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Leontief Lover's Song of the Week:
ARTIST:Ryan and Chad ft. MLB PLAYERS
SONG: I Don't Dance (MLB PLAYERS REMIX)
ALBUM: High School Musical 2
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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
"Humanity is the virtue of a woman, generosity that of a man." - Adam Smith
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"In the long run we are all dead." - John Maynard Keynes
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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
Reference: http://www.cr1.dircon.co.uk/pdffiles/determinants.pdf
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| Cartoon Corner |
By: Paul Combs (The Tampa Tribune)
By: Clay Bennet (The Christian Science Monitor, Boston)
By: Thomas Boldt (The Calgary Sun, Alberta, Canada)
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| Friday, October 12, 2007 |
| Oily changes.. |
Oily changes..
by Bea Lim
 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. |
posted by Leontief Lovers @ 3:57 PM  |
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| About Me |
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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
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"The World is Flat" by Thomas Friedman
"Confessions of an Economic Hitman" by John Perkins
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Calvin and Economics
Jokes
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!"
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