Categories
Analysis

An Introduction to Demand & Supply

Introduction:

Economics is a study of people. By exploring economics, we are able to explain the production, distribution, and consumption of goods and services. Economics can be separated into macroeconomics and microeconomics, with the main difference being that microeconomics is the study of individual and business decisions, whereas macroeconomics is the study of decisions made by governments and countries. To fully understand economics, it is necessary to understand the base of decision making and how consumers and producers interact in regards to certain situations. This fundamental concept is known as “Demand & Supply”. 

Diving into Demand:

The law of demand states that the quantity of goods demanded varies inversely with price. Further explaining that, with an increase in the price of a good or service, there would be a decrease in the quantity demanded of that good or service, vice versa. An example of this would be: If the price of an ice cream cone was $5, one would buy 2 or 3. However, if the price of the ice cream was $15, people would only prefer buying one. This law is graphically represented through a demand curve, which is downward sloping. We can remember this by: “Demand dives downwards”! 

Scaling into Supply:

The law of supply states that the quantity supplied varies directly with price. Further, an increase in the price of a good or service, results in an increase in the quantity supplied of that good or service, and vice versa. An example of this would be: If there was a drought, the availability of strawberries would be lesser, causing the demand for strawberries to be larger than the availability of strawberries. Due to the lower availability and high demand of strawberries, sellers would increase the price of strawberries, thus increasing their profit. This would play as an incentive for suppliers (producers) to supply more strawberries. Therefore, an increase in the price of strawberries would cause the supply of strawberries to also increase. This law is graphically represented through a supply curve, which is upward sloping. We can remember this by: “Supply scales upwards”! 

Movements along a demand & supply curve:

A change along the curve is referred to as a movement. These changes occur due to a change in price, while all other factors remain constant. Therefore, if a change in the price of goods or services took place in a demand curve, the quantity demanded would simultaneously and inversely change. As shown in figure below, if the price increases, the quantity demanded would contract (decrease). But if the price decreases, the quantity demanded would extend (increase). 

The same way,  if a change in the price of goods or services took place in a supply curve, the quantity supplied would simultaneously change. In this case, an increase in the price of a good or service would extend (increase) the quantity supplied. While a decrease in the price of a good or service would contract (decrease) the quantity supplied. This is further shown in the figure below. 

Shifts:

A shift in the curve occurs due to changes in any non-price determinants/factors. This is shown through the quantity demanded changing while the price remains constant. Shifts can be both rightward and leftward depending on its situation.  

Shifts in a demand curve:

A shift in a demand curve would mean that the quantity demanded has changed without a change in the price. An example of a rightward shift in a demand curve would be: An increase in advertisements for Coke, shows more people the brand and builds desire for the product. This would increase the quantity demanded for Coke, while the price of Coke remains the same, causing a rightward shift. However, if there is a decrease in advertisements for coke, people are more likely to try other goods that are advertised, causing the quantity demanded to decrease (leftward shift). We can remember this by, increase: right & decrease: left. The table below shows various factors that cause a shift in the demand curve; both leftward and rightward. 

Non-Price Determinants Causing Shifts In The Demand Curve

Rightward/Outward ShiftLeftward/Inward  Shift
Increase in consumer incomeDecrease in consumer income
Fall in taxes on incomeRise in taxes on income
A rise in the price of substitutesA fall in the price of substitutes 
A fall in the price of complementsA rise in the price of complements
Change in consumer taste & fashionChange in consumer taste & fashion
Increased advertising for the product Decreased advertising for the product 
Rise in populationFall in population
Seasonal changesSeasonal changes 

The figure below shows the diagrammatic representation of both rightward and leftward shifts in a demand curve:

Shifts in a supply curve:

A shift in a supply curve would mean that the quantity supplied has changed without a change in the price. An example of a rightward shift in a supply curve would be: A more efficient printer in a newspaper factory would improve production efficiency causing the quantity supplied to increase, which is shown through a rightward shift of the supply curve. However, if there is a technological error in the printer, it will reduce the efficiency, decreasing the quantity supplied (leftward shift). The table below shows various factors that cause a shift in the supply curve; both leftward and rightward. 

Non-Price Determinants Causing Shifts In The Supply Curve

Rightward/Outward ShiftLeftward/Inward  Shift
Decrease in the cost of factors of productionIncrease in the cost of factors of production
Technological advancementsTechnological errors
Fall in the price of other products that the firm suppliesRise in the price of other products that the firm supplies
Imposition of indirect taxesGranting of a subsidy
Optimistic outlookPessimistic outlook

The figure below shows the diagrammatic representation of both rightward and leftward shifts in a supply curve:

Conclusion:

All in all, the base of economics demonstrates the relation between the price and decisions made by consumers and producers, in regards to their desires and decisions. What the law of demand and supply demonstrates remains very important to understand economics further: the law of demand portrays an inverse relationship between the price and quantity demanded while the law of supply portrays a direct relationship between the price and quantity supplied. Understanding why and how an event occurs in economics stands beneficial to understanding what happens after. 

Sources:

Categories
Analysis News

Should the Tokyo 2020 Olympics take place?

Introduction

The Japanese government and the International Olympic Committee (IOC) have officially declared that the 2020 Olympics will take place from July 23rd, 2021 onward. The decision is very controversial around the world, especially in the host country, Japan, because of the COVID-19 situation. Should the Olympics really take place? Or should they be canceled? In this article, I will cover two different perspectives: the individual perspective and a business/economics perspective.

Individual Perspective: First of all, what do people in Japan think about the Olympics? 

The above graph is the survey that asked more than 9000 Japanese citizens what they thought about the Olympics. The graph shows that Japanese citizens’ opinions about the opening of the Olympics are very spread. In August 2020, about 50% of the interviewees said that the Olympics could take place without any postponement. However, in June of 2021, only 36% of interviewees said so, and about 35% of the people interviewed thought that the Olympics should be canceled. As time goes by, it seems that more people are against the Olympics going ahead.

 In the background of such a result of the survey, from an individual perspective, there is almost no merit in the Olympics taking place this summer because simply, allowing all Olympics players from abroad means we have to expect more covid cases will occur in Tokyo. In addition, the IOC and JOC (Japanese Olympic Committee) have made rules that all players do not need to be quarantined for 2 weeks even though other foreigners who do not relate to the Olympics do. And, they also set a rule that players are allowed to bring, buy alcohol whenever they want to even though the Japanese Government prohibits stores from serving alcohol after 9 pm in Tokyo. Such “special treatments” increase the dissatisfaction of Japanese citizens. In Japan, just like other countries in the world, people try to spend time in their home as much as they can even though most of them want to travel or hang out with friends. In such circumstances, making special rules just for Olympics players make people think that this is unfair and feel disrespected.

Business perspective

On the other hand, from a business perspective, the Olympics can benefit not only a country but also some companies. The organizing committee announced that the economic effect of the Olympics can be estimated as 16,365,000,000 dollars. It means that if the Olympics are canceled, the amount of money will be lost in some ways. For the Japanese government, they spent large amounts of money to maintain places such as Japan National Stadium and Olympic Village because they thought all budgets they spent could be taken back by taking place the Olympics so that they certainly want to take place the Olympics no matter what. The Olympics also affect domestic companies a lot. The below graph shows what 4,092 companies will think if the Olympics is canceled. It shows that about 41% of them think that it is better to cancel the Olympics in terms of companies’ profits prediction. However, about 59% of them think that they will get more profit if the Olympics takes place. It means that about 60% of companies in Japan think that the Olympics will somehow benefit them even though foreigners will not visit Japan. Companies think this way because even though people from foreign countries are not able to come to Japan, the Olympics itself has a large impact on companies, especially hotels, restaurants, and airline companies because people take planes to come to Tokyo, eat meals at the restaurants, and then stay at the hotels. 

Conclusion

The Olympics should be a sports festival that everyone in the world enjoys. However, because of the spread of the pandemic, people argue who is responsible if the Olympics do not succeed, not how to make the Olympics better. In the background, many Japanese people disagree with the opening of the Olympics mainly for two reasons.

  1. They are concerned that the number of COVID cases will skyrocket once players around the world enter Japan.
  2. They feel they are treated unfairly by the government based on the special treatment that the government has made for Olympics players.

On the other hand, many companies in Japan think that they are able to take advantage of the Olympics as a chance to gain their profits while some of them don’t consider the Olympics as a big opportunity due to the prohibition of foreigners to enter Japan. It is interesting to see the different reactions toward the Olympics between citizens, and companies due to their consideration from different perspectives. Anyhow, the Olympics will begin in about 3 weeks from now. I hope the Olympics will succeed without any problems related to coronavirus and give hope to those who have suffered from the virus…

Sources

  1. https://www.tsr-net.co.jp/news/analysis/20210615_03.html
  2. https://www.nri.com/jp/knowledge/blog/lst/2021/fis/kiuchi/0525

What do you think? Let us know in the comments!

Categories
Discussion

Should housework be included in the GDP?

Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. However, it doesn’t include a broad fraction of human labour. In SNA terminology, unpaid labor corresponds to the category of ‘own-account services.’ This includes activities such as childcare, cleaning, meal preparation, and care for the sick and elderly. All of those are excluded from GDP as they are repetitive actions, which are not contributing to actual production.

What is your opinion? Do you think GDP measurements should be changed?

Additional reading:

  1. https://www.newstatesman.com/culture/2015/03/much-womens-work-unpaid-without-it-economy-would-crumble
  2. https://www.e-ir.info/2019/01/11/unpaid-work-and-the-governance-of-gdp-measurement/
Categories
Resources

Apps

Recently, our team reviewed several apps recommended for students interested in economics and politics. Below are summaries of the ones we enjoyed the most. Make sure to check them out and tell us in the comments what you think of them!

fxTrade

Initially the app was made for investors but for our purpose it contains a demo mode which is a great way to practice trading in real time! It challenges your knowledge and unexperienced people might have to do some research in order to crack the code. After a while it can become addicting as your balance is in constant fluctuation and your aim is to always stay in the positive side, getting more money!

Oanda Currency Converter

The main purpose of this App is to establish a general idea of converting currency. The application of this tool is limited but it is a great and simple way to understand and compare the value of the worlds fluctuating currencies. Ontop of that, it offers the option to add percentage rates which are actually offered by banks and credit companies.

Yahoo Finance

Anyone who is interested in the world of business knows that Yahoo is a leading resource. This app combines real-time information on the stock market with financial news. You can even track specific stocks which you are interested in! It might be overwhelming as this application is geared towards investors but it is a great way to gain insight.

Khan Academy

An useful app for learning Microeconomics and Macroeconomics as well as Statistics and History, which are relevant for your future Economics or International Relations studies! Moreover, you can prepare for SATs and APs which will help your application to the American University (read more about it on our University section page). The app provides you with lectures(videos and documents), quizzes and practice tests. Khan Academy also allows you to track you development and schedule personalised practices! Personally, it is my favourite and the most enjoyable way to study!

P.S. You can study for different subjects and educational systems, however, the programs in the App are mostly relevant for American education and prepare you for the exams in the US

Categories
Discussion

What is Economics for you?

Today’s discussion post is a little different… We are asking you what economics means to YOU personally!

Here are some quotes to inspire you:

“Economics is the painful elaboration of the obvious.” – Friedrich von Hayek

“Economics is a study of cause-and-effect relationships in an economy.” – Thomas Sowell

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University Information

Undergraduate Economics Education in the USA

Introduction

Over the past years, the USA has been a dominant destination for international students, as well as the principal choice for American high school students. According to the latest report by the ‘QS university rankings’, the USA is a leading country in the quality of education. If you want to receive valuable experiences and opportunities relevant to your academic and cultural preferences, while pursuing an Economics degree, the USA is a perfect fit.

Reasons to study Economics and Econometrics in the USA:
A high percentage of international students and no national discrimination
Flexibility, as the timetable and courses can be modified
Possibility to pursue Major and Minor degrees at the same time
Smart technology and developed classroom facilities
Research and internships opportunities
Globally recognised academic excellence

Requirements to enter Economics Undergraduate studies*:
TOEFL score 70 and higher or IELTS 6.0 and higher (only if you are not a native speaker)
SAT score of 1250 and higher or ACT score of 17 and higher
Analysing, writing and maths skills (vary from Statistics to calculus)
Additionally:
AP in Microeconomics/Macroeconomics, Statistics, Calculus
SAT subject tests(1 or 2) – Math level 2, History, Sciences
Extracurriculars:
Research or projects
Internships/summer job
Volunteering
Sports/Music/Performance Arts


*Depending on the ranking and level of the University, requirements will vary

Top 5 universities in Economics and Econometrics in the USA are:
1. Harvard University – Cambridge, MA
2. Massachusetts Institute of Technology (MIT) – Cambridge, MA
3. Stanford University – Stanford, CA
4. University of California-Berkeley(UCB)
5 and 6. Yale University – New Haven, CT and Princeton University – Princeton, NJ

A further list of top economics universities in the USA:
https://www.usnews.com/best-graduate-schools/top-humanities-schools/economics-rankings

P.S. About which region would you like to hear next?

Categories
Online Courses

Microeconomic Principles

Economics

Platform: Coursera, University of Illinois

Level: Beginner

This course aims to show students how economists think. It takes approximately 27 hours to complete. The material is divided into 8 weeks.

You can find out more here: https://www.coursera.org/learn/microeconomics?

Categories
Online Courses

Chinese Politics Part 1 – China and Political Science

Country-related, Politics, Economics

Platform: Coursera, Hong Kong University of Science and Technology

Level: Intermediate

In this course, you will learn about the interesection of economics and politics that is the case in China. Additionally, you will also learn about the orgins of China’s political system, how decisions are made, the extent to which Chinese citizens can get involved in politics, and China’s political future. The course takes around 19 hours to complete and is divided into 7 weeks.

Interested? Find out more here: https://www.coursera.org/learn/chinesepolitics1?

Categories
Online Courses

Circular Economy: An Introduction

Economics

Platform: edX, TU Delft

Level: Beginner

Our global society is not sustainable. The circular economy model provides solutions to these challenges. In this course, you will be introduced to and learn the basics of the Circular Economy over a period of seven weeks (with 3-6 hours of studying time a week).

Here is the link to the course if you want to find out more: https://www.edx.org/course/circular-economy-an-introduction

Categories
Online Courses

Political Economy of Institutions and Development

Economics, Politics

Platform: Coursera, Universiteit Leiden

Level: Beginner

In this course you will learn about the way in which politics and economics are interconnected in our modern world. Over the course of 10 weeks (and around 21 hours) you will also learn about different studies that were conducted to compare different political systems and the economical development of countries and why these studies may not be reliable.

Interested? Find out more here: https://www.coursera.org/learn/political-economy?