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20 years old and counting, this dude loves sports and videogames. he hopes to contribute something good to society one day and make other people happy
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Learning Corner
Eco Lesson of The Week : Determinants of Supply and Demand
The intersection of the supply (upward sloping) and demand (downward sloping) curves is called the equilibrium pt. This point represents the price at which goods are sold and purchased at the market. However,
this equilibrium point may change depending on a shift by the curves. The curves may shift one at a time or at the same time both either upwards or downwards. An upward
shift by either curve would raise the price, while a downward shift would lower it.
What we want to know this week is what causes these shifts in supply and demand, called their determinants.
The Determinants of Supply
1. Costs of production
2. Profitability of alternate goods in supply
3. Natural occurences
4. Expectations of future prices
5. Profitability of goods in joint supply
6. The number of sellers
The Determinants of Demand
1. Tastes, fashions, preferences
2. The number and price of related goods
3. Income
4. Expectation of future prices
5. Population
By: Clay Bennet (The Christian Science Monitor, Boston)
By: Thomas Boldt (The Calgary Sun, Alberta, Canada)
Friday, October 12, 2007
That iPod...
That iPod... By Bea Lim
When Apple launched the first generation iPod back on October 2001, it marked the dawning of a new era in the portable music player industry. The Walkmans and the portable CD players that were once the dominant players in the market were almost instantaneously relegated to the sidelines. With the iPod’s initial storage capacity pegged at 5GB and 10GB models when first launched, the portable 700MB CD players miserably failed in comparison in terms of storage capacity and portability. Sony’s Walkman and Walkman-inspired players, on the other hand, were simply no match to the iPod’s digital music storage features. By October 2004, the iPod has already cornered 70% of America’s market for portable music players . Currently, the iPod is the best selling digital music player of all time, selling its 100 millionth iPod on April 9, 2007 .
With the huge and almost instantaneous success of the iPod, it was inevitable that controversies soon arose. Rival companies filed numerous patent infringement lawsuits against Apple Inc. Several dissatisfied customers used the Internet as a means to criticize the iPod’s flaws and its alleged monopoly of the portable music player industry. It is in this light that I would like to defend Apple and the iPod against the people accusing it of monopolizing the industry because in my opinion, Apple Inc’s iPod is in the midst of a monopolistic competition.
To begin with, the portable music player industry has no barriers to entry. In fact, with so many major players in this industry such as Sony, Microsoft, Creative, Samsung, it’ll be hard to argue that Apple Inc. has restricted entry to the industry to a select few. The technical know-how of building an mp3 player is widespread. The technical and legal barriers of a monopoly in this industry don’t even exist as can be proven by the countless mp3 players coming from China and around the world.
As far as I am concerned, Apple isn’t forcing these players out of the market. While some argue that Apple’s iPod and iTunes combination is slowly monopolizing the market, it is not the fault of Apple that the consumers embraced the iPod and iTunes to the extent that it has such a dominant share of the market. As a matter of fact, Apple’s iTunes has its competitors from rival companies the same way that iPod is competing against Microsoft’s Zune and Creative’s Zen. Owners of the Zune and the Zen can use different softwares to upload digital content to their portable players, thus rendering the argument of iTunes monopolizing the digital music upload software unfounded.
Apple isn’t forcing the iPod and iTunes down the throats of the consumers the same way as monopolistic firms do. The portable music player industry has a wide array of products that consumers can choose from- each with its own strengths and weaknesses. They come in various designs and specifications depending on the taste and lifestyle of the consumers. For example, Creative’s digital music player, the Zen, has an FM tuner, voice recorder, and an organizer that can be synched with Microsoft Outlook , all of which can’t be found in Apple’s iPod. Microsoft’s Zune, on the other hand, is priced way below that of its iPod counterpart, thus offering consumers a cheaper alternative to the iPod. These points further prove that contrary to that of a monopolistic industry, the portable music player industry is in fact enjoying a healthy competition from its major players both in terms of pricing and product differentiation.
To end my point, I think people are only quick to accuse Apple Inc.’s iPod of monopolizing the market because of its huge success without giving Apple credit for revolutionizing the industry. Apple deservedly succeeded because it was the first mover in the industry that offered consumers with an innovative and trendy product. The iPod was embraced by the consumers because of its revolutionary features and jaw-dropping design- and not because the consumers were left with no other alternative. In the Philippine context where social status is of utmost importance, Apple’s exclusive and high-end image serves as one of the driving forces behind its success here. Truth be told, the Zen and the Zune are putting up a big fight in their quest to cut into the iPod’s dominant hold of the market. The only problem is Apple’s iPod first caught the fancy of the consumers way back in 2001, and it still continues up to the present.
Power Up: Sheikh-ant Do That! (Sheikh Can't Do That)
Power Up: Sheikh-ant Do That! (Sheikh Can't Do That) by Kathryn Pua
Energy is one of life's staples. We need food to give us energy to do the day's tasks and electricity to power up our various technological devices and machines (most of which we can't imagine living without). We need oil to power up our cars so we can drive to different places. The fact of life is that we need energy in practically everything we do-- life just wouldn't be the same without it. In most countries, oil and electricity-- due to the huge capital needed for the equipment and operations-- are at the mercy of monopolists and oligopolists. In particular, most of the world is at the mercy of OPEC for it needs oil to sustain not only cars but a lot of machines in different industries. Add to that the fact that most energy sources are non-renewable and difficult to find substitutes for. Despite the prices of oil rising, we can't help but continue our consumption as we see it as a necessity in life. The article "Barrelling Upwards" detailed how oil prices hiked up ($82.38 per barrel) due to a decision by OPEC to increase production by 2%, due to the worry that supply might not meet increasing demands, and lastly due to the market's reaction to the Federal Reserve's decision to cut interest rates. Most people see it as in inelastic good-- such that price increases will only decrease consumption by a small amount because consumers aren't very responsive to price changes. This attitude is better explained by the role of oil, electricity and all other forms of energy in our life rather than an improved economy or a higher income.
Science has come up with various renewable energy sources but most of them are either impractical, too expensive or inaccessible to the common man. It is in this context that Britain sees fit to turn to the sea for power, for renewable energy. According to the article "British Sea Power" from The Economist, Britain has geared its efforts at developing an alternative source of energy for the future, a marine-energy industry. The plan is for a wave farm where 30 machines will generate up to 20 megawatts of power. This endeavor, however, is not an easy one. The cost are no small amount and the technology on wave power is still relatively immature. There is also the issue of fluctuating power though it isn't a main one, given that rough seas and tides are there almost everyday of the year. However, costs can be offset in mass production, as economies of scale shall be put to work. Although the costs of today are a gargantuan amount, the benefits that the future will reap will more than make up for the costs of today.
In light of this, the Philippines too has had a few successes in the realm of renewable energy sources. According to my research, we have biomass (from coconut, rice hulls and sugar), geothermal (in Leyte,Albay, Laguna), hydroelectric (Pulangi, Agus and other rivers), solar (Northern Mindanao) and wind energy (Masbate, Romblon, Palawan, Batanes, Catanduanes, Marinduque, etc.) at various farms and plants. Yet the sad reality is that we are helpless at the hands of Meralco; we still use relatively the same amount of electricity despite constant price increases. Despite the presence of substitutes, because they are not always readily available (most of the renewable sources lie in the outskirts of town or in provinces), we urban folks have no other recourse but to depend on Meralco. We see at work here the reality that the consumer has relatively no power if the good has barely any substitutes (particularly for us urban dwellers). Although the government has more than once argued that there is barely budget for research and development of these alternative sources of energy, they should still allocate funds to these, for as said earlier the benefits will be reaped in the future-- not only in terms of costs but also in terms of the environment.
Aside from electricity, another staple source of energy is oil. Here, the consumer is once again relatively powerless as oligopolists hold most of the market and can mostly control production and prices. The article in The Economist entitled "Sheikh Up" details how the cartel is back in control for the time being. They boosted up their production and increased oil prices consequently. This is opposed to their decreasing their production last year to signal its desire to stop prices from falling below $60 a barrel. OPEC reasoned out that increased prices were implemented to regulate demand, especially in countries like China who have an unimaginably huge demand for oil. Also due to fears of possible shortages due to natural calamities, prices once again rose. Time cleared away those fears but OPEC still kept its prices up. At the present, OPEC is in control of oil and its prices and has the decency to increase supply as well if occasion calls for it. The article says that despite meetings with OPEC, people must still not expect much from OPEC. It ends with a short analysis that the effect of high prices constraining demand will soon surface-- despite recent trends of oil consumption in China. It predicts that OPEC's control over oil now will not likely last for the above-mentioned reasons.
Based on what I've learned in class, the OPEC's behavior truly paints a picture of a typical oligopolist. As profit-seeking firms, it decreases production when prices are expected to be low, indicating its desire to prevent any further decrease in price. Recent oil consumption trends seem to be defying economics-- yet they wouldn't be called laws were it not for their viability and time-tested truths. As such the laws of economics will soon prove itself right. I believe as well that if the OPEC continues to raise its prices unreasonably, people will get creative and their industry will lose loyal customers and will be replaced by newer, better and more efficient sources of energy. With unreasonably high prices fro energy, people will be forced or pushed to try alternative and cheaper sources of energy something renewable and something beneficial for the consumer and Mother Earth. In the end, their actions will have adverse repercussions on economic growth and they will have nothing else to blame but their greediness.
As for us consumers, I truly believe we have to power up and assert our power. We can't be like dogs on a leash-- on OPEC's or Meralco's leash. We should support contemporary sources of renewable energy. And should we have the means to, either now or in the future, we should financially or intellectually support researches on and actual implementation of these renewable sources of energy, for our future and the future of generations to come!
Source: http://www.economist.com/opinion/displaystory.cfm?story_id=9804057 and http://www.economist.com/displaystory.cfm?story_id=9827989 and http://www.economist.com/world/britain/displaystory.cfm?story_id=9833092
It is innate in all of us to strive and work hard for something. We are born to accomplish great things no matter what. Everything we encounter in life we want to be the best in handling it. We are made and customized to be competitors; to be winners. I think it also comes with our being Filipino; we have been under so many cultures that we have so many things we want to do. However, this is a life where money is most important; if you don’t have it you won’t function.
We Filipinos love Sports. We have been trying to excel in whatever game we can be good at, and I believe we have had our rewards just recently. However, we are also known as gamblers, and I must say that I’m not proud of it, but it is a fact. Jueteng, Horse-racing and even simple card games have penetrated the minds of Pinoys when it comes to earning money. Here comes in the merging of Sports and gambling. From the slightest bets on animal fights up to the world cup, people have been trying to allocate money from the popularity and excitement of sports, whatever it may be. I would like to focus on the game of basketball, because I can relate to it very much. I love playing the game and I can say that I have sufficient knowledge when it comes to the hidden world of basketball betting.
This perfectly competitive market of imposing the odds is very difficult indeed. It depends on all firms or “bookies” what odds or conditions regarding the end game scores would be. These conditions depend on how the reactions of the audience would be. If many would place bets on a single game, then the odds would be greater. The bookies are price takers and they are willing to risk a certain amount of price which can also depend on the many games of each day. The best source of these basketball betting games is the NBA. The National Basketball Association consists of 30 teams, each having 82 games each season. Imagine 2,460 games excluding the playoffs and finals! This business has so many opportunities of gaining the profit they want. These firms target practically every sport fanatic in the country and there are millions! I can say that this illegal but effective way of raising profits have already boomed in a way that it’s even adapting and growing to economic conditions. There are already so many basketball leagues in the country and these firms extend their coverage from the UAAP up to the PBA. Filipinos nowadays find it even more amusing to bet on a game they can grasp more or control themselves.
The greater problem comes in when firms tend to control the market in a way that they manipulate the games. Game-fixing has been an issue in our country and this is so because of the fact that gamblers want to win. In this situation, firms try to persuade the players or even coaches to “sell” games or give them up to win the larger bet in the end. They are risking a certain amount of money to ensure their possession to a much larger amount in the end. These factors affect this industry in an unjust and unfair way, but that’s what you have to face when you want to be a big earner.
Personally I must say that this illegal business of game-betting gives a large profit but of course it is morally inappropriate. Having these games continues to pull down our country towards a deeper hole of economic instability. We must focus on finding better ways of being able to earn a certain amount of income. This way of circulating money gives away the chance for the majority to improve or even sustain a life at least. Legal ways of making money must still be implemented by the government, but this does not mean legalizing all these games would provide a greater improvement for our country.
Over the past couple of years, Manila has seen a significant surge in mall constructions driven by the 3 major players in the market—Ayala, SM, and the Ortigas. While this has roused much speculation and excitement among market-watchers, retailers, and consumers, the emergence of these newer malls does not seem to have matched the initial hype as numerous painted plywood boards still line many an aisle.
With several new malls opening within “high foot traffic” areas such as North Edsa, there is obviously an over-supply of mall spaces in Metro Manila. As developers try to grab their share of the pie, the Metro Manila market just does not seem to be ready for such a growth. Hence, one would notice a significant worsening of occupancy rates in the once-fully-packed malls. Where the oversupply may seem disadvantageous to the developers with the resulting stagnation of rents, retailers actually bear the brunt as they are the ones chasing after both developers, for prime spots, and consumers, for sales.
As highlighted in the BusinessWorld article Retailers, developers complain of oversupply in mall spaces, “People shift easily to the newest mall, and if a retailer does not have a presence there, customers might forget about that store.” With the recent boom in mall construction in major shopping areas, retailers benefit from the natural rent control brought about by the increase in supply, but ultimately lose to increased operational costs as additional branches in nearby malls are opened due to pressure from the shift in consumer behavior.
Casual encounters with entrepreneurs show that new entrants are more severely disadvantaged, as they are forced by the developers to open branches in low-occupancy malls before the requested mall spaces are granted. Further, where operational overhead such as utilities (electricity, telecommunications line) and even banking services may be regulated by developers given the diversity of their holdings, these services are imposed on exclusive terms to the retailers to generate a higher profit margin for the lessors. Initial investments and operational expenses are hence driven abnormally high for these retailers, ruining potentially successful business cases.
As such, while the demand for mall spaces may in reality be commensurate to the growth in supply, various economic factors as well as the developers’ reaction to the market condition contribute to a cycle that result to a net excess in supply. A moratorium in mall constructions is indeed a consideration that needs to be seriously evaluated and implemented to contain the problem of oversupply. As the market demand and consumer growth catches up with the supply, this can be reviewed and eventually lifted.
Do you want to be millionaire or billionaire? Probably you will say “sure or of course” However, you do not know the way to be rich. Then, let’s benchmarking those who the richest one in the world, the CEO of Microsoft inc. William H. Gates. He is the first one who founded Microsoft company, and develop the program such as DOS, BASIC and WINDOW series. No one doubt that Microsoft was the monopoly in the computer market before dividing two companies by USA government. He and his company have made money for 30 years to sell computers, soft ware and other inventions. No one even though Apple disturbs its way and makes it stop, because Microsoft is strongest monopoly based on its own technology.
Second, focus on the Philippines, there are almost Japanese cars on the roads, because Japanese car companies are monopoly in the part of cars’ component market. Every part of car such as engine, wheel, gear and so on are made in Japan and factories in the Philippine do assemble the parts and produce cars. It gives advantages to the Japanese company, first one is giving stable monopoly state and second they can sell their component to Philippines local car factories. Because Filipino assembles the parts of cars, so they do not have any chance to learn or get any information about making cars. As Japanese company does not give any technical idea of cars, the Philippines have to depend on supply of Japanese products. Moreover, in local car market, all component of cars are made by Japan, so if the local car does not work, they should buy new component made by Japan in high price. Japanese car companies make lots of money through the advantage of monopoly in the Philippines.
Third, if you have your own idea, how will you be rich as using the idea? The key is patent. Patent prevent you from invade other competitions and keep your entity stable monopoly to get money alone in the market. The patent is a legal way to confirm that the idea is available to only you and if someone uses the idea without your permit, the one should be sued. The government will keep you and your idea from other follower. It is the way to be rich as a monopoly company in the market
I've got this X-box right where my heart used to be
I've got this X-box right where my heart used to be By Zerge Zandueta
About four months ago, I went to Powerplant with my family and entered this store called Mobile 1. I was just wandering around and ended up inside this store since it sold it electronic gadgets. Being a boy, these are the sort of things that attract you. Girls may never understand but I was awestruck when I saw the new PS3 in display. It was so sleek, so black, so sexy I wanted to hug it. I haven’t seen a game actually played on it, but externals alone, it was a sight to behold. As jaw dropping as it was in appearance, its price was even more so – P57,699. That’s fifty seven thousand six hundred ninety nine smackers for a console.
How much to sell my spare kidney to afford the PS3 is not the topic of this entry. What I’ll talk about here is the video game console industry and how they operate.
There are three video game console giants in the world today. Two come from Japan – Nintendo and Sony, while the third is Bill Gates’ Microsoft. Sega was formerly in the mix before troubled times relegated them to being only video game producers. Given the number of these companies, it is obvious to see that they are in an oligopolistic market structure. While Sony and Nintendo also sell handheld devices (PSP, Gameboy/DS), I’d like to direct our focus on their next-gen consoles: PS3 for Sony, Wii for Nintendo, and Xbox 360 for Microsoft. These three companies account for all the production of video game consoles around the world. Unlike in other oligopolistic structures such as gas, differentiation is essential to sell their respective products. And so these 3 have different features. For example, the Wii focused on family-based fun with their interactive remote. Sony, for its part, developed a monster of a machine (3.2 GHz processor, 20/60 GB internal HDD memory, etc.) with a capability of playing Blu-Ray (the next gen DVD format). The Xbox 360 is set up as a slightly weaker version of the PS3 but is cheaper and already has a ton of games out in the market. Other competitors can’t easily enter this market since the companies have a natural barrier to entry. First of all, these three companies are already way ahead in terms of technology. These companies actually have plants and formal work teams devoted solely for the conceptualization and production of the consoles. They have research and development teams who focus solely on developing the product and their suppliers are scattered all around the globe. Secondly, they have an established reputation and are household names (in fact, the spell checker in Word doesn’t even underline these brands anymore).
As of the moment, the Wii, despite being the least graphically appealing of the three consoles, is beating the other two in terms of sales. Despite being behind on every aspect of machine performance, the Wii is winning the hearts of people everywhere. The console could be found in day-care centers and home for the aged alike. Although sales reflect the Xbox 360 ahead by 1.28M (units sold) as of May, pundits say that the Wii has already overtaken the Xbox 360’s sales last September. Microsoft had the early advantaged since it released the console some months before Nintendo did.
Looking into the strategic decision-making that goes on in oligopolistic markets explain part of the reason why. An oligopolistic firm must always weigh their competitors’ reaction to a decision they make. Aside from this they must take into account decisions already made by their rivals before arriving at their own. The Nash Equilibrium, which applies to this kind of market structure emphasizes that, “Each firm is doing the best it can given what its competitors are doing.” Most of the oligopoly models taught to us in class are based on the oligopolistic players selling a homogenous good. So, I can’t really see how they can be applicable in this scenario of the video game console industry. However, the fact is ascertainable that Nintendo very well took into account the decisions made by its competitors in producing its console, the Wii.
The trend in the video-gaming industry has always been towards improving visuals and graphics. Since the days of Pacman, computer gaming has very much evolved into producing such life-like characters as Solid Snake, Claire Redfield, and the new Pacman himself - Manny Pacquiao (Fight Night 3). Video-games nowadays just keep on looking better and better. Taking into consideration the fact that its competitors would continue on with this trend, Nintendo opted to take another road. They decided to sacrifice graphics to make a highly-entertaining, family-based, interactive console in the Wii. The remote you use while playing actually motion-captures your moves, so this time around, you don’t mash buttons – instead you punch, slash, and swing at air. Because they decided to use a lesser technology in terms of graphics, they were able to lower their price at around P20K. As it turns out, their strategy worked like a charm. Instead of competing at making their console meaner and more powerful, they were able to create a niche in the market previously unaddressed before. In their strategic decision making, they were able to gain an advantage.
Perhaps another fact that contributed to Nintendo arriving at such a strategy was the fact that their previous console, the Gamecube was such a flop in comparison to the Xbox and PS2. Being able to set their own prices, the big 3 in the video game console industry has to create a demand for their product. Let’s face the facts, video gaming consoles aren’t really a necessity. When demand for a console lowers, sales drop and the company faces the possibility of a loss in its investment. The drop in demand for the Gamecube during 2002 cost it a lot of money, since they have factories put up to supervise the console’s production. Without profits, they can’t recover the costs spent for these factories, sunk as they may be. So to increase demand, the company lowered the console’s price. The strategy worked, and the other two competitors were at the same time hurt by the move, having to slash some off their price to avoid losing too much market share to Nintendo. This previous experience in gaining an advantage by using a low price may have had a say in the company’s strategy with the Wii. So past decisions count too in an oligopoly.
Okay, okay. So what I’ve probably talked about was pretty boring. Yup, I’ll be the first to admit, I kind of got bored writing it too... I hope you learned something though. In any case, I can assure you, reader, that playing one of the mentioned consoles would erase your boredom. Promise!
So see ya around, I’m off to the hospital.
“When a man with experience meets a man with money, the man with experience ends up with the money and the one with the money ends up with the experience.”
UAAP season has come and gone and once again I'm reminded of an issue usually swept under the rug-- betting and gambling on sports. People from all ages and all walks of life do it-- they place their bets on lotteries, casinos, horse races, cock fights, dog fights, etc. Indeed, there's definitely the economics of gambling! There's the hush-hush aspect of gambling and there's the out-in-the-open types. Such out-in-the-open, "legal" venues for gambling draw in so much cash daily that they truly are worth the attention. Speaking of which, I recently came upon an article about the world's biggest casino located in Macau. The article "Macau Wow" talks about the gambling industry in Macau and particularly the newly opened Venetian Macau. The world's biggest casino cost a fortune to build ($1.8 billion to $2.4 billion for construction costs alone, according to the article) and a lot more to operate (needing "16,000 employees and enough power for 300,000 homes").
The article also talks about how the local monopoly was penetrated by the Las Vegas operators, hence decreasing the customers of Macau's old casinos. As I've learned, real casinos are usually monopolies or oligopolies, with very few market players-- as explained by the huge capital or funds, requirements and efforts needed to set one up and keep it in operation. According to my research, in order to open up a casino, one needs to obtain licenses to operate, gather investors, accumulate funds, set up the tables and machines, tackle the construction, etc. Add to that the perennial dealings with government agencies who check up on the casino's operations. These barriers to entry are difficult enough to tackle and if you add to that a government granted monopoly, you have an almost impenetrable market. Particularly in Macau, the local casinos used to be secure through a government-protected monopoly. Hence, as I've learned, local Macau operators probably had a huge market power. But it opened up the industry to Las Vegas operators and now local Macau casinos are forced to compete in a deadly market, especially against the newly opened Venetian Macau, which will surely draw in not only tourists but also locals. Since firms seek profit maximization, more foreigners have since then penetrated the market-- realizing its profitability and clawing at each other just to have a bigger share of the pie.
Aware of the industry's situation, however, Chinese authorities have intervened. They are now, according to the article, stricter about visas. This political intervention may be a hindrance to strategic planning, according to "Macau Wow" but the crowd turn-outs can very well assure their success.
Although the local casinos no longer have a monopoly over the market, it doesn't mean that they have to drop out of the race. As our lessons have taught us, firms in oligopolistic settings can still make positive economic profits in the long run. That means that if local casinos play their cards right and compete in the best possible strategy, they don't have to come out as losers in the industry. As I've learned, there many possible models for oligopolies and many possible ways to act or react in the market. Although at a disadvantage now, local casinos should take a risk and try something novel. Perhaps price competition can be an answer, perhaps they could persuade more government intervention, perhaps they could invent a new kind of game or maybe other methods combined can be the solution to their problems-- they'll never know until they try. They could use the major ace up their sleeves-- experience in the local gambling industry to predict customer's preferences and respond to their needs or create a new need altogether matching the local customs and culture. A few losses shouldn't leave their spirits daunted-- instead, they should respond bravely to the challenges mounted by the foreign casinos!
In our province, Jala-Jala, Rizal, there are only very few ways of earning a living for the people there. I must say that our place can still be considered one of the still rural and inefficient places in our country. Fishing, Farming and small transportation businesses are still the basic jobs for its citizens. I have witnessed the very little development of my hometown and I would like to share it with you guys. Maybe there is a big reason behind all this evidences of not improving at all in terms of economic stability. I believe this is so because of the fact that Firms want to be monopolists in this small town. I will try to enumerate and discuss the different industries in our little place and how they seem to be the only powerful firm in their respective business.
First, I would like to talk about the industry of electricity because it is one of the most important things in daily living. In our area here in Manila, Meralco controls practically everything. However, in our province, Kephilco, a Korean Company was able to conquer the production of electricity in Jala-Jala. Maybe the Foreign Investor of the said company was able to analyze the fact that if he cannot penetrate into the already established company here in Manila, Rural establishments would still gain max profit. Controlling an area without competitors ensures maximum profit for the company.
Another industry which caught my attention was the banking business. There was only one bank for the whole area and it was owned by the government. This was insurance for the government to make money in order for the town to function properly. The sad thing here of course is the corruption already reaching its maximum level; instead of the declining profit–making programs of the government. This banking system helps the people in the town but I guess it is still a “powerful” monopoly because of the fact that the government makes sure it is a single firm in the area.
The last industry I was able to see is the telecommunications industry. PT&T Phone Company took advantage of the fact that they were the only company providing phone calls to customers. This was another powerful firm because it had no competitors. It was a necessity for the people to bridge the gap between loved ones and make transactions, so this industry automatically flourished.
These firms obtained their supremacy in their own industries because of the situation in a rural setting. These companies took advantage of the difficulty of being a lone establishment. The great risk however paid off because of the absence of other firms. The problem left now for these firms is how to sustain its independence and monopolistic power. “Thy Greatest enemy is thy self.”
PRESIDENT Gloria Macapagal Arroyo has demanded a written explanation from the country’s major oil companies as to why they announced a 50-centavo oil price hike over the weekend. Press Secretary Ignacio Bunye said the President has instructed the Department of Energy to seek a formal letter explaining the new round of price increases from at least five oil industry players.
“The President has instructed the energy department to seek a written explanation from the oil companies justifying the new round of price increases. We must ensure that there is a clear justification for such increases in accordance with the situation in the world market,” Bunye said.
The so-called Big Three — Petron Corp., Caltex Philippines and Pilipinas Shell — increased pump prices by 50 centavos over the weekend. Newcomers SeaOil Petroleum Corp. and Flying V also joined the major oil players in raising oil prices.
The oil firms said the latest price adjustments included the impact caused by the expanded value-added tax (EVAT) rate, which increased the tax base from 10 to 12 percent. Bunye admitted that Malacañang has “no control” over the prices of oil in the world market but said it can monitor the local market to make sure that nobody takes advantage of the EVAT adjustment.
For their part, officials from oil companies said the volatility of prices in the world market forced them to raise pump prices anew.
Perhaps the increase was “due to competitive market forces and the continued rise of refined product prices in the regional market.”
The oil companies have also announced their decision to increase the price of liquefied petroleum gas (LPG) by 50 centavos per kilo, or P5.50 for every 11-kilo cylinder.
Top oficials of the oil companies, however, stressed that the effect of the EVAT was minimal and that the increase was mainly brought about by the continued rise in crude costs in the international market.
Dubai crude, the benchmark used by oil refiners, averaged $59.85 per barrel as of this month from $58.44 in January and $53.20 in December.
With the latest adjustment, premium unleaded gasoline’s retail price is between P37.82 to P39.35 per liter, while regular unleaded gasoline is pegged from P36.81 to P38.60 per liter.
Diesel, meanwhile is now sold between P31.35 to P33.50 per liter.
Kerosene now ranges between P33.90 to P35.22 per liter while LPG is now being retailed from a low of P501.71 to as high as P546.16.
As this developed, the Palace appealed to Congress to fast-track the approval of a pending bill promoting the use of coco-biodiesel as an alternative to oil.
“Congress would do well to act soonest on pending energy bills, including the one providing incentives for the production of ethanol and biodiesel,” Bunye said.
CME, or coco-biodiesel, is made from coconut oil while bioethanol is made from sugar, two of the country’s main agricultural products.
The Senate committee on energy, chaired by Senator Miriam Defensor Santiago, is finalizing its committee report on the Biofuels Act.
Santiago’s committee is expected to consolidate all biofuel bills pending in Congress, including House Bill 4629 penned by Rep. Juan Miguel Zubiri, which was passed on its third reading in November last year and subsequently sponsored in the Senate by Senator Ralph Recto as Senate Bill 2159.
The “Big-Three” can increase their prices as they will it because they practically have control over the country’s oil. It exists in an oligopolistic market; they account for most or all the total production in the market. Because they can increase or decrease the oil prices whenever they want it, they can earn profits in the long run. If they feel that they are earning so much right now, they can lower the prices for some time. And when they feel the need to increase their profits, they can increase the oil prices anytime.
However, an important thing to note about firms in oligopolistic markets is that they must still consider the competitors’ response. And so for example, Caltex increases their price by a peso, it seems to be a small amount, but for consumers, it is big. If Shell and Petron does not increase their prices, then obviously consumers who regularly go to Caltex will instead go to Shell and Petron. Caltex’s sales will therefore fall so greatly that they will again go back to the original price (same price as Shell and Petron)! Perhaps another factor that influences oil price changes is the growing demand for oils. After sometime, when the supply reaches its peak level, the oil supply will go down, which in turn lowers the price. Demand will decrease so much/ so fast than the supply. But eventually the demand can increase again, the supply can decrease-- which in the end, will increase the price of the oil again.
This is how the oil market runs. And we as consumers can’t really control or influence what they do. In contrast, they have some sort of “power” over us consumers. All we can do is complain and rant about it but in the end, we still consume and go to them to fill our automobile’s gas.
Return to Scale consists of three parts, constant, decreasing and increasing. No firm wants his Return to Scale to be decreasing scale. To be increasing scale, firms have tried to do followings.
The first is reorganization of company’s system, in other words business restructuring. For example, fire their employee and transfer from human resource to machine. It almost does not improve the quantity of output, it makes the efficient of output increase. Before reorganization, the firm put more input than after reorganization’s input to get the same output. As a result of business restructuring, the efficient of output is increased and Return to Scale changes from decreasing to increasing.
The second is to motivate to the company’s worker, especially it needs to the firm which is concentrated on human resource power. For instance, the manager gives employee some kind of incentive such as more money or stock option, to make them do their best and to develop their potential. It is easily to find nearby, especially in the book store. There are many management books that include contents range from strategies managing their suborders to methods motivating their workers.
The third is development of technology. If a technology is improved, the firm which uses the technology in the manufacture process can increase the volume of output as putting same input. It does not need more employee and to eager to stimulate their worker to work hard and stay later in a factory only to increase output. For example, the beer factory had lots of worker in the past because that industry needed many hands to work. However, in now days, only few engineers are needed to manage to the factory and the output is dramatically increased compared with hand-worker era.
One way my family bonds together is through our weekly grocery shopping. During Sunday afternoons, after Church, lunch, and a leisurely stroll at one of Metro Manila’s malls, we usually drop by at Shopwise or Unimart to purchase the following week’s necessities. This is a very relaxing activity for me, as it takes my mind off the stressfulness of school and focuses my attention on something else: food.
I love grocery shopping because I get to choose what I want to eat for the upcoming 7 days. Depending on moods, I’ll grab different goods from their shelves and stuff them onto the grocery cart. On some weeks I’ll feel like I want to eat healthy, and so I’ll get salad dressings, packaged greens, canned peaches, instant oatmeal, nuts, and granola bars. Sometimes, I crave for snacks to eat in front of the TV, and so I’ll buy potato chips, chocolates, cookies, and other junk foods. What I want to focus on here is a surprising trend regarding my family’s purchase of these junk foods.
On average, our groceries range from 4K-4.8K a week. Of that amount, 1/4th comes from the acquisition of junk food. Shocking? Not really. But yes, head-scratching when you take into account that before, when my mother did the groceries alone, she only had to pay 1.8K – 2K. No, this sudden increase in total grocery cost could not be attributed to inflation. In fact, during my mother’s grocery shopping days, we always ended up having more junk food than today.
So what happened?
Well, for one thing, our “income” to be spent increased. When doing the grocery with our dad, our purchasing power just went up. My mother allocates 2K as the budget constraint when doing her groceries. However, with my dad, that amount basically went up I guess to 4.8K Of course, we don’t have to necessarily spend more, but human nature as it is, we are tempted to do so. This is in line with C.Northcote Parkinson’s second law, which states that “Expenditures rise to meet income.”
But going over to the topic of junk food, why do we have less now and actually pay more?
According to the Neo-classical approach to economics, economic actors have preference over the allocation of the world’s resources. There are however constraints placed on these allocations that a person can achieve by such things as wealth, physical availability and socio-political institutions. Given these limits, people would choose the allocation they most prefer given the money in their pockets. Changes in the allocations people choose are due to changes to the constraints placed on these allocations.
When we had the increase in income, we changed the allocation of the groceries we buy, junk food specifically. Instead of buying a load of Piattos, V-cut, and Cheese Curls, we now shop for Lays, Doritos, and Ruffles. Just recently however, we stopped buying these brands in exchange for the kettle cooked versions such as Kettle Chips, Hardbite, Boulder, and Poore Brothers. When my mom was doing the groceries, she was buying junkfood worth 8-20 pesos a package. When my dad came along, we started buying potato chips costing 85-100 pesos a package. Now, with this new trend of crunchy hand-cooked chips, we pay 130 pesos for a similarly sized (5oz) package of Kettle. There was a change in the allocation of the junkfood we buy because there was a change in the income constraint of our family. We now opt to buy the higher quality good. While we do consume less junkfood now, we eat higher quality ones. This is also in line with the fact that demand for a product can decrease due to changes in consumer preferences. With the growing inclination towards the “healthy lifestyle,” people now move away from foods that are high in calories and trans fat. And so our family shelves the “evil” Cheese Curl girl aside for the lesser “evil” of Kettle Chips’ exquisite crunch (zero trans fat). Of course, Lays is trying to stay competitive by changing their cooking oil into sunflower oil. But for me and my family, their chips lack the crunch.
From this analysis it can also be seen that local junkfoods are inferior goods as compared to imported ones. When our purchasing power increased, we stopped buying these locally manufactured goods. Also however, different brands of junkfoods are very very close substitutes for one another. If ever for example, the price of Kettle Chips would unbelievably skyrocket to 500 pesos, I’m sure no one would buy it and switch to Lays instead. Also, the different flavours of potato chips are even closer substitutes for one another. As an example, just last Sunday, we bought 2 bags of “Lightly Salted” Kettle Chips instead of the usual “Cheddar Beer” since that flavour was on an 11 peso discount.
Perhaps all these underyling concepts regarding potato chips and junkfood can be explained by the fact that it is a monopolistically competitive market. The players basically sell the same product: fried potato. There are many buyers and sellers. As such, it is easy to switch to a different seller when the price of chips goes up unjustifiably. Still, to some degree however, sellers can dictate their prices through differentiation. Kettle can peg their prices higher because of the crunchiness and “healthiness” of their chips. Ruffles can set their own price because of the texture of their chips and their claim of it being very good for dipping. San Miguel’s E-aji, though with a price slightly higher is eating into the local junkfood market because of their innovative idea of including a dip in the package. Entry and exit is relatively easy. I could slice some potatoes now, fry them, and sell them. Although it isn’t really as simple as this, you get the point. However, because of this ease and low barriers to entry, economic profits equate to zero in the long run.
How we end up spending a thousand bucks on junk food now is a no-brainer. Simply buying 4 bags of kettle chips, 2 boxes of Chips Ahoy plus a handful of chocolates and other goodies and viola! We’re already there! I’m not sure however whether this new allocation of resources gives us more utility. Although I think so, I’m not sure if the utility added on to us negates the rise in our expenditures. I hope so though.
One advice some guy (Brian Tracy) gave in order to get rich was to violate Parkinson’s second law. Expenditures do not have to rise with income. The new difference gained from one’s salary raise could instead be invested to a money market account or whatnot instead of upping one’s standard of living. Sacrifice now, and at 10% annual return the investment you make can make you a millionaire earlier than you can imagine. In fact, if you just put away 5,000 per month of your earnings for 45 years at 10% annual return, with the power of compound interest, you end up with 50 million pesos in the end. (the dude Brian just said this, I’m not sure how it was exactly calculated though hehe) Doing the math, that’s 5,000 x 12 x 45 = 1,350,000. Subtracting that amount from 50 million, you stand to gain 48.65 M pesos. What more if you put in more than 5,000 a month? Hmm...
Smoking is one of the most widespread vices in the world. It is so pervasive, in fact, that schools even like the Ateneo has provided venues for smokers -- the Smocket. While all of its negative effects are known to almost everybody, I am pushed to wonder if the world, or even at least governments, are doing anything concrete at all about discouraging smoking or trying to lessen it.
I recently came across an article in The Economist entitled "Can't Kick the Habit". Here, many issues are pointed out and what makes the article really interesting is the fact that it refutes points we naturally assume as common sense.
The first thing I saw was graph of the smokers in different Asian countries. Immediately, I thought to myself that with those shocking figures, maybe governments should use the economically-proposed means to regulate demand or supply.
As I have learned, demand can be affected by other outside forces, like powerful institutions such as the WHO (World Health Organization). One of the efforts, according to the article, undertaken by the WHO is the WHO's tobacco-control treaty (whereby countries have promised to restrict the marketing of cigarettes, curb smoking in public and help smokers quit). Despite a few successes, however, these don't seem to be enough as reflected by the figures in the graph. Some companies still manage to find their way around those policies and agreements. Perhaps a stricter implementation would bump up the WHO's success rate.
Another measure that could be undertaken is the imposition of higher taxes -- but governments, of course, are afraid it would, in the long run, decrease the market demand and consequently the revenues they get from the sale of tobacco. But recent researches, according to the article, reveal that higher taxes are a win-win situation. Not only do they decrease consumption, they also still manage to increase government revenues. From the lessons, I can only think of one factor that accounts for this market behavior and it basically points to the elasticity of cigarettes. In order for a change in price not to affect the change in quantity much, the demand elasticity for the good must be inelastic-- meaning that consumers aren't very responsive to price changes. As my research confirms, cigarettes are indeed inelastic goods. Hence, higher taxes (which firms will attempt to pass on to consumers by increasing the price of the good) will affect some people, decreasing consumption somewhat while also increasing government revenues through higher taxes.
The final method discussed by the article is a stricter watch on cigarette-smuggling. It has the same effect as higher taxes and will result in a win-win situation as well. This, for me, may have more of an effect on the supply side rather than on demand. With smaller chances to smuggle goods in, as the article points out, tobacco farmers could try growing oilseeds instead for there is a growing demand for such a product. Due to lesser raw materials available, market supply of the good will decrease as firms will be able to produce less of the goods as well.
After everything that was said, as a farewell (as if to calm the fears of profit-driven firms), the article ended by saying that "Asia's tobacco firms...have so much scope to improve their efficiency that they could boost profits even in a shrinking market."
In the end, all that's really necessary is that governments and firms (and hopefully consumers as well), work hand-in-hand to lessen smoking in countries. As seen above, government's will benefit with higher taxes and consequently a healthier labor force. Firms needn't worry about profits. Everybody wins and the economy doesn't have to go up in smokes.
Technology. I view this word as synonymous to profit. Today the more advanced the discovery regarding whatever product, the greater the appeal to consumers. The higher the technology, it usually results to greater patronage of buyers. I find it sometimes funny just seeing products portraying themselves as scientific discoveries but in truth they are just the same old thing, just with a better ad campaign. On the other hand, these campaigns are effective for firms and I believe that I would want to enter in this type of business in the future. I think it would be a great way of infusing Chemistry in my quest to gain profit for myself as I enter the Shoes Business. Being a Management Economics Major, I think I have the tools to become a Monopolistic Competitive Firm.
Management Economics targets an area in business and industry wherein we are put in a position that is flexible for us. Being in an almost double-major setting, we are groomed to dwell in the realms of Management, but even more focused in being economists. We are challenged by the Ateneo to find new ways of dealing with the Economic Crisis by finding alternatives to enhance the stature of our society today and especially in the future. By being equipped with Management skills, we are now tasked to use our knowledge in Business to survive in our already devastated economy. It is with great pride that I am here in the Ateneo which has provided me with the opportunity to innovate for my country. Someday, I know, I could make a difference if I just focus on the tasks I will be facing.
Chemistry in the Ateneo also holds its reputation as one of the best Chemistry Programs in the country. Recently, an Atenean topped the Chemistry Board Exam, and it just shows that the school values the Sciences as well. It is important to keep in touch with Scientific Advancements, whether it is in Chemistry or some other field of study. The important thing is you are aware of what scientific adjustments you have top make especially in Business and Economic decisions. Almost all of our establishments thrive on research and development; and they are the ones who have been gaining maximum profit.
I, for my part, am well aware that my situation in the Ateneo is just a training ground for what’s really out there. Having done so many mistakes in my college life I am still full of hope that I can pull this thing through. I believe that whatever happens to me here in school, it is only the beginning of my future. In that future, I need to have a weapon, a driving force to be able to survive the market. And how do I do this? I need to discover something, or to innovate and improve an already withering industry. But what can I do? There have been so many inventions and innovations ahead of me. And here comes Chemistry to save me.
I have to do research and find new ways in order to be successful. I have always dreamed of entering the shoe business, because of my love or if you want to call it “addiction” for rubber shoes. I am a basketball player, and since I was little I found myself developing a sense of love and affection for my shoes. I would find ways to change the look of my kicks, make its useful life much longer, and even enhance its usage performance. I would really love to find ways of being able to become the Pioneer when it comes to rubber shoes. I want to put it in a situation wherein I am the only business who can literally “pimp” shoes.
There have always been problems with regards to the cleaning, improving, and sustenance of shoes. With these three problems, I would like to research or even discover chemicals and substances that could make these tasks easier. With regards to the cleaning of the rubber shoes, there have always been sprays and liquids which are not that effective as primary cleaners. There are whitening foams and cleaning liquids, but I believe they are not strong enough especially in cleaning and whitening in proportion to their high prices. I would like to find a certain chemical that can really be powerful and effective which also can be of no harm but very affordable. Along comes a cloth that can survive the wear and tare of these chemicals. This cloth must be tested thoroughly, and Chemistry provides me a means of doing so. I’m the “pimping” part of my plan, I would like to create a new cloth or rubber skin that can withstand the pressures of any sport. Of course, I would still have to put into perspective the importance of the design and the look of the shoe. I believe that your shoes are even crucial for your performance because without them it’s like not playing at all. By using Laboratory experiments and different tests to discover the said material, I think I can be more effective as a seller. Sustaining your shoe however, is still the biggest problem for consumers. A useful life of a shoe is 1-3 years, depending on the usage; whether it is in sports, work or even in casual wear only. I would like to develop a protective sheet that can protect the shoes from whatever outside factor especially when not in use. Usually the damage in shoes happens when you are not wearing it. The colors fade, the cloths become weak, and the metals rust all due to chemical reactions.
Because of the said reasons, I believe that Chemistry can really ignite my dream of entering the shoe business. It’s what I want to do in life, and I know that someday I would eventually help me change the Business and Economic worlds. I do believe that I can really make a difference in my field. With the enthusiasm and creativity I have, I can venture into this world of uncertainty. It is very difficult to try something especially when you don’t have enough experience yet. Fortunately, I am part of the Ateneo System which strives for “the more” and at the same time instills in its students the need to be a person for others. By trying to earn with my shoe business, I can still walk through the path of being a great help to others. Below are the details of my plan, wherein I want to use different solutions, materials, elements and compounds in order to achieve my desired dreams.
Shoe Material I want my material to be strong, sturdy and efficient. But of course, the rubber material should still be in there for flexibility and comfort. I believe I must use 3 different compounds in order for this to work. The first compound of course, is rubber. The usual rubber compounds must be used to achieve the already obvious efficiency in any sport or activity. The second compound is what I believe must be broken into a more flexible form, is platinum. It is the strongest metal, and I believe that even in a thin sheet form it can still protect the shoe from wear and tare. This platinum sheet is the key for the shoe’s survival. The third compound however, is still unknown to me because I have to experiment more in order for me to succeed. The purpose of the third compound is to combine the platinum and rubber materials in order for them to be in tact and produce the desired results. Laboratory work is much needed in this field.
Inner Sole Material Comfort for the inner soles of people has always been an issue for shoe companies. They have been dealing with feedbacks from consumers that even though the designs are magnificent, the safety of each person is always in jeopardy. It is also a huge problem that some shoes are not fit for other people, like the flat-footed and in-born abnormalities of people. I firmly believe that they must be given a chance to play competitive sports. I want to develop an inner sole wherein the shoe will adjust to the wearer; not the other way around. As the person wears it, the inner sole will be able to mold itself into place, allowing him or her to achieve maximum performance. I will have to develop a certain substance that can do this. Maybe a combination of clay and plastic? Maybe a new compound; who knows? But I will do my best to search for this new technology.
Protective Bag/Container Based on my experiences, as well as through observations, I have seen that damages to shoes most of the time occur when they are not in action. Storage is a very big problem, especially for athletes, who use their shoes every single day at maximum level. Other outside factors such and other household pests bite and damage the shoes. Even the development of rust and scratches caused by the levels of oxygen around the house affects the good condition of our shoes. Here comes in my idea of preparing a bag and storage receptacle for the said shoes. I want to put these products in a shoe-friendly environment wherein everything is controlled. Maybe it can be done through the help of a sealed or compact container. I want to develop a substance or material that can do these things. It can be imagined as a “zip-lock” for my shoes.
Cleaner I know there is no possibility that I can bring the shoe back to its original condition when I clean it, but I believe that I can improve the cleaning products out there in the market. I believe that people today have less focus on the cleaning task, that’s why we don’t get the outputs we want. Maybe a self renewing foam or liquid can be put into the product to make it effective. It covers the main material of the shoes to help it repel water, dirt and other outside factors. This product of course must be user-friendly and is not harmful to kids and the environment.
I have shown you the connection of my course to the wonderful world of Chemistry. Science must always be beside you when you try out your luck out there, whatever your profession might be. Technology presents itself better and completely differently after as time passes by and I need to use this task in my everyday life. New technology means more revenue for the discoverer. Being an economist-businessman this is my secret weapon to success.
Just this recently, Apple has launched the iPhone. This recent technology has really caught the attention of the whole world. For everyone who doesn’t understand why it has made such chaos, here’s why. Why has it caused a hype??? iPhone has combined three features that every person dreams to have. It is a mobile phone, a widescreen iPod and an Internet device all combined into one! iPhone is small and lightweight. However, looking into it, it has the typical features that any other phones have (i.e. the Dopod); features such as web browsing, emailing, mp3, etc. On June 29, 2007, they have already sold a whopping 1.28 million iPhones!
Perhaps why people want to have the iPhone is because it gives them the status symbol. One person was even featured in a local TV news show because he was the first one to have the iPhone here in the Philippines. Another person, before sending a text message to his friend, even included and boasted in the message that he was using an iPhone!
Recently, issues were raised because Apple is creating a “monopoly”. Apple is barring and limiting the US customers from choosing a cellphone service provider other than AT&T. Hackers has enabled people to connect to other service providers other than AT&T and Apple, in order to counter that, has released a software update that turns hacked iPhone into “iBricks”. iPhones that were unlocked are disabled by Apple.
We can never blame the US customers for wanting to switch to another service provider. AT&T imposes the following charges: a Regulatory Cost Recovery Fee of up to $1.25 to help defray its cost incurred in complying with obligations and charges imposed by State and Federal telecom regulations, a gross receipts surcharge, and State and Federal Universal Service Charges. These fees are not taxes or government-required charges. Taxes and other fees also apply.
With all these charges that AT&T imposes, consumers will really try to find other service providers. In the first place, the iPhone itself is already expensive. Now, Apple and AT&T is imposing other charges that consumers feel unnecessary! OK..for this reason alone, we can’t really blame them!
Even if Apple is “monopolizing” the iPhone, consumers cannot do anything about it. Still consumers buy the iPhone. Many people still covet the trendy technology! With all the issues coming up, people can’t really complain. Apple is the first one to release a device that caught the world’s attention. They were the ones who took the time to research and develop this new kind of technology- a very characteristic of a monopolistic firm.
What other firms can do is develop a new technology that is similar to iPhone. China has already developed a device similar to iPhone costing only around 12,000 pesos. As for the consumers, they can opt to buy those ‘imitations’ if iPhone is so expensive for them!
Price Taker in Perfect Competetive Market By Raymond Lee
The major features of perfect competitive market are three following - Price taker, Product homogeneity and Free entry and exit. Perfect competitive market is a part of theory so far from reality. However, these three assumptions can be realized in two parts, price taking and free entry & exit. First, briefly, free entry and exit depends on scale of firms, because if the firm is very much small like street food stores or hand-cart of buco, these small stores also need initial entry cost such as price of hand-cart or raw materials of food.
Second, price taking, which is possible when firms can know all price in the market. It is impossible even though now is already developed information society by internet and satellite communication era. However, there are much powerful information intermediaters who have existed since the market opened in this world. They are customers, like us. They have dropped by stores as much as they can, then they compare the prices of each store and decide to buy. As a result of them, the firms make their price until the lowest price in the market to be attractive seller to buyers. Smaller the market is, more equal the prices are.
For example detailed, in Dong-Dae-Mun market which is largest wet market in Korea like Green-hills in the Philippines, there are a number of customers who want to buy something in lower price than other places. They spend lots of time to hang around and to memorize the price of each store. Sometimes the store servants discount the price then memorize the lowest price then analyze the price and estimate the cost price. After this whole work, they suggest the lowest price which is added little bit in the estimated cost price to the store. Even though the stores decide their price same in Don-Dea-Mun market, they can follow the price suggested by wise customers.
I have intended to write this entry around 1 week ago.
It was Sunday. And it started out like every other Sunday in my life. I woke up to the alarm of my cellphone – stretched, tossed, turned, and hugged my pillow as I tried to prolong the sweet sensation of dreamless sleep. Squinting through droopy, half-opened eyes, the LCD on my phone read 700 am. It’s so cold during this time of the morning. And it seems getting up is the hardest thing to do.
But thank God I can, because someone else couldn’t.
I woke up an hour earlier than usual so I could type up my Philo paper before going to Church. I went downstairs and sat at the dining table. While typing away at the laptop, I was surprised to hear my dad tell my mom over breakfast, “Sama ko na si Zerge sa hospital, mauna na kayo sa Church.” And so I wondered who was sick. My dad answered me that it was my grandma. She had a fever and was feeling extremely weak. Aaah. Of course, I didn’t think much of it at first. My grandma usually has routine check-ups per month, and so maybe this wasn’t so much out of the ordinary. But boy was I wrong.
Before leaving for the hospital, we had to bring my grandma to the car. My dad told me to carry her, since he has a tennis elbow. “Kaya mo ba?” he asked me. Well, yeah, since I thought I was strong. But it turned out I wasn’t. My grandma could not move at all. I carried her deadweight. We almost fell as I was carrying her downstairs. We had to stop halfway since she had a very constrained look in her face. I was initially carrying her in a weird position, supporting her back while my dad assisted on lifting her legs. To finish bringing her down, we moved to a different position with me carrying he alone “married couple style.” She was really heavy, and the pressure to carry her without falling and making her feel uncomfortable made me sweat like probably never before. It was also such a task to simply bring her to the car.
As we were driving to Medical City, I was already pondering what could be wrong with her. I was already feeling all sad since I haven’t really spent time with her even though her room was just across mine, an itsy-bitsy 10 meters away. To cut a long story short, it turns out that she had another stroke. And this time, it paralyzed her from the neck down. She already had one before that almost cost her life. It’s just one of those things that inevitably happen to old folks.
So where does economics come into all of this? Well, just three days into the hospitalization I found out from my dad that the bill already ballooned to 120K pesos. Wow. An MRI scan already cost roughly 80K. Adding to that, a surgeon proposed to have my grandma undergo an operation at her spine to make her walk again, which would cost 400K+.
At this, I simply just can’t believe Medical City or at least that surgeon. How could they even think of an operation as a solution when the obvious fact that my grandma’s 86 year old body probably couldn’t handle it anymore. In fact, an operation at this stage could be the very thing that could lead to her death. Are hospitals and doctors now just desperate profit-seeking entities?
Since this is written for an economics class, I will tackle the “economic nature” of the problem.
The prominent question that pops us for me is, how can they charge so expensively? I was actually taken aback when I asked my mom last Monday how my grandmother was doing and she replied with the mounting medical bill. People care about price. In many cases, it is the number one factor people look into before buying a product. But in times of sickness, one can hardly do anything about it. Why?
Because medicine, and all these medical related things are inelastic goods. This means that even though the hospital raises their price, people still buy them. Price elasticity of demand is a measure of consumers’ responsiveness to changes in prices of a certain good. In rather more economic terms, it is the percentage change in the quantity demanded of a good in response to a 1 % change in its price. A good that has a corresponding 1% change is a unitary elastic good; greater than 1% elastic; and less than 1% inelastic. Here we see that even though the hospital increases prices for their medicine and other services, demand doesn’t fall by much, if it even does at all.
Why?
Obviously, this is because not buying that medicine or service may mean the difference between life and death. And here the question arises, what value does one place on life? An interesting bit of information I found out last sem was that in America, a human life was monetarily valued at approximately 50 million dollars, while here in the Philippines, it is only 50,000. In any case, people just cannot refuse to buy the heavily marked-up medicine because their loved one would suffer. They cannot say, “MRI? Grabe, mahal! Huwag na lang kaya,” and risk the doctor diagnosing an illness on his own. We are a family oriented culture. We value the lives of people we love, and perhaps that is why among other things, we speak so strongly against euthanasia and voluntarily cut open holes on our pockets in times like these. Isn’t life more precious than all the money in the world? If so, then maybe hospitals really are smart… They actually figured this out, and figured out a way to take advantage of it.
Now I’m not saying that hospitals are mean. Everyone, yes, even hospitals are profit maximizing firms. If they weren’t they’ll probably be out of business. That’s the sad fact. Medical City especially needs to charge higher rates considering they have to recover all the capital invested in building the hospital. What is weird for me though is sometimes they seem to overstep the border between being such and being actually human. The last time my grandmother was confined in the hospital (2 years ago), I was surprised to learn that my grandma’s medicine had to be bought at the hospital at a price 30-50% more than in Mercury drug. The really funny thing here is that the hospital won’t apply the medicine if it’s bought from the outside. Woah (I don’t know if this policy has already changed). And then now, there’s that surgeon who’s proposing an expensive operation! Like c’mmon, care and help a brother out man!
I’m proposing that hospitals somewhat try to be price discriminators according to a family’s status in society. What I mean here is that they should charge a fixed price for their services that could go down lower (but still over average cost) according to the patient and his family’s ability to pay. They could base this on the income bracket the patient’s family belongs to. Once they ascertained the family’s ability to pay, they can assign doctors who charge less to poorer families. Also, before undergoing scans and tests and buying medicine, the patient’s family could first present their BIR receipts so that they could accordingly be given a discount.
There are 3 conditions to be able to price discriminate: 1. The firm has to have some degree of market power 2. The firm is able to identify distinct customer groups with different elasticities 3. The firm has to be able to prevent the resale from low price customers to high price customer groups
I believe the hospitals in Metro Manila, especially the major ones (Medical City, St.Luke’s, Cardinal Santos) can somehow satisfy these conditions. They have market power since they have the reputation of housing the best doctors and having newest technologies. They could easily identify the income brackets of customers by coordinating with the BIR or asking the customers themselves. And they could prevent resale of medicine by selling only based on a doctor’s prescription (with regards to their tests and services, the question of resale is irrelevant).
In the end, the hospitals may not like it, since they’re probably doing well anyways charging at their current rates. But I believe it would be for the betterment of society. PGH is already so full and it seems that the doctors and nurses there couldn’t adequately pay much attention to every patient anymore. By lowering their prices, the big hospitals could probably attract some of the poorer families and give them better services.
If this were a perfect world, perhaps the more desirable 1st degree perfect price discrimination could occur. The hospitals can charge a different price for each patient with the price exactly equal to the maximum price that patient is willing to pay. Imagine the many lives that could be saved. Economically, this is very desirable as well, as all deadweight loss would be erased for both consumers and producers.
But this is reality. And maybe in the end, the hospitals aren’t the only ones to blame. It is in these moments of utter desperation wherein you realize how much you love, and how much you wish you could have loved when you still had the chance. Maybe we won’t feel so bad when the moment comes and a loved one falls into the prospect of death. Maybe we won’t feel so frustrated at the exorbitant rates doctors are charging to save a life. Maybe we won’t when we’ve already made that person we love know that we love them so much.
After her first stroke, I didn’t really spend time with my grandma. I’ve always thought, “Hey, she’d be okay. There’ll still be time in the future when I could hang with her.” Not so. We have to value each moment we have with the people we love each day. Fastforwarding to today, thankfully, my grandma is doing much better, although she really can’t move anymore. No, she didn’t die. She was supposed to go home today but I guess her stay at the hospital was prolonged (hmm... I wonder why$$$).
At least now I’m sure she’s more important than all the papers I wrote and hours I spent on tv, the internet, and videogames. When she comes back home, I’m gonna pay her a daily visit.
Ceteris Paribus, let all things remain constant, is a quote in economics constantly mentioned in our lessons. It’s being used so that things won’t be complicated and situations can be understood better. But I guess that’s why things sometimes seems so messed up, since constancy is just a dream. Constant… how ironic! The truth is, in this world, change is the only thing that remains constant. Everyone and everything undergoes changes, either for the better or for the worse. So nothing is ever constant. We change our clothes, our minds, ourselves, etc. the world around us constantly changes as we speak. No matter how hard we wish for something to ‘stay like this forever’ or ‘stay the same’, it won’t. That’s the reality we have to live with.
Here and there, new inventions and discoveries are made. The price of goods changes as well. The Philippine economy keeps sinking. Terrorism can’t seem to stop rearing its ugly head. Our world is overrun by problems. What will stay the same in the world we live in? Can’t it stay as is?!? All this change is driving me crazy!!! It’s so hard to keep up with. It’s not as if things aren’t as complicated enough! There are times when these thoughts run through my head. I feel lost, confused, powerless and in despair. I want to do something but can’t. I find myself swept away by the tide of change. But hope and Faith wouldn’t abandon me so I slowly rise above them. I eventually defeat these feelings but I still can’t help wishing things were different. I indulge myself in reveries and get transported to the past. Sometimes I think it would be much better to live in the olden times. I’d be able to freely admire nature in all its beauty. Things would be simpler. There would be fewer technologies, less advancements, true… but, there would also be less greed, less conflicts and less evil. People were less consumed by riches, power and fame. The words family, love and concern actually meant something to them. These old values no longer have a place in the lives of the modern man, with his fast-paced life and success driven mind set. It’s simply the harsh, saddening and painful reality, whether or not we choose to face it and owe up to these flaws. Try as we might to deny such accusations, our actions would be enough to incriminate us. My only advice to the people of today: return to the basics, to the things that really matter. Maybe then we’d be able to live happier, more fulfilled and peaceful lives.
Change happens in people too. Sometimes the change is good and sometimes it’s bad. People can change form good top bad because of many factors in their environment. But what I know causes a person to change for the worst are vices. Gambling, drugs, alcohol, smoking, etc. have destroyed many people’s lives and are continuing to do so. No matter how much we educate people, they still end up in the clutches of such demons. The only weapon to truly defeat such evils is Faith. As cliché as it may sound, God is the only support we should turn to in times of dire need and distress. People become better by growing out of bad habits and constantly improving themselves. By developing their talents, working on their weaknesses and giving to society, they are serving their purpose on this planet. No matter how a person turns out, I still believe that goodness is innate in human beings. No matter how bad we get, we’ll always be able to return to that goodness within us for God will make it so. We can walk that path of repentance and somehow restore some of the beauty we’ve destroyed through evil. People do change; they can change. If we believe, believe hard enough, they can change for the better. Their beautiful souls will one day shine through and prevail…
Change is like a double-edged sword. I’ve learned that all throughout my life. Although I know things can change for the worse, I’ll believe that they can change for the better as well. It’s a futile effort to try and stop things from changing. And like they say, change is inevitable. So we just have to learn how to live with it and make the most of things, come what may! The things that make them human, the things that make them who they are, hope, faith, and many other simple things without a price tag… surprisingly, these things are the ones that help them get through life, survive problems and get out in one piece… If there would be one thing I continually hope for that people would hold onto, it would be God and their principles. If they do hold tight, nothing will ever be able to keep them down, not even the harsh changes each day brings…nothing…
“We must adjust to changing times and still hold to unchanging principles.” –Jimmy Carter
Name: Leontief Lovers Home: Manila, Philippines About Me: people wonder why we are called leontief lovers. it's simple, in eco, there is a canonical form of utilty and production function called Leontief Preferences / Technologies. In a two good/input world, you always would need the other good/input in order to remain satisfied/have the ability to produce... in other words, you will never substitute one good for another, you need to consume/use both goods at a fixed proportion at the same time... LIKEWISE, in our blog, WE WILL NEVER TRADE NOR SUBSTITUTE ECO FOR ANOTHER! See my complete profile
An economics professor and a student were strolling through the campus.
"Look," the student cried, "there's a $100 bill on the path!"
"No, you are mistaken," the wiser head replied. "That cannot be. If there were actually a $100 bill, someone would have picked it up."
Feudalism: You have two cows. Your lord takes some of the milk. Socialism: You have two cows. State takes one and gives it to someone else. Communism: You have two cows. State takes both of them and gives you as much milk as you need. Bureaucratic Communism: You have two cows. State takes both of them and gives you as much milk as the regulations say you should need. Bureaucracy: You have two cows. State regulates what you can feed them and when you can milk them. Then it pays you not to milk them. After that it takes both cows, shoots one, milks the other and pours the milk down the drain. Then it requires you to fill out forms accounting for the missing cows. Fascism: You have two cows. State takes both of them and sells you milk. Nazism: You have two cows. State takes both of them and shoots you. Liberalism: You have two cows. State dosen't care whether you exist, let alone your cows. Capitalism: You have two cows. You sell one and buy a bull.
PRICE IS IMPORTANT! (disclaimer: may be a little off-color)
"My Dear, would you go to bed with me for a million dollars?"
"Well, yes, I guess I would."
"How about $100?"
"What kind of person do you think I am?"
"My Dear, we have already established that. We are merely haggling over the price!"
When Apple launched the first generation iPod back on October 2001, it marked the dawning of a new era in the portable music player industry. The Walkmans and the portable CD players that were once the dominant players in the market were almost instantaneously relegated to the sidelines. With the iPod’s initial storage capacity pegged at 5GB and 10GB models when first launched, the portable 700MB CD players miserably failed in comparison in terms of storage capacity and portability. Sony’s Walkman and Walkman-inspired players, on the other hand, were simply no match to the iPod’s digital music storage features. By October 2004, the iPod has already cornered 70% of America’s market for portable music players . Currently, the iPod is the best selling digital music player of all time, selling its 100 millionth iPod on April 9, 2007 .
natural calamities, prices once again rose. Time cleared away those fears but OPEC still kept its prices up. At the present, OPEC is in control of oil and its prices and has the decency to increase supply as well if occasion calls for it. The article says that despite meetings with OPEC, people must still not expect much from OPEC. It ends with a short analysis that the effect of high prices constraining demand will soon surface-- despite recent trends of oil consumption in China. It predicts that OPEC's control over oil now will not likely last for the above-mentioned reasons. 
We Filipinos love Sports. We have been trying to excel in whatever game we can be good at, and I believe we have had our rewards just recently. However, we are also known as gamblers, and I must say that I’m not proud of it, but it is a fact. Jueteng, Horse-racing and even simple card games have penetrated the minds of Pinoys when it comes to earning money. Here comes in the merging of Sports and gambling. From the slightest bets on animal fights up to the world cup, people have been trying to allocate money from the popularity and excitement of sports, whatever it may be. I would like to focus on the game of basketball, because I can relate to it very much. I love playing the game and I can say that I have sufficient knowledge when it comes to the hidden world of basketball betting. 
This perfectly competitive market of imposing the odds is very difficult indeed. It depends on all firms or “bookies” what odds or conditions regarding the end game scores would be. These conditions depend on how the reactions of the audience would be. If many would place bets on a single game, then the odds would be greater. The bookies are price takers and they are willing to risk a certain amount of price which can also depend on the many games of each day. The best source of these basketball betting games is the NBA. The National Basketball Association consists of 30 teams, each having 82 games each season. Imagine 2,460 games excluding the playoffs and finals! This business has so many opportunities of gaining the profit they want. These firms target practically every sport fanatic in the country and there are millions! I can say that this illegal but effective way of raising profits have already boomed in a way that it’s even adapting and growing to economic conditions. There are already so many basketball leagues in the country and these firms extend their coverage from the UAAP up to the PBA. Filipinos nowadays find it even more amusing to bet on a game they can grasp more or control themselves. 
Over the past couple of years, Manila has seen a significant surge in mall constructions driven by the 3 major players in the market—Ayala, SM, and the Ortigas. While this has roused much speculation and excitement among market-watchers, retailers, and consumers, the emergence of these newer malls does not seem to have matched the initial hype as numerous painted plywood boards still line many an aisle.
such as engine, wheel, gear and so on are made in Japan and factories in the Philippine do assemble the parts and produce cars. It gives advantages to the Japanese company, first one is giving stable monopoly state and second they can sell their component to Philippines local car factories. Because Filipino assembles the parts of cars, so they do not have any chance to learn or get any information about making cars. As Japanese company does not give any technical idea of cars, the Philippines have to depend on supply of Japanese products. Moreover, in local car market, all component of cars are made by Japan, so if the local car does not work, they should buy new component made by Japan in high price. Japanese car companies make lots of money through the advantage of monopoly in the Philippines.
PRESIDENT Gloria Macapagal Arroyo has demanded a written explanation from the country’s major oil companies as to why they announced a 50-centavo oil price hike over the weekend. 
The oil firms said the latest price adjustments included the impact caused by the expanded value-added tax (EVAT) rate, which increased the tax base from 10 to 12 percent. 
As this developed, the Palace appealed to Congress to fast-track the approval of a pending bill promoting the use of coco-biodiesel as an alternative to oil. 
to the article, reveal that higher taxes are a win-win situation. Not only do they decrease consumption, they also still manage to increase government revenues. From the lessons, I can only think of one factor that accounts for this market behavior and it basically points to the elasticity of cigarettes. In order for a change in price not to affect the change in quantity much, the demand elasticity for the good must be inelastic-- meaning that consumers aren't very responsive to price changes. As my research confirms, cigarettes are indeed inelastic goods. Hence, higher taxes (which firms will attempt to pass on to consumers by increasing the price of the good) will affect some people, decreasing consumption somewhat while also increasing government revenues through higher taxes.
Because of the said reasons, I believe that Chemistry can really ignite my dream of entering the shoe business. It’s what I want to do in life, and I know that someday I would eventually help me change the Business and Economic worlds. I do believe that I can really make a difference in my field. With the enthusiasm and creativity I have, I can venture into this world of uncertainty. It is very difficult to try something especially when you don’t have enough experience yet. Fortunately, I am part of the Ateneo System which strives for “the more” and at the same time instills in its students the need to be a person for others. By trying to earn with my shoe business, I can still walk through the path of being a great help to others. Below are the details of my plan, wherein I want to use different solutions, materials, elements and compounds in order to achieve my desired dreams. 
Just this recently, Apple has launched the iPhone. This recent technology has really caught the attention of the whole world. For everyone who doesn’t understand why it has made such chaos, here’s why. Why has it caused a hype??? iPhone has combined three features that every person dreams to have. It is a mobile phone, a widescreen iPod and an Internet device all combined into one! iPhone is small and lightweight. However, looking into it, it has the typical features that any other phones have (i.e. the Dopod); features such as web browsing, emailing, mp3, etc. On June 29, 2007, they have already sold a whopping 1.28 million iPhones! 
Obviously, this is because not buying that medicine or service may mean the difference between life and death. And here the question arises, what value does one place on life? An interesting bit of information I found out last sem was that in America, a human life was monetarily valued at approximately 50 million dollars, while here in the Philippines, it is only 50,000. In any case, people just cannot refuse to buy the heavily marked-up medicine because their loved one would suffer. They cannot say, “MRI? Grabe, mahal! Huwag na lang kaya,” and risk the doctor diagnosing an illness on his own. We are a family oriented culture. We value the lives of people we love, and perhaps that is why among other things, we speak so strongly against euthanasia and voluntarily cut open holes on our pockets in times like these. Isn’t life more precious than all the money in the world? If so, then maybe hospitals really are smart… They actually figured this out, and figured out a way to take advantage of it.
Change is like a double-edged sword. I’ve learned that all throughout my life. Although I know things can change for the worse, I’ll believe that they can change for the better as well. It’s a futile effort to try and stop things from changing. And like they say, change is inevitable. So we just have to learn how to live with it and make the most of things, come what may! The things that make them human, the things that make them who they are, hope, faith, and many other simple things without a price tag… surprisingly, these things are the ones that help them get through life, survive problems and get out in one piece… If there would be one thing I continually hope for that people would hold onto, it would be God and their principles. If they do hold tight, nothing will ever be able to keep them down, not even the harsh changes each day brings…nothing… 
