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Theo Blog 2: Lego and Shell Oil

http://www.economist.com/blogs/democracyinamerica/2014/10/greenpeace-lego-and-shell?zid=319&ah=17af09b0281b01505c226b1e574f5cc1

 

Lego bricks, like many modern toys, are made of an oil-derived plastic. Up until very recently, Lego had a promotional deal with the oil company Shell, making the two compliments of each other. When the demand curve shifted for one, it would shift for the other. However, after a long campaign orchestrated by the enviornmental group called Greenpeace, which was displeased by Lego’s continued partnership with a company participating in Arctic drilling, Lego finally agreed to terminate their partnership with Shell. The two are thus, no longer complimentary goods. This event may also cause a downward shift in the supply of oil from the Arctic, as now producers may have the expectation of penalties for those who stay. As Greenpeace hoped, this may reduce producers desire to enter the market.

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Supplying Homeless with Homes

This article talks about  a new idea to create small homes inside of billboards. Thinking back to the idea of scarcity, we can see that housing is certainly a scarce resource. There are huge numbers of people living without homes, and this pushes the demand for housing way up. The demand for low cost housing has risen tremendously, especially in the case of homeless people. Because of that, someone has decided to enter the market, and take advantage of the increase in demand. Michal Polacek started designing a way to change billboards into low cost housing in Art school and the idea has since taken off.

 

Article: http://money.cnn.com/2014/10/31/smallbusiness/billboards-for-homeless/index.html?iid=SF_E_Lead

 

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Why Drop in Oil Price Could Squeeze U.S Economy

The following article talks about how a decline in the price of oil could inversely affect the oil industry and the economy in general of the United States. Such price drop, created when there is plenty of supply but not enough demand, is a good sign for the consumers and acts as an economic growth uplift, but it can also hurt the US exports, spending and employment. Through a comprehensive and easy-to-follow analysis, the article points out the implicit downsides of the reducing fuel price by touching on several familiar topics that we have learned in class, including supply & demand, exports & imports, global supplies, change in price, etc.

http://www.cnbc.com/id/102083493

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Competition forces Ebay to shift strategy

It was recently announced that the subsidiary of eBay, PayPal, known for allowing payments and money orders to be made through the internet, will be turned into a separate publicly-traded company.  Despite the top management initially insisting that the companies would continue operating as one entity, a big reason for the split is major shifts in the market, specifically those resulting from Apple Pay. Apple Pay’s entry into the online payment market has created competition in the world of bit-coin currency, and now PayPal is much more appealing to competitors of Apple and eBay can make an enormous profit in its sale.

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Producer surplus=New Firms

Today is class we learned about producer and consumer surplus. One key point I remember is when the producer surplus is large, which means producers gain from the exchange. When producer surplus is large, it attacks new entrepreneurs to enter the firm, because they know that they can create a company similar to the company making the profit. What the new company will do is create a similar product and charge a price a little low than what the consumers are used too, this will attract all the customers.

This idea relates to the article I posted In this article, it explains the profits that shaving companies make, like Gillette. The profits are incredible, and the market is a 6.1 billion dollar economy. This opportunity striked the interest of Michael Dublin who invented Dollar Shave Club. He charges a minimal monthly fee, and they send you raizers every month. This company attracted the attention right away from many consumers, and they are doing revenues of 50 million to date. This is a perfect example of what we learned with consumer surplus, and Dollar Shave club saw an opportunity within the producer surplus, and created this company.

Enjoy the Article!!!

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