Priyanka's Econ Blog

Externalities of Oil in Uganda February 18, 2010

Filed under: Uncategorized — priyanka821 @ 8:44 am

Extracting oil from the African grounds has always been a subject of controversy. Just recently, Tullow Oil, a Britain based oil firm has made a “secret” deal with the government. But what are the externalizes? Locals in the area are exposed to more green house gases, causing the temperature in an already hot region to rise. Furthermore, the environment is being affected by the constant extraction. The firm however, protests that the deal is standard and would ensure environmental protection. Sealing this deal may also public upheaval as rebels often fight for a fairer share in the wealth of oil for its own people, such as in Nigeria. These upheavals may lead to deaths, commotion and noise pollution, of which all are negative externalties.

The oil extraction destroys the environment and releases carbon dioxide. There is a social cost for this because (MSC>MPC). There is a loss for society as the oil is over extracted, thus even members of society who do not use the oil, experience the cost for this. Market failure would occur at point Q, where the oil is being over extracted. Q* is the optimum for oil extraction. As price goes up, according to the Law of Demand, the quantity demanded will go down, the extraction and consumption of oil will be limited.

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Monopoly Power Point February 12, 2010

Filed under: PowerPoints — priyanka821 @ 1:20 am

 

“Asians must Invest” February 11, 2010

Filed under: Section 2 — priyanka821 @ 3:03 am

Asia’s surplus has been widely blamed (unfairly) for causing the global crisis. The housing bubble was destroyed by inflows of foreign money that helped inflate the market. Many Westerners believe that Asians should spend their money rather than bank it away. But a more rigorous analysis suggests that in most Asian economies it is investment, not consumption, that is too low.

Even economists who believe that most of the blame for the crisis lies in Washington, DC, argue that Asian economies need to shift from exports and investment to consumption as their new engine of growth. “Asian economies fell from 65% of GDP in 1980 to 47% in 2008. American consumer spending, by contrast, accounts for more than 70% of GDP(Roach, 2009).” In China the blame lies entirely with saving, which rose faster than its investment rate. (India’s saving rate climbed just as steeply, but it was matched by an even bigger jump in investment, which kept its current account in deficit.)

Figure 1: Plunging Investment Rates of Asia since 1995

As seen in the figure above, the saving and investment curves correlate, yet savings are much higher than investments. Asians are scared to lose money in their market as the stock market is full of risks. The Indians in 2009  invested about 46% of their GDP, as a consequence of their steady economic growth in the past few years. Philippines, has remained low on investment, being the least investing country in 1995 and also in 2009. With more investment in markets, companies will have an opportunity to innovate more with better resources and create useful products. With useful products, consumer demand will increase and the global economy could be stimulated again.

current account surplus: Equal to country’s domestic saving minus its domestic investment.

 

Monopoly Presentation Reflection February 10, 2010

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

Our group did a presentation on Monopoly and it went well. Dalia, one of our group members, was missing, but we did a good job of covering it up. Next time when doing a presentation, I want to try to explain the graphs and how it works. Also, next time we should explain our product more. We declared that monopoly was best for the company, but we did not discuss what is best for the community. I think it would be more effective if we split the talking time equally between all speakers instead of only Irfani talking.

 

My Voice Threads

Filed under: My Voice Threads — priyanka821 @ 12:00 am

1. Monopoly

2. Extension of Property Rights

3. Best Economy in the World

 

MINT theatre February 5, 2010

Filed under: Section 2 — priyanka821 @ 3:39 am

At MINT theater in Sannomiya, a child pays 1,000 yen, a high schooler pays 1,500 yen, and an adult pays 1,800 to watch the same movie. This is an example of price discrimination. This may be due to the fact that with a child, is usually accompanied with an adult, thus the theatre makes 2,800 yen.

“Price discrimination or yield management occurs when a firm charges a different price to different groups of consumers for an identical good or service, for reasons not associated with costs (Riley, 2006).”

Price discrimination is a common form of a strategy that businesses use to increase revenue. They can target specific  age, nationality, income, sex and etc. Price discrimination is an extremely common type of pricing strategy operated by virtually every business with some discretionary pricing power. It is a classic part of price competition between firms seeking a market advantage or to protect an established market position.

Price discrimination is effective because the demand for a product varies within different consumer groups. The group that has a more inelastic demand for a certain product is likely to be charged higher for the product. For example, MINT theater charges a higher price to adults as they have a higher income and their demand for movie tickets will be rather inelastic. However, a high school student with a part time job, who has a lower income will have a more elastic demand for movie tickets in relation to price. If MINT theater does not give them a lower price, they will not come to the movies as often, and MINT theater will be losing revenue. Through price discriminating, there is always a supplementary profit made. However, the big question is whether or not is fair.

For more information visit:

Price Discrimination