T23:56:00.002+01:00

I found out on internet and I ll summarise it as 3 main explainations :

- Interest Rates :
In the economy, we have a fix amount of money. The price level representing for the amount of currency we have to spend to purchase something. If the price level is high, therefore we have to have a large amount of currency to purchase. And with low price level, the quantity of currency we have to purchase is less. Suppose that some of these money that we do not spend, will go to bank as a saving. It will lead to the rising in bank loans and therefore it will drive down the interest rate.
With lower interest rates, firms are easier to borrow and therefore the investment will increase, which leads to the increase in aggregate demand ( because Investment is one of factors determine the aggregate demand).

- Exchange rates :
When the price level falls, the interest rates is driven down and therefore it more likely to decrease the exchange rates. Lowering exchange rate can increase the net export because the price of export become cheaper. Price level falls, exchange rates fall, increase in net exports which contribute to aggregate demand >> therefore AD increase.

- Wealth :
The lower price level is, the more you can afford to buy >> therefore it increases the consumption and leads to the increase in aggregate demand.

AS micro essays (8)

2009-03-27T01:35:00.001Z

Food is necessary to life and to maintain the national security. Efforts are often made to stabilize price and incomes of farmers. Most of the governments intervened to the agricultural market to ensure that an adequate amount of food is supplied at the acceptable price. The impact can be positive or negative to the economy depends on how the consumers and producers reflect to the policies. However, to the end, the circumstance is that the intervention of the government spill over the international trade in food products.

Intervening into the agricultural market by setting a barrier always is carefully considerable by the government. The price in free market has to be set by the demand and supply forces. We always have question that whether we are using our resources in the most efficiency way. The low price in the free market needs to be made by the increase in the productivity or the achieving economy of scales, not by supporting from government. So therefore intervening into the agricultural market often contents the fear that market fails in achieving productive and allocative efficiency. But in the other hand, appropriate policy at suitable time will bring benefit to the economy.

The most common type of trade barrier is the tariff. Tariffs discourage imports by rising

the price of the imported good, thus discouraging consumer purchases. Domestic

producers benefit from reduced competition and higher prices, and producers in exporting

countries are harmed by the reduction in the level of exports.

Unlike tariff, which allows goods flow into the market without limit, quota fixes the quantity of import products that can go legally to the economy. The function of the quota is, by reducing the available of import goods in the market, the price of import product will rise and therefore it brings to domestic products more competitiveness.

Quotas can have unintended side effects, as illustrated by the U.S. sugar program. Selected countries are each allocated a fixed quantity of sugar which they can legally export to the U.S. These quotas protect U.S. producer prices, which are higher than world prices. Over time, high U.S. sugar prices have encouraged increases in domestic sugar production. Corn growers have become major supporters of the U.S. sugar program because the higher U.S. sugar price resulting from the quota led food manufacturers to substitute high fructose corn syrup (HFCS) for sugar. Therefore, with the sugar program, production of HFCS has been highly profitable; without the sugar program, sugar prices would have been lower and HFCS production might not have been profitable.

Barrier entries also bring to the war in economy. In most cases, losses equally taken by both countries. . For example, the EU has banned the use of growth hormones in cattle production in member countries and has banned meat imports from animals which have been given growth hormones. This essentially eliminates all meat imports from the U.S., where use of growth hormones has been judged safe. The U.S. has challenged the ban and both sides claim to have a scientific basis for their position. Similarly, the U.S. has banned imports of all fruits and vegetables treated with ethylene dibromide, but other countries disagree with this decision.

In conclusion, international trading should be liberated. Each country has its comparative advantage, and the trading will have the circumstance that both economies will gain benefit. By eliminating the barrier in the agricultural market, it will bring benefit to the whole economy even though the cost is some domestic sector might get worse off. And more important, it will avoid the trading war which just will damage the economy

Phillip Curve

2009-03-19T01:31:00.002Z

Phillip Curve shows the relationship between level of unemployment and level of inflation. It is a trade-off between them, which means that if there is a rise in unemployment, therefore it would be a fall in inflation rates and vice versa.
When there is an increase in unemployment rates, more people now are not spending much as before. Therefore it could be a decline in the consumption, which is one factor, determined the aggregate demand. The rate of unemployment strongly depends on the aggregate demand. So a raise in unemployment rate would lead to a fall in aggregate demand and therefore, the rate of inflation will be reduced.

However, this model is not always true. It can’t explain the situation of the economy when there is a stagflation, which means that there is slower economic growth (or recession) combine with higher level of unemployment. So that new model has introduced base on the idea of Phillip Curve to explain it.Supposing the rate of inflation is now at 0, and therefore the rate of unemployment is at U. After time, the government realised that it is a high level of unemployment and they want to intervene to fix it. What they might do is to boost the demand for the market. After intervention, the unemployment rate is improved, it contracts from U to V. As there is a rise in demand, the inflation rate will increase as there is a rise in price level. Therefore prices get higher, and workers now required a higher real paid for their works.

However as there is a rise in their wages, workers now realised that their increase is just a nominal increase, therefore they might stop supply more labour and the output will return to its original. And finally, in the long run of Phillip Curve, there is a rise in inflation but a sustained in level of unemployment.

But.....
If inflation rises then exports become uncompetitive and so they fall. Exports are injections so AD falls which means unemployment raises.
If there is inflation then demand for Imports will rise and so leakages increase and so...unemployment rises.
If unemployment is low then exchange rates are high which makes imports competitive, exports not so...so unemployment raises.
So, really, inflation is high and unemployment is high; inflation is low and unemployment is low.
The exact opposite.
Or is this wrong...?
.... Absolutely true ...

Output gap

2009-03-17T22:43:00.002Z

An output gap is said to exist when an economy is not producing at full capacity. So a negative output gap occurs when the economy’s actual output bellows its potential output. Illustrating the negative output using PPF diagram, the point has to lie within the curve, which means that the economy is not using all of its capacity.

Some problem might rise from it. The economy doesn’t achieve the allocative and productive efficiency. The productivity of workers might be low or there is the wrong target of producing, when the supply doesn’t meet the demand in market, or we can say that the consumer satisfaction isn’t maximised.

But I think the output gap is not so harmful for the economy. Well it’s not when the gap is not so large. When there is an output gap, it will lower the inflationary pressure for the economy. The economy can increase their output without rising in price level because they have capacity. We might say that when the negative output occurs, there is a high level of unemployment, because the economy doesn’t use all of its resources, here is workers. It might not be true because some people work as waitresses, bankers, bus-drivers, street cleaners, and teachers as well, doesn’t actually ‘produce’. Therefore their contribution will not take into account of output of the economy.

When the output gap is getting wider, we can assume that the economy is failing to achieve the allocative and productive efficiency. To deal with it, the government might use the supply side policy. Training is needed more to increase workers productivity. Or government might subsidise firms to reduce their production cost, therefore they can produce more.

In the other hand, the positive output arises when an economy’s actual output is higher than its potential output. It seems to be impossible because when the economy is at full capacity, the output will not raise even the aggregate demand shifts to the right. For a short time, however, an economy might be able to produce more if workers work overtime, some people who are not usually in the labour force enters it, and machinery is used flat out. It contains a danger of inflationary and it can’t be hold for a long run, according to the diminishing returns law unless the economy potential output increase.

Unit 2 Goverment Policy - Monetary Policy

2009-02-23T00:50:00.002Z

Unit 2 mindmap (Unemployment)

2009-02-20T01:35:00.005Z

Compare Living standard using statistics ...

2009-01-30T02:33:00.001Z

According to the statistic information of National income in 2003, the USA became the country in the world having the highest Living Standard, with the Gross National income reached into 11 012.6 million dollars, and the Americans had the highest efficiency in production as well with the Gross National Income per capital was at 37 870 dollars. In the South of America, Colombia achieved 10.1 million dollars in Nation Income, which is equal to 1% of America and the Productivity was 6 410 which is much lower than the USA
In the European countries, the British economy was at the top high National income with the high Gross National Income, which was 1 680.1 million dollars and high level of efficiency in production. Another large economy in the Europe is Russia Federation: with the high level population and the large area of land, Russian Federation‘s Gross national Income was 374.8 million dollars in 2003.
On the east side of Europe, Czech Republic was achieved 72.9 million dollars. Even their achievement is lower than the Russian, but with the lower factors of endowment, small area, average level of population, they still achieve a good level of National Income and the Productivity is much higher than the Russia Federation when the Gross national Income per capita was at 7150 million dollars compare to 2610 million dollars of Russia.
In South East Asia, the National income of Indonesia in 2003 was 173.5, which is a high level among the Asian countries. In south Asia, Pakistan was achieved 77.6 million dollars, which is less than Indonesia but the efficiency in production is higher with 4 690 dollars per capita compare to 3 210 dollars of Indonesia.
In fact, consider and comment on the Living standard of a country we do not only just base on the information of National Income. Living standard which mean is the average quality of living of people. So the National Income is the result of the combination of all people in a country. And how the National Income affects the Living of people, it much depends on the strategy of the Government in spending. So living standard doesn’t only depend on the National Income but strongly affected by another factors such as the distribution of income or education ...etc.
As we see in the National Income statistic, the USA is the country having the highest national income. But the gap of Income distribution between High Income Group and Low Income Group is very large. The distribution of income into the lowest income people is 16.1% when the highest income group take into account 68.2% in 2000. The inequality is described more in Population aspect. 78% is the percentage of the concentration of people in cities and in the Communication aspect, the Internet users per 1000 people in 2003 was at 119. The number of people using internet in the USA is low if compare to UK with 658.9 or in New Zealand – 413.8. We might connect the high level of people living in city and the low level of users of internet. The low level of people using internet in country side can be the reason that pull down the level of people using internet in America.
Colombia is at the top of countries having the lowest National Income. But we can’t conclude that the Living standard of Columbians is bad. The percentages spending of Colombia on education in 2002 reach into 5.2 % or National Health Services, which is the high level of spending if compare to UK or Indonesia, countries achieved the higher National Income. So that, people there is receiving a good Living standard when the Government concentrated on Education and people doesn’t worry about their health services.
In Asia, Pakistan has the National Income at 77.6 million dollars – which is 2 times lower than Indonesia. But Pakistan has a great achievement of technique in production. With the level of productivity at 4 690 dollars per capita, the low level of energy per capita, which was at 454 kg of oil equivalent, Pakistan could save a lot of money from solving negative externality caused by pollution, or the money they saved from production by using efficiency resources is really considerable to distribute to other sectors in the country such as health care or education.
In Europe, the UK can be an example to show that living standard doesn’t just rely on the National Income. UK has the high level of National Income, which is 1 680.1 million dollars, but it has to face with a lot of problem as well. The old population of UK is now the difficult question for the government when there was the slow growth from 1990 – 2003 was at 0.2 %, and the percentage of population aged +65 was 16 % - the highest level among 10 countries surveyed. In the other hand, British people in some aspects are having the higher living standard if compare with the USA – which has the highest level of National Income. The contribution to the high living standard of UK is the high level of spending of the government on education and health care services. The communications of UK is good as well when the statistics in telephone mainlines, telephone per 1000 people or Internet users is always at the high level.

Who else gained from the recession ?

2009-01-28T02:48:00.002Z

We are now living at the really excited time. All of the banks in the UK are now having the financial crisis, at the same time. This is the situation that has ever never been in history. The recession is soaring and seems to be unpredicted about the end. People’s confidence and expectation about the economy is falling to the lowest point. Investors are now withdrawing away from the economy.

But it’s not hopeless about getting advantage from the situation. I think that, people who are flexible in market share prices and have little bit lucky, can earn a lot of money. Let’s take a simple example in real life. Most of us tend to buy more, or just buy things when the prices of them are at the lowest. You often buy clothes after Christmas, when the prices are discounted into 70%. It’s same with the share prices. When the business is not doing well, investor’s confidence is low, then they will withdraw their money and massively sell it. And when the prices of shares become cheap, it’s now the time for people to make the choice. In my opinion, company which has big affect on the economy is a good choice, because the government might not let the company go into bankrupt due to its strongly effect. An example is the AIG in America. When the price of share of AIG reaches its warning low point, the supply of shares of AIG was increase very fast while people expected the continuous falling in its share price. But finally, the American saved this company and this company turned over the difficult time to reach the growth after that. So a lot of people were profited by buying shares at the right time.

Why is the pound falling ?

2009-01-26T03:03:00.000Z

Firstly, I agree that the falling of the Sterling is most caused by the recession in UK now. To deal with the fall in consumer and investor confidence, the MPC has been dropping the rates of interest to the lowest level that we’ve ever seen before, with the aim of pumping cash into the flow of credit in the market. As we know that the interest rate influences the exchange rate because it influences the demand and supply of currencies on the foreign exchange. By cutting interest rates, the immediate result received is the withdrawing of foreign currencies away from the market. Traders tend to move from one currency to another to take advantage of price movements or take advantage of better return in other countries. It leads to the increase in the demand for foreign currency such as Euro and Dollar and the Supply of Sterling increases as well. Therefore, the value of Sterling falls.

With the low exchange rates, UK traders can decline the Trade deficit because of the increase in competiveness in foreign market when the price of exports becomes cheaper. But it might be a bad effect to the economy when the cost-push inflation occurs due to the rise in import prices.

The prices in house market can increase when the interest rates is set low. But it can’t be true for the UK economy in this circumstance. The world house market just experienced big failure leads to the recession spread over many economies and caused the fear of investors about another crisis in this market. So that now, even with the low interest rates that can make them easier to enter this market but with lack of confidence, they will tend to invest on production which is now strongly supported and encouraged by the government.

Measuring the National Income

2009-01-23T02:57:00.001Z

How best to fight the recession?

2009-01-21T05:06:00.000Z

While the cutting of interest rates into 2.5% last three months seems to be not efficiency to the recovery of the economy, now government is considering whether there will be a continuous cut. The main purpose of the government to boost up the economy now is to increase the consumption, investigation and production in the economy. So that, the government expected that with the low interest rates will lead to the rise in the flow of credit by borrowing money and then, boost the economy to go up again. But the debate about which parallel of rates is enough is now a hot topic for economists. Three members of The Times Monetary Policy Committee are calling for a cut into 1 percent, drastic cut over 3 months and this is a level not reached since 1694. But this idea is argued by other members while the large cut last three months just lead to a little effect on the economy. They assumed that increasing the flow of credit can be solved without cutting more rates by issuing a new policy to force banks to lend money with state guarantee. This suggestion reached into the crux problem of the economy because now there is a lending drought that leads to the loss of confidence of many parts in the economy. Mr Pennant-Rea,former Bank Deputy Governor, agreed. “The best option is for the Government to guarantee bank loans, for specified purposes and for a limited period. It is high time the monetary debate concentrated on the banks.

2008-12-13T19:04:00.004Z

Today i just listened to 1 podcast in Radio Economic. It was a really long podcast with 40mins talk
I kept reading the economic OCR book to make me dont forget and practising english as well. I ll do the Chrismars revision from tomorow after I print it out
Hehe i found that i m really interesting in history, i read a lot of article about my city in the past - Saigon, but now it changed its name into Ho Chi Minh City. I didnt know how beautiful was it...
Ah i found a picture of my school might be taken 50 years ago too, just little bit different compare to now...hehe

I ll go to sleep now, but before it.. hehe .... here is a really famous and lovely song of Vietnamese people ^^

30D left...

2008-12-12T15:15:00.002Z

I got a bad sick again today, so terrible .... I just listen to 2 podcasts and i just understand may be 30 > 40 % of each. Its really really hard to understand for me. Mr Chris, is it hard because it s talking about business and i dont study it, is it better to listen to radio of BBC ?
Ah.. I read 2 article in free english course as well. ... Im so tired now, i ll go to sleep, gud night every one

33 days left ...

2008-12-10T16:13:00.002Z

I just recovered from illness ... I was really sick because of cat's fur and the weather ....., Time past so fast, hopfully that its not so late for me to start today.
Today i finished 2 mock exams of math, now i wont scare about logarithm anymore hehe. And i has done 1 mock exam as well. Mr Chris can you give me a site to download the mock exam and mark scheme ?
I learnt by heart all of the definitions of Unit 1.
This week is a terrible week to me, I lost lots of files and i dont know where is it now, I ll come to lex'house tomorow to borrow him all of his file to copy ...

Before math test ... hehe

2008-11-26T23:11:00.008Z

Work of monitor peter hehehe ....

So logical ....

more ...

Good idea >>

and ...

When u get stock ...

Article : Business reaction

2008-11-26T22:43:00.002Z

The article : Taxes of envy don't add up: Darling's squeezing of the rich will drag us back to the 1970s

2008-11-26T21:21:00.002Z

From the Article : ECONOMY: The growth that simply vanished - and now Labour will drive national debt to more than £1trillion

2008-11-26T16:30:00.001Z

Re-budget report

2008-11-26T13:01:00.004Z

George Osborne, the shadow chancellor, has accused the Government of "the greatest failure in public policy for a generation" in its management of the economy.

Anthony Grayling in Bombing Civilians in Wartime

2008-11-17T02:40:00.003Z

Anthony Grayling argues that bombing civilians in Dresden and other German cities in the Second World War was morally wrong.....

Why is in history, the bombing of allies on German cities such as Dressen, that killed thousands of innocents has been largely forgotten. Or how many students nowadays know that the total people who killed by the bombing in Tokyo is higher than the morality from Nagasaki and Hiroshima?. These immoral bombing is hidden behind the reason that the bombing on civilians was an important part to contributeto the victory. Or at least, the explanation is that no war doesn’t have the sacrifices.

He contributed to his argument by showing evidence that how shameful are RAF and USAAF chose population areas to bomb instead of military facilities and building such as rail ways or camps. He also gave the idea that bombing in civilians areas is not efficient. He mentioned that the total products of the Germans were still increasing even though the amount of bombs drop on their cities raised by years. Bombing not only was a part of strategy of making the Germans became weaker , but also for the reason that the Germans had to be punished by their culture and their aggression.

Especially, he compared the bombing of USAF on Japan with the terrorism event 11th of September. His opinion is that, the terrorist attacked in 11th September is the same aimed with massacre civilians in World War II bombing by terrorising the rest of the survival population. He didn’t refuse that the bombing in WWII was an attack in a declare war, but anyways, both of them don’t alternate in complexion of moral.

About the article...

2008-11-14T02:29:00.002Z

Long term cures must wait...
In the situation that all the economy in the world is in a serious sick condition, I agree with this statement for the UK economy. When there is a stock to solve a problem, people start to impute the blame to other people, in this case are Mr King, Mr Brown, Alistair Darling...Policies of the government cannot be useful due to the lacking in unifying policies between countries. Looking back to the past, when the Great Recession occur in 1929 in New York, each countries they had their own solution for dealing with this problem. And finally, all of them were falling down together. This is the lesson for this recession nowadays.

Each single action of UK likes keep cutting tax and interest rates seems to be not efficient. By cutting tax and interest rate, it may stimulate the consumer to borrow money to invest, boost the whole economy. But we have to know the situation of the economy now; investing in everything is riskier than keep money in a safe bank, even though the low interest rates. The price of house market is falling down, otherwise price of material for producing is rising, and spending money on investing may be not a good idea. The problem now is to break down the grid-lock situation between banks of countries, which made the economies become stock. All of us now are hoping for a negotiation which will provide corporately efficient solutions of countries together.

Public goods and Private goods

2008-11-10T17:53:00.000Z

Inflation and Deflation

2008-11-07T03:18:00.001Z

Producer Surplus & Positive externality

2008-11-04T19:40:00.003Z

Consumer Spending

2008-11-02T17:09:00.003Z

International Trade

2008-10-30T00:17:00.001Z

Economic Cycle

2008-10-29T22:18:00.002Z

Unemployment

2008-10-29T04:49:00.003Z

Economies and Disecnomies of Scale

2008-10-29T02:43:00.004Z

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

2008-10-28T03:18:00.002Z

Economic Growth and Development

2008-10-28T00:38:00.001Z

Combining of Information Failure, Poverty, and Factor Immobility

2008-10-24T01:53:00.002+01:00

Market Failure and Government Failure

2008-10-23T02:33:00.004+01:00

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

2008-10-23T01:08:00.003+01:00

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

2008-10-23T00:46:00.004+01:00

Buffer Stock

2008-10-22T03:48:00.002+01:00

Minimum Prices

2008-10-22T03:24:00.002+01:00

Aggregate Demand

2008-10-22T00:31:00.003+01:00

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

2008-10-20T01:08:00.004+01:00

Smoking ...

2008-10-19T22:32:00.007+01:00

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 ......

2008-10-19T02:59:00.005+01:00

-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

2008-10-14T23:16:00.005+01:00

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

2008-10-14T13:05:00.004+01:00

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

2008-10-12T23:25:00.002+01:00

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

2008-10-08T23:15:00.002+01:00

(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 ?

2008-10-06T23:07:00.002+01:00

-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. ?

2008-10-02T23:38:00.004+01:00

(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 ?

2008-10-02T00:54:00.003+01:00

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

2008-10-02T00:23:00.002+01:00

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.

How can justify a right salary cap ??

2008-09-26T00:34:00.002+01:00

In professional sport, the effective of clubs depend on the salary cap of them. If your salary cap is high, so that you will have more money to buy good players, and with high salary, players of your club will be sastified, they will play better. But do not many clubs have a lucky like Chelsea football club, the club has a boss - Roman Abramovich - who doesn't care about the salary cap. Most of manager must think how to use the salary cap effectively. One of the popular way for solve this problem is signing bonuses.

"A signing bonus incentive to join that company or sign-on bonus is a sum of money paid to a new employee by a company as an . Signing bonuses are almost exclusively only given to full-time salaried employees of a company, as opposed to a temp-hire or intern. These are often given as a way of making a compensation package more attractive to the employee e.g. if the annual salary is lower than he or she desires. It also lowers the risk to the company as it is a one-time payment: if the employee does not meet expectations, the company has not committed to a high salary. Signing bonuses are often used in professional sports, and to recruit graduate into their first jobs" . For example about the signing bonus, you are a football player, and have a 50 million pounds contract for 5 years. Let's say that the boss will give you 10 million pounds for signing bonus, which is all paid out in the first year but gets factored into the cap ( 10 million/ 5 years = 2 million per year). If we suppose that our player's contract is structured so that he has a base salary of $2-million the first year, with higher base salaries in the final two years of the contract, the 7 million (salary and signing bonus) paid out in the first year appears as 4 million to the cap.

Entry for wednesday :">

2008-09-24T23:01:00.003+01:00

Is it efficient to share a bill with your friend ? Well, i think that is rally good, at some aspects. It is good at finance for you. You are having dinner with your friend, and each people may be have same choice of food. If you and your friend order a big meal for 2 or more people, it will be cheaper, and will be have more food while using a same amount of money. More food but cheaper ... :"> .

Well, but it's sometimes hard to share bill with your friends. When you are the person that invited them to go to the restaurant, it would place you into a stranged situation, i think. Because that in western countries, pay by your self what you ate is normal, it's cultural (Is it right ? ). But in other country (Viet Nam), it will be a silence when you and your friend recieve the bill. If you say that you will pay all of this, it's okay. But if you dont say anything, you may have a small argument about who have eaten more food .... :). But anyway, in any countries, share bill is a really good way, efficient way when you go to the restaurant with friends.

Viet Nam has been ranked 1st in top ten new attractive market by UK

2008-09-23T23:07:00.007+01:00

At the newest meeting London for 2 days, from 23st to 24th September 2008, the UKTI ( .... i don't know ...) has published ten new attractive market. According to this, Viet Nam is ranked 1st in 10 country will have the fastest economic growth in the future. In UKTI report, ten countries in this ranking is : Viet Nam, Mexico, UAE, Ukraine, Indonesia, Singapore, Poland, South Africa, Argentina and Saudi Arabia. According to Lord Digby Jones - Prime Minister of Economic of UK, Viet Nam has been ranked 1 because of the amount of labour available for work, and because of the cheap cost of manufacturing a product. And with the population of 80 million people, Viet Nam becomes a big, potential market of the investors. Futhermore, the economic of Viet Nam has been approciated because of the progresson in policies of the Government.

Tuesday 23st 2008

2008-09-23T20:25:00.004+01:00

- Why does Kamikaze pilots wear helmlet ??

-------------------------------------------------

First time look at this question, may be you will think that is funny. Kamikaze pilots - who want to die - wear helmlet to protect them. But the helmlet doesn't have just one purpose - to protect their head. In the helmlet, it includes microphone, air glasses, oxygen pipe to make the pilot not be unconscious, help them attack the target successfully. The purpose of the kamikaze attack is not killing themself, it is killing enemy, so it is obvilious that kamikaze pilots wear helmlet

MindMaps of Trade, Unemployment, Inflation and Economic Growth

2008-09-22T21:10:00.005+01:00

Sunday Sept 14th

2008-09-14T13:14:00.000+01:00

I'm having a problem with the relationship between export, import, exchange rate and goverment expendature. I know that if the exchange rate increase >> Export increase >> Import decrease ... But I don't understand exactly why . Can some one explain for me