http://www.economist.com/business/displaystory.cfm?story_id=12638642
Summary:
Recently, car industries such as GM and Chrysler are requesting loans from the government. This is a problem for both the United States and in Europe. The European government is considering giving car manufacturers €40 billion ($51 billion) in soft loans. The GM Rick Wagoner said that they need the loans fast or they may not be able to pay off their bills by the end of the year. Although Ford seems to be doing better than Chrysler and GM, chief executive Alan Mulally, predicts that Ford will also go bankrupt due to the fact that this will be a big impact on the suppliers. Some such as the European Commissioner believe that the big car producers should receive help because they are important and traditional car makers. However, Neelie Kroes (competition commissioner), believes that giving loans to these car makers will be unfair for the other car makers out there.
Chapter three connections:
This article talks about government involvement which is what chapter three is about. Even though car companies such as GM and Chrysler are privatized companies, they are still requesting money from the government to avoid bankruptcy. As a result, this will have negative third-party effects on the people that are living around the area because of the pollution caused by the cars. If the government loans the money to these companies, then it will be unfair to other competitors. On the other hand, many small car companies depend on the these three big businesses to operate. However, if the government does not loan money to them, then there are many jobs that would be lost. All in all, both choices lead to bad consequences.
Personal Comment:
Since i lived in Vancouver for all my life, i have seen many GM and Chrysler cars. Although the government should not lend money to private companies on normal circumstances, I think they should in this Situation. In my opinion, this is not just about saving the big companies, but instead it is to protect the people's jobs. Since we are in recession, I believe that the car makers should receive help to avoid going into a more serious state we are in now. I have seen commercials a few months ago that were advertising cheaper cars for about $18,000, but now they go as low as $8,000. I have never seen a new car sold for such a low price in my life time before. Also, if the companies do go bankrupt, the other car makers might not have such smooth time either because many people will lose their jobs. As a result, there will be a decline of consumers that are going to buy vehicles. Even though these three companies are American owned, there are many factories built in Canada (mostly in Ontario). As a result, these companies provide jobs for the Canadians and if these three major car companies were to close down, that will leave not only Americans unemployed, but will also leave many Canadians unemployed too.
Sunday, November 23, 2008
Monday, October 27, 2008
Chapter 2 Blog
http://www.economist.com/business/displaystory.cfm?story_id=12454133
Summary:
Earlier this year, the price of oil was very expensive and did not show any sign of lowering. As a result, 30 airline carriers have been bankrupt and more are expected to take place later on this year. But things are starting to look brighter because oil prices have recently started to drop shortly after those bankruptcies. Therefore, the beginning of this gloomy event for airlines ended up being an advantage for airline companies to make profit. Now, many old planes are being replaced with more fuel efficient ones.
Chapter Two Connections: Supply and Demand:
This article made a connection with chapter two’s supply and demand concept. When the price of oil was high, many airline companies were making very little profit or in some cases, losing money. This is in fact a supply problem rather than a demand one because the supply of oil went up so there are more tickets supplied. Another reason this is a supply question is because the cost of oil is so much that the airline companies are forced to either charge their customer to pay for fuel surcharges and have less sales or charge the tickets regular price for more sales. If they decide to charge the consumers more, this would move the supply curve to the left because there would be less tickets sold due to the increase in price. However, not charging the consumer would move the supply curve the the right because less there would be more tickets sold at a lower price. Since this is a luxury for most people. this is elastic. Although you may think that it is a necessity for all business people to take the plane, it really is not because the CEOs make the decision of travelling to somewhere else when they really do not need to. The bottomline is that it is not a necessity for the majority of the people.
Personal Reflection:
I agree that building fuel-efficient airplanes could make airline tickets more inexpensive; therefore, creating more of a demand of airline tickets. However, the oil prices right now are fluctuating quite a bit and may rise at anytime. Therefore, by the time they build their airplanes, the oil prices may be as high as before (especially in the current recession). As a result, the demand for airline tickets may be very low if the price of oil shoots up. If I were in their positions, I would wait until the price of oil settles before proceeding in constructing fuel-efficient planes. However, it is possible that airline companies are demanding for fuel efficient planes to be built or they would buy the used planes from the bankrupt companies. In order for the manufacturers to stay in business, they must build the fuel effcient planes. Since there are about 40000 workers working for this company, they must do as the airline companies say or all those jobs may start to decrease. Although this may not be true, there is a high possibility.
Summary:
Earlier this year, the price of oil was very expensive and did not show any sign of lowering. As a result, 30 airline carriers have been bankrupt and more are expected to take place later on this year. But things are starting to look brighter because oil prices have recently started to drop shortly after those bankruptcies. Therefore, the beginning of this gloomy event for airlines ended up being an advantage for airline companies to make profit. Now, many old planes are being replaced with more fuel efficient ones.
Chapter Two Connections: Supply and Demand:
This article made a connection with chapter two’s supply and demand concept. When the price of oil was high, many airline companies were making very little profit or in some cases, losing money. This is in fact a supply problem rather than a demand one because the supply of oil went up so there are more tickets supplied. Another reason this is a supply question is because the cost of oil is so much that the airline companies are forced to either charge their customer to pay for fuel surcharges and have less sales or charge the tickets regular price for more sales. If they decide to charge the consumers more, this would move the supply curve to the left because there would be less tickets sold due to the increase in price. However, not charging the consumer would move the supply curve the the right because less there would be more tickets sold at a lower price. Since this is a luxury for most people. this is elastic. Although you may think that it is a necessity for all business people to take the plane, it really is not because the CEOs make the decision of travelling to somewhere else when they really do not need to. The bottomline is that it is not a necessity for the majority of the people.
Personal Reflection:
I agree that building fuel-efficient airplanes could make airline tickets more inexpensive; therefore, creating more of a demand of airline tickets. However, the oil prices right now are fluctuating quite a bit and may rise at anytime. Therefore, by the time they build their airplanes, the oil prices may be as high as before (especially in the current recession). As a result, the demand for airline tickets may be very low if the price of oil shoots up. If I were in their positions, I would wait until the price of oil settles before proceeding in constructing fuel-efficient planes. However, it is possible that airline companies are demanding for fuel efficient planes to be built or they would buy the used planes from the bankrupt companies. In order for the manufacturers to stay in business, they must build the fuel effcient planes. Since there are about 40000 workers working for this company, they must do as the airline companies say or all those jobs may start to decrease. Although this may not be true, there is a high possibility.
Thursday, September 25, 2008
Economics 12: Chapter 1 Scarcity and Opportunity Costs
http://www.economist.com/business/displaystory.cfm?story_id=11966993
Summary:
As people worry about the shortage of oil, they do not realize that water supplies around the world have a more serious problem. Unlike oil, water cannot be substituted by something else. As a matter of fact, some think that water is too low-priced. Statistics show that water usage has been doubling every 20 years. Out of all the activities that take place, consumption of water is used by agricultural activities. The quality of the water is just as important as the amount. As a result, many companies such as Dow have reduced their usage of water by 29% from 1997 to 2006. Countries such as Beijing have made goals to clean up the polluted wastewater by 2010. Overall, many countries and companies strived to keep the usage of water to a limit.
Chapter One Connections: Scarcity
Many people in the article have thought of water as a resource that would not deplete, but water is actually beginning to become scarcer. This connects to chapter one because scarcity is one the two major topics in the chapter. When a resource becomes scarce, we try to find a replacement for it. However, there is no substitution for water. Since there is no replacement for water, countries started to clean the wastewater. Thus, it is like finding another replacement for water. Since this is becoming a major issue, companies in China have started to cut back on the use of water. However, Canadians have not decreased their use if water, but instead increased it. A decade ago, Canadians used 49,683,984,000 litres a year which is two times more than the Europeans. Now, Canadians increased the usage of water to about 25% more which is about 25,000,000,000 litres a year. If China and other parts of the world can decrease the amount of water they use, why can't we? As a matter of fact, people are starting to question about the price of water. Since it is said that when a resource is more scarce, the price of the item should go up. However, it is not happening. The goal everyone has right now is to make water less scarce by using it wisely.
Personal Reflection:
Vancouver is known for its heavy rainfall it gets each year. Eversince i was born, I have lived in Vancouver and I have never thought that water would become scarce because of the abundant rain we get. In my opinion, it is human nature to use all the resources that are available to us. We just take what we have for granted and do not realize we are actually using more than we need. Many people in the world have enough water just to survive while people like myself do not realize the waste of water until the problem surfaces. After reading this article, I am convinced that the world has a major problem with the scarcity of water; therefore, I am going to reduce the amount of water I use when it is necessary.
Summary:
As people worry about the shortage of oil, they do not realize that water supplies around the world have a more serious problem. Unlike oil, water cannot be substituted by something else. As a matter of fact, some think that water is too low-priced. Statistics show that water usage has been doubling every 20 years. Out of all the activities that take place, consumption of water is used by agricultural activities. The quality of the water is just as important as the amount. As a result, many companies such as Dow have reduced their usage of water by 29% from 1997 to 2006. Countries such as Beijing have made goals to clean up the polluted wastewater by 2010. Overall, many countries and companies strived to keep the usage of water to a limit.
Chapter One Connections: Scarcity
Many people in the article have thought of water as a resource that would not deplete, but water is actually beginning to become scarcer. This connects to chapter one because scarcity is one the two major topics in the chapter. When a resource becomes scarce, we try to find a replacement for it. However, there is no substitution for water. Since there is no replacement for water, countries started to clean the wastewater. Thus, it is like finding another replacement for water. Since this is becoming a major issue, companies in China have started to cut back on the use of water. However, Canadians have not decreased their use if water, but instead increased it. A decade ago, Canadians used 49,683,984,000 litres a year which is two times more than the Europeans. Now, Canadians increased the usage of water to about 25% more which is about 25,000,000,000 litres a year. If China and other parts of the world can decrease the amount of water they use, why can't we? As a matter of fact, people are starting to question about the price of water. Since it is said that when a resource is more scarce, the price of the item should go up. However, it is not happening. The goal everyone has right now is to make water less scarce by using it wisely.
Personal Reflection:
Vancouver is known for its heavy rainfall it gets each year. Eversince i was born, I have lived in Vancouver and I have never thought that water would become scarce because of the abundant rain we get. In my opinion, it is human nature to use all the resources that are available to us. We just take what we have for granted and do not realize we are actually using more than we need. Many people in the world have enough water just to survive while people like myself do not realize the waste of water until the problem surfaces. After reading this article, I am convinced that the world has a major problem with the scarcity of water; therefore, I am going to reduce the amount of water I use when it is necessary.
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