Japan's Natural Disaster Hurts Economy

On March 11, 2011, Japan was devastated by a natural disaster that struck the Japanese economy. The 9.0 magnitude earthquake and tsunami devastated the northeastern coast and triggered a crisis at a nuclear power point. The Bank of Japan is conducting operations that are helping the rise in demand for post-disaster funds. Japan’s bank is taking cash from money markets and bringing its emergency funding to nearly seven hundred billion dollars.

The government had ordered workers at the nuclear plant to withdraw from a stricken nuclear plant in Japan due to a surge in radiation. The government ordered the temporary efforts to cool the overheating reactors for safety reasons. There will be a decrease in work and income for workers at the plant causing a decrease in income and future purchases for local business's. The nuclear crisis has triggered international alarm, its emergency at the nuclear plant is partially overshadowing the earthquake at this time, but both emergencies are affecting the economy in a negative manner.

The devastation has increased demand for fuel and food. Local supermarkets were cleared out after the disaster and Japanese civilians are not compliant having lost loved ones and not having food for the family that has survived. With a decrease in quantity, prices will rise in Japan until the economy can get back on track. In the automobile industry there is a power supply shortage that will slow down production. With a decrease in demand for automobiles due to higher prices of fuel, Japan is displaying an inward shift. Inward shifts in demand are usually due to famine or in this case natural disasters

The Japanese government is stepping in during a crucial time to take part during the market failure. I have not doubt that in time the Japanese government and Bank of Japan will build back up the country to what it originally has been. The billions of dollars going in to Japan will only benefit the country. With outside help from surrounding countries, states like Iwate, Miyagi, Fukushima and Ibaraki, which have been hit the hardest will see a brighter future. I think it will be impressive to see the progress Japan will make after a year compared to when Hurricane Katrina hit the United States of America in 2005. The reconstruction of New Orleans was a slow progress in the United States and I believe Japan will be determined to build up the economy much faster.

http://news.yahoo.com/s/ap/20110316/ap_on_bi_ge/as_japan_earthquake_economy;_ylt=Apm1PqdCEaLivvCBxynJcWTv5rEF;_ylu=X3oDMTMxZmpvazFjBGFzc2V0A2FwLzIwMTEwMzE2L2FzX2phcGFuX2VhcnRocXVha2VfZWNvbm9teQRwb3MDMQRzZWMDeW5fcGFnaW5hdGVfc3VtbWFyeV9saXN0BHNsawNqYXBhbnNjZW50cmE-

Google is a dangerous monopoly -- more than Microsoft ever was

Steven Christopher
Economics Article 3/22/11

Joe Wilcox starts in the article talking about Google’s search and advertising dominance and perceptions about the company’s growth. He explains that the sudden realization of Google’s monopoly started two years ago, starting with invention of the Google DoubleClick. Apparently, with the introduction of this new product came the significant boost that Google needed to start abusing power. Google controls the large majority of products in many areas, such as browsers, mobile operating systems, and advertisement. Through different developments, Google has made a monopoly, created an oligopoly, and a monopolistic competition.
This article proclaims that Google is the world’s largest monopoly. A monopoly is defined as a single seller with complete control over an industry. “The US Justice Department went after Microsoft in May 1998 out of fear the company would become the Internet’s gatekeeper. That never happened with Microsoft, but it most certainly is occurring with Google. Its business is all about profiting from information.” (Wilcox) Here, Wilcox clearly explains that Google controls the information online, and they are profiting off of it so well, they are able to keep all competition away. Google will always control the vast majority of information because of its browsers, such as the Chrome browser and mobile browsers.
Google reaches the level of monopolistic competition with its retail trade in operating systems for personal devices. A Monopolistic competition is defined as a market structure in which there are many sellers supplying good that are close, but not perfect, substitutes. In such a market, each firm can exercise some effect on its product’s price. “The Android mobile operating system was released in 2009, which sales rose 961 percent year over year in 2009.” (Wilcox) The Android mobile operating system showed that although there were other products on the market, the Android phones were the best substitutes to other phones. Google recently released a new operating system for mobile phones and net books called Chrome OS. With this introduction, Google swiftly became the leading supplier. Google clearly has the vast control over the market. “Google has erected a mobile applications stack, by leveraging together Android, Chrome, disparate Google Web applications and search services.” (Wilcox). Google is a market structure they supplies good, that are not perfect, but substitutes to other operating systems, and web browsers.
Oligopoly is defined as a situation of imperfect competition in which an industry is dominated by a small number of suppliers. In this article Wilcox proves that Google is a dominating industry. Google is one of few industries that control the ability to produce an operating system and browser. Google is also one of the few industries that control a large majority of E-books. “Google negotiated making millions of books freely available online via Google search.” (Wilcox). This is a demonstration of power that clearly indicates that Google is one of the few companies that controls this industry. Google has the resources, influence, and power to make these developments possible and impossible for other companies.
The Google corporation controls and influences information, operating systems, browsers, and new age technology. In recent years it is clear that Google has become a great monopoly, caused an oligopoly, and created a Monopolistic competition. Although the cooperation is liked and respected by most people, it is starting to hurt other businesses and corporations in specific areas because they cannot compete with Google. “Google is a dangerous monopoly. Being a monopoly isn't illegal in the United States, although in Europe it seemingly is so.” (Wilcox) Monopolies like Google need to have a boundary which does not allow them to take control, and push companies out of competition.

http://www.betanews.com/joewilcox/article/Google-is-a-dangerous-monopoly-more-than
Wilcox, Joe. "Google Is a Dangerous Monopoly -- More than Microsoft Ever Was Betanews." Betanews Technology News and IT Business Intelligence. Web. 22 Mar. 2011. .

"As Health Costs Soar, G.O.P and Insurers Differ on Cause"

The article I chose is from The New York Times and it is called “As Health Costs Soar, G.O.P. and Insurers Differ on Cause.” This article is about how companies and small businesses are being affected by rising premiums for health insurance. Economists are saying that health insurance is expensive simply because health care is expensive; premiums are rising because of the underlying cost of care and the growing demand for it. The cost of living in the country is barely rising 1-2% while increases in health insurance costs are rising as much as 20-45%. The problem is not just the increasing costs but the fact that the given coverage on insurance plans are also shrinking. Robert I. Woodland, the president of the Woodland Design Group in Manchester New Hampshire, stated: “Essentially, we have been paying a lot more for a lot less” (Pear, 1).

The author of the article states that the new federal health care law may eventually “bend the cost curve” downward. But as is appears now, the rising cost of health care is causing insurance premiums to rapidly increase while coverage given is shrinking. If we were to graph a general demand curve for health care, there would be movement up along the demand curve to show an increase in price. The law of demand states that there is a negative relationship between price and quantity; in other words, when the price of a good rises, with all other things constant, buyers tend to buy less of the product. When it comes to an essential good, such as health care, prices do not have as much of an effect on whether consumers will purchase this item. When a good is a necessity, or an inelastic good like health care, an increase in price will alter consumption of that good but not by much. The opposite of inelastic goods are called elastic goods. Elastic goods are considered to have lots of substitutes, causing consumers to be more sensitive to prices changes.

Looking to the future, President Obama’s administration and officials hope that starting in 2014, “each state will have a central market where consumers and small businesses can pool their purchasing power and buy insurance. In theory, the exchange could bring more insurers into the market, increase competition and drive down prices” (Pear, 2). Bringing more insurers into the market will cause an increase in suppliers. If we were to graph a supply curve for this to show an increase in supply, there would be an outward shift to the right of the supply curve. And if we were to graph a demand curve for this scenario, there would be a downward movement along the demand curve to show a decrease in prices.

Source:

Pear, Robert. “As Health Costs Soar, G.O.P. and Insurers Differ on Cause.” The New York Times. The New York Times, 4 March 2011.Web. 20 March 2011. http://www.nytimes.com/2011/03/05/health/policy/05cost.html?ref=healthcare

"Region's Clothing Stores Bump up Costs as Cotton Gets More Expensive"

This article from the Roanoke Times is a perfect example of the effects of supply and demand on the price that consumers must pay for a good. In the case discussed in the article, the supply of cotton on the world market has been drastically reduced because of damage to the cotton crop in China the world's largest cotton-growing country, loss of land to grow cotton in the United States as more land is being used for other purposes, and finally the increased demand for cotton clothing in many countries around the world. All of these factors have led to a restricted supply of cotton for clothing manufacturers.

As the worldwide supply has dwindled, prices for raw cotton have reached record levels. This rise in the price of the natural resource has most likely led to an increase in the variable costs manufacturers have had to pay in order to produce cotton garments. Some manufacturers are looking for ways to use less cotton in their products to help reduce these variable costs. As the cost of producing these items has increased, the clothing manufacturers have been forced to pass their expenses on to the stores that purchase their products for sell. Consequently, as the retail stores' expenses have risen, they have been forced to raise the price of the cotton clothing they sell, meaning that their customers have ended up paying more for the items they purchase.

The rise in the price of cotton would be shown as a shift to the left on a supply curve. Since demand has also increased, there would also be a shift to the right on the demand curve. If this trend continues, consumers will eventually be unwilling to pay the higher prices for cotton clothing. They will instead search for a substitute for the cotton clothing that they would normally buy. They will look for a cheaper alternative when deciding what kind of clothing to purchase for themselves and their families. The rising prices and the substitution effect will cause the demand for cotton to eventually decrease. As this happens, gradually the amount demanded and the amount supplied will once again become equalized meaning that a new equilibrium price will have been reached. When this occurs the cotton market will have stabilized and the prices for cotton clothing will probably decrease. Unfortunately there is no set timetable for when this stabilization will occur. Until then, we will all be paying more for the cotton products we purchase.


www.roanoke.com/business/wb/280462

Is the world in for another oil shock?

The Middle East and Africa produce over one third of the world’s oil. The Economists explains how there were three devastating oil crisis’ that caused a lot of unrest throughout the world, the Arab Oil embargo in 1973, Iranian Revolution in 1978-79, and Saddam’s invasion of Kuwait in 1990. Unfortunately, according to the article consumers have good reason to be concerned for another oil shock. In the article, the author explains how Libya’s turmoil could interfere with oil supply. The output of Libya’s oil supply has decreased by half. The Libya oil crisis could potentially cause this unrest to spread across the region and cause there to be an oil deficiency through out the Middle East. Luckily, the reaction on the market has not been that destructive. As the violence in Libya increased the price of Brent crude by 15% and, on February 24^th the price of barrel was up to $120 dollars. But since, Saudi Arabia said they would produce more oil it forced the prices to drop to $116 due to the law of demand. Due to the fact, gasoline is an inelastic good consumers are not very sensitive to the changes in price, which means that gasoline is essential to consumers. Although, gasoline is an inelastic good, economists are still concerned that the decreased supply in oil will cause the prices to escalate to an all time high and that the reduced supply could boost inflation. Fortunately, the Libya oil crisis has only decreased the world’s oil supply by 1%. Comparing to the crisis in 1973 where oil production decreased by 7.5% the 1% decrease does not seem that severe. Although, the prices are of oil are rising due to the oil crisis there is another reason that prices are raising as well. Prices of oil are increasing to the lack of supply of oil. Firms are raising prices in order to hopefully decrease the demand of oil because due to the law of supply when there is a shortage there is an upward pressure on prices. There are additional concerns about the affects of oil prices on inflation. Economists are concerned that if the prices of oil keep raising the increase in prices will fuel inflation. Inflation causes consumers to be less sensitive to price changes as well. Hopefully the problem will eventually work itself out and the unrest in Libya will cease so, there will be less concern about the production of oil. Until then there is some serious apprehension about the world’s production of oil.

http://www.economist.com/node/18281774

The rise of Netflix, the Demise of Blockbuster

As technology advances around the world, consumer’s expectations grow about the products they are buying. Consumers are also expecting to be able to get what they want more conveniently. Shopping through the Internet has become the new trend. Why drive all the way to the store to buy something when you can stay in the comfort of your home and purchase something through the computer? When two companies are producing virtually the same service, the consumer will almost always choose the more convenient of the two. This works towards the favor of companies such as Netflix, Hulu, and RedBox. The new technology and convenience of Netflix has made them the powerhouse in the category of movie rentals. This in turn has put Blockbuster on the brink of bankruptcy.

While Blockbuster stuck to an outdated business model, Netflix took advantage of the rent-by-mail and streaming video service. Blockbusters decline in numbers show us very clearly why they are on the decline. By the fourth quarter of the year 2009, Blockbuster’s total sales were down 16%. Their revenues were down 18%. This equated to a $425 million loss. By the end of 2009, Blockbuster had totaled $964 million in total losses. Hidden in those numbers are debts that Blockbuster owed to multiple large corporations such as $21.6 million to FOX, and $20 million to Warner Brothers.

Economist Ludwig Von Mises once said that if a business is unsuccessful, it is often because they have failed the consumer. Many customers feel as though they have been treated unfairly by Blockbuster, mainly pertaining to lack of customer service and late fees. Late fees themselves were what actually caused the creation of Netflix, resulting in the demise of Blockbuster. Reede Hastings, the CEO of Netflix, created Netflix after returning a movie he rented from Blockbuster late and receiving a $40 late fee. Hastings founded Netflix, which boasted no late fees. Customers could return movies whenever they pleased.

Blockbuster’s share price reached an all time high of $19 a share in 1999. By 2010, each share was worth a mere $0.30. In 2003, Blockbuster declined to purchase Netflix for only $50 million. Netflix and Blockbuster began to separate and increase and decrease in revenues, respectively, was 2003. Attached below as the second link is a chart showing the stocks of Blockbuster and Netflix. As Blockbuster profits began to plummet, they got rid of late fees, which cost them around $300 million annually. They ended up reintroducing late fees in 2010 in attempt to make up for those losses. By 2010, Blockbuster was only worth $24 million.

It is very apparent that Blockbuster’s success is in the past and Netflix and similar companies are on the rise and are the future of movie rentals. Netflix’s ideas and strategies of delivering movies to consumer’s houses without adding on any unfair late fees have made Blockbusters services obsolete. Although Blockbuster has filed for chapter 11 and is attempting to stage a comeback by virtually copying Netflix through their “online DVD rentals”, it is very hard to imagine this happening: currently one Netflix share is worth $72 and Blockbuster’s is worth 35 cents. Although Blockbusters original business plan was very successful, companies must always tend to their consumers and think of ways to please them. No amount of money can fix a broken business scheme. It is clear that Blockbuster’s successful days are behind them.

http://www.bgr.com/2010/02/25/blockbuster-continues-its-decline-posts-425m-loss-in-q4/

Graph- http://consumerist.com/2010/09/everything-you-really-need-to-know-about-blockbusters-bankruptcy.html

Muller Martini closing plant in my hometown

Muller Martini, a Newport News location of a company that produces printing equipment, will shut down in early 2012. This will result in 160 lost jobs. Muller Martini is a Swiss-based company who opened its first factory in Newport News in 1973. This is a result of a fundamental issue with supply and demand. This factory produces machinery for publishing companies, and the world demand for paper processing materials has been decreasing for many years. The Internet and other forms of media have decreased the need for printed material, and this lack of demand is closing this plant. Because they are closing the plant, we can assume that their level of profits will be leading them beyond the shutdown point. The shutdown point is reached when revenues just cover variable costs. The shutdown point can also be reached when losses are equal to fixed costs. This business has reached the point where they will be losing too much money in the long run and they cannot cover their costs, this is called the critical zero profit level. This firm will have the lowest losses in the long run if they exit the market. The result of this situation is the firm exiting the market. Exiting the market is usually considered a last resort, but for this firm the time has come. This firm has been successful in the area for almost 40 years. 40 years is a relatively long lifespan for a business. In the past, this firm has attempted to rescue itself with previous layoffs of workers. The company laid off 79 workers in may 2009. This unfortunately has not been enough to lower costs of production. The fact that businesses go out of business may be shocking, but it is a fact of the economic system that thousands of businesses enter and exit the market each year. Muller Martini is going to exit the market in three phases. They will layoff workers in three groups. This company will still be operating other factories in other parts of the country, but for the local economic system there will be an impact. They can move the very limited orders to their other facilities and save money by not operating extra manufacturing facilities. These 160 people will have to find alternate employment. The 290,000 square foot manufacturing facilities will be vacant until another firm sets up shop there. We can hope that whatever happens there in the future will help to be a boost to the local economy.

Source: Daily Press

Manufacturing layoffs: Muller Martini will close its Newport News manufacturing plants by Jan. 2012; 160 will lose jobs. - dailypress.com