Category Archives: Initiative

Final Reflection

My mock exams turned out pretty good. I actually think that the tests on definition and diagrams helped a lot before the mock exams. Through those tests, I saved up time studying. Instead of going through the definitions and diagrams once again, I just went through some details that were important to know (details that could help me with the evaluation). Thus, I did not waste time thinking of ways to answer the questions on the exam. Thoughts just came up my mind quickly mainly because I was comfortable with the topics already.

As for the revision, I would go through definitions and diagrams once again (including the ones for international and development economics). Once I’ve mastered them already, I’ll dig in to the details until I get comfortable explaining different ideas already. I will try answering past papers and see how well I do on them.

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Exchange Rates (DD)

An exchange rate is the price of one currency expressed in terms of another. An exchange rate system is the way in which the exchange rate is determined. These come in three types. They are:

Fixed – this is an exchange rate system where one currency is fixed in value against another. It involves the government working to keep the parity via intervention on the currency markets. These give certainty but can cost vast sums of foreign exchange from national reserves.

Floating – this is an exchange rate which accepts that market forces will determine rates based on how they view a country’s trade performance and its economic and political stability. These systems cost less to maintain but can result in vast swings and changes in currency values. This can seriously affect trade performance and confidence.

Managed or dirty float – which is where the rate is floating but between upper and lower limits that the domestic government keeps it to. It brings more stability but at less cost to the national reserves.

Appreciation – this describes an upward movement in a freely floating exchange rate. This may occur day by day or perhaps even minute by minute.

Revaluation – this also describes an upward movement in an exchange rate, but in a fixed exchange rate system. This will be a very infrequent event (if ever) and means the government has deliberately changed the fixed value of the exchange rate upwards.

Depreciation – this describes a downward movement in a floating exchange rate.

Devaluation – this means that the government has changed the fixed rate of a fixed exchange rate downwards.

The Marshall-Lerner condition looks at the overall impact of a depreciation on the current account of the balance of payments. This will be the sum of the effects we identified above on imports and exports. The condition states that the current account will improve after a depreciation if the sum of the price elasticities of demand for imports and exports is greater than 1.

J-Curve – Evidence around the world suggests that the Marshall-Lerner condition does not hold in the short run, but does in the medium to long run. This is because in the short run, there will be few extra exports sold when prices fall – people overseas do not react immediately and so export demand will take time to change. However, extra money will have to be paid for imports immediately and so the current account will tend to deteriorate. In the medium term however, the lower export prices will start to lead to an increase in demand for them and so the current account will start to improve. The export elasticity of demand is therefore low in the short run, but will be higher in the long run.


Reasons for Trade Definition and Diagram

Reasons for trade:

  • Different factor endowments – some economies are rich in natural resources while others have relatively little. Trade enables economies to specialise in the export of some resources and earn revenue to pay for imports of other goods.
  • Increased welfare – specialisation (where countries have a comparative advantage) and trade allow countries to gain a higher level of consumption than they would do domestically and this leads to increased welfare and higher living standards.
  • To gain economies of scale – with specialisation and production on a larger scale than may be possible domestically, a country may be able to gain more economies of scale. This will lead to lower average costs and benefit consumers through lower prices.
  • Diversity of choice – trade enables us to access goods and services that we may not be able to produce ourselves.
  • Political / historical reasons – some trade takes place for political and other reasons relating to history and tradition, though this is generally diminishing in importance.
  • Increased competition – increased global competition may help to spur domestic productivity improvements and give domestic firms a better incentive to innovate and improve their products. This will benefit consumers.
  • Trade may be an ‘engine for growth’ – increased trade may help to spur greater domestic economic growth and drive further improvements in living standards.

Absolute advantage exists when one country is able to produce a good more cheaply in absolute terms than another country.

Comparative advantage exists when one country is able to produce a good more cheaply, in comparison to other goods produced domestically, than another country.


Corn Syrup vs. Sugar

Recently, there has been a debate going on whether high-fructose corn syrup is bad for people’s health or not. Some people argue that it causes weight gain for people more than sugar does, but some people do not believe this issue. For safety precautions, people started consuming less of corn syrup. Thus, the demand curve of corn syrup shifts to the left, as the demand curve for sugar shifts to the right. Moreover, advertisements also caused a decrease in demand for high-fructose corn syrup. Twitter, Facebook, and Youtube posted up some advertisements that show negative effects of the product to the human body,

DEMAND FOR HIGH-FRUCTOSE CORN SYRUP

People started buying sugar more although it is 40% more expensive than corn syrup. Moreover, “[t]his month, new bottles [of ketchup] featuring a banner proclaiming “No high fructose corn syrup” arrive[d] in stores.” There is greater supply for products that do not have high-fructose corn syrup. The combined United States sales of high-fructose corn syrup for Archer Daniels Midland, Tate & Lyle and Corn Products International were down 9% in 2009, compared with 2007. A further decline is expected this year, he says.

However, Science is on the corn syrup’s side! Leading scientists argue that when corn starch is converted into syrup, it is not any different from sugar. Both products have the same amount of glucose and fructose, as they say.

There are not enough evidences to prove that high-fructose corn syrup causes damage to human body. Although an experiment with rats was performed to test the effect of corn syrup and sugar to our body, we cannot really come up with a final conclusion that corn syrup is bad for the health. Some people argue that rats don’t have the same body as humans. However, I would say that lessening the consumption of corn syrup would be better just to be safe.

ARTICLE LINK


Help save the earth??

This week, students in Canadian Academy are supposed to help save the planet we are living on, the Earth. For the first time, we were not allowed to print anything at school. All printers were turned off, so we could reduce the amount of paper wasted and the amount of energy from printing consumed. This action would lower both the demand for electricity and paper. I honestly thought that this would not work in the long run since people would end up printing any way possible. I myself printed at home and this did not really make any difference to the goal of the action, which is saving the earth. I used paper and I used energy. The effect was the same.

Thus, printing causes negative externality since the marginal private benefit is greater than marginal private social benefit. I benefited from printing at home, and it did not really help the community in general. More and more trees are affected from the production of paper, so it is not good for the society. Hence, negative externalities are created.

Overall, no-printing day only worked in the short run since people ended up printing at home and the days after the rule was over. The same amount of paper and electricity that were supposed to be used in that day were added on the following days when the students could actually print. Thus, other actions would have been more effective, such as not using the elevator and heater or airconditioner.


Teen alcohol

Similar to Schoolies week, teenagers in the United Kingdom have been caught drinking alcohol, but in this case, the kids were caught for underage drinking. The video mentions that about 5,000 liters of alcohol were confiscated, and about 2,000 drunk people were referred to social services, where 300 of them were referred to alcohol treatment! There are negative externalities in this issue since not only the kids caught are affected, but also their parents and the people in the service centers. The mother interviewed said that she knew about her kid since she could smell it from her kid’s breath.

I think it was right that the police confiscated the alcohol that they found since underage drinking causes really bad effects not only to the teenagers’ health, but it also makes their parents concern a lot. Teenagers may be allowed to drink, but only to a limited amount, and not to get drunk.

LINK TO VIDEO


Microsoft’s Creative Destruction

The article is a great example of diseconomies of scale. Microsoft used to be the best and the most popular technology company, but now, what happened to it??? It cannot keep up with Apple’s ipad, Amazon’s Ebook, smartphones such as the iPhone and Blackberry. Other people are rejoicing as Microsoft struggles, but Microsoft workers know for themselves how good Microsoft is. They actually have the best and the smartest engineers in the world. However, the company’s workers compete among themselves, which I think, would not benefit them at all. Division of labor would help them from their continuing fall.

Although Microsoft has tried to come up with a tablet, their ideas were not good enough, and so were criticized by the public. However, they should have taken the risk to bring them out to the market. Apple’s iPad are gretting criticized in the market too, doesn’t it? It’s just that Apple takes a very high risk when they release products to the market. Moreover, Microsoft needs to innovate and produce products that are better than everything that was recently released in the markets. The only reason why Microsoft still earns profit is because people continue to purchase Microsoft Office. They should come up with better and newer products, to even maximize their profits. Innovation is one key thing that could help monopolistic firms to get up from their fall.

ARTICLE LINK