ZIS IB Year 2 2013-14

Due to the fact that current cocoa crops are becoming less suitable for the growth of cocoa beans (temperature increases), prices have begun to rise. Due to sudden supply shocks, such as the political unrest in Ivory Coast, less cocoa beans have been harvested, and the production of 1/3 of the world's chocolate has been stopped temporarily. This is causing the supply curve for chocolate to shift to the left. The demand curve, however, shows a shift to the right, as prices and the demand for chocolate are rising (Easter Holidays; seasonal change).

This is an article on the prices of food and the way this affects the supply. Since the year 2012 has been a very warm year, there have been major draughts throughout the world. This article although focuses on the market in America. The draughts have left a major decrease in the production of products. The government's forecast states that the prices of beef would rise 4-5%. Professional analysts although also said that they do not believe that people therefore start buying less, on the other hand they said that it might affect the economic growth over the next years.

This article describes trends in supply of food. In summer 2012, being much hotter than usual and causing the biggest drought in half a century, are causing rises in prices. Groceries such as milk, beef, chicken and pork are expected to rise in price due to the record-breaking weather. Crops, such as corn, of which 88 percent were affected, are to go through major change. General increase of food goods will cause a shift of the curve to the left.

The Article talks about the fact that prices for agricultural products will rise in 2013 due to a heat wave in 2012. This means that the warmest year yet; 2012, will impact the supply of agricultural goods. As there will be less supply, the prices of agricultural goods will increase by up to 5% of goods such as beef and pork. In addition, as the US is a large exporter of agricultural goods, expert say that there has to be a solution to make sure that the global food prices will not spike. Due to the fact that there is a reduction of supply, the supply shift will shift left or upwards. Therefore, there will be less produced at each price and the new equilibrium price will be higher than before. In addition, there will also be fewer goods demanded due to the higher price.

Real estate market supply issues addresses the fact that in America supply of low to mid-range housing continues to lag behind demand, and will do so until prices rise. The demand for the properties are high however the supply is not being reach and this is due to the fact that home owners can get such high loans. Especially in neighbour hoods which have been affected by foreclosure, the houses have gone under water and this happened during the downturn. Another problem is that buyers now believe they can demand the closing costs which can be a bad financial decision for home owners to put their house on the market as they will not get the full costs. The real estate market is destined to remain soft as many Americans are in debt and would rather let their credit cards erupt with late payments.

'Explain what you think is happening to the equilibrium quantity and price and what it means for signalling, incentives, and resource allocation.' If you would graph out this situation you would see that the supply curve shifts to the left. At this point there would be an increase of scarcity because there would be less houses to sell to match up the demand. In this example it can be assumed that producers would have incentive to produce more because the prices of the houses would therefore increase. If the demand is staying the same and the houses are become more expensive then the producers will be willing to produce more. However consumers may no longer be able to buy property anymore so may look for other substitutes including renting apartments or moving into a mobile home. More resources will be allocated to produces houses.

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.

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.

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.

Apple is facing problems due to one of their display suppliers named Sharp, having "manufactoring difficulties" as stated by The Wall Street Journal. This will result in a decrease of displays produced for IPhones, and with this, the supplies of IPhones 5 expected will not be fulfilled. This will therefore also affect the demand of the costumers which will not be satisfied since Sharp still is not in full production. Apple is still hoping to launch the Iphone on september 12th and start the sales on september 21st.

Due to Apple having screen supply problems with one out of their three companies, Apple has to see if they can increase the production of IPhone 5 screens in the other companies, or else they will have less supply than demand available. This will mean that the supply curve will shift to the left leaving lots of consumer demand uncovered. Not only would Apple not be able to cover all of the costumers demands, but also, due to a scarce amount of IPhones available, the new equilibrium will also have a higher price per unit sold. Therefore the consumers incentive will decrease due to longer waiting times in order to get their IPhone5, as well as due to higher prices, which would then decrease the IPhone sales. Therefore, in order to avoid this, Apple will need to find another way of producing all of their needed screens in order to fulfill all of the demand and avoid costumers from turning away from their product.

Prices of cotton in Tanzania dropped by almost 40 percent due to high supply. However, some Tanzanian MP's advised that people not sell their cotton for less than 1,000/kilogram and instead make mattresses with it. However, some desperate cotton merchants have been selling their cotton fro as low as 300/kilogram to the black market. By August 24, 2012, 174,000 tonnes purchased and 145,000 tonnes delivered to ginneries.

High supply causes a movement along the supply line in this graph. This lowers prices to the consumer and encourages producers to stop producing more of the same goods. The equilibrium quantity has been increasing, therefore reducing equilibrium price. This signals producers to reduce production as their profit has been decreasing. Meanwhile consumer are signaled to begin buying the goods more as the prices for them are being lowered as the producers attempt to sell their products more cheaply.

The article written by Peter Woodman addresses the problem of the decreased supply of aviation fuel during a short period of time in June 2012. The Manchester airport gets its fuel from the near Port on Merseyside. There was an interruption in the supply of the fuel which caused the airline to send out precautions to the passengers - their flights might be cancelled or delayed. Since the airport uses over three million liters of aviation of fuel per day, this shortage of supply created temporary problems for the airport. In other words, there was a problem because the demand of aviation fuel was high but the supply of fuel was low which caused the Manchester airport to think of alternatives for their passengers and flights. This supply issue falls under the category of a "shock" - an unexpected event that occurs that causes the decrease supply of a particular good.

Coffee supply in Starbucks and other plantations is decreasing. The global supplies are becoming less due to shocks that are occurring because of climate change. Shocks include hurricanes, mudslides, erosions and variations in dry and rainy seasons. All of these events affect the crop yield negatively, as they reduce the production of coffee and cocoa. It is suspected that by 2050 it will be too hot to grow chocolate in the Ivory Coast and in Ghana, which are the main global producers. Not only Starbucks is affected by the climate changes but also wealthy and other independent farm plantations. Central American workers reported that they have already experienced changing rainfall patters and more severe pest infestations. The Arabica coffee bean, a specialty in Starbucks, is at great risk. Coffee is a necessity for some people and it would be a real issue if coffee disappears. Jim Hanna, the company's sustainability director, informed Guardian that the U.S. government should step in and try to reduce climate change. Gap, an American company, has already stepped in and is campaigning. There have already been 2 warnings in less than a month that coffee is at threat and therefore it is important to thing and look 10 to 20 years ahead.

Coffee, a product consumed by so many people, but starbucks is now seeing climate change as a big threat to their industry. As climate change intensifies and the world's temperature is slowly but surely increasing in certain regions, it is feared that by 2050 in Ghana and the Ivory Coast it will be to hot for coffee to grow. Specifically the Arabica coffe bean which is one of the most important beans in the industry. There is now a lot of pressure on the government to act quickly and efficiently on climate change before it is too late. However coffee harvesters an farmers are already seeing severe changes in climate such as hurricanes and resistant bugs all causing for less produce. 

As the coffee beans are becoming scarcer, the supply for coffee is decreasing. Not only the coffee supply is decreasing, but also the cocoa bean, meaning a substitute is also not an option for switching to. The price of coffee will increase and the quantity demanded will therefore decrease as well, as not everyone will be able and willing to buy coffee at the higher price. The equilibrium price will settle at a higher price, with less supply being produced. This will signal to the consumers to buy less coffee/ hot chocolate and signal to the producers to produce less. In other words, the consumer incentive is to consume less and the producer incentive is to produce less. The resources will be allocated differently, as fewer resources are allocated to the production. Coffee becomes scarcer. The marginal benefit decreases and the marginal cost will increase.

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.

This article is about Chinese oil supply and how China is attempting to overtake the United States in yearly oil productions. It is an example of a supply article, because it speaks of how lower prices directly relate to supply. It also speaks of how both China and India are putting a lot of money into foreign oil resources, hoping for the future. Looking forward, if China continues in its current footsteps, it will be obtaining the most oil in the world, and not only from domestic resources, but mainly foreign ones.

Analysis This article about oil prices and supply in China, relates to what we spoke of in class, because some of the key elements of supply and demand are included. The main issue of the article is Chinas oil supply, along with its demand for oil. China has a generous supply of oil from its own resources, whilst she is still trying to acquire a lot of oil from foreign sources. China is also attempting to up her quantities of oil to beat the United States within the next couple of years, and by 2020, China is to be the country that will be obtaining the largest quantities of oil. The article is related to our class topic of supply, because as China plans to sink its prices for oil, the supply, or quantities should go up with time. This is exactly what was discussed in class and is shown on supply curves or graphs.

Explain what you think is happening to the equilibrium quantity and price and what it means for signalling, incentives, and resource allocation. China has made constant attempts at increasing its oil supplies, which would lead to lower oil prices and economic growth. The equilibrium quantity of oil will increase and therefore the prices will be lowered. A higher supply of oil signals lower prices for both the producers and consumers. China will try to probably keep the price up, and the consumers will look for a substitute, or try to ration the good. Although, if the consumers are willing to buy at the old price, while the suppliers gain in resources, there will be a producer surplus. In other words, the producers, China, will gain more than they could be gaining if the consumers were to adjust their standards.

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.

Samsung underestimate demand for Galaxy SIII, losing a possible 2 million sales in a single month. A manufacturing glitch resulted in the slowing of production. Demand has increased substantially in the last two years, especially in the Asian market. Samsung used to only hold 10% of the market share, but they have now overtaken Apple completely. Samsung's success could be down to the price of their phones (substitution good), or the altering tastes of customers.

The demand curve for Samsung's Galaxy SIII would shift to the right, resulting in greater scarcity, and a required increase in supply. This did not occur in this situation. Customers were forced to ration their consumption, as some versions of the phone went out of stock completely. Price of the product would increase in most scenarios to further incentivise an increase in production, and a rationing of the good. If Samsung had kept up with their demand, they may have won some market share over other companies, but their quarterly incomes were predicted as far lower than what could have been achieved with adequate supply.

Demand article as Oil demand falls in China

This is an article on the demand of sugar. As the International Sugar Organization has stated, that there is a deficit of 15 million tons in the production. It is stating: "Stocks are currently so low, says the ISO, that even next year's harvest is unlikely to restore reserves to a healthy level." This could make people nervous and push them to buying a big amount of the product now. Since the product might become scare in the future, the prices would rise and therefore people would buy a surplus of the product at the current price. The principal of  expectations of the future price would be touched.

Changes in equilibrium: Since the expectation of the future price principle is addressed, the demand curve shifts to the right. Therefore there is a higher demand for sugar, due to the fact that sugar is becoming more scarce. As a result of that, the producers have an incentive to produce more and raise the price, as they realize that the demand has increased. Consumers may then substitute or ration, as the price has increased and they might not be willing or able to buy sugar at this price. As a result of the points above, there would be more resources used to produce sugar even though it is becoming more scarce.

This article illustrates the increasing demand for "greener" cleaning products, which sparks the industry changes.

Throughout the first six months of the year Lego posted an increase in profit of 36%, revenue increase of 24%, however the demands for the Lego products along with all of the toy market has started to fall. This has been the most negative toy market in the U.S. for now. The reason for why the toy market has started to record such negative results are various factors. Amongst those factors were the approaching presidential elections meaning that taxes will go up for all the people making them want to save up more. Moreover the rising debt and the huge economic uncertainty going throughout the country has also started to deeply affect the toy market, making people have to spend less which ultimately leads the consumer to buy or spend less money on their products leading to worse economic results and making the toy market decrease.

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).

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.