Friday, November 28, 2014

Transatlantic Trade and Investment Partnership (T-TIP) Agreement

For the last few years the U.S. and Europe have been developing a free trade agreement called the Transatlantic Trade and Investment Partnership Agreement. The goal of the T-TIP is to eliminate tariffs and other barriers to trade. The overview of the agreement through the link provides information on the U.S.'s objectives and benefits. It states that the U.S. exports $730 million in goods to the EU daily. Without trade restrictions prices would drop and demand would rise. In the end the U.S. will export more goods each year, rising the total terms of trade. There are people who still oppose the T-TIP agreement for environmental and labor reasons.

Environmentalists are concerned about corporations involved with the agreement will not need to adhere to high environmental standards already in place. Corporate profits would benefit by not needing to maintain standards. However, the WTO says a country has the right to refuse products from a country that doesn't meet a certain environmental law if and only if those same laws are implemented domestically. This means neither the U.S. or the EU needs to accept all products offered as exports.

Another concern is labor standards weakening as a result of increased competition. Though, the textbook states that U.S. trade laws give the president the right to refuse trade from a country that lack proper labor standards. That places a large responsibility on the president to be aware of labor standards around the world and to take intiative against a country when necessary. This shouldn't be a large issue working with the EU considering they have similar labor standards as the U.S.

Overall, the T-TIP is going to benefit the U.S. and the EU greatly. The agreement shouldn't take away from trade from other countries, but only increase existing trade between the U.S. and the EU. They want the agreement to set standards for future agreements with other areas around the world. Hopefully it will open more doors for other free trade agreements, but when working with developing countries questions of environmental and labor standards will be more difficult to address.

Friday, November 21, 2014

Export Subsidies

The World Trade Organization (WTO) has the goal to eliminate all export subsidies. In order to earn permission to subsidize exports countries need to make a commitment to reduce the amount of subsidies in the long run. Reducing subsidies will make all countries buy and sell goods at the world price. Right now developing countries are hurt by subsidies because they cannot compete with the developed countries’ low prices from subsidies. 

The process of reducing export subsidies needs to be gradual. The type of good depends on how long subsidies have to be eliminated. For one set it is 5 years for developed countries and 10 years for developing countries and the other set is 9 years for developed countries and 12 years for developing countries. Some developing countries suggest a longer timeframe. As importers they want to make sure they have enough time to adjust to buying products at higher world prices while exporters will need to adjust to selling at world prices. By eliminating the export subsidies it will create a more fair market system by selling at the world price. 

I’m curious to see when the subsidies are eliminated if countries will respond by enacting different tariffs to regulate imports to help domestic producers. Hopefully this doesn’t happen because it would be counter productive to enforce tariffs. It all just depends on how countries do adjust overtime.

The Battle of Subsidies: Boeing and Airbus

In class, we have discussed the effects of subsidy imposed by governments in the aerospace industry, which is between Boeing and Airbus. The Battle ofthe Big Boys: A Critical Analysis of the Boeing Airbus before The WTO, a working paper, in which the author introduced the dispute caused by the implement of subsidy between the two big boys, Boeing and Airbus, and gave a critical analysis of making decision in the future which will have an deeply impact to the whole industry.
The commercial jetliner industry, which have been locked in a two horse race since the 1980’s through mergers and acquisitions in the industry, which led itself to be a state of duopoly. For the reason of that Airbus is appealing to be an undeniable champion in the market, the dispute and standing feud surpassed from between two companies into one of the most high profile trade dispute around the world. The stakes increased dramatically when both involving countries sued each other at the WTO, primarily trigged by an alleged grant of illegal subsidies by the governments of both parties to the two respective competitors.
According to this article, the author argued that there are erroneous messages sent out to the world struggling for control in a duopoly market, when liberalization and globalization have been a dominant trend worldwide, even if it is one of the longest and expensive conflicts in the history of international trade.
Although, the two parties are in compliance with the rules, there are still chances that one or both the parties would violate the terms unilaterally, leading to a provision of subsidies continuously. Additionally, with the resurrection of other countries in the relevant industry, there is an international cordial solution needed to be achieved with all the players involved.
To my perspective, currently, with the impracticability of the complete withdrawal of subsidies, the significant objective of the WTO is to prevent a thoroughgoing subsidy war, which is costly and will results in a historically-improved distortion in the whole industry.


Keystone XL Pipeline

Just this week, the United States Senate has narrowly failed to pass the bill that would created the much talked about Keystone XL Pipeline. There are many political reasons for this outside the scope of the class, but I'd like to take a look at some of the few implications associated with this bill that can be analyzed with what we have learned in class.

The Keystone XL Pipeline is in essence an oil pipeline covering the distance between Hardisty, Alberta, Canada, and Steele City, Nebraska. This stretch of pipeline would take a more direct route between locations of an already existing pipeline. The opposition is almost purely environmental in its motivation, citing oil independence and harmful impacts of implementing yet another pipeline as its prime arguments. I'll not get into any sort of discussion on that end because this is not a blog for an environmental economics class.

What does this mean for the United States in the way of trade? Surely the implementation of the pipeline would allow the United States to produce more oil for both domestic consumption and export. This means that the United State's demand for foreign oil decreases dramatically, while world supply of oil increases. Both of these would cause a serious drop in prices of oil world wide because the U.S. is a large country. This has an ambiguous effect on terms of trade for the U.S. as prices of imports goes down, as will the prices of exports. Not only will this cause a decrease in prices of oil but of almost every other good because of much lower transportation costs. This certainly improves welfare.

While this Keystone XL pipeline certainly improves the welfare of Americas and Foreigners alike, many people would still argue that there cannot be a price put on environmental sustainability.

The link to the article is http://www.bbc.com/news/world-us-canada-30103080
My links have a tendency to not work, so I'll name the article. on www.bbc.com the article is called  "US Senate narrowly fails to pass Keystone XL pipeline bill"

Thursday, November 20, 2014

International Labor Agreements (Corporate Responsibility)

     Throughout Chapter 11 in class we will begin to discuss the issue of International Agreements. One in specific will be in regards to labor. With everyday pressure from consumers and unions, corporations have began to monitor and improve the conditions in their overseas plants and the plants of their overseas subcontractors (Book Reference). Many overseas plants tend to do a number of unethical things ranging as far as pollution and child labor. Do you think companies are taking a big enough stand to improve their overseas operations or just sweeping it under the rug?

     One company taking a big stand is Wal-Mart. Recently, Wal-Mart ordered Chinese suppliers to raise their standards of operation. Wal-Mart wants Chinese suppliers to meet strict environmental and social standards or risk losing their business. Wal-Mart has been pursuing a drive to improve its' reputation on environmental and social issues over the past three years in response to growing criticism in the U.S. over issues that include labor conditions in its' supplier factories. At the time Wal-Mart was demanding a 20% increase in energy efficiency by the 200 largest Chinese suppliers as well as disclosure to the factories used so they can look into proper employment and working conditions.

     Another group of companies taking an unexpected stand are major U.S. apparel brands. This stand is being known as the RSN Cotton Pledge. Uzbekistan is one of the worlds' leading cotton producers and heavily relies on manual labor from children. Uzbekistan made a statement back in 2012 that they would aim to reduce their child labor force, yet have made no significant effort in doing so. Finally, several apparel brands are standing up and forcing Uzbekistan to stand by their word. The growing support for the Pledge is also sparking consumer awareness and rejection of the situation in Uzbekistan.

     Again I raise the question: Do you think companies are taking a big enough stand to improve their overseas operations or just sweeping it under the rug? I want to hear everyone else's views on the subject and how you believe international trade is affected by corporations not being responsible and using child labor or unethical pollution.

Fossil Fuels With $550 Billion Subsidies Hurt Renewables

According to the International Energy Agency, fossil fuels are reaping $550 billion a year in subsidies, which is holding back investment in clean energy. While wind, solar, and biofuels received a $120 billion payout, oil, coal, and gas received more than four times that. These huge subsidies are giving the incentive to consume more and more of these harmful forms of energy. That basically means that we are continuing to pay to pollute the world, when we could be using that money on the clean forms of energy that I have already mentioned earlier. Renewable resources will account for about half of the global increase in power generation to 2040 due to the outcome of the government subsidies. While these subsidies will basically stay the same, wind and solar capacity is projected to grow up to six times of what it is currently at now, which shows that their economics are greatly improving. It is reported that globally, wind power will take more than a third of the growth in clean power; hydropower accounts for about 30 percent, and solar 18 percent. These $550 billion fossil fuel subsidies are another example of how subsidies can be harmful, not just to the rich or the poor, but also to the world environment. The policy is in need of a shift to clean energy because the world’s temperature is on pace to rise by 3.6 degrees Celsius by the end of the century. This means an increase in sea levels, damaging storms, and drought, according to the International Energy Agency. These subsidies are putting people at a great risk years down the road if we continue to depend so heavily on fossil fuels, instead of going in the direction of clean energy. From class we know that subsidies are granted to assist an industry so the cost can remain low and competitive, but this is definitely a subsidy that will be doing much more harm than good in the long-run. http://www.bloomberg.com/news/2014-11-12/fossil-fuels-with-550-billion-in-subsidy-hurt-renewables.html

Happy Thanksgiving

A couple of people have missed weeks when they were supposed to post and/or comment. If you are among this group, then you may write up to one original post and up to two comments to replace those missings. Anyone may also post for their extra comments if they would like to do so as well.
I will be in Atlanta presenting at a conference this weekend, after which I will be spending Thanksgiving with the in-laws. I feel well-prepared for the former, but please wish me luck on the latter.

Tuesday, November 18, 2014

U.S historical “Embargo” in 1807 Vs. U.S opened Japan’s Market in 1854




In class, we talked about how autarky is different from free trade market and how large the gains are from trade. An embargo is when all export systems shut down.  In 1807 to 1809 Thomas Jefferson imposed an embargo during the war between Britain and France. Still U.S prevents trade from several countries. During this period U.S. exports fell from $49 million to $9million, especially products like cotton, flour, tobacco, and rice. This is loss for the U.S. economy. On the other hand, in 1854, United States forced Japan to open up their trade. Due to this event Japan’s economy developed quickly.

I found some good embargo examples. As we learned, there is an embargo between U.S and Cuba. Most communist countries are against American government. Powerful countries use some widget to cut off goods and service for long times in order to change political or economic trade. For example, Cuba can’t reach American goods for over 50years.


In my opinion, embargo and forcing to open the market is governmental powerful strategies. Nowadays the global economy has more conflict, but is also getting bigger and powerful through some institutions as WTO. 

At the same time, the United States and other powerful countries wanted to have free trade with Korea, but Korean government refused. They wanted to keep national isolation or exclude foreigners because they wanted to keep their power and kingdom. Around 1910, the Korean government failed and all powerful countries controlled and took away Korean resources. The most powerful control was Japanese cruelty oppression. In this situation the trade was unequal. There is no give and take, only one side took away everything. Therefore, all this is not right between embargo and opened market by power ruled but there is also chance to change to develop like Japan did. The most important is the government decision when this happens. The Korean government rejected change when this happened, so Korea lost everything for 50years.  If would have been better for Korea to participate in right trade.

 

Friday, November 14, 2014

Tariffs and Quotas in Oil Price

Recently, the oil price was going down. It is the result of oil’s price war against U.S., Russia and Iran from Saudi Arabia to implement its oil market share stabilization policy. They increase oil production and cut oil price. Therefore, the global oil price is dropped. What are the United States’ reactions?

According to the article, the Saudi dump oil on the United States by selling oil below the global price because they want to slow down the growth of shale production. On the United States’ side, they have several weapons to counter the Saudi. First, since the oil price is cheap, the United States’ government will buy more oil. Therefore, they will get benefit from this cheap price, and this price support amounts to place a price floor under the United States’ oil price. Second, they can set a tariff. This tariff will rise up the oil price to against the Saudi. However, WTO’s rules state that outlaw imposing tariffs on non-agricultural goods. Third, the United States can set a quota on the exports of Saudi oil to the United States. However, this quota will be more harmful and less effective, as the Saudi oil exports to the United States has diminished with the increases in domestic shale production. Lastly, they can also lift the oil exports ban. Although this measure can help the shale industry, it will lower the global oil price.

In conclusion, business is war, and imposing tariffs and quotas are main weapons of government to against other countries.

References:

http://search.proquest.com.proxy.sau.edu/docview/1624954299/E13E497903144982PQ/6?accountid=28567 

Fuel Subsidies Effect on Rich & Poor

Recently in class we have been discussing how subsidies are often seen to be very beneficial to the trade of a country, but that is not necessarily the case.  We have learned that subsidies can flood the world market of a certain good, thus hurting the country involved even more than a tariff would.  I looked for an article discussing the negative effects of a subsidy on a certain commodity or resource, and found the following article on fuel subsidies.


http://oilprice.com/Energy/Gas-Prices/Why-Fuel-Subsidies-are-Bad-for-Everyone.html


This article delves into the specific ways that people within the country that is receiving the subsidy are hurt.  First it discusses the ramifications that the subsidy will have on the poor.  The article explains that there are both good and bad things that come from subsidies.  The obvious bright side to a subsidy, is that it makes the good cheaper to the importing country.  The problem is, that in most countries, the poor account for a very small percentage of fuel consumption.  It is the rich people within the country that are reaping the benefits of the discounted price of fuel.  The government is using their budget on subsidized fuel which could be used in other ways to directly help the poor.  They do not experience very much benefit from this, and are hurt by lack of government attention to other direct needs. 


On the other hand, the rich are hurting from these subsidies as well through taxes.  It is the rich within the country that are eating these consumption taxes that are proven to rise along with the subsidies.  The progressive nature of the tax tends to out-weigh the regressing price of fuel that comes with the subsidy.  The author also makes the argument that subsidies can hinder economic growth by changing a countries' structure of trade.  A country will often begin to export goods or resources that have higher opportunity costs rather than in places where they have a competitive advantage.  This will in the end, hurt the countries' terms of trade.


My response to this article was that I agree with a lot of the points that are being presented mainly due to the discussions that we have had in class.  I have never previously viewed subsidies to be an issue, but seeing how they can hurt everyone within a country with minimal benefits, it makes you wonder why they are put in place at all.

Monday, November 10, 2014

Differential Export Taxes

http://www.ifpri.org/sites/default/files/publications/ifpridp01236.pdf

http://southeastfarmpress.com/soybeans/us-soybean-industry-protests-argentina-s-unfair-export-tax

The link above leads to a working paper discussing the reasoning behind differential export taxes and the effects of removing these taxes from those countries that commonly use them.  Essentially a differential export tax is a tax which is higher for exported goods which are lower on the value added chain and lower for exports which are higher on the value added chain.  The working paper commonly refers to the soybean industry in Argentina and its differential export tax which taxes the exportation of unprocessed soybeans much more heavily than soybean-based products such as biodiesel.  

Argentina developed this differential export tax to combat a series of tariffs created by its trading partners on soybeans and other agricultural goods.  The idea is that by rewarding the production of goods higher up the value chain Argentina stimulated investment in the production of goods less heavily tariffed by other countries.  Unfortunately this has distorted the world market of soybeans, and the American soybean industry is particularly unhappy.  The second link above leads to an article on the unrest of the US soybean industry and what its members think needs to be done to remedy the problem.  

They claim that differential export taxes are against the World Trade Organization’s policies and are worried that because Argentina’s use of differential export taxes have gone unopposed, more and more middle market economies such as Ukraine and Indonesia will increase their use of the same kinds of taxes.  This could be particularly harmful to the United States’ economy as it is more developed and exports many goods that are higher on their value added chains.  These differential export taxes are also a problem because the government of the United States cannot even use them because export taxes are illegal under constitutional law.  


In the end, the working paper shows that these differential export taxes are indeed causing distortions in the market which are hurting many people worldwide.  The paper shows that were some of the import tariffs on agricultural goods lifted then countries would not be forced to use differential export taxes to stimulate their economies.  This in turn would create more consistent world prices and a better allocation of resources worldwide.  

Friday, November 7, 2014

U.S. Tariffs on Chinese Solar Panels


In this article, Diane Cardwell and Keith Bradsher examine the trade dispute between America and China over China’s import dumping of solar panels in America. In 2012, Chinese companies were proven to have been granted subsidies while selling their products in America for less than it took to produce them. The disagreement began in 2011 when a German solar panel producer, SolarWorld, filed a case against Chinese solar panel manufacturers for competing unfairly in America. America’s solution for this problem was to impose a 24% to 36% tariff on solar panels imported into America. However, those opposing the tariffs coincide with what we have learned in class this week. Imposing tariffs on Chinese solar panels will not penalize the Chinese companies but only hurt American consumers. The only party losing in the current situation is American solar panel manufacturers. This is unfortunate and something should be done to allow American, Chinese, and German solar panel producers to compete equally but imposing tariffs at the expense of American consumers is unfair.

Another possible solution that would allow American solar panel companies to better compete with foreign companies would be to provide subsidies to American companies. Just as we have demonstrated in class, providing subsidies for companies delivers nearly the same outcome as tariffs without the negative effects falling on consumers. For the solar panel situation in particular, subsidies seem to be a better alternative to tariffs because they will make it easier for American companies to compete with the Chinese and reduce the negative effects incurred by American consumers.

Import Tariffs or Free Trade?

As we learned in class on Wednesday, tariffs are not beneficial to the consumer.  Many people believe that the government should reduce tariffs so that Americans will be able to buy more at a lower price.  I found an extreme version of this idea in the article attached in the title of this blog post.  The author suggests that our government should dispose of all unilateral import tariffs and quotas.  His point is somewhat valid based on the empirical data charts provided in the article.  These charts show how a reduction of import tariffs in countries such as Chile, China, Australia, and New Zealand have all resulted in a dramatic increase in economic growth. 

However, the idea of cutting or completely disposing of import tariffs is highly unlikely due to political pressure.  Opponents say that the economic value from cuts is modest at best.  Companies that want lower or no tariffs would also require political action by persuading their local legislators.  Those that back import tariff eradication argue that our current tariffs are aimed towards developing countries, while more developed countries face near zero taxation on their exports to the U.S.  The article refers to this dispersion of tariffs as a two-tier tariff system. This is true, but I disagree with the article’s negative attitude towards higher tariffs from developing countries.  The main reason these tariffs are higher is due to the types of products that come from developing countries that compete against domestic laborers as opposed to imports from already developed countries that are similar to American products.


Personally, I agree with the idea that import quotas should be disposed of because of their possible extreme effects on multiple economies.  On the other hand, I disagree with completely free trade.  I think that the ease and amount of government revenues collected is too high to just get rid of completely.  However, an alternate idea could be for the government to lower income taxes that would give Americans a higher disposable income.  To counteract the lower tax, the government could raise some import tariffs to still bring in equal tax revenues.  This may potentially protect domestic jobs while making the average Joe even happier by lowering income taxes.  The downside to my idea is the negative impact on the exporting countries, but if the two-tier system is taxed more evenly then the increased tariffs will be absorbed more easily.

The Impacts of the US Sugar Quota

In the United States we have an interesting policy on sugar imports. The US has a quota on how much sugar they can import from other countries. We talked about this in class a bit and I wanted to go more in depth and see who supports this policy and who is against it and for what reasons.
The US first started this policy in 1934 during the depression era by passing the sugar act. The act was created due to overproduction of sugar in the United States causing sugar prices to be very low. This act was meant to protect sugar growers in America. Later the law was added to by making the limit of imported sugar to be around 15 percent of domestic consumption. This keeps American sugar prices above the the world prices.
World vs US Sugar Prices
This graph displays US vs World sugar prices and supports that US sugar prices are generally higher.
With this act restricting the amount of imported sugar there are those who benefit and those who are left out. The biggest supporters of this and the "winners" of this act are American sugar growers. with prices being higher they are able to make much more money and have much greater profits. The first "loser" would be countries that export sugar. The US is a huge markets and they are missing out on a lot of money. Countries like Australia miss out on millions of dollars of revenue from sugar they can't export to the United States.
The second loser would be us, the consumers. With the quota the supply of sugar is lowered which causes prices to be higher and a loss to consumers. Some estimates say it is around a 3 billion dollar loss. Another way consumers lose would be they have to use substitutes for sugar. The Quota is one of the reasons why many products that need sugar contain corn syrup which many believe to be less healthy and not taste as good. I believe that it would greatly benefit the US and many other countries if the United States reformed their sugar policy.

The choice between Import Tariffs and Quotas

From what we have learned earlier, we know that even though countries benefit as a whole in international trade, there are still winners and losers since the gain from trade is unevenly spread. That is why government need to do something to influence the amount of international trade—to help the losers limit their losses. As we have discussed in class, government usually use these trade policies, which includes the use of import tariffs (taxes on imports), import quotas (quantity limits on imports), and subsidies for exports.
Tariff and quota both serve the propose to provide protection to domestic import-competing industries. but why tariffs seems like it is more preferable to quotas? The choice between one or the other is likely to depend on several concerns, which, according to the article, are revenue effects, administrative cost and the protective effect.
In term of revenue effects, tariffs will automatically generate tariff revenue and has a immediate advantage for government while quotas may or may not generate revenue depending on how the quotas is administered. The Progressive Policy Institute has found that the United States collects 20 billion dollars a year in tariff revenue. This is revenue that would be lost to the government unless their import quota system charged a licencing fee on importers.The administrative costs of tariffs and quotas are likely to differ too, though it is not obvious which of these two would be less costly.
Perhaps the most important distinction between the two policies is the protective effect, quotas are more protective because they limit the extent of import competition to a fixed maximum quantity. In contrast, tariffs simply raise the price but do not limit the degree of competition or trade volume to any particular level, which means that it has more market flexibility.
So why GATT has a preference for the the application of tariffs rather than quotas as a guiding principle? One reason was tariffs could be expected to be less protective over time. Another reason concerned transparency.
With a quota in place, it is very difficult to discern the degree to which a market is protected, however, with a tariff in place, one can use the tariff percentage as a measure of the degree of protection. Besides, it was considered somewhat easier to negotiate reductions in tariff rates than quota increases during GATT rounds of trade liberalization. Trade liberalization agreements generally target a fixed percentage for tariff reductions. For example, countries might agree to reduce average tariffs by 30 percent from their current levels. This rule would be perceived as being equal reciprocation in that each country would be liberalizing to the same degree. Hence the agreement could be judged to be fair. However, with quotas in place, it would be difficult, if not impossible, to apply such a straightforward type of fairness principle.
For this reason, current WTO member countries agreed to phase out the use of quotas in the Uruguay Round. Instead, countries will apply tariffs that are equivalent in their market effects to the original quotas. This adjustment is referred to as tariffication. In this way, future rounds of trade liberalization negotiations will be able to use fair reciprocal concessions to bring these tariffs down further.

Thursday, November 6, 2014

Smoot-Hawley Tariff of 1930 Mostly Responsible for the Severity of Great Depression?

For almost a century now historians, economist, and even the laymen have attributed the depth and longevity of the Great Depression to mostly the ceteris paribus effects of the Smoot-Hawley Tariff of 1930. In class we have analyzed the effects of tariffs on the domestic economy and have concluded that while dead weight losses occur, so too do net gains to different groups. In his working paper of 1986 (linked as title) entitled, The Political Economy of the Smoot-Hawley Tariff, Berry Eichengreen, refutes the idea of blaming the depth and longevity of the biggest economic downturn in history to solely the effects of the Smoot-Hawley Tariff and provides and effective analysis as support.

Using an adaptation of the Mundell-Fleming Model, Eichengreen held retaliation from foreign countries in response to a tariff imposition constant at 0 in order to account for the disaggregated effects of the Smoot-Hawley Tariff on the domestic economy. In doing so, he found that by using an upper-bound estimate of Smoot-Hawley that the effect of the tariff increased GOP by 5.25 per cent, ceteris paribus. The fall in output between 1929 and 1931 was on the order of 15 percent. This indicated that the tariff had a useful expansionary effect which reduced the fall of domestic output which would have otherwise occurred at approximately 25%. Contrarily, later in his analysis Eichengreen added in the effects of retaliation to the output of the domestic economy and found that there still existed a small possibility of domestic output increasing even with the imposition of the tariff; therefore, the macroeconomic impacts of the Smoot-Hawley Tariff were small.

To conclude his analysis, Eichengreen gives sufficient evidence for an already increased display of protectionism for foreign nations prior to the initiation of the Smoot-Hawley Tariff. This global display of protectionism is likely more of a key factor in affecting the depth and longevity of the Great Depression than the U.S. tariff itself. If Smoot-Hawley had significant macroeconomic effects, these operated instead through its impact on the stability of the international monetary system and the efficiency of the world capital market.


Wednesday, November 5, 2014

Test #2, Question 29

It appears there is another publisher's error in the answer key for the questions on the exam. Question 29, which deals with the gains from migration for home and foreign, gives the correct answer for the home country's gain as (c) $500. But, since this represents the area of the triangle enclosed under the foreign labor demand curve and the new equilibrium wage, it represents the gains for foreign capital-owners. The (net) gains for home workers is the area above the home labor demand curve and the new equilibrium wage, which has an area equal to (b) $300.
If you answered (c), I will not penalize your score, since you may have gotten to this conclusion based on your efforts to use the practice assessments to study. If you answered (b), please see me during my office hours so I can review your answer sheet and make the appropriate changes.

Monday, November 3, 2014

Price Floor and Ceiling


Price Floor and Ceiling


http://www.college-cram.com/study/economics/government-intervention/price-ceiling/

http://market.subwiki.org/wiki/Price_floor

 

As we learned that there is no equilibrium perfectly in our free market or capitalistic economy. Between demand and supply effect how consumer can purchased their goods with right price. Supplier wants make more profit as much they can; also the consumer wants pay less money as much they can.

There is two price ceiling by government that bounding and non-bounding. Bounding line is below equilibrium line that minimize price. Un-bounding line is above the equilibrium. It is depend on demand and supply.

I believe that the price method is not always work between demand and supply. For example, there is over supplier and the supply price down also, the demand is high then the price will be decrease. But sometimes, the price increase then decrease. The Government will intervene to control price to increase to high price this kind of unexpected increase. Black market will be not applied. The government will cannot control Black market because some supply items does not fulfill to demanders requirement. I believe that most black market items are high quality goods item or imports. For example, liquor, cigarette, band named items. These items supplier can make enough but demand increased any times.

However, if the price low, many of consumer can purchase whatever they wants. The other hand, how explained that some goods are very high price but still many consumers demand? What would be the price line has to drawing this demand/supply line?

Market price does not always the same result from economist theory because many of side effects/resources are changed every day. For example of material, labor, exchange rate and etc. are changed.  

However, price ceiling definition is a government-imposed maximum price charged on a product. It differs from a price floor that a price ceiling artificially keeps prices from rising too high, which in theory allows consumers to afford the product or service, but can result in shortages and rationing. A price floor keeps prices from falling too low, which can protect producers, but can generate excess supply and waste

In conclusion from price floor and price ceiling is protecting both supplier and demander that some economic is negative falling situation. This will be effect shortage.

Saturday, November 1, 2014

Effect of the H-1B Program

The H-1B program allows people to apply for a non-immigration visa to work in the United States. It allows workers to live in the states for three years  with the option to renew it for another three years. The applicants are primarily searching for jobs in STEM fields (sceience, technology, engineering, and matematics). The demand for high skill labor in STEM fields is greater than the amount of workers available. Thousands of high skilled positions go unfilled yearly. With the H-1B program companies are able to fill their open positions faster, but there is a fixed amount of 65,000 availble visas. The number of applicants always well surpasses the amount available.

People should support the H-1B program because it helps increase domestic wages and mizimizes unemployment. By having a high demand and high wages in the STEM industry people are encouraged to educate themselves in those academic areas. Graduates knowledgable in STEM fields quickly find jobs and the unemployment in those industries is extremely low. Filling these positions is also beneficial to the job sector in general because for every STEM position filled five more jobs are created. Two of the jobs will go to other high skilled workers like doctors or lawyers, and three of the jobs will go to low skilled or unskilled workers in the service industry.

The H-1B program allows flexibility around the economy by filling positions as needed and providing options for workers and employers. Overall, the H-1B program has helped reshape immigration in a positive way. People should encourage students to earn college degrees in STEM subject areas and should be happy there are people abroad willing to help the economy by filling STEM positions across the country.