The article
http://www.freep.com/article/20081122/BUSINESS01/81122047/1014
Summary
General Motors has reviewed the possibility of bankruptcy. GM basically said to themselves - No! We cannot be bankrupt, it is not an option! Their plan is to receive a share of $25-billion low-cost loan from the government to survive the economic downturn. They argued that consumers are unlikely to purchase vehicles from an automaker in bankruptcy. The congressional leaders said, "if the plans are convincing, they would hold more hearings on a domestic auto loan bailout program."
Connections
General Motors is a privately owned company. It is not owned by the government in any way and now they are requesting money from the government. The 3rd party effects in this case are society as a whole. If GM goes bankrupt, many, many people will be laid off. This is related to Economic stabilization because if GM gets more money, they may get people spending again, which "hopefully" leads to a stabilized economy. On the other hand, if they don't help GM and GM declares bankruptcy, we may fall from a recession to a depression. This is indirectly related to the government because the government absolutely does not want people to be laid off. So adjustments or loans can fix things. This benefits population as a whole, but it will charge people revenue (more tax) for the adjustment. The government wants to get involved in this market (automobiles) because of the economic downturn and in this case, it fits into the "Possible shortcomings of the Free-market System." category.
Reflection
General Motors is not the only company that will fall if the government doesn't step in. Ford and Chrysler is also in the same position. These privately owned companies have possible shortcomings and if these companies survive, it is a positive 3rd party demand since people will have jobs, higher incomes, and a better economy. The government even considering to help privately owned companies is a good thing for the economy. I guess the government will have to adjust their spending's and tax policies to help the economic condition.
Thursday, November 20, 2008
Monday, October 27, 2008
Chapter 2: Supply and Demand and Elasticity and Inelasticity and speculators and revenues and ... cigarettes.
News article:
Summary
This news article talks about a price increase in cigarettes in order to finance public wage increases. Brands such as Marlboro and Rothmands will be increased in the price but the question was, will it affect people? They are predicting that the price movements won't affect people since the demand of the cigarettes are not affected due to it being inelastic. Since the smokers are addicted and smoke as a habit, they will learn to accept the price change. The revenues for the company will be higher for the tobacco industries.
Connections
The obvious connection in this article is the inelasticity of the cigarettes. People who are addicted to cigarettes won't care if the cigarettes price increases. Although the cigarettes may not seem like a neccessity, to some it may be. The demand of the product will slightly decrease. People will "try" to quit, or decrease the amount of cigarettes smoked in a day. The companies will be able to produce more cigarettes with more money, but they will have the same amount of consumers. The same can be said for things like alcohol and drugs or any addictive product.
Personal Reflection
Smoking is horrible. The government did a good thing by increasing the price in the cigarettes. Adding a government regulation will decrease the amount of smokers, but unfortunately, according to this article, the cigarettes became a neccesity and it is inelastic. The government should offer more things like a ban on cigarettes because tobacco is harmful to the liver. Canada can learn from this article and take action by adding more government regulations which will decrease the demand of cigarettes. But of course, the actions have to be smart or else it won't work.
Summary
This news article talks about a price increase in cigarettes in order to finance public wage increases. Brands such as Marlboro and Rothmands will be increased in the price but the question was, will it affect people? They are predicting that the price movements won't affect people since the demand of the cigarettes are not affected due to it being inelastic. Since the smokers are addicted and smoke as a habit, they will learn to accept the price change. The revenues for the company will be higher for the tobacco industries.
Connections
The obvious connection in this article is the inelasticity of the cigarettes. People who are addicted to cigarettes won't care if the cigarettes price increases. Although the cigarettes may not seem like a neccessity, to some it may be. The demand of the product will slightly decrease. People will "try" to quit, or decrease the amount of cigarettes smoked in a day. The companies will be able to produce more cigarettes with more money, but they will have the same amount of consumers. The same can be said for things like alcohol and drugs or any addictive product.
Personal Reflection
Smoking is horrible. The government did a good thing by increasing the price in the cigarettes. Adding a government regulation will decrease the amount of smokers, but unfortunately, according to this article, the cigarettes became a neccesity and it is inelastic. The government should offer more things like a ban on cigarettes because tobacco is harmful to the liver. Canada can learn from this article and take action by adding more government regulations which will decrease the demand of cigarettes. But of course, the actions have to be smart or else it won't work.
Saturday, September 20, 2008
Chapter 1 : The Fate of Everybody REVISED
The article: http://www.dallasnews.com/sharedcontent/dws/news/nation/stories/091508dnnatwallstreet.7aecb503.html
Summary
This article relates to an event that happened on a single day. Apparently, we can say the stock market crashed because the "Lehman Brothers" bank went bankrupt and the Merill Lynch investment bank sold itself for "pennies." According to "The Dow Jones Industrial", the index lost more than 500 points. A significant drop since the stock market reopened after September.11 attacks. The company AIG had lost 60% of their value, this means that almost $20 billion was lost on Monday. To sum it up, there was a 10.0 earthquake in the financial sector.
Connections
Although it may not be obvious, the connection to our text is scarcity. The resource here that is scarce is credit. The root of the problem was the housing market slump. This in turn caused the credit crunch, meaning people are not willing to lend money to other people. This connects to scarcity because credit is becoming a scarce item. Without credit, a lot of business (Lehman Brothers and Merril Lynch) are not able to function properly. Many business depend on loans, credits, or in other words, spend other peoples money to make money. The article connects to direct costs because people spend their money to invest and make more money, yet these companies failed to provide the reward of "making more money." Since people know this is happening, the opportunity costs for the companies are skyrocketing because they could have done other things such as selling their bank to another bank, saving themselves from bankruptcy. They did not take the best possible alternative that was given to them. This is also an example of how you can expect anything from the economy. They cannot control what people think and do as economics is not a science.
Reflection
If it costs me $1 to borrow $10 from my brother, now it would cost $3 because there is a less supply of credit. It drives up the price and lowers the demand. Because the private sector is doing so bad, the government should step in and help out businesses, especially in this stormy situation. Credit is really difficult to obtain when you also need the trust and confidence of others. The banks mentioned went downhill and couldn't obtain the trust and confidence of the credit suppliers. I wouldn't invest in the companies either. The scarce resource of credit will affect me too because it will turn our economy to a recession due to scarce resources. People will not invest in banks anymore because of how the economy is doing.
Top: A Credit Crunch(er)
Summary
This article relates to an event that happened on a single day. Apparently, we can say the stock market crashed because the "Lehman Brothers" bank went bankrupt and the Merill Lynch investment bank sold itself for "pennies." According to "The Dow Jones Industrial", the index lost more than 500 points. A significant drop since the stock market reopened after September.11 attacks. The company AIG had lost 60% of their value, this means that almost $20 billion was lost on Monday. To sum it up, there was a 10.0 earthquake in the financial sector.
Connections
Although it may not be obvious, the connection to our text is scarcity. The resource here that is scarce is credit. The root of the problem was the housing market slump. This in turn caused the credit crunch, meaning people are not willing to lend money to other people. This connects to scarcity because credit is becoming a scarce item. Without credit, a lot of business (Lehman Brothers and Merril Lynch) are not able to function properly. Many business depend on loans, credits, or in other words, spend other peoples money to make money. The article connects to direct costs because people spend their money to invest and make more money, yet these companies failed to provide the reward of "making more money." Since people know this is happening, the opportunity costs for the companies are skyrocketing because they could have done other things such as selling their bank to another bank, saving themselves from bankruptcy. They did not take the best possible alternative that was given to them. This is also an example of how you can expect anything from the economy. They cannot control what people think and do as economics is not a science.
Reflection
If it costs me $1 to borrow $10 from my brother, now it would cost $3 because there is a less supply of credit. It drives up the price and lowers the demand. Because the private sector is doing so bad, the government should step in and help out businesses, especially in this stormy situation. Credit is really difficult to obtain when you also need the trust and confidence of others. The banks mentioned went downhill and couldn't obtain the trust and confidence of the credit suppliers. I wouldn't invest in the companies either. The scarce resource of credit will affect me too because it will turn our economy to a recession due to scarce resources. People will not invest in banks anymore because of how the economy is doing.
Top: A Credit Crunch(er)
Thursday, September 4, 2008
This is an economics blog
This is a economics blog for economics because i am required to do economics in an economics blog. Therefore, in the future I will be blogging about economics in this economics blog, now I will take a picture from Google.com/images/ about economics.
As you can see, it is on the bottom of this blog. I believe this is what Economics is. It is about "The Beveridge Curve." The Beveridge Curve is a curve that represents economics.
As you can see, I have no idea what I am talking about because this is the first class of economics and I am testing out making a blog. Laters
As you can see, it is on the bottom of this blog. I believe this is what Economics is. It is about "The Beveridge Curve." The Beveridge Curve is a curve that represents economics.
As you can see, I have no idea what I am talking about because this is the first class of economics and I am testing out making a blog. Laters
Subscribe to:
Posts (Atom)