Archive fortaxes

China’s Advantages in Production

In our day to day lives, the majority of the things we use are made in China. Whether its a computer, a piece of clothing, or a microwave; its made in China. This is attributed to a number of reasons. In our class, we have seen that understanding labor markets is essential to achieving efficiency. Countries will trade with the countries that produce goods at the cheapest costs that retain quality in their products. China has become the hub of manufacturing because it has cheap labor, low taxes on exports, and an efficient business ecosystem.

Since China is a very populated country, the supply of workers is greater than the demand for labor. As a result, wages are very low and production costs are lower than other countries. Additionally, China is not very strict on things such as child labor, safety regulations, and long shifts regulation. Low tax rates on exports further China’s advantage in manufacturing goods. To conclude, it is likely that China will remain “The world’s factory” due to the many advantages it has in manufacturing.

http://www.investopedia.com/articles/investing/102214/why-china-worlds-factory.asp

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Tesco market value failure

http://www.bbc.com/news/business-29716885

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.

 

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Junk food taxes

Many articles, such as this one, reported the impact of Mexico’s junk food tax on snack sales by PepsiCo and Coca Cola, noting that sales fell by 3% as a consequence of the tax. This reduction in sales is what we would predict from our tax model. The article also notes that PepsiCo and Coca Cola are lobbying against similar taxes on sugary drinks in CA. This suggests that the supply side of the junk food market is less elastic than the demand side and fits with most studies that find the demand for junk food very price elastic.

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