Sex Shop and Negative Externalities

I bet the title enticed lots of you to read this. Chapter 11 discusses externalities. The Salt Lake Tribune had an article about a proposed store that sells lingerie and sex-toys. Apparently lots of people in the area are upset about the store called Blue Boutique coming to the area. Mayor Rocky Anderson supports it and the developer is not backing down from the opposition. It is apparent that those opposed to the store think that there are to many negative externalities that would come along with it. None of the externalities mentioned are monetary but the type of people that it may bring to the area as well as the curiosity it will raise in nearby children seem to be the big concerns. When retailers look to move into an area, there are many externalities that go along with it. I used to live near a small town that Walmart wanted to come to and there was lots of discussion about the externalities both positive and negative that it would bring. After discussion, the positives seemed to outweigh the negatives and Walmart was allowed in. It will be interesting to follow this story and see where it goes.

And I Thought We Had Problems

In a New York Times article, Airbus is trying to cut more costs as it is feeling a great pinch with the weakening U.S. dollar. Why is their situation any different than anyone else? They build their planes by purchasing with the Euro but sell their planes using the dollar. The Euros value is increasing while the dollar is diminishing meaning there sales are lower and their expenses higher, all because of currency values. This is creating a real problem for Airbus.

Price We Pay For Bottled Water

An article in MSN discussed bottled water and how it is a strong part of the American economy. Bottled water costs three times more than gasoline. During its transportation empty space must be left in the trailer, because water weighs so much. This creates high transportation costs. We are taking this water from countries such as Fuji, who cannot even support its own citizens with clean drinking water.
So why do Americans pay so much for this water? It is convenient, we think it is more healthy for us than the stuff that comes out of a tap, and it is a sign of wealth. Bottled water comes in second behind carbonated soft drinks in consumer spending. For the makers and suppliers of bottled water this is great as it costs about the same to bottle and distribute as soda pop, but the marketing cost is 15% of that for soda.
The author mentioned that bottled water is a sign of the strength of the economy. If America goes into the recession that people are thinking could happen, the bottled water industry is sure to suffer. This could also have an impact on the many jobs that the production, storage, and transportation of water provides to the economy. It will be interesting to see if there is a noticeable difference in the market for bottled water in the coming months.

Alibaba.com - Biggest E-Commerce Debut Ever

This article here talks about how Alibaba.com had a 192% increase on their first day of trading in Hong Kong in an IPO that raised $1.7 billion. This is considered record for a mainland web company.

Isn't this a wonderful age that we live in, where intellectual property with practically no physical presence can make such a dramatic affect on the business world? Traditional 'brick-and-mortar' stores have numerous issues and concerns to overcome and constantly monitor, and much of the revenue is taken to sustain the physical plant, inventory, workforce, warehouse, etc. Now, you can get a group of techs together with a good idea, a domain name, and a server with adequate bandwidth, and make millions or even billions of dollars.

How soon will it be until there are a limited number of traditional 'stores' and e-commerce becomes the major marketing presence?

PetroChina vs. Exxon-Mobil

This article here talks about how PetroChina has overtaken Exxon-mobile as the biggest oil company in the world. China has had incredible market growth and is quickly becoming a force to be reckoned with.

How soon will "Made in China" be considered "Made in Japan" or "Made in America" for that matter? Once upon a time, Japanese manufactured items were cheap and the country to be 'used' by more modern and advanced countries to exploit. We have since moved to China, India, and others for this exploitation since Japan has evolved to be a market competitor (take Toyota for example). How long will it take China to step up just as Japan did, and what country will we exploit next? Eventually, won't we run out of 3rd-world countries to make all of our cheap stuff for nothing?

Is $100 Oil Lethal?

This article here talks about how oil prices are increasing and the dollar is decreasing and the Dow lost 361 points. Many are worried that the signs point to lethal prices for the American economy, but some feel that $100 oil will not be as detrimental to the economy because America isn't as dependent on oil as much as it has been in year's past. However, they do feel that the high oil price when combined with a credit crunch will prove painful.

What do you think? Are we as oil dependent as we have been in the past, or can we overcome prices at the pump amidst credit crunch, stock market, and dropping dollar issues?

Goodbye Economy!

This cartoon depicts the situation of housing market right now and how it is really hurting the value of the United States dollar and the overall economy. It is hard to say how long the economy is going to have to fight to try to come back from this devastating event, but it is definitely going to be an uphill battle for the US economy. Let us just hope that we get someone in the presidency in 2008 that will make this uphill climb fairly easy for all of us.

I Want It Now!

Economists are starting to study the impact that instant gratification plays in peoples’ decision making habits. For example, if you offer someone $100 today or $110 tomorrow, almost everyone would say they would take the higher amount of money tomorrow in order to receive a one day ten percent return. Though when really offered $100 today or $110 tomorrow, it seems that most people take the money that is offered today. Therefore, is there an increased benefit that is derived from having something today that we could just as likely have tomorrow? The answer to this question is starting to be yes. Though it may seem that people are merely stupid and make poor decisions at certain times, maybe these people are not idiots, but rather rational thinkers that put a large value on the amount of benefit they receive from having things immediately. Many people seem to be adopting this I do not care how, I want it now attitude. What are you willing to pay for instant gratification?

How the Web Prevents Rape

This article is looking at the impact that internet pornography is having on the rape rates across the nation, and surprisingly enough, it is finding that the two are inversely related. Therefore, the studying is saying that as the level of internet porn availability increases in a particular area, the level of rapes in that area decrease. The interesting thing about this study is that it has almost 50 independent studies it can survey all at once, because the internet became extremely popular in each of the 50 states at different times. This interesting correlation is not only being studied at universities by economists and psychologists, but it is also being studied by law enforcement around the nation. What exactly should be done about this correlation is still up for debate. Should we expose people to more pornography in order to decrease rape rates? The experts have their opinions, but what do you think?

Looking to Live in a Community with Low Murder Rates? Try Committing a Crime

Many people are concerned about living in some areas of the United States because of the high level of homicide rates that occur in these areas. If you are one of these people, this article offers a really simple solution to this issue, commit a crime and get yourself sent to prison. Yes, that is right prison. Per capita, the levels of homicide rates in the United States’ prisons are much lower than they are in most large cities across the nation. As for me, I will take my chances against the odds in order to not live in prison.

Standardized Tests > Grades

This article addresses the issue that students’ grade point averages are not good predictors of how they will do on standardized test, because teachers give students good grades really easily without ensuring that the students have learned all of the information that the course. Therefore, this author suggests that failure of students should be allowed to happen more regularly in order to allow for a more efficient and competitive market of students.

Free the Bourses!

This article here talks about how there is a Markets in Financial Instruments Directive (MiFID) in Europe that open bourses to cross-border competition and now allow them to sell their products anywhere in the EU.

This means that previously there were regulations and restrictions against free trade in these areas so perfect competition could not effectively alter prices. Now that trade is open, this competition will drive prices down and raise quality levels so consumers and society will be better off.

Chineese Crackdown

This article here talks about how over the past 2 months they have arrested 774 people related to the recent unhealthy and dangerous products including lead-based paint on toys and poisonous dog food.

China has become the Japan of decades ago when all of their products were considered cheap and junk. Since then they have become models of productivity and quality. China is recognizing this implication and wishes to improve their reputation as they are quickly becoming a developed country and a sizable force in the global market. How long until China will rival Japan for productivity and quality?

Troubled Turboprop

This article here talks about how SAS finally had to ground all of its Canadian-built Bombardier Q400 planes after three of them crashed. Even though no body was hurt, and Bombardier claims that there is nothing wrong with the planes, SAS decided to make the move to curb consumer fears.

This will be a tough blow to the plane industry in general, not to mention Bombarier and SAS. It is difficult to regain consumer confidence after one such incident, but three...well, let's just say I am glad that I don't work for the Public Relations department at SAS.

SAS now needs to regroup and come out shining with a new strategy that will encourage customers to try the airline because of specific improvements to their maintenance practices, pilot training, shorter hours and more rest for pilots between flights, etc.

Take that cable guy!

This article here talks about how the FCC is moving to ban contracts that landlords have with cable companies. Before the ban, landlords determined the television entertainment choices you had in your building and how much you were going to pay for it base on their contract with the cable provider. This created a monopoly on cable service in these buildings. When the ban goes into effect, tenants will have the opportunity to select their own provider and be able to shop around for the best price.

The iPhone Invades Europe

The iPhone is finally being released in Europe. There is a bit of scepticism about whether or not it will be as successful in the European market as it has been in the American market. Currently in Europe most phones are sold at a subsidized cost. The Europeans also have a higher expectancy for the data speeds and camera technologies in their cellular phones. However, the iPhone is going to make an attempt in the European market, even with its lower capabilities and much higher price. The hope is that the new touch screen and easy navigation will catch the attention of the people in Europe. The demand in the United States has been very high for the phone, despite the fact that many users have had to terminate their current carrier to sign up with AT&T. It will be interesting to see if the Europeans have the same draw to the iPhone as the Americans.

Oil Likely to Hit $100 Soon

In this article there are a few analysts talking about why oil is increasing in price so fast. They explain how the weakening dollar is making oil more affordable for emerging markets to purchase the commodity. This is causing a worldwide spike in demand that is continuing to drive oil prices up. Many analysts are saying it will shoot past $100 very soon.

I think the price of oil will cause Americans to shift over to very fuel efficient cars like hybrids and small compacts. This has already been happening over the last couple years with the increase in hybrids on the road, and SUV sales dropping. This trend will increase if the price of oil continues to rise.

Cable Monopoly

Although I know cable companies have very little competition, I didn't realize how much power they have. Consumer groups claim that cable companies treat consumers unfairly because of the lack of competition in this industry. In fact, the Telecommunications Act of 1996, which was intended to prevent such monopolistic power, has possibly been an underlying factor in the increase in cable rates. The article states that since the Act was put in place, cable rates have increased 45%. I believe that the act along with other underlying factors has made it more difficult for competitors to enter the cable industry.

In St. George, I think that Baja is the only cable provider and their rates are definitely not cheap. Recently, Baja added the Mtn. television channel, which has resulted in many consumers leaving satellite providers that don't provide the Mtn. channel in St. George. This is because of loyalty to BYU and U of U sports even if the price is more. Therefore, Baja could probably take advantage of those consumers who switch over to their services because of brand loyalty/sports team loyalty, and it will increase Baja's market power. Cable companies are making a lot of money since they are increasing prices a lot and costs are not increasing very much. I believe that cable services are pretty inelastic since the prices have increased drastically, yet the demand doesn't seem to decrease much. As a matter of fact, I would not be surprised if the demand has increased in the past several years. What do you think? It seems like the prices of cable will continue to increase and their monopolistic power will not diminish soon unless more competition can find a way to enter the market; however, it won't be easy to enter this industry and doesn't seem likely.

HD vs BlueRay Price Wars

As if the battle between HD and Blue-ray wasn't ugly enough, Walmart first dropped the price of their Toshiba HD A-2 DVD player to $198.00, then to $98.87 on a one-day sale. One strategy is exclusivity of movie titles offered with the hope that loyal customers will fit the bill, but I fear that this strategy will fail.

The battle being waged is reminiscent of the Beta vs VHS war over video cassette tapes mentioned in our previous class. One has higher quality specifications and the other has a lower price. Unfortunately for Sony, Blue-ray will become this generations Beta, especially with price wars like these. The perceived quality to the average consumer is almost identical, but the cost difference is almost double.

The fact of the matter is that unless there is a significant benefit from the much higher priced item, consumers will choose the cheaper product because they receive more consumer surplus.

The iPhone Legacy: Pricier Smartphones?

This article talks about the fast rate smart phones keep improving with the new iPhone. It explains how the sales growth of smart phones will be reduced because of the increase in cost for the new features. The increased costs will translate into higher priced phones and price out a lot of people. The major cost component talked about was flash memory for the programs and downloads available. If flash memory comes down in price the smart phones will not rise in price as much as anticipated.

I think the features on the smart phones have shifted the demand curve out. Before the iPhone came out, there weren’t too many people waiting in line for days over a $500 phone. It will be interesting to see how technology will change cell phones.