Priyanka's Econ Blog

H1N1 November 25, 2009

Filed under: Section 2 — priyanka821 @ 3:56 am

The state of Wilkes is trying to distribute their H1N1 vaccines through priority of people as the supply is limited. Apparently, supply meets demand in Wilkes.

“The target groups are pregnant women, people between 6 months and 24 years old, people who live with or care for children younger than 6 months, people 25 to 64 with medical conditions that put them at higher risk for influenza complications and health care and emergency medical services personnel (Wilkes, 2009).”

As the flu season is coming along, a huge part of the population will demand the vaccination to stay immune from it. Will Wilkes be able to keep up with the demand?

The Demand for H1N1 Vaccines due to Global Pandemic

As the pandemic hits the world, more people will require the vaccine. However, the vaccine is limited in supply. As the season continues, the demand may exceed the supply. The supply is rather inelastic, implying that people will be willing to pay high prices. D1 shows the increase in demand leading to a new increased price (P1). This settles the equilibrium at at E2.

 

India and China Say “Cheese”

Filed under: Section 2 — priyanka821 @ 12:20 am

Until a year ago, milk and cheese prices were soaring world wide. A rapid economic growth in China and India drove up commodity prices which included milk based products. But, just as growth flourished, the recession hit and milk prices have fallen more than 18% since. With rising prices for fuel and cattle feed, many farms are either making a loss or quitting the industry. The market forces should drive prices up again in Europe and the U.S. but how long will it take for this recovery?

As we can see here, As India and China experienced a rapid growth their populations demanded more of dairy and milk products shifting the demand curve from D to D1. This drove the commodity price of milk higher, from P to P1 and the quantity demanded increased from Q to Q1. Due to higher price and increase in demand, the equilibrium price changed from E to E1. However due to the recession the price of milk decreased.

The Demand of Milk and Dairy products due to Recession

Because of the world wide recession, the demand for milk and dairy products have dropped dramatically. The demand curve has shifted to the left from D to D1. This causes the the quantity demanded to move from Q to Q1 and the price to drop form P to P1. The equilibrium moved from E to E1, and lowered the price of milk and dairy products.

commodity price: Price of raw materials.

For more information:

Sloman Economics: Milk and Dairy

 

Charlie and the Cadbury Factory November 11, 2009

Filed under: Section 2 — priyanka821 @ 12:28 am

cadbury

Chocolate is known to create love. Sugar rush, sweet tooth and the release of endorphins are just some of chocolate’s irresistible aspects. Earlier this week, American company, Kraft bid a price of British chocolate-giant, Cadbury. The results were hostile as Kraft offered  300p in cash and 0.2589 Kraft shares for every Cadbury share. Cadbury regarded this offer as “derisory”. Not only was the offer inadequate, the American idea of chocolate does not suit the British palate. Kraft retorted by stating that, if the price has changed a little, the response of Cadbury’s board has not altered one jot.

“Kraft said its offer was pitched at an enterprise value of 13.9 times Cadbury’s underlying ebitda (earnings before interest, taxes, depreciation, and amortization), noting that Cadbury paid 12.8 times historical ebidta when it bought the Adams chewing gum business in 2002.”

British stake holders expect a higher stake, at least 800p a share. That will get the British stake holder’s endorphins running…

CITATION:

CNN

The Economist

 

Bread Wars November 6, 2009

Filed under: Uncategorized — priyanka821 @ 2:56 am

The demand for bread in the UK is quite price elastic. Although the demand has decreased for Hovis bread, prices are very likely to increase due to increase wheat prices because of inflation.”The troubled food group admitted that Hovis was losing the bread wars with fierce rivals Warbutons and Kingsmill as all three battle unprecedented cost inflation in the market fuelled by spiralling wheat prices (Premier Food, McLaughn).” Since the consumers are sensitive to a price change in bread, demand for bread is a price elastic.

bread2(1)

“This differential in retail prices led to a significant decline in volumes.”

The comments came as Premier plunged into the red, halved its dividend and raised £125 million from bankers to cope with rising raw material prices and increased debt costs.

 

 

 

Dear JAL, November 4, 2009

Filed under: Section 2 — priyanka821 @ 12:23 am

JAL

As you are experiencing a $1bn debt, I would advise you to lower your seat prices and cut off some of your business class seats. This is because due to the global economic recession, less business men tend to be flying around the world and if your prices sustain being too high only your debt will grow. At this point, price is very elastic, and a drop in price would mean that you will gain more consumers. Also, I would recommend you cut many domestic flights because some routes are just useless. Though you are known for your sleeping seats and excellent service, you should cut back on these luxuries as at this point with the recession, not many people are willing to spend a fortune. The expensive bottles of wine should be reduced as this will cut in the factors of production. You have fired a lot of staff, which is also reducing the money consumed in factors of production. I would also recommend Ryanair’s technique: land somewhere close to a major city. The prices to land at the outskirts are drastically different than those of airports at major cities. Good luck :).

 

Ryanair and British Airways

Filed under: Section 2 — priyanka821 @ 12:15 am

ryanair-Irish-budget-airline

a) European air travel is price elastic. Different airlines drop their prices which attriacts consumers, and thus other airlines drop their prices too. BA increased their prices because they intend of increasing their business class, and get rid of economy seats. On the other hand, Ryanair aims to lower the price for commoners. BA sees their business class as inelastic.

b) Ryanair is Europe’s largest low-fare carrier. It has added 6 routes each year since 1991 and is use to back-packers who may find British Airways too expensive. Ryanair lands in outskirts of major cities, making the prices for landing cheap, and convenient for travelers as there are buses and trains meet each flight. Ryanair only needs two flight attendants in its Boeing 737, which minimizes service cost. Also as Ryanair flights land at less congested airports, the flight can be back in the air withing 35 minutes letting each aircraft make two more flights each day, therefore allowing more trips each day with the same amount of flights.

c) Ryanair can offer below 10 pounds because when the prices are low the demand will increase drastically. They can maximize their revenue by decreasing price because they will have more consumers.