The private jet industry has also experienced economic gains acting as a substitute to corporate jet fleets. According to an article in Business Day, many large companies are faring better economically but are still reluctant to invest in their own corporate jets and choose instead to use chartered jets to fly their executives to multiple meetings while avoiding the hassles of commercial flights.
If the body scanners and enhanced pat downs are here to stay, the demand for private jet charters might increase as consumers are given more time to adjust their flight plans; however, complacency with the measures may result in a decreased demand in the long run. The use of chartered jets should increase as the economy improves, but the use might decline as corporations recover enough to reestablish their own fleets.
Ellis does explain that if the tax is not renewed it would cut the cost of government by $60 billion dollars. However, Ellis points out that the same $60 billion dollars could be used in spending to generate jobs and strengthen business.
I believe Ellis is right is his view that the $60 billion dollars would be put to better use in spending and not in government cost reduction. A negative change in income will shift the entire demand curve to the left. Because the tax credit is affecting people at all income levels except the top 10%, all levels of purchasing will be affected. Also, a change in income on the demand curve is very different from a change in the price of goods. A change in the demand curve by income is much more elastic than the change in price. I hope more people learn of this 'forgotten' tax credit and our representatives can get it renewed.
Black Friday is a good indicator of how well the economy is doing. The article “Retailers happy with black Friday Turnout” claims that this Thanksgiving had more shoppers than the previous two years. Economists estimate that this is a good indicator that Utah is pulling out of its recession.
Many retail stores analyze the turn out on black Friday as an indicator how the remaining year will go. One reason why consumers are out spending more could be that they have more money to spend. It could also be that people have less uncertainty or fear of the economy. However, the article also claims that other factors also increase retail spending, such as the snowy weather. Snowy weather can create a mood of Christmas which will send more consumers Christmas shopping. The increase in spending is more likely a factor of money available to spend as well as people’s perception of how well the economy is doing.
Regardless of what factors send people out shopping on black Friday; this acceleration in shopping is a great boost to the economy. Analyzing Black Friday compared to previous years can be a great way to measure how well the economy is doing.
As companies mature there is often a period where supernormal growth is superseded by a lower level of constant growth. This is often problematic because despite the consistency of this trend and expectation that eventually it will happen no one actually wants it to happen. So companies will do everything in their power to prevent it and companies often have a significant amount of unnecessary upheaval and restructuring when it does occur. The real question is why does this happen? Why can't a larger version of the original continue to come up with new and winning ideas and carry on its success? Google is one company that has carried on this supernormal growth for longer than most and in doing so seemed to be a company that could beat the expectations. Recently many are starting to suspect that Google has indeed reached the end of its supernormal period. One answer as to why that may be despite Google's fervent efforts to be creative and develop new ideas is the loss of a portion of its most talented human capital. Google's as well as many other companies’ huge growth can be attributed to new and groundbreaking ideas with values far exceeding the cost of their implementation. But as Google has grown many of the creative visionaries who pioneered these are leaving to newer and smaller companies despite lucrative monetary inducements and offers of greater freedom to work. It begs the question what does the most productive portion of our society value as reward for its work: money, freedom, success, or something else?
I wish I had read Robert J. Samuelson’s article when it was originally published. He excellently predicted what we are now experiencing in today’s economy. He clearly elucidated that the usual side effects of a recession are higher unemployment, weaker profits, and you nailed it—more stress! Sounds like my job. He then breaks down a major benefit of a recession: it dampens inflation. He noted that a US recession might also reverse the upward spiral of oil prices and trigger a faster, and healthier, drop in home prices—which it has done both. At the end of 2008 and through the 2nd quarter of 2009 we were paying well under $2.00 for a gallon of gas at Costco, and about that time a number of people were getting into some pretty inexpensive houses after the marketed crashed. This decline in housing prices has continued the slump in the real estate market, but it has introduced more people to the market that previously could not afford a traditional mortgage at the inflated prices. I think that these are the smarter people who did not jump into the housing market with ARMs and all the other exotic mortgages. Now, here we are: over built and where are all those titles? I only see the situation getting a lot worse in the next few years before it can ever start to get better.
Black Friday has come and gone this year, and if you did not purchase a big-screen LCD, then you’re an informed consumer or you already have one. Better deals are expected to come later on this holiday season and into the beginning of 2011. This quarter, the average price for a 42” LCD TV is approximately $626. However, the price is expected to drop below $600 by the first quarter of 2011 and prices for 52” LCD TVs are expected to decline by about $120. Why the drop in prices you ask? Well, the TV market has been relatively sluggish and there are really no indicators signaling a comeback anytime soon. Sales for LCDs have been declining for six consecutive months, so I guess you could say we’re experiencing an LCD TV recession. Economists are saying the scarce demand for LCD TVs is somewhat attributable to an increased saturation of flat screen TVs in homes across the country. Over the past five years, sales for flat-screen HDTVs have surged, and now about 56 percent of households in the US have at least one HDTV. Since most people already have an LCD TV, there is less motivation to purchase new ones, even with tremendously low price tags on the most monumental shopping day of the year. So instead of TVs, was projected that Apple’s iPad and Microsoft’s Kinect for Xbox 360 will be the hottest items for this year’s Black Friday extravaganza, the numbers will be reported soon.
I believe that it can be a negative externality when their ads are leaked, but I also believe that it can be a positive externality for companies. I am a bargain shopper and I am attracted to the "low price" and the "great deal" ads on Black Friday. I also know that I start looking for those ads at least a week in advance. My wife and I knew we wanted a TV and we know which TV that we wanted from Wal-Mart before the ad was sent to us in the mail. I believe that the positive externalities of this issue outweighs the negative. I believe that consumers like having that information early to plan and evaluate their Christmas budget. I don't believe other stores have enough time to copy a competitor's strategy if the part of the ads are leaked a week in advance. The positive benefits and extra sales that companies see on Black Friday due to leaked ads outweigh the costs.
Chinese suppliers have to see if they can pass the increased cost to U.S. retailers. I don't think that will be too difficult seeing as how cotton suppliers are in a very good position. With demand surpassing supply and cotton stockpiles diminishing, the cotton suppliers should be able to fetch a fair price.
This is an interesting topic for examination as I believe it has numerous discussion points. For example, in regards to the price of marijuana, I believe that if it were legalized we would see an increase in price in the short-run with supply remaining the same and demand shifting rightward. Then, in the long-run, I can see the price falling with both a rightward shift in demand and an even greater rightward shift in supply. If the government’s only purpose in legalizing marijuana was to make the price drop and make it safer for consumers (FDA would be involved) then the legalization of the drug makes sense.
However, if the government’s intent is to save money by decreasing law enforcement costs and raising tax revenue, then I believe their argument is flawed as externalities in addition to hard costs need to be considered.
Although the California citizens voted against the legalization of marijuana, I believe that the topic will continue to resurface until it eventually passes.
The article, The Click and the Dead, talks about how the internet has changed the consumer market. “Everywhere people bemoan the replacement of the local and the quaint by outposts of big, homogeneous chains. But how true is the notion that the internet in particular has hastened the demise of some retailers, and that those it hurt were overwhelmingly small?” Before the internet and e-commerce, people would have gone to a couple stores and maybe called a couple more before buying a product. Nowadays people can shop online and, as predicted, people have become pickier in their selection-making process. Price has become a much greater issue because people can gather more information about products before buying. Competitive pricing has resulted in less efficient companies going out of business. If price is becoming more of an issue because of the internet then, in theory, companies that can achieve economies of scale have a better opportunity to survive because they can lower costs more than competitors. More often than not these are bigger companies or chains. There is hope for smaller retailers, however. If they can effectively market themselves as someone that provides a unique product they can meet very specific customer needs creating a better chance of success. Hopefully smaller companies can find a way to compete to ensure better products and lower prices.
The other economic factor that led to Ireland's demise is that of "Supply Side Economics". The basic principle of supply side economics is that by removing, decreasing, or controlling barriers such as taxes, regulations, and monetary policy, increases incentives for individuals and businesses. When those individuals and businesses have an incentive for business, benefits will trickle back down to the people and the government. Case in point, some large American corporations went to Ireland due to their relatively lower corporate tax rate of 12.5%.
Ireland's tax cuts and tax rates were very attractive in the short run and benefited the country for many years in many different ways. Now the country is experiencing budget deficits and debt issues that it doesn't look like it will be able to recover from. I believe supply side economics can be a very wise strategy for stagnant or flat growth economies in the short run. If used as a long-term solution, the country will have to deal with debt and deficits that will surely come.
With all the options, it will be interesting to see where the market settles with regards to price and which options will remain viable in regards to consumers desires. It will also be interesting to see which company's strategy will be the most successful. I personally utilize all three of these companies, depending on the viewing options available. It will also be interesting to see if any of them will go the way of Blockbuster, which has filed bankruptcy and continues to struggle to survive in the marketplace.
The author, Stephanie Armour, presents the facts that 30 year loan rates are at 4.17%. Median home prices in the 3rd quarter were up in 50% in metro areas whereas last year they were only up in 20 of the same metro areas. Also, the Fed says that it will be putting 600 billion into long term treasuries by June 30th of 2011. Since May of this year, 30 yr. rates have been below 5% and improvements in home prices have been made even though home purchases fell after the Fed canceled the home buyer tax cuts.
The drop in long-term mortgage rates will entice many more people to refinance drop the cost of their mortgage. This could increase discretionary income and therefore further spending by the population on the whole. This could help jumpstart the economy or at minimum give it a boost.
The biggest problem getting the boost to the economy that is needed is that many in the position to need refinancing have poor credit or little equity. These factors will limit the ability of some to qualify to refinance. I feel that the lower rates do and will entice people to refinance. Refinancing will give people more cash to spend getting caught up and possibly ahead in their finances. Looking at the whole situation from a realist point of view, I'm not confident that there will be enough qualifying individuals to achieve the level of refinances necessary to have a large enough impact. Therefore, the effect will not be enough fuel to get this economy rolling.
Link to the NPR interview with the Duke professor:
This sounds like a good topic to research for a comment or another post...
Dean and Sobel report that the universal belief that Walmart drives “mom-and-pop” shops out of business is statistically unsupported. Their research suggests, that while Walmart does cause some directly competing small businesses to fail, those particular failures are completely counterbalanced by the entrance of new small businesses through the process of creative destruction. This article presents a different side of how the entrance of Walmart actually affects a community. Walmart’s entrance into an economy actually spurs innovation by driving out old inefficient businesses, leaving newly vacated commercial real estate available at lower prices. More affordable rents decrease the barriers to entry for new and more innovative businesses and these new companies have to be more specialized because of their proximity to Walmart. Overall, with the entrance of a new Walmart store into a community, entrepreneurialship is stimulated, businesses become more efficient, and consumers save more.
Illegalizing this drug will greatly increase its price. First, supplies will only be willing to sell the drug at a much higher price because of the added risk of getting caught. Second, in the short run demand might be more inelastic because of the strong dependence on the drug. People will be more willing to pay the higher price because of their dependence.
However, in the long run demand will greatly be reduced because of alternative options. Spice is currently a supplement good to Marijuana. The current demand for Spice is high because it is legal and at a relatively low price compared to Marijuana. Now that Spice is illegal the demand for Marijuana will go up.
This new policy is being considered due to the relatively short supply of bucks found within the deer population. If Utah continues to harvest bucks at its current rate, authorities fear that the deer population will greatly decrease as too few bucks will remain to sustain the population.
Thus far, it appears that the DWR is only contemplating reducing next year’s available tags by 7,000 (94,000-87,000). The reduction in tags may cause an amount of upheaval amongst residents as completion for said tags may become fierce.
Another idea which the DWR may want to consider is raising the price for tags. As explained in supply and demand graphs, when the price is raised, all other things held equal, the demand will decrease.
I believe that if the herd ratio is the true issue, the DWR may save itself some problems if it merely raises the price for tags. Thus, residents not willing to pay the higher price will self select out and while those who truly value the hunt may still participate.
Many retailers have also started to slash their prices in October in a desperate attempt to get people into their stores for the Christmas season. These decisions by major retailers may change the way Christmas shopping is done for a couple years, but I see the attempts eventually backfiring as people get more and more fed up with the insanity of shopping so early in the Christmas season.
Apple continues to bully its competition to preserve its monopoly, not that there’s anything wrong with that, other than the fact in highly innovative industries patents constrain innovation.
This past Friday, Apple filed two lawsuits against Motorola declaring that its Android Smartphone infringes upon six of their patents.
The problem is, tech companies can file extensive claims against one another because patents exist for every new innovation, like: mobile e-mail, syncing e-mail and calendars, and multi-touch etc.
So now the basic idea of competition in the market for Smartphones, and other computing devices, is up to the decision of the courts…prepare for maximum inefficiency.
When it comes to software, there’s a variety of solutions to every problem, that’s why Dana Blankenhorn believes patents “should cover how things are done, not the act of doing them.”
The duration of a patent in any tech industry is terribly inclusive and would last longer than the life of the rapidly changing market. If the courts enforce such patents, then without a way to side-step their decisions, innovation will decay.
These findings, if proven correct, will motivate the movie producers to make the necessary changes in the final product to garner the PG-13 rating. However, producers will only cut out the least amount of content necessary to receive this rating to maximize the profits afforded to being as close to an R-rating as possible.
The result of the PG-13 movie demand curve shifting to the right is causing a forward shift in the supply curve from movie producers who are taking advantage of the shift in demand to produce higher profits and revenues. Also, because the profitability increases even more if the PG-13 movie increases in elements and material more like an R-rated movie, the differences in material between the PG-13 and R-rated movie will continually shrink.
The article stated that 55% of movies are R-rated and 35% PG-13. The percentage of PG-13 movies will increase in the future. Is this study conclusive evidence that movie makers should abandon making all R-rated movies? I do not think so. I assume that the movie industry will want to ensure the facts in the study are correct and that the findings are true due to the conservative nature of the school producing the results and other articles reviewing the same study but reporting different numbers.
Looking at the demand for cigarettes in this case we can see that the people realized there would be a price increase and therefor a reduction in the quantity that could be purchased. Also, considering the inelasticity for the demand of cigarettes these people would still purchase cigarettes even if the price were increased. So, to save money, these consumers started stock piling cigarettes to save some yen.
One consumer purchased 100 cartons and saved approximately $1,300 in potential taxes. Many others are buying what they can with 30 cartons being the norm. This hoarding effect will cause a future drop in sales but things should return to a normal level after the stock piles are smoked. Once this consumption does return to a normal level you should see the quantity demanded decrease from the consumption level that existed before the tax announcement but not by a third, it should be less due to the inelastic nature of cigarette consumption.
Due to the “housing bubble” and perceived “good times ahead,” mortgage lenders were frantically closing home loans for anyone who applied; regardless if the applicant was qualified. Even though closing loans for unqualified borrowers is bad business, the problem becomes worse as lenders habitually “fudged” on the paperwork by not adequately completing documents or filing them properly.
To compound matters further, the lending industry relied on Fannie Mae’s digital overlay system, known as Mortgage Electronic Registration Systems (MERS), to create images of their paperwork. MERS would serve two purposes. First, they would digitize the agreements and thus businesses would not need to keep hard copies of their files. Second, MERS would become the “third party that would foreclose if a borrower stopped paying.”
The major problem with MERS, however, is their system was unable to keep up with the flow of agreements. As a result, a number of contracts were never scanned and thus became lost or accidentally destroyed. Of those contracts which were digitized, a number of them were not correctly filled out and thus the agreements were not legally binding.
According to the article, due to the recession, between $2 trillion and $6 trillion in “U.S. mortgages and home-equity loans that were securitized during” 2005 and 2007 are “likely to go into default.” In other words, those individuals who should not have received loans but did are now unable or unwilling to make their monthly payments and thus the banks need to foreclose.
However, due to the problems of incomplete documentation or un-scanned (lost) contracts, banks are having a difficult time proving they have the right to foreclose on said individuals and thus, it appears, they have no legal rights to reclaim their properties.
From and economic standpoint, this article brings to light major flaws within the mortgage industry and foreshadows more difficult times in the future. Who will bear the expense of the losses if banks are unable to reclaim their properties? Will the Government, once again, feel compelled to “bail out” the banks? If that were to happen, taxes would unavoidably increase. Will the banks find a way to prove ownership and thus evict tenants? If that were to happen, the supply of houses for sell will shift to the right and thus home prices will continue to fall and citizens nationwide will continue to see their wealth deplete.
From any angle one approaches this news, it is apparent, in the near future, home values will continue to fall, banks will lend less, and the Government may very likely raise taxes. Hold on to your wallets!
One of the most important parts of Karl Marx’s economics is to describe value and how money works in this system of assigning prices/values to objects. Money serves society by performing various tasks. Namely it provides the means by which exchanges of goods can be made in an efficient manner. I believe that when a price is given to a good or, as Karl Marx would say a commodity, it represents the value that the market is willing to pay for such a good or service. This is a free enterprise and capitalistic way of looking at the value of a good/commodity and one which Karl Marx opposes. Rather his is the view that, “but what is the value of a commodity…the objective form of the social labor expended in its production. And how do we measure the quantity of this value…by the quantity of the labor contained in it” (Marx Das 255). Simply put in Karl Marx’s terms, “price is the money-name of the labor realized in a commodity” (Marx Das 79). Especially, in today’s automated manufacturing and service oriented businesses the price of a good or service definitely doesn’t represent the labor that goes into it. I think this is one aspect of economics that Karl Marx got very wrong.
Nevertheless, Karl Marx did use his thoughts on the exploitation of labor to identify how capitalists use such labor to create surplus value and combined with greed establish a wealthy class in society. I have attempted to piece together Karl Marx’s idea of how capitalism works in the following; “the capitalist buys labor-power…that…labor may reappear in a commodity… capable of satisfying a want of some sort” (Marx Das 143). This object of want which needs to be sold for a profit, or rather at a surplus value above the capitalists expenses, so “the rate of surplus value… (Is) the degree of exploitation of the labor-power” (Marx Das 174). This surplus value adds to the profits of capitalists “who extracts unpaid labor directly from the laborers, and fixes it in commodities” (Marx Das 280). Then the capitalist becomes greedy and “becomes a hoarder of money…gold and silver thus become of themselves social expressions for superfluity of wealth” (Marx Das 109). This social class of the wealthy becomes ever more lustfully greedy, “the expansion of value… becomes his subjective aim…ever more and more wealth in the abstract becomes the sole motive of his operations” (Marx Das 124-125). I agree that this cycle does take place in capitalist societies, but I disagree that it becomes each capitalists’ sole purpose and driving force in life. Bill Gates, Warren Buffet, and other wealthy capitalists whom start and fund charitable foundations that benefit society and humanity are examples of the utopia that can come from capitalism. Karl Marx would have never have fathomed such benevolent philanthropy from the wealthy capitalist class of society.
Some are questioning WalMart's decision in lowering their prices in the first place. The decision to lower their prices to spur revenue would have been a wise decision, had the overall economic well-being of our country been healthier. Since people are still hesitant to spend money on unnecessary items, their strategy backfired. Instead, WalMart should have taken a different approach, such as cutting the prices on some of the large ticket items, while maintaining a reasonable profit margin on complementary items to those large ticket items.
There are few modern businesses in Southern Utah. I am increasingly surprised how many business majors are unaware of the advantages GoogleApps provides and the number of small-business owners who have not yet harnessed it. Google’s Internet-scale cloud computing framework accomplishes economies of scale that yield considerable cost savings for customers. With over 3 million users and 3000 organizations signing up each day, Google’s marginal cost is incredibly low, therefore it is able to offer the service at just $50 per year per user. This service is valuable to me because it is scarce. Few companies offer such efficient and user-friendly cloud software at a reasonable price. If I were to create it on my own I’d have substantially higher costs with a much lower rate of success.
Sellers- The commercial real estate market has been hit hard by the economic recession. CRE values have declined due to the bad economy. If the proposed changes occur, sellers should expect some stabilization of value due to an increase in demand.
Lessors- The changes will impact the lessors financial statement, but more importantly, will impact the terms of the leases. Lessees will desire shorter-term leases due to the reporting factor.
Buyers- It is already a great commercial real estate buyer's market and with the extension of the SBA fee waiver there are even more reasons to buy now.
The impact of the proposed accounting changes may not have a huge effect in the stabilization of the commercial real estate, but it should help provide some incentives for buyers. This is what the commercial market desperately needs in order to recover.
The bar is set too high for immigrants to comply with the law of becoming legal, so they come here anyway. Some believe, although impossible, if we stopped illegal immigration, that the laws of supply and demand would increase wages to become more desirable for Americans. This might be true but the prices for the products from those jobs would not be so desirable.
If illegal immigrants are interrupting the laws of supply and demand as the article “The Dark Side of Illegal Immigration” would suggest why make them illegal. We should put them on the same playing field as Americans. Instead of tax free below minimum wage workers, why not manage the immigration problem by making it easier for foreign workers to obtain work visas? This would quickly increase taxes from workers who would now be complying with the law. It would also greatly decrease illegal immigration by those who want to comply with the law but have no other recourse if they want to work here (this still does not make it right but its reality).