ZIS IB Year 2 2013-14

The article Chicago's cigarette tax could approach New York's (by Megan Hickey) focused on the possibility of Chicago increasing taxes on cigarettes. There are several underlying reasons for the proposal; one being a $298 million budget shortage, the other to increase awareness of smoking for health purposes. Chicago already has the second highest tax on cigarettes in the US, the average cost for a pack being $10.25, after New York at $12.50. The total combined tax amount is $5.67 which is made up of a federal tax of $1.01, Cook County tax of $2, Illinois tax of $1.98 and a government tax of $0.68. The possibility of increasing this tax would lead to less consumption of the product, less revenue for tobacco companies and more deadweight loss for consumers and producers. However the Chicagoan government believes that the health benefits gained from less tobacco consumption are far greater than that of cost. To continue this tax hike (continued increase in the tax of cigarettes) would continue the trend of declining tobacco consumption and could decrease the youth in smoking by 7.2%. Not only would the state receive health benefits but the government would be able to increase their revenue through this tax hike.

In this Article it is perfctly shown how the goverment can control a country with taxes. by putting the taxes so far up for alcohol the people will think twice if they really need alchohol or not. By changing the system from a overall tax for all different kinds of alcohol to a more individual with respekt to the strength of the liquor a more fair and logical system was created. this enables the citizens to consume wine and beer which are less "dangerous" and harmful than hard liquor which may cause or enhance the chances of physical fight, destruction or vandalism on public streets. A bottle of wine, where this is less likely to happen, might even generate more income if taxes are low so people drink more of it in restaurants or at home to dinner.

In this article it is described, how the winners off a medal at the Olympic Games are celebrated like heroes. They also receive honorariums. A gold medal winner receives $ 25'000. Nevertheless the winners will have to pay taxes from this honorarium. For winning the gold medal they will have to pay a tax of $ 8'965. Now if we look back at 2008 when Michael Phelps won 8 gold medals, he would have to pay a high tax for winning his gold medals.

The government wants to implement a one dollar raise in taxes on cigarettes, in order to ward consumers off them. The government is doing so to warn how dangerous and harmful cigarettes are.They want to discourage children and teens from smoking. Another reason for the tax raise of $1.98 is to help pay the state's rising cots for health care for the poor. There was a $2.7 billion shortage in the Medicaid funding, which needs to be recovered through collecting taxes. As cigarettes are quite inelastic, people will continue to buy them even if the price increases, as they are an addictive good and cannot be put down easily. Substitutes would not be an option in this case, as there is a tax added on other tobacco products as well.

The Germany tax rates for an individual are 14% - 45% of their total income. Singles pay on income above EUR 250,731 (couples, on income above EUR 501,462) income tax of 45% before 5.5% solidarity tax and 8%-9% church tax.  An individual is liable for tax on his income as an employee and on income as a self-employed person. An individual who meets the test of a "permanent resident" of Germany will have the tax calculated on his income in Germany and from overseas

Mario Monti, Italy's prime minister stated that the richer population of Italy, the ones who own multiple large motoryachts, are the ones that happen to not be paying taxes. He states that it is a struggle to confront tax evaders, and that it is "like a war". The tax evasion causes a large gap in Italian stretched public finances. These boat owners are seen as the ones who do not pay their share, mostly because the paying of boat taxes depends on its size. Between 10-12 meters, €800 are required, 20-24 is €4,400 and anything above 64 meters is €25,000. Obviously, having to make these payments do not please the boat owners, and unsurprisingly, they have fled to more welcoming harbors, where getting a spot costs much less. Many of these flee to Croatia or Corsica, which causes business in many Italian harbors to drop by a lot, specifically 50% in Rome's marina Ostia.

This articles talks about the decrease in demand in the coffee production. A decrease in the price of a cup of Joe, shipping coffee took a hard hit with prices to move a crate of coffee has increased to 6.8% more. The global economy has dropped due to the worsening debt crisis in Europe, where thirteen countries are slowly collapsing. European countries are unable to afford coffee, which is why British drinkers had to cut back in the coffee consumption by 6.7% in 2011, while the demand fell in 2.6% in Spain and 1.6% in Italy. Brazilian coffee production have expanded field for production and increased the use of fertilizers in response to last year's high prices. The Brazilian farmers are holding off from selling the product due to that they are waiting for the prices to recover so that sell larger quantity of coffee.

The demand of coffee is decreasing due to that the import prices have increase to 6.8%. The coffee market has decreased because the prices of the good have increased. The overall demand for coffee has decreased because producers now face higher cost of production. Since the expense of coffee has increase consumer incentives decrease. Since the demand of coffee has decreased other markets like tea, energy drinks have increased because demand for substitute goods increased. Producers want to minimize production cost while maximizing profit.

The article Catfish Farmers Fight Fish Glut and High Fee Prices centered on the left shift in demand for catfish. There has been a steady decline in the demand for catfish in the last decade, causing its demand curve to keep shifting left. Last year, the supply of catfish was low which in turn led to higher prices (due to its scarcity). These higher prices led people to substitute (determinant of demand) catfish with other goods such as inexpensive imports or similar species of fish. The catfish industry has not been able to recover. This year (2012) the supply of catfish has managed to surpass the demand. The high supply led to cheaper catfish costs this year, which in theory should have led to more demand, however people seem to be sticking with their substitutes despite the price change. The feed prices for catfish (feed being a factor of production) are at an all-time high which is causing farmers to suffer; with high costs of production and low prices, they are receiving little profit. With the whole industry suffering, the government has decided to purchase 10 million dollars' worth of catfish hoping to act as a positive determinant of demand (trying to shift the demand curve to the right). This has not had a great effect on the catfish industry and people are starting to question its value; whether people are willing to buy catfish. The declining of this industry has already led to many catfish ponds being replaced with new crops.

This article was about the decrease in demand for catfish due to substitution and a change in taste and preferences by consumers. This has caused the demand curve to shift to the left. Because it has shifted left, the price of catfish has decreased therefore signaling that catfish is not as scarce as it used to be and its value has decreased. How have consumer incentives been impacted by this? Because the price has decreased and the good has become less valuable, people would be more inclined to buy it due to the lowered price. How would producers be impacted by this? As demand has decreased the price has decreased, and the lower the price the lower the quantities of goods firms are willing to supply. Therefore the supply of catfish will decrease. This demand shift will have a negative effect on substitute markets as consumers may find the price of catfish cheaper which may lead them to switch from their product to catfish. Lastly, how will this impact resource allocation? As there is a decrease of demand, therefore a decrease in supply, less resources will be used for the catfish industry and invested in other more profitable markets.

The summer movie season reached a low with fewest movie tickets sold since 1997. Despite major hit movies such as "The Avengers" and "The Dark Knight Rises", the coming summer is supposed to fare even worse. By the end of Labor Day weekend, an estimated 529 million movie tickets will have been sold in the United States, almost 100 million fewer tickets than a decade ago, when 629 were sold. Partially due to increasing movie ticket price, movie ticket revenues dropped by 4.5%. Despite the increase in price affects the attendance to movies, analysts suggest that increasing the prices is the solution for struggling movie businesses. The movie business must be on the right track again, already having higher revenues and attendance than by this time last year.

The consumer preferences have changed with the slight rise in prices, causing a decrease in demand. The decrease in demand demonstrates that the consumers are losing incentive to buy as many movie tickets and causes a shift of the equilibrium price. As a result, consumers have incentive to ration their spending on cinema tickets. The producers begin to produce less at higher prices and create a rise in allocation of resources to movie-making to increase demand for movie tickets.

As the supply of diamonds keeps becoming scarcer, the demand for diamonds is increasing greatly. Global factors affecting the large demand for diamonds are increase in consumer wealth, better marketing tactics, western influence, and future value/prices. In India specifically where the population growth rate reached over 25 % - which has also led to the rise of a middle class - diamonds are now being seen as a "status symbol", or as a way to show off, the demand for diamonds is increasing quickly. China has as well due to strategically improved marketing tactics and western influences increased its use of diamond wedding rings up to 40 % of all women. As diamond prices are higher than a few years ago, diamonds can be seen as worthy to invest in because of their increasing value and finite supply. 

The world demand for diamond keeps increasing signaling that diamonds are becoming scarcer and scarcer. Producers will therefore increase the prices of diamonds as it is a limited source, producers will also however try to find more diamonds so that the resource isn't as limited. Depending on the consumer's income, demand for diamonds will decrease with higher prices. Consumers will also switch to an alternative market - an increase in demand for other stones, gems - as their behavior will change. Consumers will also ration diamonds and if purchasing it, purchase it in lower amounts.

This article discusses the reasons which have resulted in a fall of fertilizer demand in India. The author states that the demand for fertilizer will drop 1/5  from 54.6 million tons  to 24 million tons by 2013. Additionally companies supplying fertilizers to the public have already experienced the first signs of decreasing demand and have been confronted with 50% decrease in potash consumption and a 30% decrease in the phosphate consumption.  Indian Companies supplying fertilizer had raised their prices the previous year due to record sales however these prices are now representing one of the key reasons for the decrease in consumption. India has experienced unpredictable rainfall this year meaning that farmers were unable to determine when they should  apply fertilizer. They knew that if they applied the expensive fertilizer without rainfall in the following days , the fertilizer would be wasted and therefore the farmer would have made a big loss. This has resulted in a decline in fertilizer consumption as farmers are not willing to take this large financial risk as the price for fertilizer is so high they will not be able to afford the economic consequences if the fertilizer is not applied at the correct time.  This links into our classwork as this scenario shows an ideal example of the law of demand. The law of demand states that as a price of a product rises the demand for it will decrease. In the article the demand for fertilizer falls as the price for fertilizer rises. 

This article tells us that fertilizer is become less scarce in India as the demand for fertilizer decreased. This means that less products are being consumed and therefore their is a surplus of the good on the market. Because the price for fertilizer was so high farmers have decided to invest the money in other products which will benefit their crops. The consumers will wait for the price to decrease before they start consuming fertilizer again. Producers will now decrease production and will sell their product at lower prices. As the demand for fertilizer has increased firms are not making as much profit and therefore they will shift their resource allocation to more profitable products.

A new study by the Bill & Melinda Gates Foundation has found that chocolate is rising in demand in countries with new markets, such as China. However, due to global warming and a temperature rise of 2.3 degrees, the crops where cocoa is grown will halve by 2050. This will cause the entire demand curve for chocolate to shift to the right in the next 40 years. So far, an exact number for the price increase is unknown.  Price increases have occured in some places, such as West Africa, where the prices have gone up by 10 per cent.  Since cocoa needs a specific environment to grow (cool and moist), farmers can either decide whether to move their crops into the shade, which will have high costs, or to switch from growing cocoa  to another crop that CAN grow in the arid climate.  Some cocoa suppliers think that firms should focus on the quality and not the quantity of chocolate produced. This could have benefits, like better prices for farmers and less child labour. Not only is the chocolate market being affected by global warming, but also the French wine and Italian pasta market.  Non-price determinants such as the prices of related goods and expectations of future chocolate costs also play a large role in the chocolate market. If the demand for chocolate goes up in the next decades, the prices will also rise. Due to a change in prices more people will turn to chocolate-related goods like candy and pastries. Also, since a large price increase is expected to come, people will most likely buy as much chocolate as possible while it is still cheap. 

It can be deduced for this article that the scarcity for chocolate is increasing, just as the demand is. Due to shifts to the right in the demand curve, the price of chocolate has increased. Therefore, the demand curve will shift to the right and move up along the scarcity curve. Therefore, consumers will make sure to ration chocolate, as it has now become more expensive and less affordable. Other markets, like the candy market for example, that act as a substitute for chocolate will experience an increase in demand. On the other hand, markets like the chocolate chip cookie market, will experience a decrease in the supply curve, as chocolate is no longer as available as before. From the chocolate producers' perspective, they will increase the production of chocolate, as the prices are higher now and they can make more of a profit. Therefore, they will increase the allocation of resources towards the production of chocolate (like machinery, land for plantations, etc).

Verizon is expecting a surge in demand for smartphones like the iPhone in 2011, however how many Apple devices will sell is unknown because of uncertain quantity of supplies. The lack of supplies has really come to their attention in the last quarter of 2010 were they had a 2.6% decline in revenue. Even Apple claimed that they would've sold way more iPhones in the same period, had they had more supplies to meet the demand. The reason that Verizon predicted that this great surge in demand for the iPhone will come and are trying to gain more resources, is because only 26% of their customers own a smartphone, and they predict that 50% will be on a smartphone by the end of 2011. Verizon wants to be prepared for the launch of the iPhone. CFO Fran Shammo, stated that if Verizon is able to sell 11 million iPhones, that their revenue in 2011 could increase from  4% to 8%, and earnings from 5% to 8%, and these figures could double in 2012.

After having witnessed a loss in profits due being unable to meet the demands of consumers, Verizon is allocating more resources to the production of iPhones. On a PPC graph the demand line would increase showing that Verizon will have an increase in both the quantity of the supply and the increase in the price of iPhones. This is a signal of less scarcity in the market, and the incentives of both the consumer and the producer. Because of this increase in the supply of the iPhone, competition to Apple will have a decrease in potential consumers. A producer's incentives have become to produce more at a higher price. Since Verizon doesn't want to make the same mistake twice, they will allocate more resources to the production of iPhones so that they can maximize profits.

The United States has had its worst draught in half a century, the Agriculture Secretary Thomas Vilsack predicts that the corn yield is the lowest since 1995 and that prices of corn and soyabeans will rise in price by 20-25 percent unless there will be more rain. The Agricultural Department estimates that the general food prices with rise between 3 and 4 percent. In the Midwest the average production was reduced by 60 percent according to the Johnson County Farm Bureau.

In this case the supply on the curve would decrease and therefore the prices would increase and scarcity would also increase. Consumers would ration their consumption of food because it has increased in price. The article particularly states that the price of corn and soyabeans will increase significantly, therefore consumers might buy less goods from the corn and soyabean market and might consume in meat products because of the rise in food prices. The producer would eventually start supplying more when the draught is over for next years harvest, so there would be a shift in resource allocation through an increase investment in agriculture in the years after the draught due to the rise in price.

This article is acquainting us with China's plan to increase its supply of meat. Today, consumers in China are eating ten percent more meat than they did five years ago, so demand is increasing. However, the supply is lagging behind. Thus, Chinese officials have decided to buy millions of U.S. livestock and import it into China. This is a good example of how government intervention affects supply. By importing the U.S. livestock the cost of producing meat in China will be much less, whereas the quality will be much higher. However, critics from the U.S. are skeptic of this ordeal, as the cost of meat production is rising in the U.S. So the livestock exports to China would be increasing supply in China but they might decrease supply in the U.S. and lead to a future loss of a key U.S. export. 

Evidently, the reason for China's attempt to increase its supply of meat, is that there is an increase in the demand of meat. This means that meat has become scarcer. From a consumer perspective, the incentive now is to ration the amount of meat that is being consumed. Another consumer incentive might be to switch the consumption of meat with the consumption of a substitute good such as fish. From a producer perspective, an incentive is to produce more because the price is higher now. Therefore a producer is able to make a greater profit from the production of meat. There will also be a greater allocation of resources into the production of meat, as it is a more lucrative business.

This article addresses a recent issue which has impacted many US citizens living along the Gulf Coast. It discusses  the impact that Hurricane Isaac has had on the price of oil and gas in the past couple of days. The national oil and gas prices have risen by 5 cents in one day. Areas which were most affected include Ohio, Indiana and Illinois where prices rose by up to 14 cents.  This increase in gas and oil prices can be blamed on the destructive affects of Hurricane Isaac. Isaac has flooded the oil hub located along the Gulf Coast and has shutdown a main pipeline in the mid-west. This has created a limited supply of oil and gas. Now that oil and gas companies can produce less they have driven up the gas and oil prices to compensate for the lesser quantity of gas and oil sold. This relates to what we are studying in class as it illustrates how scarcity influences the price. A product retains a higher value as it becomes  scarcer. Oil has now become a more scarce resource in the US and therefore the prices have risen.

very constructive analysis of the problem. You seem very intelligent pascal.

The reason for why the Canadian government started to stockpile on maple syrup is because considering that the market for the maple syrup is very dependent on the weather and how much sap comes out of the maple trees they will stock pile and get more back- ups. The reason for this is that the Canadians are expanding their market into more regions having more than 70% of the maple syrup market and they are attempting to expand it so in order to keep the demand on maple syrup rising they will use their backups in case there isn't enough. They are making sure that there is always enough maple syrup for the market. They don't want to create a demand and then have a bad season leading to them not being able to supply. For example in 2008 when they started having failed harvests their supplies ran short which lead to the prices going up from 2.40 Canadian dollars to 4.00 which lead to several producers to be priced out of the market because of their inability to supply. Which is why they have reserve supplies of maple syrup so that they can always be able to supply the maple syrup market in case they have bad harvests one season.

The strategic maple syrup reserve signals that there is going to be less scarcity in the market for this product as they will always make sure that there is enough of this product being supplied. The producer to ration the maple syrup more, because if they supply too much of the maple syrup their reserve will start to decrease as they will not be making sure that some of it is directed towards the reserve. If the demand for the maple syrup would be very high they would allocate more of the maple syrup in their reserve stocks to the market however if they were to have a lowered demand they would allocate less of the maple syrup and keep it in their reserves.

The article talks about future trends in demand and consumption of food in the future. The graphs portrayed in the article, show the estimated increase in food demanded over the next 10-15 years. This has to do with the fact that the population is continuing to grow significantly in the near future. The problem with this is that while more food is needed, many countries have little room for improvements. This will make them rely heavily on imports in the future as they are not able to feed their growing population. The biggest problem is that if the food production is not increased significantly over the next years, there might be a global shortage of food. 

The example of food is very relevant when talking about this topic. As the worlds population, the food becomes more scarce, the demand rises. This causees the price of food to increase. Usually, this would cause many people to allocate their resources towards the food production. Currently however, despite rising prices of food, it is still more profitable to produce something else. This causes the food production to be lacking of food, which causes the price to rise even more.