Archive forDecember, 2016

Chocolate prices are Rising

Hershey and Mars take up 2/3 of the chocolate industry in the U.S. and they both decided that prices are going to increase, as much as 7% on each chocolate bar. If both of these companies decided to form a cartel they would be able to because they hold 2/3 of the whole market. There is also a coco supply problem that is happening in South Africa. Since the supply is decreasing it causes a spike in the price of chocolate.


OPEC to reduce oil production

This article is about OPEC members, acting as a cartel, under Saudi Arabia’s coercion, try to reach a deal on cutting on production.

The organization pledged to remove 1.2 millions barrels of oil a day from global oil production if non-OPEC countries, like Russia, increase their production.

This action will eventually lead to a rise in the oil price to above $50, even above $60 within weeks, per barrel due to a great decrease in the supply of oil, as much as 2% of global production. It may mark the beginning of the end of a two-year glut in the world’s oil market.

Since September, Saudi Arabia’s oil minister and his Iranian counterpart have been engaging in a game of brinkmanship that, if failed, would push the price of oil below $40 a barrel. However, Saudi Arabia was wise enough to realize that pragmatism is the best choice, so it chose to cut down 4.6% of its oil production, and so did other OPEC members.

The cut will take effect on January 1st, and it will greatly reduce the global oil inventories next year. Non-OPEC output has fallen this year, adding more impetus to the cartel’s efforts. If oil production decreases and oil price increases, America shale producers will have the incentive to produce more output, but their ability to produce low-cost oil has been exaggerated, so this may not happen as very swiftly and easily as it is said. Nonetheless, many shale producers have been standing still, despite OPEC’s many efforts to kill them. The cartel, after all, haven’t been able to declare even a Pyrrhic victory from the past two years.



Although Obamacare is an incredibly controversial topic of discussion, there are recent articles proving that the economy has been growing since Obamacare passed in 2010. Some facts that prove this statement are that;
-more than 15 million jobs have been added through November
-the number of people who are struggling to pay for medical care dropped by 22%
and the share of uninsured Americans dropped by 8.9%
This article makes it clear that we need to stop using Obamacare as a scapegoat for our troubles within our economy.

Link Below:


U.S. Home Prices Hit New Peak

Supply and high demand forced home prices in September to a new peak nationwide.  This is hopefully the start of a new advance in housing recovery we have needed for a while now.  An example, is that in Seattle, prices jumped 11.0 percent year-by-year.  The supply for homes, however, is still fairly tight, but economists are hoping for the advantage to swing in favor of the buyers, rather than in favor of the sellers which it has been for years.


The link to this article is below:

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OPEC Has a Deal, But Will Its Members Cheat?

This article in today’s Wall Street Journal represents exactly what we have been talking about in class when it comes to cartels and their incentive to cheat. Recently OPEC (Organization of Petroleum Exporting Countries) reached an undisclosed agreement to cut production in response to exceedingly low oil prices as a clear result of supply outweighing demand. The article expresses how all countries did reach this agreement, but there is no official mechanism for punishing members that decide to cheat and increase their own personal revenue. If OPEC truly has a goal of reestablishing oil prices to where they once were, they cannot afford to continue to cheat because if it continues, these countries will just continue to bid down the price of oil to its market price, as opposed to the monopoly-like, above market price that they are trying to establish.



Labour Falls, Price Rises

Following Brexit,The UK is currently having less food choice and higher food prices because the supply curve is moving to leftwards and upwards while the demand curve is moving rightwards and upwards.

Many food and drink association have claimed that EU workers, who play an important role in the supply chain, are already leaving because they are ambiguously assured about their right to remain in the UK. The EU workers are only one-third of the number of workers in the industry, but they are generally skillful and high quality workers. They are also highly flexible and can provide the UK with a large number of skilled, semi-skilled and even unskilled labour in the long-term. EU workers  possess a lot of skills that cannot be found in UK workers. It is very often that companies have to look into the Europe continent for food engineers and skill labour; farms also rely on unskilled workers coming from other parts of the EU. Not enough graduates are coming through from UK universities, argued Nestle chair Dame Fiona Kendrick, who is also president of the Food and Drink Federation. She even said that, “We just can’t find the people in the UK to do the jobs,”

With Brexit and its subsequent fall of the value of the pound, the UK’s economy in general and the food security in specific are at risk as trade associations have warned. Thus, this industry’s importance should be as equally considered and recognised by the government as financial or automotive sectors, for the sake of the UK’s “economic and physical wellbeing”.

While there is this problem in the food industry, the Home Office, in respone, said the UK government needs and is trying to diliver a fair and controlled immigration policy and wants to see the net immigration to the UK fall down to sustainable levels while making sure that all voices are heard. Still, it is a very complex issue.



Airline Oligopoly

The airline business has been effected severely by the Obama administration. The administration allowed for many of the businesses to merge together in order for the airline business to be made up of 4 primary airlines. Continental was taken over by United, American was taken over by US Airways, and Delta took over Northwest. Due to the merging of these companies, an oligopoly was formed between the 4 primary airlines. This lead to many issues such as a decline in customer satisfaction. New fees appeared, seats became less comfortable, leg room room disappeared, and higher fares appeared. In the future, the airline oligopoly is only predicted to become stronger. Virgin America would be the deciding factor if the airline were to be taken over by one of the primary 4. With more companies there is higher competition. This leads to a higher incentive for companies to create the most quality experience for their consumers. However, due to the oligopoly, there is way less competition and therefore less incentive for companies to attempt and outperform their competitors. Conclusively, the oligopoly in the airline business can only lead to less and less desirable flying experiences.

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Energy Environment

This article illustrates the concept of Supply and Demand, as it talks about the changes in price per barrel, and the consequences of this occurrence. Not only are hundreds of thousands of workers losing their jobs due to the plunging prices of oil, but companies are also going bankrupt. This article talks about the current oil prices, and why they have fallen to its current state. Domestic production has increased, making the value of oil much less. The more we have of a certain product the cheaper it will be, mostly because not only will there be more of the product in the market, but there will be more producers willing to sell their product at lower prices.


Bundling Products

This article illustrates the concept of “Bundling,” and how it can’t be easily done in some cases. “On June 28th, an American appeals court upheld parts of an earlier judgment that, by bundling its Internet Explorer browser with its Windows operating system, Microsoft was seeking to preserve, or even extend, a monopoly position in operating systems.” This illustrates the concept of bundling, and how certain companies will attempt to bundle items in order to in some sense spread their products into the market, by pairing goods with higher demand, with goods with a lower demand.


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Overfishing is a Big Threat !

In the article “Overfishing is a Big Threat to Humanity as it is to our Oceans” illustrates the decline of fish and other marine vertebrates– mammals, reptiles and birds– populations since the 1970. The author, Dermot O’Gorman, mentions how he saw fishers bring home fewer and fewer fish each day due to the amount of fishing that was taking place. As we get closer to 2050, it is expected that the demand for seafood will grow tremendously. However, this is a major issue for both humanity and the ocean. The more fish that are caught means the less fish in the long run for people to survive off of and it will affect the life-cycle in the ocean.

This article connects to Public Goods and The Tragedy of Commons because it shows how if there is not a restriction on people’s actions then things will get worst. An ocean is non excludable meaning nonpaying people cannot be excluded from fishing and it is nonrivial because people can use it and not stop the access of others. If there was a fine or a charge then people would be mindful about how much or how often they are fishing. If access to the ocean was excludable then populations would probably be higher.

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