Saturday, April 26, 2008
Wednesday, April 23, 2008
Cost Cutting
Refer to the article
http://www.boston.com/business/markets/articles/2008/02/20/wal_mart_gains_after_refocusing_on_cost_cutting/
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Article Review
According to the article, Wal-Mart successfully lifted its profits after undertaking cost cutting measures. I agree that cost cutting can maximise profits since Total Revenue-Total Costs = Profits. However, there are limitations to the effectiveness of cost cutting depending on different circumstances.
This strategy may work for one individual company. But when every company does it, it may not work out.
Cost cutting not only reduces the cost of production but also reduces demand. When cost is cut, the income of employees being a factor of production, may be cut as well. When every company does this, generally there will be a fall in income, causing people to have less money to spend. Hence, consumers buy less and the hope for increase in demand evaporates. Cost cutting becomes self-defeating.
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I shall end off with some JOKES ! If our imba teacher Mr Ho is unable to enlighten you why studying economics is important, perhaps i can ! Have a good laugh [[:
Reasons for Studying Economics
{Reference: www.etla.fi/pkm/Jokec.html}
1. Economists are armed and dangerous: "Watch out for our invisible hands."
2. Economists can supply it on demand.
3. You can talk about money without every having to make any.
4. When you are in the unemployment line, at least you will know why you are there.
5. If you rearrange the letters in "ECONOMICS", you get "COMIC NOSE".
6. Although ethics teaches that virtue is its own reward, in economics we get taught that reward is its own virtue.
7. When you get drunk, you can tell everyone that you are just researching the law of diminishing marginal utility.
Personally, i like number 3 the most. Thats all ! Thanks for reading [:
-IRENE the model pupil !
Sustained oil prices could bring Canada close to recession: EDC
source: http://www.canada.com/vancouversun/news/story.html?id=a0068899-6ac9-4552-8499-b814131e0534&k=38003
TORONTO - Bubbling oil prices need to burst, and soon, to prevent Canada's export sector from dragging the economy to the brink of recession, Canada's export credit agency said today.
"Exports in Canada are in recession, there's no question about that," Peter Hall, vice-president and deputy chief economist at Export Development Canada, said in an interview.
He said export prospects would remain dim as the impact of a protracted U.S. economic slowdown intensified across the globe.
"We've got 50 per cent of the world economy, even more, in the euro-zone, U.S. and Japan, altogether that are undergoing a significant slowing now. It's already happening," he said.
Hall said strength in the domestic side of the economy, which accounts for about 60 per cent of economic growth, should help Canada hold its head above water in 2008. However, with Canadian exports losing ground in the U.S. market, which accounts for 76 per cent of merchandise exports, as well as emerging weakness in other parts of the globe, exports were forecast to drag economic growth down to a painfully low one per cent this year.
The forecast puts the Canadian economy's performance at the bottom of the global list, sinking below that of the beleaguered U.S. Hall said the U.S. government's fiscal stimulus package would help the world's largest economy skirt past recession and post growth of 1.3 per cent this year.
The growth projections may seem dire, but the situation could be worse if energy prices fail to ease.
The EDC's forecasts are based on light crude averaging $82 US a barrel in 2008 and $68 in 2009. Hall said he expects oil to trade at $70 a barrel at the end of 2008. That's close to $50 less than Tuesday's intra-day record of $119.90 a barrel. But it's a far cry from the $50 a barrel oil traded for at the beginning of 2007.
"This is a bubble. Bubbles don't deflate - they pop. We just don't know when," he said, adding that oil had risen higher than he expected.
Hall said economic fundamentals showed the slowing global economy cannot sustain oil prices at the current levels. Furthermore, he believed the use of oil as a hedge against U.S. dollar weakness would unwind as slower growth drives a flight to safe-haven U.S. dollars.
"Demand and supply fundamentals just don't tell us that those prices should be the way they are right now," he said. "When world markets become convinced that this is truly a global thing, the flight to quality money is going to end up back in the U.S., and that will boost the dollar, so we're looking at that as an antidote to these currency hedge movements."
Meanwhile, Hall said food prices would continue to rise, and were already driving growth in Canada's agricultural-linked sectors.
The EDC predicts fertilizer exports to rise 31 per cent in 2008, with agricultural food up five per cent. Energy exports, despite expectations of lower prices, were expected to see a pickup in volume to rise nine per cent this year. However, consumer goods exports were tipped to fall 11 per cent, motor vehicle parts to decline nine per cent, and forestry to slip a further three per cent.
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Canada facing a possible recession could be due to the fall in demand of oil. The cause? Probably the expectations of the drop in oil prices. Oil is one of Canada's major exports, maybe that is why they are facing the risk of recession now.
The article also stated that it was the effect of U.S economic slowdown. A decrease in average income.. and since the U.S is one of the countries where Canada exports their goods to, this accounts for the fall in demand. The exports are normal goods, thus when income falls, demand for these normal goods fall as well.
So, since prices are expected to drop in the near future, maybe at that time, the demand for these goods would increase..
-xing yi
TORONTO - Bubbling oil prices need to burst, and soon, to prevent Canada's export sector from dragging the economy to the brink of recession, Canada's export credit agency said today.
"Exports in Canada are in recession, there's no question about that," Peter Hall, vice-president and deputy chief economist at Export Development Canada, said in an interview.
He said export prospects would remain dim as the impact of a protracted U.S. economic slowdown intensified across the globe.
"We've got 50 per cent of the world economy, even more, in the euro-zone, U.S. and Japan, altogether that are undergoing a significant slowing now. It's already happening," he said.
Hall said strength in the domestic side of the economy, which accounts for about 60 per cent of economic growth, should help Canada hold its head above water in 2008. However, with Canadian exports losing ground in the U.S. market, which accounts for 76 per cent of merchandise exports, as well as emerging weakness in other parts of the globe, exports were forecast to drag economic growth down to a painfully low one per cent this year.
The forecast puts the Canadian economy's performance at the bottom of the global list, sinking below that of the beleaguered U.S. Hall said the U.S. government's fiscal stimulus package would help the world's largest economy skirt past recession and post growth of 1.3 per cent this year.
The growth projections may seem dire, but the situation could be worse if energy prices fail to ease.
The EDC's forecasts are based on light crude averaging $82 US a barrel in 2008 and $68 in 2009. Hall said he expects oil to trade at $70 a barrel at the end of 2008. That's close to $50 less than Tuesday's intra-day record of $119.90 a barrel. But it's a far cry from the $50 a barrel oil traded for at the beginning of 2007.
"This is a bubble. Bubbles don't deflate - they pop. We just don't know when," he said, adding that oil had risen higher than he expected.
Hall said economic fundamentals showed the slowing global economy cannot sustain oil prices at the current levels. Furthermore, he believed the use of oil as a hedge against U.S. dollar weakness would unwind as slower growth drives a flight to safe-haven U.S. dollars.
"Demand and supply fundamentals just don't tell us that those prices should be the way they are right now," he said. "When world markets become convinced that this is truly a global thing, the flight to quality money is going to end up back in the U.S., and that will boost the dollar, so we're looking at that as an antidote to these currency hedge movements."
Meanwhile, Hall said food prices would continue to rise, and were already driving growth in Canada's agricultural-linked sectors.
The EDC predicts fertilizer exports to rise 31 per cent in 2008, with agricultural food up five per cent. Energy exports, despite expectations of lower prices, were expected to see a pickup in volume to rise nine per cent this year. However, consumer goods exports were tipped to fall 11 per cent, motor vehicle parts to decline nine per cent, and forestry to slip a further three per cent.
-
Canada facing a possible recession could be due to the fall in demand of oil. The cause? Probably the expectations of the drop in oil prices. Oil is one of Canada's major exports, maybe that is why they are facing the risk of recession now.
The article also stated that it was the effect of U.S economic slowdown. A decrease in average income.. and since the U.S is one of the countries where Canada exports their goods to, this accounts for the fall in demand. The exports are normal goods, thus when income falls, demand for these normal goods fall as well.
So, since prices are expected to drop in the near future, maybe at that time, the demand for these goods would increase..
-xing yi
http://www.forbes.com/markets/2008/04/22/home-prices-sales-markets-equity-cx_md_0422markets13.html it
U.S. Home Prices Tumble
Artcle review
It is reported that sales of existing homes in the US fell by 2% in March from the month before. Compared to a year ago, US’s house prices has dropped about 7.7% Joseph A. LaVorgna, chief economist at Standard & Poor's said in a note to investors Tuesday that falling home prices aren't such a bad thing, "On one hand they are causing negative wealth effects and forcing some new mortgages underwater; but on the other hand, this is a necessary, albeit unpleasant, prescription for restimulating housing demand," he said. This is true as falling prices will lead to a higher demand demanded for the houses in the USA in the future. On the other hand I feel that the falling prices will not stop due to the current world trend of rising gas and food prices. This has clearly affected consumer's confidence which drive the market. Also i would like to point out that USA is currently undergoing depreciation of the US dollar consumers will as a result postpone their plans to purchase houses until they feel economically secure and confident.
TAN ZI JIE
Tuesday, April 22, 2008
Rise in price of rice
Recently, there is a rise in prices of rice and when people learnt about it, they rushed to supermarkets to stock up on rice (my mother did!!!). So, i will be reviewing on articles regarding this topic...
Well, the reviews might REALLY lack depth and touch only on simple concepts...
Article Title: Limited rice supply will force price rise: Philippine farmers
source: http://news.sg.msn.com/regional/article.aspx?cp-documentid=1308472
The reasons cited in the article for the rise in price of rice will be firstly, due to an expected lean harvest. Quote "prices were expected to soar amid an expected lean harvest next month".
Output will further decrease too since "farmers to put aside some of their harvests for personal consumptions, because they too will be hit by prices". As farmers expect prices to rice, some will want to hold back supply to sell and earn more in the future Also, they have to stock up so they themselves have sufficient food to last and not buy at high prices in the future.
The above reasons will lead to a leftward shift of the supply curve. As the demand curve of rice is inelastic (since it is a staple food or necessity), as the supply curve shifts left, a small drop in output will actually lead to a big rise in price.
Article Title: Hong Kong Rice Buyers Expect 30% Price Rise; Shoppers Stock Up
source: http://www.bloomberg.com/apps/news?pid=20601080&sid=a0wJbwZyemxs&refer=asia
The surge in price of rice can also be attributed to an increase in world population and urban encroachment of land, thus increasing demand and reducing supply. A decrease in supply and increase in demand leads to the rise in price. Then, as shoppers expect prices of rice to go up, they started stocking up lots of rice. The impact of this would only be to further shift the inelastic demand curve to the right, leading to a higher rise in price.
Hmm....i wonder if this is considered self-fulfilling prophecy....
that's all...
<3xin yi
Well, the reviews might REALLY lack depth and touch only on simple concepts...
Article Title: Limited rice supply will force price rise: Philippine farmers
source: http://news.sg.msn.com/regional/article.aspx?cp-documentid=1308472
The reasons cited in the article for the rise in price of rice will be firstly, due to an expected lean harvest. Quote "prices were expected to soar amid an expected lean harvest next month".
Output will further decrease too since "farmers to put aside some of their harvests for personal consumptions, because they too will be hit by prices". As farmers expect prices to rice, some will want to hold back supply to sell and earn more in the future Also, they have to stock up so they themselves have sufficient food to last and not buy at high prices in the future.
The above reasons will lead to a leftward shift of the supply curve. As the demand curve of rice is inelastic (since it is a staple food or necessity), as the supply curve shifts left, a small drop in output will actually lead to a big rise in price.
Article Title: Hong Kong Rice Buyers Expect 30% Price Rise; Shoppers Stock Up
source: http://www.bloomberg.com/apps/news?pid=20601080&sid=a0wJbwZyemxs&refer=asia
The surge in price of rice can also be attributed to an increase in world population and urban encroachment of land, thus increasing demand and reducing supply. A decrease in supply and increase in demand leads to the rise in price. Then, as shoppers expect prices of rice to go up, they started stocking up lots of rice. The impact of this would only be to further shift the inelastic demand curve to the right, leading to a higher rise in price.
Hmm....i wonder if this is considered self-fulfilling prophecy....
that's all...
<3xin yi
Goodbye, SHanghai---Newsweek
“Goodbye, Shanghai” Newsweek
http://www.newsweek.com/id/130657/output/print
Article Review:
The cheap labors, cheap raw materials and unconsciousness of human rights in China are the most attractive points for foreign investors. These three factors together have greatly reduced the cost for production and have successfully attracted foreign companies to open up factories in China. The foreign investment has served as an incentive for local firms to compete with them and driven China’s economy to grow at an exponential rate. However, China’s economic success was somehow based on exploitation of labors and devastation of environment. These hasty methods to economic success, especially the issue regarding labor’s human rights, have caused a lot of international controversy. In order to alleviate international pressure, China has implemented several laws addressing these issues (e.g. new labor rules, environmental regulations). These new restrictions definitely have much negative impact on foreign investment as they have greatly increased the cost of production. Since profit=revenue-cost, as cost rises while revenue keeps unchanged, the profit earned by a firm decreases. In that sense, China is no more a lucrative market for foreign investors. In comparison, Vietnam, India, Thailand and Indonesia are becoming more favorable choices for investments due to the low cost for production in those countries. Hence, it is not a wonder that more and more foreign firms are leaving China for better develepment.
Tianning
http://www.newsweek.com/id/130657/output/print
Article Review:
The cheap labors, cheap raw materials and unconsciousness of human rights in China are the most attractive points for foreign investors. These three factors together have greatly reduced the cost for production and have successfully attracted foreign companies to open up factories in China. The foreign investment has served as an incentive for local firms to compete with them and driven China’s economy to grow at an exponential rate. However, China’s economic success was somehow based on exploitation of labors and devastation of environment. These hasty methods to economic success, especially the issue regarding labor’s human rights, have caused a lot of international controversy. In order to alleviate international pressure, China has implemented several laws addressing these issues (e.g. new labor rules, environmental regulations). These new restrictions definitely have much negative impact on foreign investment as they have greatly increased the cost of production. Since profit=revenue-cost, as cost rises while revenue keeps unchanged, the profit earned by a firm decreases. In that sense, China is no more a lucrative market for foreign investors. In comparison, Vietnam, India, Thailand and Indonesia are becoming more favorable choices for investments due to the low cost for production in those countries. Hence, it is not a wonder that more and more foreign firms are leaving China for better develepment.
Tianning
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