Monday, October 31, 2011

Peanut Butter rise

Due to the poor harvest season of peanuts, the price of peanut butter is going to increase for the following weeks. This is the worst harvest in decades says CNN. This rise is going to affect a lot of other markets because consumers will now try to find a substitute for a cheaper price. It will be this way until there is a new harvest of peanuts to come. Another way this will effect a good is its complement jelly with either making the consumption of it decrease while its prices stay the same. Peanut butter is one of the most commonly bought items in most households, and with an expected 13% drop of its amount sold will show that some people will find a new way to substitute this common good. This is also going to raise the prices of goods containing peanut butter, so if there is a way that the harvesters could begin harvesting for peanuts again it would be a great thing to lower this good back to its original low price.

Tainted Cantaloupe: Listeria

In late September, an outbreak of Listeriosis cases were reported throughout California. 13 deaths have been linked with the disease, and potentially an additional two. The tainted cantaloupes causing the outbreak was traced back to Jensen Farms in Holly, California. The bacteria carrying the disease is more deadly than E. Coli. Between July 29 and September 10, these infected cantaloupes were nationally distributed. By September 12, the first case had been reported and recalls began. The recalls took a huge toll on the entire cantaloupe industry. Demand plummeted when Americans heard of the crisis. Although it was only a select group of cantaloupes tainted with the bacteria, customers have avoided purchasing cantaloupes in general in fear of Listeria. The contamination of one batch of cantaloupes completely altered the buyers' desire to purchase them. This affects cantaloupe producers all over the world, not just Jensen's farm. The shift in demand causes these producers to lose money. Without the money they are forced to produce fewer to no amounts of cantaloupe. The cantaloupe industry has turned into a downward spiral, most likely not to recover for months and possibly years. 
-Morgan C.

Sunday, October 30, 2011

Airline Fees

It was recently reported that airlines, including United Continental and US Airways, have made a smaller profit since the end of the third-quarter. Five of the biggest airlines have been following the "charge more and fly less" strategy ever since the jet-fuel bills peaked to $3.14 billion. Obviously, this method is not working. Profit for US Airways has dropped about 68 percent to $76 million, when just last year profit was at $240 million. the CEO of, Rick Seaney, told Dallas Morning News that there has been 18 attempted faire increases in 2011 thus far, only about half succeeding. When such a large business, such as an airline, and you see that your revenue is decreasing, wouldn't you want to lower the prices in hopes of making more money? Because airfare is so high, people have been flying less, taking away from Delta, US Airways, United Continental, Southwest, and Jet-Blue's income. I personally think that they would have a better chance of surviving this dilemma by lowering their prices so more people will be willing to fly with airlines. Eventually, they would be able to pay for the jet-fuel bills. If the companies are expecting lower demand like the article reads, then why not do something about it? Am I wrong for thinking this?

Friday, October 28, 2011

Students Helped With Debt

Student debt is a challenge many have to go through, but Obama is putting in a new act to enhance and diminish the problem of students having long term debt to pay off their school loans. This new program is supposed to debut in 2014 and help students to keep more money and get out of debt faster. It seems as it could greatly help some people but where will the government have to achieve all the money from, more than likely either increase taxes on certain things or employ better federal spending. The debt of school loans, right now, is more than credit card debt. So helping out all of these students is going to increase our economy in the future because it is a twenty year plan. Another main point is that now the rate of unemployment for right of college is 9.4%, so the ability for a part of graduates to pay off their loans is very difficult. So through these new efforts it will help students and recent graduates get out of debt, and enjoy their future lives.

Attachment to the Grid

According to Elizabeth Souder's article in the Dallas Morning News on October 27, 2011 entitled "Double jolt: higher bills, less reliability" Texans attached to the electricity grid are about to go on "a free-market roller coaster."  Souder reveals that in the decade to come, electricity prices are sure to steadily increase for many factors, including the growing population and Texas’ climate vulnerable to extreme heat and cold.  With more Texans “Reliant” on electricity than ever, the demand is extraordinarily high and the consumers' demand is very inelastic.  Currently, with the high demand for electricity and low supply, there is a shortage.  This can be accredited to electricity companies not building more electricity generating plants because they are simply too expensive for electric companies to expand their capital in the tough and highly competitive electricity market.  One would think that according to the law of supply, with electricity prices high more supply would be offered.  However, experts who work for these companies worry that these prices are temporarily inflated and that investment in more capital could be hard to pay off in the future.  The supply of electricity is relatively inelastic as far as producing more electricity, resulting from more capital.  This is because plants right now seem to be running at full capacity, with little ability to increase production, without expanding and producing new power sources by bringing old, shutdown ones to code or by building new facilities.  In addition, many companies are being forced to shut down their electricity production plants because the facilities do not comply with the newly enforced pollution regulations, which increase the cost of production as well.  Natural gas pipelines in Texas have historically set a trend for the prices of other sources of alternative energy.  With natural gas costs relatively low, there has been deterrence from producing new sources of electricity, furthering the shortage due to the lump amount of profit allowed to companies by natural gas.  In Texas' "deregulated market" when supply cannot meet the demand of the consumers, the equilibrium price of electricity skyrockets.  ERCOT Chief Executive Tripp Doggett says that increased regulations to protect the environment alone will increase customer’s bill by 10%.  Our attachment to the grid is extraordinary, and with government setting a price ceiling of $3,000 per mega-watt hour, there is little incentive to increase supply, forcing rolling blackouts to occur.

Guilty Plea to Kidney-Selling Charges

The secondary market demand for kidneys has never been higher as the waiting list for legal transplants grows longer and longer. The once trust-worthy doctor, Levy-Izhak Rosenbaum, pleaded guilty in the federal court that he had partaken in illegal transplants for jaw-dropping payments of $120,000 or more. However, Dr. Rosenbaum never saught out the recpients but instead they asked him and theu had consenting donors who were completly aware of the consequences. Rosenbaum was buying organs from donors in Israel for $10,000 and that he was selling the organs for much more to wealthy Americans so they could skip out on the waiting list. Paul J. Fishman, the United States attorney for New Jersey, said that “A black market in human organs is not only a grave threat to public health, it reserves lifesaving treatment for those who can best afford it at the expense of those who cannot.” The black market allows wealthy people with a demand to purchase organs at whatever price the seller wants. The black market process is definately not a fair one, but is the long waiting line for those in dire situations fair too?

Netflix: Flushed Down The Toilet

Most everyone is familiar with the popular company called Netflix. Some of us even use Netflix to get DVD's in the mail, watch movies online, or how most of my friends use it, through XBOX 360 to watch movies and TV shows. Netflix became a booming company with total revenue toping out at $822 million at the end of the second quarter. However, Netflix has entered itself into an enormous collapse, some what like the collapse the Boston Red Socks had at the end of this years MLB regular season. Because of all excess demand, Netflix believed its price was below equilibrium, so they raised the price of streaming movies online and receiving DVDs in the mail in order to maximize profit. Streaming and receiving movies and TV shows by mail were previously offered together for $8.99, but with the current price increase, Netflix split streaming and receiving by mail into two individual services both costing $7.99. This price increases has destroyed Netflix, causing the demand to drop immensely. In the third quarter, Netflix lost 800,000 subscribers!!! As well as stocks plunging 35% (numbers which are predicted to worsen a lot more). Now, their is no excess demand, but now excess supply, showing that Netflix moved its price to far above equilibrium. I am a current Netflix subcriber and when they announced their price change, I cancelled my mail subscription, but not my streaming subscription. However, most Netflix customers do not have any inelastic demand, and left the company all together. If Netflix wants to stay in business, they need to make a change, especially in price.


Rodgers Bringing in the Green

Big shocker, Aaron Rodgers jerseys have the highest sales out of all NFL jerseys according to Darren Rovell. Green Bay fans probably have Rodgers shrines in their homes and worship their local hero on a daily basis. Rodgers has continued the Packers winning streak and the Super Bowl champs have a 7-0 record so far this season. Naturally, the demand for Aaron Rodgers jerseys is very high and will continue to be so for awhile. To my surprise, Michael Vick was number three on the list. Yes he's a good quarterback and has been racking up the fantasy points but with all the PETA people and dog lovers out there, it doesn't seem like Vick jerseys would be wanted that bad. After his recent shenanigans and poor performance this season, Big Ben Roethlisberger has dropped out of the top selling list. He's not that great anymore and Pittsburgh isn't too hot this season, weakening the demand for Roethlisberger jerseys. No one is really going to want to shell out quite a bit of cash for a player who isn't having a good season and isn't that popular amongst viewers. But rookie Cam Newton, who is breaking records left and right, has made it onto the list. He's been fun to watch, fans love him, and even though his team is 2-5 the demand for Cam is high. This just goes to show that demand is dependent on so many variables and when it comes to sports, popularity and success mean everything.

The Magical Limited Sandwich

What has a saucy barbecue flavor, sells for a limited time, is sold under the two golden arches logo and has helped its market? The McDonald's McRib! America's favorite sandwich has come back for a limited time in all available McDonald's fast food restaurants causing excitement amongst its costumers and the hope of more to come. Making the McRib a scarcity by saying it is available for a limited time has the costumers jumping out of their seats and running to get the sandwich making an inelastic decision because they buy the sandwich no matter what godly price it is. This is actually a great strategic way for the market to increase its profits because the sandwich is so good, according to 7,000 fans, customers would buy the sandwich for the time it is placed on the menu. How extreme do people go for this infamous sandwich? Many people drive more than 500 miles from one McDonalds to another just so they can get their hands on the sandwich not paying caring how much money they spend on gas (check out link 1). Other people have gone to the point to post where the McRibs are being sold(check out link 2). Now, if the McRib is such a successful way to earn money, why not make it permanent? Aha! That's where advertisement comes in persuading people to buy as much as possible before they all sell out making huge profits from a simple sandwich. Ronald McDonald, you have showed us yet another side of money you attain.
Link to source:
Link 2 to source:

With New Labor Contracts, Detroit Protects Turnaround

General Motors, Ford and Chrysler met with the United Automobile Workers (UAW) union this week and discussed the future of their companies after the ratification of their last four year agreement. All three of the Detroit-based companies made progress in closing the gap between foreign competition and can now be substituted because they are desired more by consumers. The American companies decided to keep cost down but they keep production the same and hire more workers. Howeever the companies evaded increasing wages for long-time workers which was a main point of the UAW's contracts. In the past, the companies hired around 300,000 workers in 2001 but now it has shrunk to only 112,000 workers! The companies claimed to reduce workers to match their decreasing market shares but their total output has decreased as well. Their marginal output of labor was shown in reverse- the less the hired, the less they produced. However, American companies pay workers about $50-57 an hour while the foregn competetors only pay below $50 an hour. The higher salary for the American companies increase the incentive for laborers to work there than for the foreign companies. This might cause in increase in the supply of labow and a decrease for the demand, but all of the American companies are looking to increase their marginall product of labor so they are looking for new workers. Will this drastic change in employees and production rate make the companies sucsessful again, or will the demand for locally produced cars decrease even more?

Not Cured, but Getting Healthier

The new GDP numbers from last quarter have just been released. As talked about in the article "U.S. Economy Picks Up Pace, Averting Stall," the details of these new numbers can be seen. The real GDP increased from a 1.3% increase to a 2.5% increase in the last quarter, that's a 1.2% increase for all you folks that are a little slow at math. This 1.2% growth was the largest in the past year. The rise in GDP can be credited to consumer spending and business investment. According to the article, consumers spent more on healthcare, and businesses invested in software and vehicles. Even though this growth in GDP is definitely a great thing for the economy, we are still not in the clear. A economy is considered healthy when economic growth is 3% for the year, meaning all four quarters average out to 3%. Sitting at 2.5% right now, our economy is not considered healthy. Hey, at least we are heading in the right direction! But, to recover from the recent recession, the GDP needs to keep increasing, even at higher rates, in order to lower unemployment by a significant amount and get our economy healthy. This task is a difficult one to say the least. According to the article, economist don't expect growth to rise in the next few quarters, but as the wise and knowingly Mr. Ostroff said, "Economists can't predict the future, they can only analyze the past."


Thursday, October 27, 2011

A Sensitive Topic

2011 is the year that candidates who are running for president have to be prepared to answer any issue in the U.S. no matter what. There's health care, immigration, education, etc. A very sensitive topic to talk about is abortion being legalized or illegalized in the United States. This is a very hard topic to answer and try to create a solution for because one may not now the background story of each woman who aborted like if they were raped, abused or if the pregnancy was to risky. This relates to economy because the cost of an abortion is over 300 dollars on a certain amount of weeks fetus has grown but the money increases as the fetus grows. Though it looks expensive, can you really put a price on a life? Before abortion was illegal in certain U.S. states, 29 per 1,000 women have aborted in a year but after it became illegalized in some countries, the amount of women who have aborted has decreased by 10 making it 19 women per 1,000 woman. Due to the illegalization of some states on abortion, clinics have closed for they no longer make enough total revenue to be greater than their total cost. Having said this, some abortion clinics have even decreased the price on abortions because they haven't reached the equilibrium of a reasonable price to some women. Again, it is a very dangerous issue to discuss, but abortion is a morally debated topic that gives profit to an entrepreneur who opens a clinic.


Wednesday, October 26, 2011

It's All Part of the Plan

A few years back, Apple products were some of the more expensive goods in the market. Prices were high, yet the technology was so advanced that it kept consumers coming back for more. Soon enough, Apple competitors, such as Verizon, Samsung, and T-Mobile, started producing smart phones similar to the Iphone, enabling you to skip the long lines for Mac products. As soon as Apple began to be regarded as ‘overpriced’, the former Apple Co-Founder, Steve Jobs, started sketching new strategies. The company started to lower their prices to where there really isn’t much competition anymore. Sure, you can always find cheaper alternatives, but nothing as great as Apple. From the iPad, iPhone, and iPods, “the aggressive pricing, analysts say, reflects Apple’s ability to use its growing manufacturing scale to push down costs for the crucial parts that make up its devices.” For many reasons, this was a great move on their part. The new iPhone 4s came out only a few days ago, and already sold more than four million over the debuting weekend. That just goes to show how superior Apple has become in today’s world of technology. Is there really much else to argue?

Tuesday, October 25, 2011

The Euro is NOT the Villian

In Antonio Fatas’ Article “The Euro’s Role in the European Economic Crisis,” he disputes the theoretical argument that manipulation of exchange rates can be used to smooth the ups and downs of business cycles.  The world economy, including the United State’s economy, is threatened by conditions in several small European countries.  In Ireland, Italy, Portugal and Greece, liberal governments have historically provided generous entitlements to the citizens of the countries.  However, their government expenditures have been far greater than their tax revenues collected.  As a result, several of the smaller European economies, especially that of Greece, are currently threatened by government debt default.  Apart of the creation of the European Union involved the creation of a standard European currency, based on the Euro, with individual countries releasing control of their historical currencies in order to encourage free trade throughout the European continent.  In several European nations with marginal economies, the loss of control over currency has added to their economic woes.  In the old system where each country controlled the value of their own currency, each sovereign nation had the power to devalue their currency in order to promote growth of their GDP, allowing them to make their debt sustainable.  In his analysis, Fatas fails to conclude that currency valuation has a major impact on the economic health of the EU members, using Sweden, one of the best performers, and Greece, one of the worst performers, as examples.  The economic health of European countries appears to depend primarily on their ability to produce products and services for export rather than on currency exchange rates.

Netflix Stocks Sink as Subscribers Flee

As the third quarter has come to a close Netflix has had some shocking realizations. It was during the start of the third quarter that they made the announcement that they were now charging separately for DVD streaming and DVD rentals.  This would result in a large price increase for consumers of the Netflix package.  Despite this Netflix still was able to earn $62 million at the end of the third quarter.  But this did not keep the demand of Netflix stocks from shifting.  The demand curve for Netflix stocks had a severe inward shift after it announced its massive loose of subscribers.  At the end of the third quarter, Netflix reported its consumer base shrinking by almost 1 million.  This is the first time the consumer base of Netflix has shrank in many years and analysts say that this shrinking is not done yet.  They predict that there will be an even greater loss of subscribers by the end of the fourth quarter in December.  Netflix itself warns stockholders that it is not going to be profitable in the upcoming quarters.  This drop in shareholders and consumers can both be explained by the law of substitutes.  Many DVD rental companies are out there and for the longest time Netflix has held the most consumers.  As soon as the price is increased though, we see the substitution effect take place and consumers take their money other places that are cheaper.  Things like Vudu and Blockbuster offer similar services that Netflix does; now that Netflix has increased their prices, consumers are choosing the cheaper option.  This increase in price of Netflix streaming and postal services also shows the effects of a price rising above equilibrium.  The increased price has caused a excess supply proving that is it in fact above equilibrium.

Thursday, October 13, 2011

Netflix Wiplash Angers Customers

Netflix has become one of the most popular online movie companies in the nation throughout the last few years. Up until July of this year (2011), Netflix had kept their customers happy relativelty complain-free. However, their recent changes have led to a spike in discontent among millions of Netflix users. A Twitter user named Steve Harrison expressed his concern: "Netflix does more flip-flopping than a fish on a hot dock." Their first mistake was discontinuing free streaming video services to households that paid for its DVD-by-mail service. This alone raised monthly prices for some customers by over 60%. At the same time as this increase of price, quality of service did not change or improve. Why would a customer be willing to pay more for the same service? Two months later in September, Netflix announced another major change. It would be splitting its DVD and streaming services into two companies: Netflix and Qwikster. Now customers would have to deal with two companies rather than one when managing queues and paying bills. Seeing how upset customers were with the new addition of Qwikster and watching as stocks dropped by over 60%, Netflix decided to revoke their original decision and break off ties with Qwikster. Some customers approved of the decision, while others were still irritated with how many new decisions Netflix has made and how much the company has changed.  Kyle Wegner, a 26-year-old in Fayetteville, Arkansas, said he was going to quit using the company until he heard about the 180-degree-turn. Another less satisfied investor stated: "They're being really reactionary at this point, and that's not very comforting."

Will Our Children Eat?

According to, our world population by the year 2050, will have grown to 9 million people occupying our earth. As a global community, by 2050, we would have to increase our food production by a whopping 70 percent to feed up and expanding populations. Globally today, close to 1 billion people are suffering from starvation while there over been over 60 riots over shortages of food in 30 different countries in the past few years. Contrary to the overwhelming 1 billion people suffering from not being able to feed themselves and their families, 1 billion other people are eating themselves into obesity when they could possible being helping this somewhat inevitable crisis coming in the near future. While the U.S. is acknowledging this soon to be epidemic, the British government is wanting to take action and join forces to prevent this from happening, and to get started as soon as possible. So what actions do you think we as a country should take to try and prevent a shortage of food for our world in the years to come?

Facebook: Charging Users?

There are many rumors being spread that Facebook is going to start charging its users an additional fee for membership. The real question is why would anyone want to pay for something that they could get for free on Google, Twitter, MySpace or any other social networking site? Facebook’s’ main goal is to connect everyone in the world. If one had to pay, it would be leaving out millions of people that weren’t able to afford a membership no matter what the cost may be. This idea is a great indicator of supply and demand. The demand for Facebook has skyrocketed since it started in 2004. In one day, half a billion people have used the website. Facebook’s business model completely revolves around having as many users as possible. The company realized that they can’t reach their ultimate goal if they charge users.  Also, the idea of charging users is a perfect example of opportunity cost. Creators are giving up potential revenue that they could receive, for the need of masses of users to fuel their company to be successful. One final example of charging users is the idea of a tradeoff for the company.  Facebook doesn’t need any money at this point because they are bringing 4 billion in revenue this year, raising more than 2 billion in venture capital. In 2012, the company is expected to be with 100 billion. They have chosen to make their money by advertising, Facebook credits, and social games such as Farmville and Mafia wars. Eventually they may charge for subscriptions to music and TV services, but it wouldn’t make sense to charge a user to their personal account.

For Richer or.....

It seems that the wedding vows are being taken a little to literally. In ABC's article Can't Buy Love studies show that marriages are falling apart due to materialism between couples. Jason Carroll, a BYU professor of family life in Provo, Utah reported that "materialism was also linked to less effective communication, higher levels of negative conflict, lower relationship satisfaction, and less marriage stability" and Susan Heitler, a Denver-based clinical psychologist discovered that "people who are materialistic tend to be narcissistic and concerned with impressing people. They have a tendency to be anxious, depressed, have relatively poor relationship skills and have low self-esteem. These qualities in turn can cause marital problems." It's so sad to think that the materialism of society affects the happiness of couples. They as individuals might have different material wants and demands that would have an impact on their happiness as a couple. We learned about the income effect and how a change in income leads to a change in consumption. Shared incomes in a marriage are being jeopordized by the materialism and demands that one of the spouses has. Shopaholics do exist, I watched a 'True Life' on it, and the people who are addicted to shopping burn through their partners income like it was Monopoly money. The need to find happiness in goods is replacing happiness in marriage. Consumers seek to maximize happiness and everyone has a right to do that but the material world shouldn't be a third wheel in a relationship.

BlackBerry service restored after worst outage ever

On Monday, October 10, BlackBerry suffered, what they called, its largest-ever network disruption. The BlackBerry service's infrastructure suffered a hardware error and then the problem cascaded with a backup system not properly working, according to RIM's founder and co-CEO Mike Lazaridis. Research In Motion (RIM) is the company that produces the line of BlackBerry phones, tablets, etc. On Thursday, October 13, the BlackBerry service was restored but not without slight damage to the psyche of the company. While BlackBerry has had a whopping 40% growth in subscribers over the previous year, it's not a good moment to alienate them. With increasing competition from the growing popularity of Google's Android phones and the market-dominating iPhones from Apple, the room for mishaps in this arena is minimal. Competition is as fierce as it has ever been in the cellular phone market and this disruption gives consumers a seed of doubt that could end up harming BlackBerry.

The infrastructure being down could potentially change the consumer's perception of the product, which could bring a devestating change in demand for BlackBerry's. This "leftward" shift of demand creates an excess of supply, which would eventually force BlackBerry to lower their prices. The Substitution effect will take place as well with Andriods and iPhones stealing frustrated customers away from BlackBerry.

- Taylor E.

The price on batgirl, superman and Lady Gaga

BOO! Halloween is closer and closer as the month of October flies by high school students. So many costumes are in stores and there are so many ideas now that the media influences teens to dress up as the character or actual person related to the current event news like Lady Gaga. However, how much does it cost to be that person or buy a costume before, during and after Halloween? Has anyone ever compared the price of one costume to making your own costume to like your favorite idol? Or the fact that when Halloween comes around there are stores open only for that specific event? One thing that I have noticed is when October begins, the demand for costumes and accessories is low and the supply is adequate but they wait for the month to reach their day: Halloween. As the days gets closer and closer to Halloween though, costume prices increase as much as eighty dollars or more! Businesses know the Law of Supply and Demand and they know that when demand goes up, their supply goes down but they get big bucks if they name that right price. Not only do the costume prices increase but accessories, that are needed to complete a costume, and Halloween house decorations have prices that follow. Some costumes don't even have the full necessary items so you have to buy those other items to make you look like the character you want. After Hallloween though, the demand for costumes decreases and the supply of costumes decrease, too: That's when all costume, accesories and decorations go on clearance since they are no longer needed. Assuming that a person stays the same size, buying a costume after Halloween seems like a cheaper way to dress up for next Halloween. Is a home made costume better than a bought one? Hmmm, maybe. Could be that maybe Halloween is much more expensive than Thanksgiving? Possibly, but for now, waiting for Halloween to pass and buying a costume 3/4 of what it originally cost so I can wear for next year's Halloween sounds more frugal to me.

Technology today

In the society we live in today, technology plays a vital role in the day to day life of the common American citizen. Our businesses, relationships, friendships, and even family all rely on some sort of technical device that enables us to conveniently communicate with one another. Therefore producers feel obligated to not only constantly generate new innovations but also improve and upgrade the current technology already in use. Selling these products is no challenge for the producers, knowing that it’s in majority of the consumers self interest to have newer, better, and more advanced items. The products prices are being sky rocketed once first out on the shelves because it’s known that the consumers demand for the product is more important than the actual price. Once the upgraded version hits the shelves the original products price drastically decreases. The conflict in this situation is if these upgraded and advanced items as advanced as the firms say they are and are they really worth the prices. A perfect example of this would be the Macintosh Company. A pretty big handful of the people today own some sort of Mac merchandise in their home. Macintosh initially began with the first iPod classic as the popular thing to have, then upgraded radically from there. After a couple of years you were started to see advancements along with frequently price changes. You had a touch screen, no screen, extremely thin and small, more gigabytes and many other improvements. Now the new product is the iphone. This is where I feel the money rip off is at its climax. Most of everyone is familiar with development of the original iphone to what it is now. Front cameras, more gigabytes, new shapes, and other, what I would call, futile improvements. When the original iphone came out it was give or take 500.00 dollars. You can now buy that exact phone for 50.00 because the demand for it is nearly extinct. I feel the macintoish company has done an extraordinary job, from an economist point of view, providing what the buyers want in return receiving profit from raising the price knowing buyers won’t care.

Wednesday, October 12, 2011

Growth in the Entertainment Software Industry

According to the ESA (Entertainment Software Association), during the first few years the entertainment software industry made a decent amount of sales revenue. In 1996 it made $2.6 billion in sales revenue, but thirteen years later it rose to $10.5 billion in sales revenue demonstrating an increase in demand of entertainment software. As new consoles and newer games are introduced into the market, the demand increases for these goods, and so do sales for the products. The growth has also caused sales to increase in other locations. The Xbox 360 has caused consumers to purchase HDTVs. "Approximately $73 million in HDTV sales can be directly attributed to the XBox 360 game console." The increase in demand for entertainment software has also lead to an increase in jobs. Texas is ranked second nationally in computer and video game personnel in 2009, with 13,613 employees. The new jobs impacted Texas’s economy and provided and annual growth of about 13.7 percent from 2005 to 2009, thus improving the state economy. The software industry is rapidly growing and is bettering the economy in general. As new products are produced, demand for the products increases to a point where the demand for certain products become inelastic for people who are greatly interested in gaming. Certain genres or a game series can interest people greatly and cause them to not care about the price of the game when it comes out. An example for the inelastic demand could be seen when the new Halo game came out and people waited outside stores ready to purchase the game, when after a month or two the price dropped. The demand for the game series became inelastic for some players because they had greatly enjoyed the previous games. The industry is trying to attract consumers by constantly producing new games and consoles tailored to the public’s general interest. As the industry grows it will continue providing new jobs and will help fuel the economy.

A Worthwhile Investment?

Before the 2008 Bejing Olympics, China mainly focused on rowing- one of the sports that could earn them the most medals due to the sheer quantity of events. This sport however is rather difficult and costs money and effort to achieve perfection. China took initiative on training to win many gold medals on their own soil for the '08 games. China hired a new coach and gave him these specific standards: "one gold medal equals 1,000 silver medals" and the bar was set. The new focus on rowing easily shifted from the previous sports of soccer and basketball and a substitution was made. The Chinese knew that they would have a greater opportunity of winning more medals (specifically gold) if they spend more time and effort on their rowing team. Due to the command economy of China at the time; their government can dictate how they spend their money and the majority was for their rowing program. In comparison to America's mixed economy, our funding is not as exponential as China's because the state does not see it as importaint as alternatives. Since the gold medals are what all countries strive for, the competition for China will be stiff. One could say that gold medals are an inelastic good simply because no matter what the cost is to attain them, everyone still wants one. In 2008, China qualified for nine out of the fourteen events but only won one gold (for the first time ever in a rowing event) and one silver medal. China is still calculating the cost-benefit analysis of their efforts to improve their rowing team and theis reaction will be reflected in their standings in the 2012 Olympics. However, for the 2012 Olympics, China only qualified for eight out of the fourteen events, will they still be able to win any gold? China hopes that their financial investments in their rowing program will finally pay off for the 2012 Olympics in England. China no longer plans to dominate in the soccer fields and the basketball courts, but rather the bodies of water all over the world. Could China capitalize on their efforts to win gold medals, or will their competition's efforts (and results of the cost-benefit analysis) exceed China's expectations?

Monday, October 10, 2011

Are You A God?

In most all cases, a luxurious car, such as the Bugatti Grand Sport, is so pricey that even some of the wealthiest people hesitate when looking at the $2 million price tag. When a professional racecar driver, Butch Leitzinger was graced with the rare opportunity to drive around in one of these, he received some wild reactions. He said that when he was stopped at a traffic light, a girl in the car next to him asked, “Are you a god?”. With pure grain leather all around, a top speed of up to 267.85 mph, and the ability to go from 0 to 62 mph in 2.7 seconds, this special car is put on the top of the list for most expensive vehicles of 2011-2012 ( So, if it’s so expensive, why even buy it? It is considered a luxury good, like Gucci and Jimmy Choo, with an expensive name that goes with it. For that reason, those who can afford it and are willing to pay the extra money, spend it for a reputation and ego. If they were to lower the price, perhaps more people would buy it, giving us an example of the law of demand. At the same time, it would take away from the glory of the car. Because of lack of sales, the company chooses to only sell one model at a time with a very limited supply. They know that, because of consumer sovereignty, many will not be sold, making perfect sense. Do you think Bugatti is doing it's best to maximize their profit?