Group items tagged

This article presents a very good explanation what is income elasticity and how it may affect producers choices and sales. The article includes four main parts: types of products, types of customers, product life cycle and determing income elasticity. In the section "Types of products" author points how small businessses and luxury items' producers are affected by people's income, and how can they improve sales. Second section talks about targeting of the customers, for example some companies may focus on people with high-income, so consumers are not sensitive to the changes in price. Product Life Cycle section talks about aging of the product and appearing of the substitutes, and the ways of overcoming that problems, attracting consumers. And the last part of an article describes how to determine an income elasticity of demand. It is a good article that helps to increase understanding.

The article discusses how during recessions, the rich become richer and how the businesses cycles still disadvantage the poor and benefit the rich. During recessions, income inequality increases and favors those who are wealthy. As unemployment rises, many people see a significant decline in their income and saving abilities. They are no longer able to afford common resources. For example, people will need to sell their business, houses… This leaves the rich buy up such resources for a cheaper price. This is what keeps the rich constantly "on top" and the poor even poorer. There is a chart which really illustrates this statement put forth by the author.

I think it's funny to see how rich people can get even richer during recession.

This article talks about how the top 1% doesn't get affected by recessions and actually gets richer while the poorer get poor. This came as a surprise to me as I thought recession always had a negative effect on the incomes of the population, but obviously this isn't true. The article states since the recovery period of 2009, the bottom 99% of workers incomes decreased by 0.4% while the top 1% workers income raised by 11.2%, an enormous amount during a recession. In my opinion I think this might be because of the increase in black market activity during a recession, due to the fact that the richest people in the world have earned their income, one way or another, through illegal activity.

This article relates directly to the concept of income elasticity of demand and cross elasticity of demand . McDonald's monthly sales fall for the first time in almost 10 years. Its revenue fell by 1.8% last month. This happens because of the various reasons. One results from the unstable economy. People are more cautious about spending their money. A lot of people choose to "eat in", simply because they cannot afford it. This applies a lot to the younger consumers, who have been facing unemployment. The company has also been affected by Europe's economy since the market of Europe counts for 40% of the company's revenue. European economy has been facing recession. There has been a tremendous amount of unemployment, which means a decrease in the general population's income. This directly relates to income elasticity of demand. As income falls, the quantity demanded for products fall as well. In this case, people choose to eat at home to be more frugal. I believe this contradicts a little to the idea of inferior goods. McDonald's may be considered as "inferior goods" to the majority. It is often said that as income decreases, inferior goods will likely benefit from it. However, in this case, McDonald's do not. People choose other alternatives instead, which is eating in. So it is just not McDonald's that has been affected, but a lot of other restaurants and fast food chains too. Furthermore, fierce rivals have also came up with strategies to out compete its competitors. For example, Wendy's Co. has decided to upgrade their menus and offer discounts. This relates to cross elasticity of demand. Obviously, as other rivals offer discounts and as well as an upgrade on their menus, consumers will shift to consuming those products that are slightly cheaper.

According to this article, the recession has induced Americans to reevaluate their spending and adopt cost-saving strategies such as using coupons or taking advantage of sales. Many people have reduced the amount of money they spend, over the last couple of years, especially those who have incomes of under $45,000. "The consumer mindset has changed (…) they've become used to being careful about what they buy and where they buy it." However, while price is a major factor, consumers said that quality was still a top priority. The article indicates that there are certain items that consumers will not go without: The first item on the list was animal protein: 10 percent [of consumers] said they refuse to give up meat, poultry, fish and seafood. Also, 8 percent saying they would not forgo alcohol, tobacco; coffee, tea; milk, juice, or household and laundry supplies. As expected, "38 percent say they're purchasing less clothing and 20 percent said they're buying less expensive brands." Therefore, items such as proteins, alcohol, tobacco, coffee, tea, milk, juice, and household supplies are relatively inelastic goods with regard to income. On the other hand, clothing is an inelastic good during this recession.

The British Columbian government has stated in its newest budget a tax increase for incomes over 150,000 dollars and a permanent 1 percent increase for corporate taxes. In the 1990s, the NDP government has implemented a similar tax hike in the hopes of increasing revenue, yet the opposite happened as the rich found ways to evade taxes and even worse found no incentive to work harder. However in 2001, the liberal party slashed taxes and revenue slowly, but surely increased. It is a period of waiting as the new tax increases take effect and to see if past still holds true, or if the future will be brighter.

Income Elasticity of Demand This article explains about pet burial business suffering because of economic recession. The business' revenue dropped from "$47.7 billion" to "$45.5 billion" within one year in the United States. The article claims, its' revenue dropped because of recession. This article is good example of how knowing Income Elasticity of Demand (YED) can be used to predict the economy of the country. Considering pet burial is luxury good, it has very high YED. The decrease in quantity demanded of the product indicates the general income of the country decreased.

Sometimes, i think the taxes are too high for some state like New York and California. You have to pay 40% of your income tax, which is I think it too much. I understand why the government did that, but think about it, 40% is almost half of your income! May be I came from the country that equal just one state of America, but more people. So that's why I don't have to pay tax that much since the division is larger. According to what we've learned, I think the government should put high tax on the bad goods for every states instead of put 40% tax on people's income.

I like this article because it is very short and it is related to the topic of this week. It is about the GNI in Korea. The GNI is the growth of the national income, consists of: the personal consumption expenditure, the gross private investment, the government consumption expenditures, the net income from assets abroad (net income receipts), and the gross exports of goods and services, after deducting two components: the gross imports of goods and services, and the indirect business taxes. The GNI is similar to the gross national product (GNP), except that in measuring the GNP one does not deduct the indirect business taxes. The GNI of Korea has experimented a very high grow this year, it is almost the double of the GNI from the year 2002. The nominal GNI from the last year was $118.7 billion, this information is based on the assumption that the country's nominal GDP expanded by 3.2 percent.

Price controls on many staple food items ordered by Ethiopia's government early this month have reduced grocery bills for many low-income families. But now shopkeepers are upset and some basic items are disappearing from store shelves. Economists are concerned about the long-term effect of the government's price-fixing strategy. The consumers responded by going to local retail shops on the first day of the new low prices to stock up on much needed basic good. how ever chaos has broken out between shop keepers and consumers as the shelves aare being cleaned of basic and even normal goods. The shopkeepers responded complaining that the weeks of low prices were unbaraible because of consumers being unhappy of even the lowest prices. The Ethiopian government defended it self that the price caps were needed to help the economic crises but 4 independant economist say that it would help the economy recover, but the government ignored them saying it would. Critcs warn that it will only help in the short term and only worsen the economy in the long term.

Price controls on many staple food items ordered by Ethiopia's government early this month have reduced grocery bills for many low-income families. However, shopkeepers are now upset and many basic items are disappearing from store shelves. Economists are concerned about the long-term effect of the government's price-fixing strategy as the price controls have triggered chaos and tension in the local marketplace. 'Ceiling price have been put on items such as meat, bread, rice, sugar, powdered milk and cooking oil due to merchants taking advantage of global price hikes. The consumers have greatly benefitted yet storekeepers are unhappy, some products they bought before the price controls must now be sold below cost. In a free market economy, the preferred way of doing this is to increase the supply and increase competition. The Ethiopian government has been heavily criticized. Despite the upheaval, government officials are hoping their experiment in price-fixing will help to curb inflation. Recently released figures show the inflation rate jumped from 10.2 percent in November to 14.5 percent last month.

UK expects an increase in the Consumer Price Index to 3pc by June 2013 and to remain above 2pc until early 2016. In comparison, wages are only expected to rise at an average of 1.5pc. This will put more pressure on household as they have already seen a higher cost of living, which has risen four times more than wages. The recent increase is a result from petrol prices and energy bills. The bank's aim has been at 2pc, but the Chancellor may change the mandate. Another interesting point is the Chancellor may change the target inflation measures to CPIH- includes housing costs- and RPIJ, which is an alternative way of calculating retail prices. This article obviously relates to inflation rate. We can see the use of CPI as a measure for inflation rate. We can see that inflation rate does affect people with high cost of living and also people which has fixed income. Here, although many people does not have fixed income, they are still affected by the inflation due to the slower increase in the wages. We can also see that in order to reduce inflation, it does not only involve the government, but also the banks of those countries.

Obama suggests US can reduce deficit by closing tax loopholes. Deficit is when expenses exceed income. This will allow the US to fund things for the economy's growth without having to raise tax. Obama also says that he wants a fair and transparent tax system and further health care reforms. He says that since US spends a lot, they need additional revenue and also smart spending reductions. This relates to cash inflow and outflow of the economy. US have been dealing will the excess of outgoing money over the incoming money. This becomes public debt for the national. This could possibly slow the the efficiency of how the government can support different sector of the country, such as the economy.

It is no surprise that Apple products are in high demand, and the new iPhone 5 is no exception. Demand is defined as the willingness and ability of a consumer to purchase a product. The demand curve is also sloped downwards, opposite that of a supply graph. However, in the case of Apple, the demand curve does not follow the norm. The New iPhone 5 reached a pre order sale of 2 million in the first 24 hours, while the iPhone 4S reached one million. The demand has gotten higher, yet the price has risen from $179 to $199. The course companion states that demand increases as a result of a price fall and the graph shifts to the right with an income increase, yet the iPhone manages to be not only the best selling iPhone, but the most expensive. I think the size of the population and the change in the age structure played a big role in the massive pre-order sales. The whole population did not necessarily increase, yet the population of smartphone users has increased. It was exciting and interesting to see how these regular news articles relate to what we have learned throughout the week.

The article shows that the selling for iphone 5 have been incredible. It's because the demand for the new iphone is extremely high so that it took only an hour for Apple's site to change its shipping estimates for the product to two weeks. And it's now the most expensive smartphone over the world due to the high demand of iphone. And i think it's also because of the supply of the phone is limited, which is much less than the demand. Further more, in the demand supply graph, the increase in demand causes the demand graph shifts to right, which shows us how the price goes up and the company are going to have more income. I think that's how the news relates to the topic for this week.

This article talks about the change in supply of oil in different regions.

This article talks about an increase in the excise duty on soft drinks which are already subject to a 23pc VAT rate. With this measure the government is trying to reduce the obesity and to increase the revenues of the government. I think that this is a good idea because the problem of obesity is very concerning. Also the costs of treating the obesity are very high (in Spain the government is paying 37 million each for treating the obesity) Many doctors says that the obesity is the epidemic of the XXI century. The fat tax has been introduced in some countries in Europe. The problem is that these taxes are very unpopular because the food is a necessity product. The biggest impact of a tax increase would be felt by the young and lower income groups who are the biggest consumers of soft drinks.

UK unemployment has risen to 1.2million, resulting in a youth unemployment rate of 21.9%. The british government, which insists the deterioration in the jobs market are due to the eurozone debt crisis, have been criticised for ignoring domestic problems . "Overall, the rise in unemployment and weakness of earnings growth relative to inflation continue to place substantial pressures on household finances - squeezing real incomes, suppressing confidence and leading to increased precaution among consumers. This can only be bad news for economic growth in the short-term." said Scott Corfe, senior economist at the Centre for Economics and Business Research. Government's work programme and work experience schemes have been created in attempt to is get a significant number of young people off benefits and find exmployment.

This article is about the ongoing European Economic Crisis. A decrease in number of jobs and increase in population has led to higher rates of unemployment than ever before. Due to the high unemployment, lesser people are paying taxes as well. So the tax revenues for the country is falling too. Hence they cannot extricate themselves from the debt either. Two of the worst affected countries are Spain and Greece. However countries like Germany and Austria were not affected that badly. Initially in Germany retails sales went down, but since unemployment didn't increase tax revenue wasn't affected. For example the state of Baden- Württemberg pays 49% of the income for taxes.

Like you said one of the most affected countries is Spain where the situation is really bad and the unemployment is really high. There are a lot of things that contributed to this situation, the people spend more than gain, the banks didn´t work properly, the government didn´t intervened… The reasons that many people don´t pay the taxes is because they don´t have nothing and the inequality in Spain is a big problem now. The standards of live of a lot of persons are bad; there are families that live on the grandfather's pension. The people are angry and blame for everything the government.

This article talks about how the euro crisis is effecting the unemployment level severly. It states that due to the record new high level of unemployment since 1975 at 11.6%, at a rate of 11.7% now, less people are paying there taxes. This causes the governmnet to have less of a budget nad therefore it cant subsidize as many companies as it originally wanted to further increasing the crisis. What the governmnet needs to do in this case in lower the taxes so a larger amount of people can afford it and therefore more people would pay tax increasing the governments budget and therefore increasing subsidies

It is an article about supply side policies in Africa specially investing in human capital in order to increase the potential output of the African countries. We know that education creates positive externalities and the benefits of education and training are not just felt by those who receive education, it will help the economy as a whole because it will increase the potential output of the economy. Greater regional integration and investment in social entrepreneurship and industry are also necessary for inclusive growth. Competition hast the effect of encouraging greater efficiency. Therefore, any policies that increase competition will increase efficiency and improve the productive potential of an economy. After reading this article I research a bit about the economic growth in Africa and I found this: Six of the world's ten fastest growing economies of the past decade are in sub-Saharan Africa. A clutch of countries have enjoyed growth in income per person of more than 5% a year since 2007.

The IMF, International Monetary Fund, points out that US's economy is likely to see a 1.5 or 2% growth without the tightening fiscal policies. IMF also points out that there is very low private demand in Great Britain. They suggest government to adjust its initial fiscal plans. We can see that this relates to the use of fiscal policies and their impacts. Here, we can notice that instead of boosting economic growth, US fiscal policies, which I believe is the fiscal cliff. The government's plan is to increase tax rates and decrease government spending. This could possible reduces income and slows the growth of the economy.

The United States remains desperate for faster growth and stronger job creation as it continues its slow recovery from the 2009 recession. Peter Blair Henry, the dean of NYU's Leonard N. Stern School of Business states private investment is falling $1 trillion short per year due a to disputes over the "fiscal cliff," the federal borrowing limit and other issues." Monetary policy and fiscal policy are working at "cross purposes" - one is expanding while the other contracts." Governments should save money during times of economic prosperity and spend it to boost the economy when growth decreases. Lawmakers should prioritize predictability in policymaking to trigger private investment and government investments, particularly in education, should be off-limits to cuts. Henry points out that a solution to closing the wage gap is to produce more skilled workers. Raising taxes on the highest tax bracket may also be part of the solution to overall sustainability concerning the fiscal side, but not a solution for income inequality.