Archive forexpectations

Retail sales reflect oil and markets

This Washington Post article describes the market during the month of November, especially around Black Friday and the week or so after. It attributes high spending to the low gas prices (a normal good) and improvement in the job market, both of which cause a shift in the demand curve. People have more money to spend on gifts and other superior goods. While sales actually exceeded economists 0.4% improvement prediction by 0.5%, there was still an 11% drop during Thanksgiving week compared to that week last year. Although one might think that lower gas prices and a better job market would cause buyers to spend more, the article explains that people are still very price-sensitive and hesitant to make impulse buys, due to the unpredictability of the market.

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Theo Blog 2: Lego and Shell Oil


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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Theo Blog 1: Video Game Externalities


Not so receantly anymore, Microsoft released an add-on for their previous video game system, the X Box 360 known as the Kinect. The Kinect add-on has since been incorporated into their current system, the X Box One. Over the years, video games have been blamed for a plethora of negative effects, or external costs, such as health risks, desensitizing users to violence, and antisocial tendencies of users. However this article focuses on the positive externalities, or external benefits, of this system in particular, which has lead to technological advances in hospitals and schools. What the Kinect has done, has created a way for doctors to operate computers and machines without physical contact. Does this mean the Kinect should cost more? Not necessarily, but this is an example of a private supplier developing a good with a social benefit.



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Competitive Holiday Season Looms Ahead

Walmart is the world’s largest retailer. Despite this, the company still has fierce competition with other firms such as Kohls and Target. Though Walmart reported a quarterly upturn in sales when matched against comparable firms, it still has much to worry about. More so than ever, Walmart is feeling the effects of online shopping. There is an intense rivalry between Walmart and online firms such as Amazon. This worry is increasing as we approach the holiday season, a season in which sales are at their peak. To combat this threat, Walmart is instituting a price match feature at all 4,300 U.S. stores. Essentially, if shoppers can find a product for a cheaper price online, Walmart will match the price in stores. Sales in stores have been rising, but the increase has been primarily limited to home goods, health, and apparel departments. Many of the objects that are true luxuries are being bough online, and Walmart wishes to change this before the holiday season is upon us. So far this method seems to be working. Walmart’s total revenue has increased by 2.9%, bringing it to a total of $119 billion for the 13 week quarter. In comparison, similar firms only experienced an average increase of 0.5%.

This is a great example of a competitive market. Though it is not for a specific product necessarily, these ‘super stores’ as a whole can be directly compared. They are in constant competition and utilize the strategies of other firms to increase their own profits. I find it very interesting how the online market has a direct impact on the sales in physical stores, and what various firms are doing to counter the loss of sales. It will be interesting to look at the numbers after the holiday season and see if this strategy truly works. From a consumer standpoint, it seems like a good deal. You can buy a product for the same price as online without paying and waiting for shipping. I am excited to see if Amazon and other online retailers bring about a new deal to counter Walmart’s latest move.

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Winter is coming: Road salt supply low, demand high

This article is an example of the concepts of shifts in demand and its effect on price. This article is about the low supply of road salt, despite its high demand due to the past year’s harsh winter. Because of the higher demand and low supply of road salt, the price is increasing. Its prices have gone up because of its lack of availability. Salt mines are feeling the pressure by a large amount of local governments “trying to replenish their supply at the same time.” People are trying to stock up early for this winter, especially because there is a general consensus that it supposed to be even worse than last.


The reason Americans are spending less

This Washington Post article lists a variety of reasons why and how Americans, both young and old, are saving their money, even with the impending holiday season. Many of the reasons relate to shifts of and along the demand curve. The first reason given is that people do not have as much money to throw around, probably because people’s general incomes are lower, meaning a shift in demand to the left. The second reason is that people are expecting a raise around the holidays. This means that people expect to have more money in the future, so are holding off, meaning a future shift to the right, but a current shift to the left. Other people are worried about a stagnant income and the state of our economy. This article clearly demonstrates how income and expectations affect the demand for goods.


Tesco market value failure

Tesco is a multinational grocery and general retailer that is headquartered in the UK. In the last year it experienced a major decrease in market value by 50%. This business failure not only affected its employees but also UK’s citizens that rely on Tesco’s financial contributions to UK’s pension funds. This also negatively affected citizens’ savings and the government’s tax income.
Sources of Tesco’s collapse included faulty recording of accounts (deals with suppliers and when costs were paid), and competition with Aldi and Lidl.
Market failure stunted economic development of external parties, and severely impacted UK’s total economic growth and productivity.
This article directly connects with our lessons about market productivity, impact on external parties, economic growth and development, and the general idea of cause and effects of market behavior in the world of microeconomics.



If the team does well, so does the city

This article explains the effect of NFL game performances by teams and how this affects the prices of tickets. The San Diego Chargers have been doing extremely well this season and therefore the attendance to games has increased significantly. Tickets at the beginning of the season cost an average of $177.06 on the secondary market but after their consistent wins on the field, the price of tickets has now increased to $219.20, “a 23.8% increase in five weeks,” which is astounding. Go Chargers! The Buffalo Bills have also been playing very well and their tickets have had an 8.5% increase in price on the secondary market. Unfortunately for the New Orleans Saints, whose performance has disappointed so far this season, tickets have dropped from an average of $268.53 to $250.14, a 7% drop.
This trend in prices displays the effect of expectations on the demand market. Because supply for the tickets of these games is constant, the better or worse the home team performs affects the quantity demanded. When they perform well, this causes the demand curve to shift up and to the right, therefore creating overall higher priced tickets. When a team plays poorly, the demand curve shifts down and to the left instead, creating a lower ticket price. This shows that not only does team performance affect the prices of tickets but how much American Football is a major element and pastime in our domestic economy.

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Hedge Fund Manager Bullish On Market

This article talks about the founder of Citadel, Kenneth Griffin and his expectations for the market. His change in expectations was caused by a  raise in both the S&P and the DOW a few days before. Because Griffin is such a big name in the financial industry, and people value his opinion, his change in expectation will most likely result in a  change in expectation for the general public. With more and more investors taking a bullish stance on the market, there will be more buying and selling, and hopefully more growth.



WTO Take-aways

This recent article by William Mauldin, the Wall Street Journal reporter, reflects on the key conclusions from the World Trade Report, a document that is annually issued by WTO (World Trade Organization) “to deepen understanding about trends in trade, trade policy issues and the multilateral trading system”.  This directly connects to Chapter 2 (“The Power of Trade”) and Chapter 9 (“International Trade”). WTO is a good example on using specialization, division of knowledge and comparative advantage in producing goods. Also, it is clearly seen from the article how significantly trade can be affected  by political conflicts (ex. Russia, Ukraine etc.). Unemployment can negatively impact the exchange of goods as well. The Report also predicts the growth of emerging markets.

P.S. If interested, you can find the original World Trade Report here.

Anastasiya Khlopina


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