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PED at Price Club November 29, 2009

Posted by Avu in Section 2, The Economist Outside of Class.
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This is a handsome Korean boy at Price Club

This is a handsome Korean boy at Price Club

Earlier today I had the pleasure of spending an afternoon with two handsome young Korean boys as we went to Price Club to buy some treats. Price Club is, for those that don’t know, a small shop on the east end of the island which predominantly deals in foreign goods. These goods are mostly food and drink, and almost all from the United States. Among the goods included are Wonka bars, Old El Paso, and Thansgiving treats. To the point however, three young men enter this store looking to buy chocolate and soda. We are all students at Canadian Academy, from relatively affluent families, seeking to buy chocolate and soda for no reason other than our own personal enjoyment. So, in other words, these are luxury goods, and not necessities, as we are not purchasing this food for needed nourishment. Needless to say we can live without these goods, however delicious they may be. We came across Wonka “Whipple Scrumptious Caramel Delight” chocolate bars and, reminiscing on better days when our parents would buy these for us, we were in the mood to purchase some. The bars were priced at 525 yen for normal shoppers and at 500 yen for Price Club card carryers. With this price tag, one handsome young Korean boy misread it and said happily, “At 500 yen I will buy 3 bars!” Upon the realization of his mistake, he was taken in with shock. At 500 yen, he was willing and able to purchase 3 bars. At 525 yen, he was still able to buy 3 bars, but he was not willing to. He was not even willing to buy two bars. At 525, this hansome young Korean boy bought one chocolate. This shows just how elastic the market is. Since he does not need, but simply wants the bar, his demand is going to be more driven by price than any other consideration. Of course, this is not necessarily a change in price, not at all, but psychologically the price has increased by 25 yen for our handsome young Korean boy.

Upon the "shift" in price, quantity changes dramtically

After eating a third of the chocolate bar, the handsome young Korean boy announced that he is suffering from diminishing marginal utility with each bite, but that’s another story for another time.

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The Bronx Zoo Needs Gentrification… Seriously November 27, 2009

Posted by Avu in Section 2, The Economist Outside of Class.
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Charlotte Street, part of the Bronx, one of the most violent, poor, and dangerous areas in the United States. The tenants in the late 20th century would aggressively commit arson to try and receive reparations and perhaps a new home. Landowners were hardly forgiving. Buildings would shut down abruptly, with homeowners being offered little advice other than “move to Queens”. This has improved lately, with a homeowners association reselling houses at about 50,000 dollars, inviting a larger market, and over time driving the prices up. At this time, a relatively large amount of real estate, quite functional for a single nuclear family, sells for 500 grand. Across the river in Manhattan, a person would pay the same for a studio apartment the size of a closet. As time went by, 92 more houses were constructed in the area, inviting more and more people. The secret was financial stimulus from the city, organizations, and generous donators. The basic price was less than half of that of construction, providing reasonable accomadations for less affluent folk. However, Charlotte Street’s real triumph was their screening process. Only buyers with a high credit score could buy, and they had to go through house ownership counseling among other requisites to be considered acceptable buyers. Now comes the next step. Complete gentrification of this Bronx neighbourhood. Because of its success in an age of debacles, its pretentious historical value could attract more pretentious millionaire trust fund babies who are sick of the bustle and hustle and Manhattan and would prefer to live in a quaint little slum in the Bronx. This is after gentrification of course, we can’t have rich white kids living in reasonable housing, they need McMansions. All sarcasm aside, gentrification of the Bronx would create huge investment potential. While it may, potentially, and of course tragically, leave some homeless, but the cash flow of course forgives this. Profit is of course more important than charity.

Uniquely Massproduced – Televangelism November 18, 2009

Posted by Avu in Section 2.
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Oprah Winfrey is a beacon of hope for many reasons. First and foremost, she is a very succesful and skilled television opinion editorial presenter; she is better than anyone else in the business. Secondly, Oprah is the most fiscally successful woman in the United States, making her an icon for neofeminists and secretaries worldwide. Finally, Oprah is the most fiscally successful African-American in the United States, ahead of the like of Jay-Z and Russell Simmons, after rising from poverty and rap in a glorious tale of uplift. Oprah, with all her positive qualities is unique. There is one Oprah, despite the many similar impersonators like Tyra Banks, and therefore there is a perfectly inelastic supply of Oprah. This is different from regular people because we are ubiquitous and therefore easily replaceable.

Oprah Winfrey has a perfectly inelastic supply

The Post-Crisis Consumer November 10, 2009

Posted by Avu in Section 2, The Economist Outside of Class.
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John Gerzema is a former economic strategist for several companies such as McDonald’s, BMW, Coca-Cola, United Airlines, Holiday Inn, and other companies. He is currently a Chief Insights Officer for Young & Rubicam, understanding and anticipating changes in the world of economics. He co-wrote The Brand Bubble, a book advocating change in today’s market. He has recently delivered this very strong lecture on how consumers act nowadays that discusses the complicated world of demand.

The lecture can be found here

 

Making Bread… Literally November 9, 2009

Posted by Avu in Data Response, Section 2.
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Hovis, like other major bread distributors, has recently suffered from a surge in the price of materials to make bread, namely wheat. Because of this, it is only natural that Hovis would drive up its prices to match this, moving the curve left. However, this resulted in a huge drop in quantity demanded for several reasons.

PED: The simple drop in price was huge for Hovis because since bread is such a widely produced commodity, there are replacement items readily available, often cheaper. This contributed to an elastic demand for the product.

XED: Other breadwinners decided to wait slightly to drop their prices. Hovis wasted a lot of money on advertising campaigns and were choked up and had to sell their product. Other companies were able to minimize profit and dip into their savings to keep the price low, rewarding them with more customers and Hovis with fewer.

YED: Hovis predicted that their bread was considered a normal good, with demand dropping with the recession. What they didn’t realize is that their good is an inferior good, and the core of their market is the less wealthy. By driving up the prices, this core demographic is hurt hardest, forcing them to find new companies to buy from. Because of this, Hovis immediately loses quantity demanded.

elasticity

Demand for Hovis bread is extremely elastic

Thai Rice & Why Government Intervention is Evil November 1, 2009

Posted by Avu in Data Response, Section 2.
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Thailand has long been a staple for rice lovers worldwide with their unique and cherished Jasmine Rice. However, with a fresh harvest, supply far exceeds demand, leaving producers with a painful surplus and a hungering need to drop prices towards equilibrium. To add insult to injury, the government has oh so benevolently set a price floor to supposedly aid the farmers. Of course, the government’s inefficiency led to a high limit, preventing farmers to export their products in a competitive overseas market. The extent of the government’s flaws can be witnessed in the graph below.

Picture 2

The price floor prevents the price falling back to the equilibrium