Archive forSection 04

Ecuador economy shrinks 2.2pc in Q2 on lower non-oil exports

By: Domenica Romo

QUITO: Ecuador’s economy shrank 2.2 percent in the second quarter of 2016 from the same period the previous year, due to a stronger dollar that hit non-oil exports, the OPEC country’s central bank said on Monday.

Ecuador’s economy is dollarized and an appreciation of the US dollar this year has hit the Andean country’s exports of bananas, cocoa, flowers and tuna.

But the central bank said an increase in bank deposits, expectations of stronger consumption and a small recovery in oil prices would boost the economy of crude-producing Ecuador in the second half of the year.

“There are very positive expectations for the third and fourth quarter,” central bank President Diego Martinez told reporters in Quito, adding the bank may maintain its forecast of 1.7 percent economic expansion this year.

The oil sector grew 7.4 percent in the second quarter year-on-year, boosted by the ramp-up of new projects, Martinez added.

Ecuador suffered a 7.8-magnitude earthquake that killed more than 660 people in April.

Authorities had said that would likely knock 0.7 percent off gross domestic product this year, as $3.344 billion would be required for reconstruction.

http://www.brecorder.com/world/global-business-a-economy/321283-ecuador-economy-shrinks-22pc-in-q2-on-lower-non-oil-exports.html

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College Textbooks Prices have increased more than 1000 percent since 1900s

Going to College is expensive. Contributing to tuition fees, housing, travels is an enormous payment on textbooks. Public Interest Research Group found the average student spends as much as $1,200 each year on textbooks and supplies alone. College textbook prices are increasing way more than parents’ ability to pay for them. According to NBC’s review of Bureau of Labor Statistics (BLS) data, textbook prices have risen over three times the rate of inflation from January 1977 to June 2015, a 1,041 percent increase.

One of the reasons why publishers and bookstores keep raising prices is students are “captivate consumers”. As students have to buy books they are assigned, textbooks become necessities. Thus, with the change in the price of textbooks, the number of textbooks demanded varies very little. In other words, the price elasticity of textbooks is inelastic.

As a result, in order to avoid rocketing prices, students are renting books, buying cheaper digital versions instead of hardcovers or paperbacks, and taking advantage of free, “open source” textbooks. This shift in purchasing books changes the demand in other industries such as online banking and shipping. However, this still meant they have to spend hundreds of dollars on textbooks.textbookprice_d7bbb96677a81c69da37daa70391dc73.nbcnews-ux-600-700

Source: http://www.nbcnews.com/feature/freshman-year/college-textbook-prices-have-risen-812-percent-1978-n399926

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Avocados and Deforestation

Some food for thought, did you ever consider how a rise in demand affects the environment? In the case of ethanol, farmers make way for more corn and reduce production of other crops leaving demands unsatisifed in other categories. However, the rising demand for avocados both in the U.S. and abroad is leading to an increased incentive to produce more avocados and increase profits. In the case of Mexican farmers– this is enough motivation to cut down forests to make way for avocado trees. Not only is this deforestation illegal, but it’s destroying a natural environment in order to increase profits. If Americans protested Mexican avocados to prevent this deforestation it would lead to waste and a drastic increase in prices, things which no one wants. It really makes you think about the impact of adding guac to your order at chipotle- aside from the added cost.

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Road taxes in Europe – Not easy being green

In order to control green-house gas emissions, governments have tried to tax petrol and diesel, tax the ownership of dirty cars and offer rebates for greener cars’ buyers. This article explained how fuel tax was the most efficient way to encourage the purchases of greener cars.

http://www.economist.com/news/finance-and-economics/21702762-why-fuel-taxes-are-best-way-encourage-sales-greener-cars-not-easy-being?zid=293&ah=e50f636873b42369614615ba3c16df4a

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NAND chips prices up after Japan earthquake, tsunami, nuclear meltdown fears

According to Computer World, the price of NAND chips increased as a result of the natural disasters happened in Japan in March, 2011.

NAND flash memory chip is an electronic non-volatile computer storage device, which is erasable and reprogrammable electrically. It was invented by Fujio Masuoka – a Toshiba worker and commercialized by Intel Corporation. The six producers of this chip are Intel, Micron, SK Hynix, Samsung, SanDisk and Toshiba. It is manufactured in a factory or fabrication plant (fab). At the fab, NAND chip is etched onto wafers which are then sliced into individual die, tested and packaged. It is widely used in industrial robotics, electronics and other digital devices such as personal computers, cameras and mobile phones. Thus, consumer product manufacturers (e.g. Apple, Dell, Samsung) are the main buyers of NAND flash memory chip. Because its price is getting cheaper while its productivity is getting higher and the electrical industry is growing fast, the demand of NAND flash memory chip increases.

After Japan earthquake, tsunami and nuclear meltdown in 2011, memory chip price shot up due to fabrication plant shutdown, power outage and supply chain shortage aftermath. Because Japan accounts for 35.7% of the world NAND flash chip production, these natural disasters caused a huge decrease in the supply of the chip, which made the supply curve shift up, to the left. The equilibrium price went up because the supply of NAND chips decreases but the demand is still the same.

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Source: http://www.computerworld.com/article/2470864/smartphones/chip-prices-up-after-j apan-earthquake–tsunami–nuclear-meltdown-fears.html

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Is College Really Worth It?

“Is college really worth it”, a mind striking question that tons are starting to ask themselves. In older generations the word college helped a person to stand out, but now students and parents are wondering is it worth the time, commitment, and money. David Leonhardt, the author of “Is College Worth It” begins his article with the negatives about going to college. He describes how graduates are struggling to find work in their field while others are accepting jobs that feel overqualified .In addition to student debt is at its highest. However, with all these negative implications, Leonhardt still tries to convince readers that a college education is worth it. College provides a ton of opportunities. For example, there is a gap between college graduates and high school graduates. Studies from the Labor Department statics by the Economic Policy Institute in Washington show how on average college graduates make 98 percent more an hour than people without a college degree. Actually an individual is wasting more money by not attending college than if they were to attend. If one took their tuition and fees and then subtracted it from the lifetime gap between the earnings of college graduates and high graduates and then adding in inflation the actual cost of college is negative. In the long run, attending college is the best option and it is worth it.

This article is closely associated with the concept Opportunity Cost. This concept involves the loss of potential gain from other alternatives when one has already chosen a different option. Opportunity cost is calculated through the formula O.C.= give up/ get. Hypothestically speaking if someone asked what is the opportunity cost for a student going to college they would say the “get” would be going to college and the “give up” can range from getting a job right after high school or attending to trade school — specific direction for a specific job. A lot of people do not see the worth or benefit of other alternatives; even though, college is the best option for most people. For example if someone decides to attend trade school instead of attending college that means they do not see the long term affect of a college degree or they just want to obtain skills so they can work quicker. People go through the process ,opportunity cost, every time they are stuck between options. Especially  when deciding  to attend college or do something else like join the army or go into the workforce early. When people look at things like future debt, price, time, and commitment they don’t realize that that is in the process Opportunity Cost. Comparing benefits is always the best way to go about things when making huge decisions.

The Link: http://www.nytimes.com/2014/05/27/upshot/is-college-worth-it-clearly-new-data-say.html?_r=0

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Maersk previously Monopolized Trade; now Separating and Specializing

http://www.bbc.com/news/uk-scotland-scotland-business-37441698

Maersk being one of the largest shipping companies in the country has monopolized the shipping industry in Denmark for 11 years. The country worries that the company has decreased in trade. In order to counterbalance their decrees in trade, the 112 year old company is breaking up its  590 ships large and 500 smaller ships. The company currently  is the operator of one of the biggest gas field developments in the UK waters, along with monopolized production in  Denmark, Qatar, Kazakhstan, the US Gulf of Mexico and Algeria. Additionally, further development is currently underway in half a dozen other countries.

They have decided to split form their oil, drilling,  and offshore services, as profits in that division have come in far below their predicted expectations. The companies decision to separate businesses will allow them to focus on their most profitable markets. The company has decided to focus on its transport and logistics business. Their decision to shrink back from the global market will allow then to specialize in the areas where they can make the greatest profit.

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Demand for Cable TV in Constant Decrease

Cutting the Cord – The Economist

Since 2013, traditional (200 channel bundles) cable subscriptions, along with “television viewership,” are decreasing progressively. In fact, people are switching to online streaming services such as Netflix and Hulu.

This showcases some important economical concepts. Namely, the demand for cable TV is decreasing because the price of its substitutes (Video streaming services, skinny bundles… ) is much cheaper and more available in recent years than it has ever been.

Further, this shift from cable TV to streaming services showcases the effects of a downward pressure on the price of television. Indeed, the large bundles of channels creates a surplus in the quantity of channels supplied (viewers watch on average 17 channels while the bundle offers 200 channels), therefore, viewers switch to on-demand services and skinny bundles for cheaper prices and less “wasted” content.

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Oil Prices: What’s Behind the Drop?

Since the 1990’s, the oil industry has been experiencing a series of boom and busts. However, recently, the oil industry is at an all-time low. Rising oil producers such as, Nigeria, Algeria, Russia, and Canada, have contributed immensely to the drop in oil prices. Since there are more producers of oil that are competing in the same market, producers are forced to lower their prices in order to sell their oil to consumers. The diversification of the market is actually  hindering producers in the oil industry rather than allowing them to succeed in a global market. Although producers are feeling the ramifications due to the increased number of producers, consumers are benefiting from the sharp drop in oil prices.

According to the article, the drop in oil prices is “helping lower-income groups, because fuel costs eat up a larger share of their more limited earnings”. Since oil has become more affordable, the demand for oil has increased. Although the demand of oil has increased,  producers are still forced to retain low prices due to growing number of producers entering the market. This discrepancy has caused a shock to ripple throughout the international oil industry. As a result of this “In the United States, there are now virtually no wells that are profitable to drill.” Due to this shock, oil companies have announced cuts to their pay roll and have even laid off thousands of employees. Overall this sudden change in the oil markets has lead to both benefits and repercussions in the international market.

 

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Speculating in the Commodities Market

This article describes a game in the commodities markets between “felines” and “mice”. In this particular article by The Economist, the felines are large oil companies who intend to sell at the highest price possible, and the mice are gamblers betting against the market.  This article references the relationship between supply and demand during different periods of time such as the commodities boom, where there was a rapid rise and fall of goods like oil, coal, fuel, food ect. The article mentions that although speculators are frequently blamed for this crash in the commodities cycle, the boom was actually a result of rising demand in China for scarce resources and then a fall in demand when resources became more available.

 

 

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