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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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Effect of Ebola on the Supply of Food

With the continuing fear of the Ebola Outbreak, food supply has become scarce in countries such as Sierra Leone, Liberia, Guinea and many other places in West Africa. Agricultural activities have been put on hold my famers, which are affecting families near by. According to the WFP, around 80 percent of people have said that they have been eating less now that supply has died down since the Ebola Outbreak. A farmer from Sierra Leone spoke about the affect of Ebola on the production of the cocoa farms. Before the outbreak, around 50 bags were being harvested but now only 10 are if they are lucky. Almost 40 percent of farmers have left their land to move to less effected areas, leaving their production behind. In Liberia, rice production decreased by 10 percent. Due to the Ebola outbreak and decrease in supply, food shortages have occurred especially since international trade has been put on hold. Goods that were being imported from various countries are no longer being imported, therefore creating lack of multiple goods. Due to the scarcity of food, prices have risen because fewer quantities are being produced although because domestic workers are no longer working, family incomes have decreased, making it hard to get a hold of the higher priced food.


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.


Oil and the global economy

In this post, the author describes the effects of the fall in price of oil and how it connects to the global economy. The drop in prices effect the world’s economy due to the fact that oil is a necessity that is hard to come by. No matter what, every country needs oil, and the lowered price creates a higher GDP for each country.

The article talks about how Saudi Arabia is attempting to raise the prices because it is a top exporter of oil. They are attempting this by reducing the production. This is very similar into what we are doing in class.

There is another similarity between this article and class, which is the relationship of a domestic product and world prices. The world price continues to drop closer to the domestic price of Saudi Arabia.


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.


The Impact of the Ebola Outbreak on Trade

This article, from the International Business Times, discusses the impact that the Ebola outbreak has had on the “already fragile markets and economies of Liberia, Sierra Leone, and Guinea”. One of the main concerns presented in the article is the labor shortage caused by the disease, which will lead to a reduction in the production of cash crops, food shortages, and a reduction in household income (leading to a decrease in access to food).


Price and demand increase of fruit in southern India


This article, posted in December 2013, deals with price increase and demand for fruits in India. There had been many changes during this crop season: prices for apples and grapes have increased, there had been a shortage of bananas, and the supply of oranges grown had increased. Due to the higher prices of apples and grapes and the shortage of bananas (causing bananas to become more expensive), oranges became the more popular fruit in southern India. Oranges are being sold at RS40 per kg, while apples are being sold at double the price of oranges.

Demand is a big factor during these rapid changes. Due to the high demand of oranges, importation of oranges had greatly increased. Even though more oranges were imported than previous years, the charge to transport this fruit did not increase.The rise of oranges imported is evident by the massive amount of oranges being imported to markets in India. The main market in Chennai receives about 150 tonne daily and the Kochi main market receives 100 tonne daily.Liaqat Ali feels it is still too early to predict supply and demand though. “We have to wait till January-February when the demand goes up.”

Will these prices become permanent and will the demand for oranges stay this high for years to come?




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.



Recent Drop in Ethanol Price

A recent drop in the demand for ethanol has sent prices lower than they have been in up to four years. In class we studied the concepts of supply and demand and their impacts on the price of a product or good. In this article we can see that there is a clear surplus of ethanol which is causing the price to decrease significantly. A price drop in ethanol isn’t bad news for consumers of gasoline due to the fact that they are close compliments as standard gas is made up of 10% ethanol. While US citizens enjoy the price drop acts as a detriment to Ethanol makers. However, in recent history the ethanol industry has experienced a market that fluctuates heavily so this fall is something that the producers can recover from.


Decline in World Prices for Oil

As this article explains, the worldwide oil market is currently experiencing a significant decline in prices. Part of the decline is linked to the slowing rate of economic expansion in China and Europe, meaning that people living there have less disposable income to spend on gas. This results in a decrease in demand, or, on an economic model, a leftward shift of the demand curve. There is also a much greater supply of oil, particularly in America. Domestically, this shifts the supply curve to the right. For other oil producing countries, this means another leftward shift in demand.


For the overall market, the leftward shift of the demand curve and simultaneous rightward shift in the supply curve creates a surplus. Saudi Arabian suppliers are attempting to reach equilibrium in the market by cutting prices. However, while Saudi Arabia’s market can afford to be relatively elastic, many producers have invested in projects to increase the supply of oil in response to expectations of higher prices in the future. In the long term, producers are likely to invest money in other areas and eventually decrease the supply, but for the time being, the surplus only continues to rise. In all, consumers are better off thanks to lower prices. However, producers stand to lose a lot of money, as the oil they invested trillions of dollars into producing is being sold at ever-lower prices.


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