Though considered the most basic common sense for anyone who studies economics, I never stop finding the supply - demand model to be highly useful in interpreting how the world functions. Supply and demand in the market for goods and services have a direct and fundamental influence over the prices and quantity. Furthermore, supply and demand are highly applicable in markets outside goods and services. In the labor market, foreign exchange market and loanable funds market, the way these markets function is simply supply and demand in disguise. Wage rate, exchange rate and interest rate are essential the same as price for physical goods in their respective models. The supply - demand model can be used to explain so many economic activities that one can never overestimate its value.
I would be interested in gaining a more in-depth exposure to the cultural differences between countries, such as how people converse and how they cope with ambiguity. This will be valuable human-focused knowledge, as is different from the technical-oriented models and equations that I am familiar with.
For any students who are considering taking the class, it is advised that they grow into the habit of pondering over an economic issue and trying to interpret a single issue from different angles. I find it highly helpful to constantly try to understand the economic news using the concepts we learned (or reviewed) in class. It brings everything I have learned into real-life application as opposed to textbook examples. I find myself a more mature critical thinker after this course, rather than merely good at models and math. Consequently, I highly suggest a serious student to keep thinking economically, whether it be class reading or world news. Exercises of this sort hone the brain.
Thursday, May 31, 2012
Wednesday, May 23, 2012
Response of "Beware of Greeks Bearing Bonds"
Original Article: http://www.vanityfair.com/business/features/2010/10/greeks-bearing-bonds-201010
The passage that I have found particularly interesting is the author's discussion on how Greeks find it difficult to compliment other Greek's successes. Indeed, by the author's account, it is almost impossible for Greeks to view the success of their fellow men without suspicion of misconduct and bribe. There has been such mistrust among the Greek people that everyone is devoted to the pursuit of self-interest and self-interest only. This relates later to the infamous Vantopaidi scandal. The public criticism is highly concentrated on the group of monks who have manipulated the Greek government to obtain wealth because, as the author put it, "some outside party...comes in and exploits and corruption of their system. Enter the monks." Given such a high emphasis on self-interest by a nation, it can be expected that even the seemingly holiest group intends to squeeze wealth with deceptive scheme. Further, with a nation that has such inclination to doubt and reproach others and detect no fault with themselves, it comes as no surprise that the country will lay blames on a single group of monks without reservations. This cultural traits of the Greek nation has somehow explained the scandal from the roots.
Although the Greek economy is nothing but small compare to the other European Union countries, crisis in Greek is expected to threatens the whole Euro Zone. Sharing currency, the Euro Zone is more mutually integrated than any other countries in the world. If Greek defaults, which naturally dampen investors' confidence in the European economy, foreign investors will withdraw their investment in Europe and domestic investors will move their assets abroad to preserve their wealth's value. As a consequence, the aggregate demand for Euro will decrease, and a weaker currency will negatively influence all countries in which the currency is in circulation.
The National Income is consisted of consumption, investment, government expenditure and net export. As the Greek government cut government spending, the National Income will decrease rather than increase. Further, an increase in taxes will reduce Greek household's income, which in turn decrease consumption. Thus, the measure in fact will do no good in bringing up the country's GDP.
The passage that I have found particularly interesting is the author's discussion on how Greeks find it difficult to compliment other Greek's successes. Indeed, by the author's account, it is almost impossible for Greeks to view the success of their fellow men without suspicion of misconduct and bribe. There has been such mistrust among the Greek people that everyone is devoted to the pursuit of self-interest and self-interest only. This relates later to the infamous Vantopaidi scandal. The public criticism is highly concentrated on the group of monks who have manipulated the Greek government to obtain wealth because, as the author put it, "some outside party...comes in and exploits and corruption of their system. Enter the monks." Given such a high emphasis on self-interest by a nation, it can be expected that even the seemingly holiest group intends to squeeze wealth with deceptive scheme. Further, with a nation that has such inclination to doubt and reproach others and detect no fault with themselves, it comes as no surprise that the country will lay blames on a single group of monks without reservations. This cultural traits of the Greek nation has somehow explained the scandal from the roots.
Although the Greek economy is nothing but small compare to the other European Union countries, crisis in Greek is expected to threatens the whole Euro Zone. Sharing currency, the Euro Zone is more mutually integrated than any other countries in the world. If Greek defaults, which naturally dampen investors' confidence in the European economy, foreign investors will withdraw their investment in Europe and domestic investors will move their assets abroad to preserve their wealth's value. As a consequence, the aggregate demand for Euro will decrease, and a weaker currency will negatively influence all countries in which the currency is in circulation.
The National Income is consisted of consumption, investment, government expenditure and net export. As the Greek government cut government spending, the National Income will decrease rather than increase. Further, an increase in taxes will reduce Greek household's income, which in turn decrease consumption. Thus, the measure in fact will do no good in bringing up the country's GDP.
Monday, May 21, 2012
7th Week Post on Economics News about the UK
Original Article: http://www.businessweek.com/news/2012-05-16/u-dot-k-dot-unemployment-unexpectedly-falls-in-stabilization-sign
The unemployment rate in the United Kingdom as measured by International Labour Organization methods demonstrates decline in the first quarter of the year. The newly published figure is 8.2 percent, as compared to a 8.3% at the beginning of 2012. Jobless-benefit claims also fell by 13,700 from March. Compared with what the Bank of England had predicted before, the growth in the job market is still weak. Yet, the data have delivered a promising signal that the UK is recovering, though at a relatively slow rate, from the crisis, as is shown by an increasingly stable labor market. As a positive consequence, firms are encouraged to expand business with the sound economic data and to increase investment. With rising confidence from firms, it is expected that firms will expand hiring and provide more jobs in the market. It is also hoped that a stable economy will attract more foreign firms to establish business within the UK and thus, provide more employment. However, the recent negative news with regard to the Greek exit from the Euro Zone has raised concern within the UK borders. Multinational companies that have a significant volume of trades with the Euro Zone are specifically concerned with the outcome of the incident, since exports to Europe are predicted to decline as its economic prospect deteriorates. It is anticipated that the new Euro Zone financial hit will have a consequential influence over the British economy, especially that firms in the exporting industry are likely to cut employment as a response to the ambiguity in the European economy. This will again strike the job market in UK negatively.
The unemployment rate in the United Kingdom as measured by International Labour Organization methods demonstrates decline in the first quarter of the year. The newly published figure is 8.2 percent, as compared to a 8.3% at the beginning of 2012. Jobless-benefit claims also fell by 13,700 from March. Compared with what the Bank of England had predicted before, the growth in the job market is still weak. Yet, the data have delivered a promising signal that the UK is recovering, though at a relatively slow rate, from the crisis, as is shown by an increasingly stable labor market. As a positive consequence, firms are encouraged to expand business with the sound economic data and to increase investment. With rising confidence from firms, it is expected that firms will expand hiring and provide more jobs in the market. It is also hoped that a stable economy will attract more foreign firms to establish business within the UK and thus, provide more employment. However, the recent negative news with regard to the Greek exit from the Euro Zone has raised concern within the UK borders. Multinational companies that have a significant volume of trades with the Euro Zone are specifically concerned with the outcome of the incident, since exports to Europe are predicted to decline as its economic prospect deteriorates. It is anticipated that the new Euro Zone financial hit will have a consequential influence over the British economy, especially that firms in the exporting industry are likely to cut employment as a response to the ambiguity in the European economy. This will again strike the job market in UK negatively.
Sunday, May 20, 2012
6th Week Post on Economics News about the UK
Original Article: http://www.nytimes.com/2012/05/18/business/global/chance-of-greece-exiting-euro-grows.html?pagewanted=all
A possible Greek exit from the Euro Zone has recently raised international alarm to the well-being of the Euro Zone financial system. It has been observed that if Greece departs from the Euro Zone, the international fear on whether Europe will survive the crisis as a whole will once again be aggravated. It can be expected that investment in the Europe will decline; depositors will withdraw their money from the European firms and banks. The most direct result will be a significantly weaker currency. International trades will be influenced as a result of the change in capital flows. For United Kingdom, a stronger GBP will decrease British exports and increases imports from Europe, since the British goods have become relatively expensive and European goods relatively cheap. Thus, the net export sector in the UK GDP will decline. Given that the Euro Zone is one of the biggest trading parties with the UK, this financial turmoil in Europe is expected to exert significantly negative effect on the British economy.
A possible Greek exit from the Euro Zone has recently raised international alarm to the well-being of the Euro Zone financial system. It has been observed that if Greece departs from the Euro Zone, the international fear on whether Europe will survive the crisis as a whole will once again be aggravated. It can be expected that investment in the Europe will decline; depositors will withdraw their money from the European firms and banks. The most direct result will be a significantly weaker currency. International trades will be influenced as a result of the change in capital flows. For United Kingdom, a stronger GBP will decrease British exports and increases imports from Europe, since the British goods have become relatively expensive and European goods relatively cheap. Thus, the net export sector in the UK GDP will decline. Given that the Euro Zone is one of the biggest trading parties with the UK, this financial turmoil in Europe is expected to exert significantly negative effect on the British economy.
Monday, May 14, 2012
Vehicle Market Executive Summary
With a huge population, a significant GDP growth rate and a
low car ownership, China is recommended as a targeting market for the global
vehicle producer. Provinces like Guangxi and Guizhou are the most appropriate
market for scooters, given the low income and laxer motorcycle regulation.
Developed eastern cities like Guangdong and Tianjin will be the targeting
market for four-door sedan, since the average income and the need for cars are
high in these areas. The best market for luxury limousine is a national
metropolis such as Shanghai and Beijing, which has the largest number of multimillionaires
and company headquarters. Container ships will be the most convenient means to
transport the vehicles, especially because most of the targeting markets are
close to ports. While doing business in China, it is worth noting the severe
corruption problem and the importance of networks in the Chinese hierarchy
system.
Thursday, May 10, 2012
5th Week Post on Economics News about the UK
Original Link: http://www.bloomberg.com/news/2012-04-12/u-k-trade-gap-widened-as-car-exports-dropped-to-u-s-china.html
Reported by the Bloomberg, the U.K. has seen a widening trade deficit in the first quarter of the year, especially as the car exports to the U.S. and China drops. Given a weak domestic economy, with a high rate of unemployment and rising inflation, the U.K. is hoping to boost its economy with expanding exports. However, its trade with countries outside the European Union has not demonstrated promising outcome. Prime Minister David Cameron has come to Asia in April in an attempt to boost commercial ties with the region.
The declining exports are attributed to a weak global economy, with the demand on the cars and heavy machinery market shrinking. In addition, starting from the beginning of 2012, the GBP has appreciated against the USD consistently, from below 1.53 GBP/USD to its current level of around 1.6155 GBP/USD. A stronger GBP tenders british goods more expensive, which reduces demand from foreign consumers and thus, exports.
Reported by the Bloomberg, the U.K. has seen a widening trade deficit in the first quarter of the year, especially as the car exports to the U.S. and China drops. Given a weak domestic economy, with a high rate of unemployment and rising inflation, the U.K. is hoping to boost its economy with expanding exports. However, its trade with countries outside the European Union has not demonstrated promising outcome. Prime Minister David Cameron has come to Asia in April in an attempt to boost commercial ties with the region.
The declining exports are attributed to a weak global economy, with the demand on the cars and heavy machinery market shrinking. In addition, starting from the beginning of 2012, the GBP has appreciated against the USD consistently, from below 1.53 GBP/USD to its current level of around 1.6155 GBP/USD. A stronger GBP tenders british goods more expensive, which reduces demand from foreign consumers and thus, exports.
Wednesday, May 9, 2012
Response on Information Wants To Be Free
The passage that I find most interesting in the reading is on how book prices listed by multiples of websites still differ even though the Internet has rendered the searching costs nearly zero, and prices are expected to be the same for identical product. The author attributes this phenomenon to the concern about quality, which is an implicit application of need for information. Given the lacking knowledge on the quality of the same product from different sellers, consumers are willing to pay higher prices in order to obtain the product with the highest quality from the most trust-worthy provider. The differences in the product quality has made the supposedly-identical product differentiable, as an indirect result of lack of information. This idea exceedingly appeals to me, since it resolves my long-standing puzzle about the continuous difference in prices for a same good in such a nearly perfectly competitive market as the Internet. This is definitely a most reasonable explanation for my question.
By transaction cost, the author refers to the costs incurred by consumers to search for the lowest price. For example, without knowledge on the price of a laptop computer on average, consumers will have to do research before they can land a seller who offers the computer at the lowest price. The searching process takes time and money. This comes to the consumers as a transaction cost.
When information is unevenly distributed, sellers are able to charge the buyers a higher price for the goods they are selling, because the buyers are not able to compare prices in the market, unless they pay the transaction costs. This makes the sellers a winner in the trade, because they gain higher revenue from every single buyer. In return, buyers lose in the trade, since they are forced to pay a higher price, given the lack of information.
By transaction cost, the author refers to the costs incurred by consumers to search for the lowest price. For example, without knowledge on the price of a laptop computer on average, consumers will have to do research before they can land a seller who offers the computer at the lowest price. The searching process takes time and money. This comes to the consumers as a transaction cost.
When information is unevenly distributed, sellers are able to charge the buyers a higher price for the goods they are selling, because the buyers are not able to compare prices in the market, unless they pay the transaction costs. This makes the sellers a winner in the trade, because they gain higher revenue from every single buyer. In return, buyers lose in the trade, since they are forced to pay a higher price, given the lack of information.
Friday, May 4, 2012
Response to A Fez of the Heart
The passage that I found most interesting is the one where the author described the contrasting attitudes between the old associate and the younger sales person to the Fez. Evidently, the young man was embarrassed by the fact that they were selling something as uncool as Fez; however, the associate from the older generation was apparently more attached to the old-fashioned hat. This strikes significantly as the confusion some young people in China are going through, where they are overly proud to claim themselves westernized and at times despise our own magnificent Chinese culture. This is a loss of self-identity in cultural invasion.
As the world becomes increasingly integrated, opportunities are more abundant for economic growth of countries. However, globalization also brings culture spreading, which can be both virtuous and vicious. As is illustrated by the development of tourism in the article, Pomegranate has gone through successful economic development as their tourism industry thrives. However, they also lose their own cultural identity and tradition in the process, as foreigners bring in social norms and values that are highly distinct from their own. To some extent, there exists a trade-off between economics and culture.
For the United Kingdom, London is one of the leading destinations for tourists. As the capital of the country, London has a significant number of historical buildings that are highly worth visiting. It also has a vitally developed cultural industry, specifically the WestEnd theaters, that attracts tourists from around the world.
As the world becomes increasingly integrated, opportunities are more abundant for economic growth of countries. However, globalization also brings culture spreading, which can be both virtuous and vicious. As is illustrated by the development of tourism in the article, Pomegranate has gone through successful economic development as their tourism industry thrives. However, they also lose their own cultural identity and tradition in the process, as foreigners bring in social norms and values that are highly distinct from their own. To some extent, there exists a trade-off between economics and culture.
For the United Kingdom, London is one of the leading destinations for tourists. As the capital of the country, London has a significant number of historical buildings that are highly worth visiting. It also has a vitally developed cultural industry, specifically the WestEnd theaters, that attracts tourists from around the world.
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