ZIS IB Year 2 2013-14

This article relates to the idea of demand because in the article it talks about the growing quantity demanded in the Coffee market. Since the Coffee market is expending so rapidly the price of the coffee is expected to increase rapidly. The larger the cofee market becomes the more the demand curve will shift, eventually the quantity demanded will decrease because the price does not seen worth it anymore for customers

Because the demand on coffee is increasing there is a threat that the product will have an increase of price soon because it will become very scarce. since the demand on the product is so high that the consumers have indicated that they want the coffee. Producers have an incentive to produce more coffee. If the producers are not able to keep the high amount of supply up than prices will rise and the supply line will shift to the left indicating that the price will increase and the scarcity has increased as well. Other markets may suffer as well from the increased of scarcity because the demand on complimentary goods will increase as well if the demand on coffee stays high.

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.

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.

In this article the company Norsk Hydro decided to change the raw material they produce for German rolling mills to 'increase in-house primary metal sourcing, replacing less cost-efficient remelting of cold metal as a source for its Neuss-Grevenbroich rolling mills.' This is supposed to optimize to the current issue in the market. The Neuss mill will increase production of aluminium to 150,000 tonnes per year unlike the last few year in which it only produced 50,000 tonnes. The factories have a maximum production limit of 230,000 tonnes. Although the tonnes created per year are now increased, it is still not exploiting the maximum point. This point may not be profitable due to limited demand in the market. Maybe the supply and new improvements including framework, CO2 compensation and more efficient smelters will increase the demand.

Although this article shifts supply to the right as there are technological advancements such as better smelters, there is also a movement along the supply curve as the company is getting closer to exploiting their maximum production point. In this case they state that supply is higher than demand. At the moment they have a surplus so the producer must decrease the price so that the quantity demanded will increase. The product, because of the surplus, is less valuable and as there is more quantity it is not as scarce as before. Related markets can buy the aluminum at lower price, increasing their benefit. The producer of aluminum must reduce resources allocated into production to return to the equilibrium point.

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.

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.

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.

Weather disruptions and rising energy expenses have increased grain costs at record high. Current supplies may be ample to start unrest caused by the high food prices. With droughts in the Soviet Union and weak monsoon rains in India, corn and soybean prices last month exceeded records. It is said that U.S consumers might need to pay 3 to 4 percent more on food next year because of the effect droughts have on store shelves. Places such as the middle east and North Sub-Saharan Africa are at a great risk since most of their products are imported. Because of this supply shock, there is a negative shift along the supply line as supplies are becoming more expensive. With the addition of governmental intervention such as taxes, firms will have a much lower profit this year on grain supplies.Also there will be less products for the firms to sell. Not only does this affect firms but as stated before, the world should be ready for a food price increase in the coming year.

Becuase of weather changes, there is a scarcity issue in the amount of food that his growing around the world. In economic terms, this means that the supply curve has shifted to the left created a new Equilibrium point. Because of this, the price has increased as the good is more scarce and of course, the supply has decreased. This means that the demand for the good has decreased and consumers have to ration their food even more. Because of this change in supply, there are less resources on the market so because of this scarcity issue, the prices have to go up so that producers get some sort of income. Unfortunately, this means that the consumers have little or no marginal benefit as the price increases. The demand for the good is still high as everyone wants to be able to buy good but unfortunately the price is too high and consumers are not able to buy the product. The marginal benefit decreases for both the consumer and the producer.

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.

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.

The article discusses the idea that in the coming 20-40 years the demand for orange juice will almost double, and that the orange market, as well as the orange juice market must be prepared to supply enough products in order to satisfy the demand for orange juice. Although the citrus nurseries in Florida as well as South America are producing massive amounts of oranges in order to supply enough to orange juice firms, it is currently not enough to satisfy the growing population. It is estimated that global population will increase by 2 billion in the next 40 years, meaning the demand for orange juice will increase substantially. As a result of this huge increase in demand, which the American and South American markets alone cannot satisfy, various other markets worldwide, such as the Asian market, are hoping to move into the orange juice industry, in order to seize the opportunity and make more money by providing the product.

In the case of the orange juice, the equilibirum price and quantity will both be increasing, as there has been a sudden shift in demand due to demographics and a projected increase in global population. As a result, producers will see this increase in demand as an incentive to produce not only more orange juice, but also grow more oranges. Consumers on the other hand, will either look for substitute goods or ration the product as there has also been an increase in price, indicating the scarcity of the product. This shift will have a large impact on other markets as well. As the price for orange juice and oranges is increasing, consumers may look to consume apple juice or other fruit juices instead.

Sony cutting jobs in some departments and moving headquarters should mean that they achieve their goal of becoming efficient in the mobile market. In a diagram, the supply curve would shift to the right. This would lower prices, and give more customers incentive to buy their phones. Their phones should be less scarce, and therefore signal to producers to limit supplies. Sony is trying to win over market share on Apple and Windows, which should occur if they are selling more phones.

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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.

After the United States supported Israel in the "Yom Kippur" war, the Arab members of OPEC (Organization of Petrol Exporting Countries) announced an oil embargo with the US, where they would charge 70% more. In 1973, at the time of this restriction of oil, the OPEC was globally known as a large oil producer. This caused a shortage of oil, thus shifting the "supply curve" to the left, while the demand curve stayed constant. With this low supply, and constant demand, oil became a scarce good. In order to reach market clearance, or equilibrium, prices increased drastically. From $3 per barrel in 1971, to almost $40 per barrel in 1980. The shift in oil supply resulted in an increase in transportation costs. In order to compensate for the high oil prices, the Government of the United States increased domestic prices, thus increasing inflation. This inflation eventually led to relatively lower oil prices.

The article Supply, Not Demand, to Blame for Pullback in May Home Sales addressed the issue of a lack of supply being the cause for the recent decline in house sales. In May, 1.5% of sales had fallen and the decline of properties is usually associated with the lack of demand. However recently, demand has been exceeding supply. A lack of supply leads to a left shift of a supply curve (price of houses and supply of properties) as there is a decrease in supply. The determinant of this shift is caused by productivity. Productivity is the input vs. the output; firms wish to minimize input to gain the greatest output. In this case, productivity has decreased as the input is not being met to meet the maximum output therefore leading to a lack of supply. It also relates to the basic economic problem of scarcity and that the resource (houses) is scarcer than before which affects the production therefor the supply of the good. However economists predict an increase in the supply of goods, despite these recent developments. Perhaps this lack of supply, this left shift of the supply curve was caused by a supply shock.

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).

In this article it talks about the issues of supply of gold. Over time a lot of mines have been emptied and now there is a problem that the product will become scarce and gold prices will increase drastically. since there is not very much gold circling around different mines, there is less to be found. The problem is also that the economy is increasing, new mines are made and people have to be trained in mining and some specialized gold makers moved to these new gold mining cities. The average of needed gold in the world is estimated to increase 6% by 2016 which is a lot. A lot of the pure gold has been mined and the not so pure gold is not as profitable. 

We see in the chart that in developing countries arms are considered a normal good. This is apparent as the number of sales is at its lowest in 2007, 2008, and 2009 - the time period of the late financial crisis. Incomes decreased and therefore also government expenditure. So since the governments had a reduced budget, they were forced to purchase fewer arms. However, once the global economy started to recover from the crisis, incomes rose again. Thus, governments were able to spend more on arms again (which we see in 2010 and 2011). This is a good example of how income, a non-price determinant of demand, can influence the demand on a good. Another non-price determinant of demand is government policy. The article states that Saudi Arabia was the developing world's biggest arms buyer in 2011, with deliveries of $2.8 billion - an unusually high number. Therefore, there must have been a change in Saudi Arabia's government policy; otherwise they would not suddenly be buying more arms. So now we see how government policy influences demand on arms. 

In this article, the demand and future of Intel's Ultrabooks will rise prosper, considering that this product had a weak entrance given its high prices. Intel has slipped with its market share, coming from as high as 87% to 84%. The way that Intel is planning to retain their lost market share and stay ahead of their only real rival, AMD, is by lowering the price of their ultrabooks significantly. Yet despite the potential threat and consequent loss in market share, the people at Forbes feel Intel will regain its dominance in the notebooks and microprocessor market.