Economic Responses - Annotated Bibliography Example

Economic responses Task: BBC News Food prices jump will hit poor, World Bank warns, BBC, viewed on 15th September . This article explains of a surge in prices of food. This pertains to the basic food in the world market. These are price elastic products that their disparity, in the same, would easily cause a large shift in the quantity that the consumer demands. However, food presents a different scenario because it is undeniably a basic commodity among all consumers. Food forms the core of an economy since the whole of the working and consuming population depends on meals for survival. It is notable that the key grains such as wheat, corn and soybean have experienced dramatic price increases (BBC News 2012). This is because it would still be feasible to sell the commodities at higher prices. This means that they possess low elasticity to changes in price. This presents notable scenarios. Heat wave and drought might have been probable causes to crop failure. This is presumable to have triggered low supply of food in the market. In spite of the fact that Europe is a highly industrial continent, the world still heavily relies on the same for food supply. In the USA, there has been a memorable drought that rendered low yields on soybeans and crop. Similarly, Ukraine, Kazakhstan and Russia experienced a similar fate in their corn yields. Besides, the climate destroyed the yield of wheat crops. This impacted the world by a rise of 10 percent in the world food prices. In addition, the World Bank reported of ethanol use in producing biofuel. This accounts for ten percent of the whole USA’s corn production. Biofuel production consumes a significant part of corn production thereby compromising on corn processing. This is a contravening scenario for imports. Countries, such as those in the Sub-Saharan, are vulnerable to food prices. To begin with, the low availability of food will compel suppliers to provide high prices. This is vital for controlling demand since the countries would be desperate to buy significant food products. Countries would purchase excess food such that they compensate for anticipated future demand. This means that a large surge in prices, of foods, cause a limited effect on the level of demand. In certain instances, it causes a panic that set businesses and governments in purchasing significant quantity of products. In such a scenario, it is crucial for responsible organizations such as governments to control fraudulent price increases. In close relation to this, governments should strive to minimize the influence of monopolies. Most families resort to alternative measures of attaining food. This would easily pertain to less nutritious foods at lower prices. In this scenario, alternatives exist to compensate for the forgone satisfaction of consuming nutritious foods such as wheat. If the price of corn increases, consumers seek the alternative of low costly food products. It necessitates a change in quantity such that the consumer maintains the same level of satiation. In the case of a less nutritious food, a rational consumer would most likely increase the quantity of the other food in one’s consumption. It is vital to highlight that consumers cannot wholly forgo the consumption of corn. This suggests that they strive to provide a feasible balance between the two products. Most consumers would strive to have smaller portions of corn and wheat while increasing their intake on alternative foods. In extreme circumstances, consumers would most likely stop consuming corn. However, entities would have intervened before the situation entirely deteriorates. Kenny, C 2012, Don’t bet on the end of China’s growth miracle, Bloomberg business week, viewed on 15th September 2012, . China has occupied the global news space because of notable reasons. This is because it has watched unrivalled economic growth in the midst of a recession. China’s economy was moving in positive tides as other countries experienced economic downturns. This generated interest as various entities strove to peep into China’s economic model. It is discernible that China fostered a high economic growth through robust efforts by the working population and a multi-industrial focus. However, China has raised fears over its declining rate of economic growth. It is notable that China’s economy has been progressing at an average of eight percent. This means that it usually shifts slightly higher or lower than this figure. In 2010, the economy surged by 10.4 percent. In 2011, the figure reduced to 9.2 percent (Kenny 2012). The year 2012 presented a worse situation as the country’s rate of economic growth fell to 7.6 percent. In this case, the rate of growth compares to the marginal product. Rate of growth is a function of growth rather than output. In the end, it still signifies growth. A decline in the rate of growth signifies an increase in output that is less than a previous figure. In China’s scenario, it set fears of a receding economic prospect. This is because, in case of the same progression, it would move to the figure zero. A growth rate of zero signifies a constant economic level. Marginal product refers to the change in alteration in growth as output increases. The marginal product can exist in a negative or a positive form. This is because it is a relation of output and input. Marginal product can also be termed as marginal returns. This is because it is a firm’s idea of progress as pertains to resources that it commits for profits. In a typical firm, it is supposed to have increasing marginal returns at the beginning. This is because it highly employs all inputs into production. Increasing marginal returns refer to a situation whereby output surges at an increasing rate. Therefore, increasing returns occur because additional input adds more output into the current level. This also points to a large capacity for growth whereby additional inputs can easily contribute into increased rate of productivity. In terms of labor, specialization and its division signifies substantial productivity. At a later point, the marginal returns decline as output progresses. This means that additional inputs contribute to increasing the level of output. However, the change occurs at a decreasing rate. In the real sense, additional input contributes to a smaller change than the previous one. In the end, it still represents a positive change. The production curve should terminate at a pointed end. This is a region whereby additional input does not contribute to a change in production. It is identifiable as the optimum level of production. This is because the marginal product equals zero. It signifies that a firm has wholly exhausted its productive space. In a practical sense, it is a stringent point that an average firm rarely reaches. The China’s situation signifies a decrease in marginal productivity. At the stage whereby growth occurs at a decreasing rate, China has to check on other ways of stabilizing their economy. These measures surpass addition of inputs. China is an established economy that engineer ways of manipulating input factors such that it stabilizes its growth. This means that it strives to shift its production curve such that it produces at a higher level. In this case, a drop in output, along the new curve, does not strike fear in the industrial community. BBC News, India opens retail to global supermarkets, BBC India, viewed on 15th September 2012, . India is one of the few countries that witnessed positive economic tides amidst the recent economic downturn. Their case is different from that of China since they follow a capitalistic model. This means that they exist in the same path that western countries have followed. The developed foreign countries are interested in gaining out of India’s resources rather than learning about their economic model. The western countries are facing a destabilization of their economies after long periods of economic stardom. On the other hand, India was experiencing promising periods of economic growth. This may be attributable to a productive space that the country has not exhausted. On the other hand, the western countries are facing limited options after exhausting their productive capacities. They exist in the stage whereby they have to manipulate input and support elements. It is a broad area that needs weighing and various calculations. In the event of globalization, western countries take advantage of this scenario to exploit opportunities in countries such as India. This is because it contributes to a shift in production curve in cases where further manipulations do not contribute to additional input. Investment, in other countries, shifts their production curves in the sense that they produce at a higher levels. The India’s government has been struggling to enact policy that opens up its local retail to foreign investment (BBC News). This exists in the form of supermarket chains such as Wal-Mart. The government had suspended an earlier plan due to opposition from other entities. However, it reinstated this plan after a long period of consideration. This is an effort to reestablish a previously stabilizing economy. In spite of the fact that India has been economically progressing, it is tricky to balance a diverse economic growth. The country has not adopted the machinations to balance large economies. In this sense, the country swings between edges of growth and instability. The government has adopted plans that allow foreign entities to have existing share of production space. This occurs in the form of agreements to share capital and profits. In these reform initiatives, foreign lines would purchase close to 50 percent of stakes in local entities such as carriers. This would help in revamping the regressing aviation sector. The India’s retail sector is a lucrative entity. It helps in providing income to entrepreneurs that build their businesses from limited capital. This is a scenario of perfect competition because they are several firms. The retail business is a favorite entrepreneurial venture for many Indians since it provided an unlimited space for increasing one’s output. In addition, it eliminates the scenario for monopoly since many individuals can access the capital to start up a retail business. This is the source of the fear towards foreign investment in the retail sector. Large businesses, such as Wal-Mart, would use large capital and established image to gain competitive advantage over local retail businesses. This eventually establishes monopolies as all consumers turn to large brands. Large supermarkets are detrimental for small retail businesses since they possess the capital to swim through economic downturns. In this sense, they hamper local entrepreneurship. It is vital to highlight that foreign investment would provide employment to the local population. However, this does not compensate for the detriment that they cause to entrepreneurship. A positive scenario exists in the fact that such agreements should be controlled such that the foreign investments for shorter periods. Hargreaves, S 2012, The case for outsourcing jobs, CNN Money, viewed on 15th September 2012, < http://money.cnn.com/2012/09/14/news/economy/outsourcing-jobs/index.html>. Outsourcing has become the new norm in economically established countries such as America. In economics theory, there exists the assumption of one type of labor. However, there exist several forms of labor. Labor differs in terms of expertise. Globalization allows the platform for countries to source for cheap manpower in other places. On the other hand, countries have restrictions that constrain such movements. In other instances, virtual companies are immovable into new locations. Such companies are able to situate their offices in flexible scenarios. Outsourcing has created a politically rife background for various arguments in the USA (Hargreaves 2012). Certain entities criticize the current government for outsourcing some jobs to foreign countries. This is in reference to a stimulus program that builds on outsourcing jobs. Tough economic periods need few and highly productive labor force. Such a labor force should possess high expertise in their fields. Economists argue that outsourcing entail benefits for both the local and foreign economy. Jobs that need high expertise present alternative cases for analyzing the input market. In most countries, the industrial community does not utilize such expertise since they offer higher standards of pay. In this sense, most companies prefer to stay in the certain zone of employing averagely skilled employees. The recession, in USA, has necessitated that governments employ alternative measures of response. This is because the economic downturn is a sign of disequilibrium to the economy. In terms of labor, the demand for high skilled jobs exceeds its supply. The feasible alternative pertains to shifting its supply curve. The firms have exhausted the expertise of the current USA’s population. This means that the existing firms cannot move along the current demand curves. On the other hand, they possess meager control over the supply curve of labor. In this sense, they strive to trigger a shift in the supply curve such that their demand becomes synchronized with the required equilibrium. It is notable that expertise labor would require heavy remuneration. However, this would not match the costs of having USA’s labor. Firms slightly cut back on their production costs by seeking high level of skills from other countries. Mostly, such jobs are intensive and technologically related. This means that the employees have a better stake at arguing out their benefits. Market research proves that outsourced labor results into cheaper goods for consumers. Cheaper goods provide an illusion, of income, that triggers most consumers to increase their purchases. Increase in consumption is a positive indication of economic progress since suppliers possess the assurance of sales. In most instances, production costs, due to labor, force suppliers to offer higher prices for their products. Foreign labor force are willing to accept compensation that the current workforce may frown at the same. This provides the advantage of advancement to these employees. In this perspective, such employees offer the market for USA’s consumer products. However, data presents fears of inaccuracy. This is because offshore companies keep records of their progress. Offshore companies do not directly transfer their benefits to employees. This raises a keen ethical issue since such employees do not attain the adequate benefits for their services. They manipulate employees by keeping them out of knowledge to the contract contents. Besides, the foreign firms do not necessarily utilize their prospects for increasing local jobs. Bibliography BBC News 2012, Food prices jump will hit poor, World Bank warns, BBC, viewed on 15th September 2012, . BBC News, India opens retail to global supermarkets, BBC India, viewed on 15th September 2012, . Hargreaves, S 2012, The case for outsourcing jobs, CNN Money, viewed on 15th September 2012, < http://money.cnn.com/2012/09/14/news/economy/outsourcing-jobs/index.html>. Kenny, C 2012, Don’t bet on the end of China’s growth miracle, Bloomberg business week, viewed on 15th September 2012, . Read More