Archive forsupply

Marijuana Cultivation and Negative Externalities

Marijuana is used as a psychoactive drug or medicine. “Marijuana (herbal cannabis),consists of the dried flowers and subtending leaves and stems of the female Cannabis plant.” Marijuana can be produced in a number of different ways but the most prevalent method is outdoor or indoor cultivation.  Most of outdoor cannabis cultivation in the United States occurs on public lands. This allows cultivators take advantage of remote areas to minimize the risk of forfeiture from the government. In retrospect, home-grown cultivators have knowledge in breeding and nurturing a variety of different strains of marijuana. Cultivators concentrate on creating various types of marijuana by controlling the growth process.“This is done by using heating lamps, fluorescent bulbs, ventilation and soil nutrients, hydroponics (growing without soil by using a liquid solution which contains nutrients and minerals) and salt-free sand.” All these factor require a large amount of electricity.

The large amount of electricity needed for the cultivation of marijuana results in a negative externality because it uses an excessive amount of electricity. Four indoor plants sucks as much as much electricity as 29 refrigerators. A scientist, Evan Mills, discovered that “legalized indoor marijuana-growing operations account for 1% of total electricity use in the US, at a cost of $6bn per year. Annually, such consumption produces 15m tons of greenhouse gas emissions (CO2), equal to that of three million average cars.” The excessive amount of energy used results in large amounts of CO2 emission which is a negative externality.

Once the social cost is taken into account, the quantity of the goods consumed decreases. In order to account for the negative externality, in this case CO2 emissions, the price for the good increases which leads to a lower quantity being consumed.

Why Marijuana is Not Green

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Too many demand not enough supply

Annual sales for Apple iPhone has increased tremendously since the release of the first official iPhone.

This is due to the popularity iPhones receive fro various people and the new changes that apple make to each new phone that is produced. Since the demand for iPhones were extremely high, apple has increased the price for iPhones over the years that got, so high that the demand for the phone decreased, and customers would start to look else were for a phone. Since apple experience they drop of sales it was not expected that the demand for the new edition of the iPhone would be so big, so now apple is facing a shortage due to a high demand of their product and enough supply.

The price for the new iPhone 7 range from $649-$749 due to the difficulties of the new features apple has added to the product. Given this, apple was not expecting to have suck a high demand for this product. Phone companies has requested more of the product given that the demand for the new model was four times as high for the demand of the old models.

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Shifts in Blueberry Supply and Demand


The blueberry production in Oregon has increased due to a machine they use to improve picking and packaging efficiency. This innovation has created a berry boom. Recent articles on the health benefits of the fruit have increased the consumers desire to purchase the berries. Their health benefits and recent surpluses have resulted in a high demand for the berries. Supply increased due to the technological innovation which decreased the price but the increase in demand due to the health benefits returned the equilibrium back to normal. Thus the equilibrium price remains relatively equal because even though the consumer demand increased, the invention of the new technology allowing the farmers to keep fulfill the demand.

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Donald Trump’s proposal to interfere free international trade: a 45% tariff on Chinese exports

When Donald Trump was being interviewed by the New York Times in January 2016, he said that he would add a 45 percent tariff on Chinese exports to the United States. However, are benefits from the market with this tariff more than those from market without tariff?

Chinese low-priced goods producers are indeed strong competitors for the local American producers. According to tariff shifting figure, the price of Chinese goods will be much larger so that it would be easier for American companies to compete. In addition, the money gone to government’s pocket can be used to create more manufacturing jobs for local people.

However, as Chinese goods becoming more expensive, low-income Americans who usually purchase these goods have to raise their consumption. In addition, according to the concept we learned in the beginning of this semester (If cost goes up, supply curve will shift up which causes price going up), prices of productions that are made from Chinese materials are also going to increase. Moreover, as the former journal states, China also holds a significant amount of stock of US Treasury bonds, so that China could push back from dumping those. If not, China can also impress a tariff in exports from the United states. Therefore, from the perspective of American residents and market participants, these disadvantages are more crucial than the benefit of inserting a 45% tariff on Chinese exports.


Fears Over Zika Drive Demand for Mosquito-Repellent Products



Usually, in February, the demand for mosquito-repellents is low. The reason is that because of cold weather, there are less mosquitos.However, this time the expectations (fear of Zika virus) drove the demand up. For some companies, as Invisaband, the increasing demand led to the shortage of mosquito repellents. The company cannot increase supply because its manufacture in China is closed and will not open until mid-February. The producer is only expecting to order twice more product (increase the supply)when the manufacture is opened.

(The article also includes video about the increase in demand for mosquito repellents )


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Negative Externalities of Bottled Water


During the summer of 2009, the sales of bottled water dropped drastically. This was a result of the increase in awareness regarding the detrimenal effects of plastic waste from the bottles on the environment and the possibility of negative health effects on consumers. Consumers learned about the chemicals in the plastics used rubbing off into the water, people ingesting them and having health problems. Consumers also realized how disastrous these one-time use plastic bottles are for the environment. They take up massive amounts of space in landfills take hundreds of years to decompose. This newfound knowledge caused consumers to start using more tap water and reusable water bottles to reduced costs after the 2008 recession and help the environment. As the demand for bottles water decreases, supply curve shifts up and to the left which lowers the amount produced. Using reusable bottles benefits the consumer’s health and pockets, by saving them money and benefits society as a whole by helping reduce the amount of waste entering the environment.

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Election Affects Stock Market

Going into the election, people were thinking that the stock market was going to do poorly so they sold their stocks. However, right now the stock market is booming and is almost at an all time high. Looking at the data from past election day stock markets, it seems that this is a typical pattern. Brokers believe that the stock market doing well is only short run, and will soon go back to breaking even. The stock market is a great example of supply and demand, since the supply is always constant, while the demand always changes. People believed that the demand was going to go down, however the stocks ended up being in higher demand.



The End Of Price Hikes for Pharmaceuticals?

Many drug companies hold monopolies over production of certain medications simply because of patents. However, this Business Insider article shines light on a type of monopoly no one thinks to talk about. Similar to the “You can’t take it with you” effect discussed in class, certain drug companies will excessively raise their prices because they are producing a life saving drug for which there is no substitute. The demand is presumably inelastic, but they also don’t have very large markets in general. Therefore, these “orphan drugs” don’t make the companies which produce them any profit because the market is so small. Since profits aren’t being made, even when patents expire generic drug makers have no signal to enter into the market thus allowing the monopoly to remain. With no true market price these firms feel they can set whatever price they want, thus leading to 5000% increases of prices in some cases. However, they are still subject to demand and while patients who need these drugs will continue to purchase them, the pressure is increasing for these companies to increase their consideration of their consumers. As highlighted in the article, when firms less than ethical prices hikes were exposed, several announced plans to cut prices. Could the end of exorbitant prices for these “orphan drugs’ be headed our way? Is all it takes to increase a company’s ethics is expose their behind the scenes dirty work?

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“US new home sales unexpectedly rise in September”

The sales of homes in the US rose in September. The CNBC article claims that this signals an increase of demand for housing in the US. In our terms, this means that the demand curve for houses has shifted up and to the left. There are not enough houses though, because the supply curve is not as elastic as the demand curve. In effect, there are not quite enough houses being built to match the demand.


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Rising Oil Prices lead to Higher Gas Prices

During August of 2016, oil prices rose by three dollars, which caused the gas prices in southern states like Florida, Georgia, and Tennessee to increase by three to four cents per gallon. This was the first time gas prices rose in Florida in 62 days. Oil prices rose because the amount of crude oil supplied decreased in the second half of 2016. While there has been an overall decline in prices over the past two years, this was still a shock to see an overall increase of six cents in gasoline. In terms of supply and demand, this shock would cause of a shift in the supply curve. The curve would shift to the left because the quantity supplied decreased, which would lead to a larger equilibrium price. According to spokesman Mark Jenkins of The Auto Club group, “Gas price are likely to remain volatile through the rest of the month, but stay low through the rest of the year.” Luckily, gas prices have been and still will be in an overall decline.

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