Microeconomics 2015

Taxes are mandatory contributions to state revenue which can be imposed through, a person’s revenue, a purchased item, or a business transaction. They are mandatory because they are meant to finance public investment and projects which are beneficial to the collectivity. This article presents another view on taxes. In this case, the article talks about the phenomena of not paying taxes rather than the direct impact of a rise of fall that tax rates can have on the supply or demand curve. Currently, Starbucks, Facebook, and Fiat Chrysler are potentially going to have to pay the Netherlands and Luxembourg government back tens of millions of dollars back that they did not pay due to tax evasion. The tax evasion apparently happened thanks to some the special tax deals the companies made with the national tax authorities. Even tough having low interest rates makes a country more attractive for business, it is not fair to the government that needs revenue. In the same way that imposing a tax on any particular good creates a deadweight loss, not paying a tax causes the Netherlands government a loss in the area of the total revenue which reduces its productivity and efficiency.

http://fortune.com/2015/10/22/starbucks-fiat-illegal-tax-deals/

On behalf of Sophia N.

When I was in Ecuador this summer I was shocked by the high prices of imported goods, namely while in the supermarkets. A local told me they have a very high tax on imported goods. I looked into this and found there was a tariff of up to 45% on some goods. The reason given was to “safeguard [the] economy from the effects of changes in the international economic environment, such as low oil prices, appreciation of the U.S. dollar and the depreciation of the currencies of [their] trading partners.”

One of the articles I found discussed some repercussions of this tax. For example, the majority of the apples sold in Ecuador are from Chile. “Nine out of 10 apples bought in Ecuador come from Chile. Tell me how the local market can fill that shortfall?” said the president of the Chilean fruit growers association, Juan Carolus Brown. I found this to be interesting because some of the exercises we have been doing in class and on Aplia regarding tariffs have addressed this. Although the domestic supply does increase when it is more profitable, ie when tariffs are very high on a particular good, if the domestic supply cannot keep up, there is a shortage. This tariff not only impacts foreign businesses, but also domestic businesses that depend on imported goods.

Another thing that this article addresses is the issue of smuggling, which is something the textbook briefly mentions in regards to the sugar tariff in the US. If prices are much lower in Peru and Columbia, which both have lower tariffs on most items, then it encourages smugglers who can bring over those goods and sell them at a profit.

As we have learned from the reading and the homework, trade restrictions, which include tariffs, often end up hurting the consumer as it raises the prices of the goods affected by the tariff. This means that tariffs will have the biggest impact to people of lower socioeconomic status, as it may be difficult to buy certain goods with such high prices.

http://www.cuencahighlife.com/foreign-backlash-to-ecuadors-new-tariffs-on-imports-pours-in-ecuadorian-businesses-also-cry-foul-saying-higher-costs-will-hurt-the-poor-as-well-as-the-rich/

http://latinamericaadvisor.org/2015/04/27/how-will-higher-import-tariffs-affect-ecuadors-economy/

Last summer, the price of bananas went up 16%, which is a very significant amount. This was due to a change in the supply, as there was a smaller crop than there usually is. There was a disease that affected the health of the bananas and many plants died. The quantity demanded decreased as a result as a result of the price change. With fewer bananas to supply to consumers, the price went up, and only those who really wanted the bananas paid for them. The lower-value consumers didn’t buy bananas any more, as the price was higher than their willingness to buy. 

Link: http://www.dailymail.co.uk/news/article-2690852/Price-bananas-rockets-16-Costs-hit-smaller-crop-usual-fungal-leaf-disease-hitting-production.html

The demand of eggs is very large and constant but prices have seemed to be increasing. When the Avian influenza struck, the Agricultural community suffered a huge blow when most of their chickens were dying or dead. This article goes into depth about how the disease caused a price raise of about 120%

http://www.latimes.com/business/la-fi-egg-prices-20150530-story.html

http://www.latimes.com/business/la-fi-egg-prices-20150530-story.html

Over the past 75 years Farmers have been transitioning from feeding their cattle a natural grass diet to a diet consisting of grains and corn. In fact, “Seventy-five years ago it took a cow four to five years to reach a slaughter weight of 1,200 pounds. Today it takes 13-15 months, thanks to corn, antibiotics, growth hormones and protein supplements.” From an economic stand point this seems like a good thing, because there will be a surplus in meat. However cows simply aren’t meant to consume corn and grain, unfortunately the all grain diet has made consuming beef significantly unhealthier for humans. The new diet has in turn skyrocketed the cases of the E Coli bacteria found in beef, because the diet weakens the cows immune systems, in turn the number of beef recalls due to E. Coli has climbed significantly. Forcing farmers who chose a grain diet to use lots of antibiotics on the animals. Essentially the diet has caused a new external cost in the beef market. Since recalling beef is wasteful farmer have lost a lot money, and consumers have gotten very sick, which has driven down customer loyalty. Secondly bacteria like E. Coli are becoming more resistant to antibiotics. On the bright side people have noticed how the beef market has become unhealthy, and recently people are refusing to buy meat if it wasn’t naturally raised. This has caused a shift in the market, because the demand for healthier beef has increased forcing a lot of farmers to stop giving their cows a grain diet.

http://www.globalaginvesting.com/news/blogdetail?contentid=1479

Posted on behalf of Jared S.

In the year 2011, fuel efficient cars were in high demand. Author Sternberg states that as gas prices had risen, the demand of fuel-efficient cars had risen as well. This illustrates the fundamental economic laws of complements and substitutes. Substitutes come into play as fuel-efficient cars are substitutes to non fuel-efficient cars. As the price of gas goes up, the demand for fuel-efficient cars rises, as the demand for non fuel-efficient cars falls. The reason behind this is because non fuel-efficient cars are closer complements to gasoline than fuel-efficient cars. As the price of a complement rises the demand for the other complement falls because consumers don’t want to use the complement alone.

http://www.autotrader.com/car-news/fuel-efficient-cars-in-high-demand-for-now-112681

http://www.worldwatch.org/node/5408

This article talks about the price increase on grains and how this increase is affecting more than one country. It says how it is also harder for other countries because of the costs and the availability of certain foods. The price increase is not only causing the United States to buy less food, but it is also preventing them from helping those in need of food. Since imported foods has also had an increase in price, it is also hurting the hunger-affected countries.

Name of Article: Quinoa’s Global Success Creates Quandary at Home

Link to article: http://www.nytimes.com/2011/03/20/world/americas/20bolivia.html?_r=0

This article illustrates the economic concept of supply and demand. New York Times writers Romero and Shahriari discuss how in the past several years, quinoa transitioned from an easily accessible staple food for Bolivians into a highly internationally demanded export. This article discusses essentially how prior to the twenty-first century Bolivians were consuming quinoa easily and with frequency, similarly to how many consume bread or rice. However with the health kick that has swept the United States in the past decade, the demand for quinoa by Americans has increased drastically causing the price of the grain to “triple” and as a result making it unaffordable for many Bolivians.

In this article the different externalities of hamburgers are discussed. The main topic of the article is to find if there are actual externalities to the price of the hamburger. The author of the article is critiquing the the work of another who proposed many externalities such as litter and health.

http://www.forbes.com/sites/modeledbehavior/2014/07/20/the-externalities-of-hamburgers/

This article addresses a threat to the world supply of coffee for Starbucks due to climate change. It states that there is already visible evidence of climate change affecting the supply of coffee, and this problem is said to increase in the next 10-20 years. Changes in weather patterns along with increased hurricanes have been seen to negatively affect crop yields of the coffee beans. The article explains how the producers in this instance the farmers, will in the future be discouraged to cultivate coffee because of the decrease in crop yields. In connecting this article to our course, this notion by the famers will lead to the decrease in supply of coffee as they are unwilling to continue producing it. The supply curve for coffee is being examined in this article and it is a clear example of how decrease in production leads to a decrease in supply. As we know from class, this decrease in the supply curve will eventually lead to shortages in coffee overtime, which in the end will raise the prices of coffee. The article also states that people are trying to address and prepare for the impacts of climate change now so it will have less affects on the supply of coffee in the future. This issue is very significant because the demand for coffee is very high and that is something that will not change.

http://www.theguardian.com/business/2011/oct/13/starbucks-coffee-climate-change-threat