Farewell Plastic Bags

Ireland put a tax on plastic bags in 2002 and as a result, costumers have to pay 33  cents for a single bag. Only after a couple of weeks, the use of plastic bags dropped by 94 percent. It turned out people had bought re-usable bags and had been very careful to avoid plastic bags. Many people talked about how they no longer even felt comfortable buying one. With a 94 percent drop in use we immediately can tell that plastic bags are very elastic and almost perfectly elastic. We can tell because with a minor price raise to 33 cents, the demand dropped by close to 100 percent.

Because of the elasticity of plastic bags, Ireland’s government made a effective choice. As a result Ireland has taken another small step towards defeating global warming. Read full article here

Section 2 Essay Reflection

I am fairly pleased with my essay score for this section. I think I can improve by hammering down all concepts. What happened on the essay was I wrote a ton about one concept and on the other one not so much. I think if I develop a very in depth understanding of all concepts, I can compare and contrast them to a greater extent. Also, when taking the test, I found myself a little bit confused with my own writing. I needed to have a more logical flow to my essay which was lacking because I had not sufficiently practiced my outline of the essay. For the following units, I plan on learning all concepts rather then only going in-depth with a few of them. Also, in preparations for essays, I would like to write all the way out a couple of times. 

Garlic Prices Rise Like a Swine Flu Fever

http://www.telegraph.co.uk/news/worldnews/asia/china/6663201/Swine-flu-fear-leads-to-shortage-of-garlic-in-China.html

Garlic prices in China has increased by 15 times. The price spike has been compared to the infamous tulip craze in the 1630s.

One major cause for the garlic price rise is swine flu. Rumours were spread that garlic could protect you against the swine flu and consequently the demand shot up. However, due to a falling garlic price last year, many farmers cut down on their supply. This in combination with the sky rocketing demand has caused a shortage, the shortage of course raising the price even more.

What has resulted in this booming value of garlic is that speculators are speculating. They buy large amounts of garlic, and move them to another warehouse where they sell it for a higher price. They continue moving the garlic from warehouse to warehouse as the value of garlic rises and the speculators make tons of money.

So what we see is, the swine flu has driven the demand up to Q3 and then the shortage in garlic has driven supply to Q1. The resulting price is very very high and we have a shortage.

Tax to the Rescue of Russian Livers

In Russia, alcohol is everywhere and everyone drinks it. Russian livers process an average 18 litres of pure alcohol a year and the average Russian drinks 30 litres of hard liquor a year. Because its such a highly demandedgood, Beer and Vodka have a fairly inelastic demand. The government not only wants to battle alcoholism but also wants to gain some money through this inelastic product so they are proposing an increase in tax on these items.

This increase in tax will consequently cause a raise in the price of beer and vodka, anywhere from 20 to 30 percent. A raise in price will consequently lower the demand of the product. This can be seen in a price raise from P2 to P1 and a decrease in demand from Q2 to Q1. However, there are a couple of problems in the governments problem. Since alcohol is such an addictive substance, many people will continue to purchase beer and vodka despite the price raise. Even if they do stop, they will most probably simply switch to cheaper alternatives since there are many substitutes.

Article: http://www.economist.com/businessfinance/displaystory.cfm?story_id=14710635

Oprah and Rembrant

In the economics video we watched, we learned that certain services and products will always have an inelastic supply. Oprah, for example, has an inelastic supply curve because there is only one Oprah. It would be impossible for her to supply more of herself. Rembrant on the other hand is dead, and there is a fixed amount of his paintings. Therefore, the supply curve is very inelastic. Finally, sportsman have a specific ability and like Oprah, there is only one of them. Because of this their supply curve is inelastic too.

Hovis not flawless

Hovis chose to raise their bread price “to more than £1 for the first time last September.” This raise in price caused their sales to drop. In this drop, we can see that the demand of Hovis bread is elastic. We can assume this, because the second they raised their prices, the amount of people that bought their bread dropped. The reason the demand on Hovis bread is elastic is because it is responsive and sensitive to changes to price. Also, because Hovis is a brand, it is bound to have elastic demand since there are many substitutes to bread. As seen in the graph, it shows how a small change in price causes a big change in quantity demanded. In this case, Hovis raised their price and relied on their costumer loyalty. However, the small change caused a very large change in the quantity demanded.

JAL

Japan airlines needs to definitely cut down on prices to maximize their profit. Possible cuts can be in their staff and the foods they serve. They could also change their marketing scheme and possible do something similar to Ryanair.

Why Ryanair Flies High

The article we have read suggests that British Airways believes that the demand is inelastic in the upper segment of the market. This way raising prices causes very little changes in the quantity demanded while also avoiding a decrease in the revenue. Ryanair’s believes that the demand is highly elastic in the lower segment of the market. They than have a very low price and attract a large amount of consumers. Changes in prices however significantly affect the revenue.

Ryanair has cut down as much as possible on their costs and they have also increased their routes. 

They sell their first seats at a regular higher price. Once they have covered their costs, they calculate the cheapest price for their next seats while still having a reasonable profit. They range these prices and they lower them as more and more people buy tickets. This way, they maximize their profits. 

End of Quarter Relection

Throughout this quarter I have come to realize that most of my economic reasoning comes from when I was very young. When I was young, I would sit at the breakfast table as my parents would read the newspaper, and they would every once in a while explain certain economic concepts. Till this date, when I take economic tests, I find myself referring to those breakfast table moments. I feel like these ideas I learned at a young age has allowed me to understand very clearly how demand and supply works. However, I need to be responsible for learning more specific and detailed economic concepts to aid my understanding. I think if I properly break down my economic reading time, then I can learn these concepts with much understanding.

What I learned about Data Response

In taking the Data Response Question, I realized that one of the most important elements is previous knowledge. The article I had dealt with the relationship between chocolate and cocoa. The embarrassing part was, I had no idea that chocolate was made from cocoa. As you can see, no matter how I answered the question, my answer would have not made sense due to this huge fault. Aside from that, current economic events are important as well as the STORES TOEISS.