Scarcity

Scarcity

    The idea at the core of economics is that “there is no free lunch”. Sacrifices that are made in order to have one thing compare to the other ones are called opportunity cost by economists. To obtain more of one thing, society forgoes the opportunity of getting the next best thing. That sacrifice is the opportunity cost of the choice.

    The Egyptians is deprived of water. The waters are mainly consumed by domestic consumption in local houses and Egypt’s pressing need to feed their overrated population through the expansion and irrigation of the country’s farmland with the same or lesser amount of water. They have to sacrifice "water" for domestic consumption. This is call scarcity. In order to overcome this problem, the government has to build a canal for plantation. However, most of the Egyptians do not realize that their country is facing a lot of water issues. 

written by: Au Yang Zheng 0315388

reference: http://www.globalpost.com/dispatch/news/regions/middle-east/egypt/120406/could-egypt-run-out-water-2025

Elasticity : Everyone LOVES Oil

Elasticity

Everyone LOVES Oil

"Price elasticity" is a measure of how people react to rising prices. A high number means they cut back sharply when prices rise while a low number means they just suck it up and keep buying. So what's the elasticity of oil prices? This is important, because it tells us, for example, how people react to higher taxes on gasoline.

WHAT WOULD THEY DO?
Will they use less and find other ways to get around? Or keep burning the stuff and figure out other sources to cut back?

Oil falls under necessities. Oil has few substitutes, an inelastic factor, a longer time period for adjustment, an elastic factor, and depending on income it can be a cheap good or an expensive good.The factors for a product to have inelastic demand curve is usually fewer substitutes, the product is considered a necessity, it has a short time period for adjustment, and is a cheaper good relative to income.

Few substitutes for oil and gasoline exist, and as such, demand for these goods is relatively inelastic.  Low price elastic demand is commonly associated with "necessities," although there are many more reasons a good or service may have inelastic demand other than the fact that consumers may "need" it.








 

Stuart Staniford draws our attention to the latest estimates from the IMF, and as he says, they're pretty eye popping. Here's the table:

 

 

 

Take a look at the bottom row. "Non-OECD" means poor countries, and the IMF figures that short-term price elasticity in poor countries is -0.007. This means that a 1% increase in price leads to only a 0.007% decrease in consumption. Put another way, even a 50% increase in price leads to only a negligible 0.35% decrease in consumption. Long-term elasticity is higher, but even here a 50% price hike would lead to only a 1.8% decrease in consumption.

 

 (Source :http://www.motherjones.com/kevin-drum/2011/04/raw-data-everyone-loves-oil)

 Written by : Ng Pui Yan 0313660

Fast-food chain are compete with each other-- MONOPOLISTIC COPETITION

Fast-food chain- Monopolistic Competition

        According to the survey released by Consumer Reports, McDonald’s Corp, Burger King, KFC and Taco Bell are the biggest US fast-food chains, but they lag smaller rivals like In-N-Out Burger and Chick-fil-A when it comes to taste.  All of these fast-food chains are going to compete with one another in order to get demand from the consumers. They are trying to differentiate themselves in terms of promotion, services, products attribution, brand names and packaging. The competition among these fast-food restaurants is known as monopolistic competition.

     Unlike perfect competition, in order to seek maximizing profit, the monopolistically competitive firms should juggle three factors:

-           Price

-          Product

-            Advertising

     More than of the survey participants said that they preferred to go to the fast food restaurant with a lower price. Therefore, there are many fast food restaurant are doing promotion. Besides, let us take an example, McDonald is doing advertising everywhere to attract customer or to inform the consumer about a product. Besides, each firm should have a product that is distinguishable in some way from those of the other products.  

     Although product differentiation and advertising will add to the firm’s cost, they also increase the demand for its products. When demand increases by more than enough to compensate for the added cost, the firm is earning profits [TR> TC, AR> ATC].

[article from: http://www.themalaysianinsider.com/features/article/big-fast-food-chains-lag-rivals-in-taste/]

written by Yoon Jing Wei 0315416

Natural Monopoly

Water supply- NATURAL MONOPOLY

         The Selangor Government will have to pay RM17 million in compensation to Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) when it starts giving free water in June, 2007.  The compensation was based on the 20 cubic metres of free water or RM11.40 monthly to be given to 1.5 million consumers in the state. Therefore, the people need not pay RM11.40 in water bills. We can say that Syarikat Bekalan Air Selangor Sdn. Bhd. (SYABAS) is one of the monopoly firms in Malaysia because it is the only firm which supply water to the resident in Selangor.

           Since supply of water requires high fixed or start-up costs to operate the business, so it is known as a market structure called natural monopoly.  Natural monopolies are common in markets for ‘essential services’ that require an expensive infrastructure to deliver the good or service, such as in the cases of water supply, electricity, and gas, and other industries known as public utilities. Government tend to nationalise or regulate these firms because there is the potential to utilize monopoly power and to ensure that consumers get a fair deal. Therefore, the government give compensation to SYABAS to ensure that people are not suffer for the water bills. In this way, society can benefit from having natural monopolies because having multiple firms operating in such an industry is economically inefficient.

resources:
          - http://www.themalaysianinsider.com/malaysia/article/Free-water-will-cost-Selangor-RM17m-a-month-says-ex-MB/]

        - http://www.investopedia.com/terms/n/natural_monopoly.asp

        - http://www.economicsonline.co.uk/Business_economics/Natural_monopolies.html 

written by: Yoon Jing Wei 0315416