08s6f econ blog

This is an example of an ogliopoly.




*PLEASE FULL VIEW THE IMAGE* :)

(to refresh your memory, ogliopoly is the market situation when there are a few dominant sellers selling homogenous or differentiated products and the sellers are mutually interdependent)

Hence since there are only around 10 stalls in the canteen, it is quite a few numbers. All of them have roughly the same amount of output as the number of sellers is quite evenly spread out between the stalls. Their products (food) can be deemed as homogenous or differentiated. It is homogenous as all of them sell food. However, it is differentiated in the sense that there are Japanese, Indian, Malay, Western, Chinese food and also there are stalls seling snacks and drinks.

Furthermore, I realised that some of the stalls are also trying to diversify their products instead of narrowing themselves to just one kind of product ("market"). For example, Malay food stall started selling Indian food while Asian Fusion stall just started selling traditional chinese rice cake products on tueay (20 May 2008).

There can never be a monopoly happening in the Hwachong canteen as barriers to entry is very low as the capital needed to run a stall in there is not very high. Furthermore none of the stalls control a large proportion of the "market''. Also, there are a few stalls in the canteen so there is no sinlge seller and products sold are not unique. Since all 3 characterstics of a monopoly have not been fulfilled, the Hwachong canteen is therefore not a monopoly market structure.

Yay.

Fransisca :)

HELLO! =D hmm after the wonderfully exciting fac outing yesterday, i'm here to post an article review after the merger of two airline companies in the U.S. ! sorry its kinda long ! >< happy reading! haha hope it helps! =P

RED: IMPORTANT POINTS FROM ARTICLE
PURPLE: MY ANALYSIS =))

Buckle Up

By Jacqui Goddard Newsweek Web Exclusive
Apr 18, 2008 Updated: 1:45 p.m. ET Apr 18, 2008

Delta and Northwest have come a long way since skirting with Chapter 11 last year. Earlier this week, the two airlines announced a proposed merger. that's designed, in part, to hedge against rising fuel prices and the economic downturn. The marriage will create the world's largest carrier in terms of traffic, with 800 aircraft serving 400 cities in 67 countries. Staff will number 75,000 and combined annual revenue is estimated at $31.7 billion.

The possible merger of two airline companies, Delta and Northwest, is an example of a horizontal integration which occurs when different firms producing the same product or involved in the same stage of production join together to form a business unit. A merger increases a firm’s capacity and market share, which is less costly than internal expansion and yet still allow the firm to reap internal economies of scale (EOS).

So is it all blue skies ahead, or should the industry—and passengers—be buckling up for turbulence? NEWSWEEK spoke to Bijan Vasigh, managing director of Aviation Consulting Group and professor of economics and finance at Florida's Embry-Riddle Aeronautical University about what the merger may mean for the summer travel season. Excerpts:

NEWSWEEK: Delta and Northwest have both been struggling, so teaming up with one another sounds a bit like a three-legged race. Can they make it without stumbling?
Bijan Vasigh: The major objective is to enhance revenue and reduce costs by streamlining, but the jury is still out on how much they can achieve. These two are not the most efficient airlines in the U.S., so merging will create lots of new problems, like how to bring all the pilots together. No doubt they would have less competition and be able to cut costs, but will it still be a panacea down the road? I have a little bit of a negative opinion on that.

The merger would allow the resulting firm to enjoy cost and revenue advantages
A larger firm reaps internal EOS due to a larger scale of production. After merging, the firm will have the resources to support research and development, leading to development of better products to cater to the different tastes and preferences of consumers, allowing the firm to stay competitive and hence enhance revenue and reduce costs. It can also bargain and enjoy bulk purchases at a lower price from suppliers.

A larger firm also reaps revenue advantages. It is able to generate to more revenue and offer a broader array of service. A merger of two airline companies with different expertise also result in a combination which is more to the liking of consumers and enables them to capture a greater market share. They can also set aside a greater budget for advertising, establishing a strong brand name and fostering consumer loyalty.

Is this a done deal, or will it be terminally delayed?
Since it creates a monopoly-power issue, the merger has to be approved by the Department of Justice to make sure it doesn't violate antitrust regulations. It's not a done deal until the government gives permission, which could take several months—though the Bush administration is friendly to this type of issue.

However a merger also means that the firm enjoys a greater market share and has steeper and more price inelastic demand curves. This may result in the company ending up as the monopoly, which is undesirable as the company has full control over prices.

Won't this new mega-airline just threaten the smaller ones? Might we see them forging mergers, too?
Mergers like this could be a way to save the airline industry. If this one goes through, we should see other airlines doing the same in order to be competitive—for example, United and Continental may try, and if that goes through it will steer other consolidations in the U.S.

Merging does not always threaten smaller firms whose survival is made possible if they are able to reach out to consumers who desire for individuality and variety. Small firms can provide more personalized services for consumers as compared to larger firms. Also, as pointed out by Bijan Vasigh, small firms can also merge to join in the competition, which ultimately benefits consumers who enjoy more consumer surpluses.

Is this farewell to cheap tickets?
Yes. The major issue for any type of merger is that lower competition brings higher prices—that's a basic economic issue. They will have a tendency to run less flights, fill up the aircraft with more passengers and charge higher prices. [But] in some respects, passengers could benefit because the new airline will have a bigger reach; they can fly from the U.S. to any part of the world with no problem, so that's a positive.

The increased market power of firm could translate into higher prices and hence, lower consumer surplus. However, consumers benefit from the wider range of service offered.

But might they cut back on some of those routes?
The good thing about this consolidation is that they have many complementary routes; Delta is very strong over the Atlantic and to Europe, while Northwest is strong in the West and the Pacific. But where they are serving the same routes, [those flights] will undoubtedly be trimmed.

This shows an example of technical EOS which can be reaped by the merged firm, by sharing expertise and labour.

With more flights and more passengers to handle, could it also mean more delays? And will my baggage make it?
I don't think it will create more delays. Maybe some services could become less customer-friendly. But troubles with baggage? Hopefully not.

I hear Delta pilots are generally happy with the deal, but Northwest's aren't. Why?
It depends on how they agree on seniority issues and things like pay and work conditions. If you work for an airline [that pays] a lower salary and merges with one with higher wages, you would be happy. But if it had less you wouldn't be happy.

Though merging brings about many benefits for the company, it may also result in unemployment or retrenchment problems as workers who are not as skilled are no longer hired. As stated in this case, pilots in Northwest are unhappy as they are being paid a lower salary than before the merger. This may result in tension among the workers and lead to conflict. This is a type of internal disEOS – management difficulties whereby the firm faces problems in coordination and communication.

Will in-flight service change? Can travelers expect even fewer amenities?
One of the best ways to have more passengers is to provide attractive in-flight amenities--for example, JetBlue is popular for its 23 channels of live television. If there's no competition, cabin amenities can be a way of saving of money. But in a merger, those cabin amenities may go—smaller legroom, less aisle services, and that's a major issue for passengers. But free peanuts and cola … I think they're safe.

Initially, when there is competition, airline companies will tend to differentiate themselves by offering better and more attractive services. However, after a merger when the level of competition is not as high as before, services such as cable amenities may be forgone to reduce costs. This may make the firm less attractive to consumers who are looking for high standards of service.

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i have the soft copy of this review in msword. so feel free to get it from me if u have difficulties reading it on the blog =)) and do give me feedback or correct me if there u find any incorrect analysis anywhere =P thanks!

-xinling :))

Public assistance hike to kick in 2 months early
Weekend TODAY April 12-13 pg 3

COME May, recipients of public assistance (PA) can expect to receive more money for their daily needs.
The increase in PA rates has been brought forward from July 1 to May 5, the Ministry of Community Development, Youth and Sports (MCYS) announced on Friday.
Under the new rates, PA recipients will receive a rate increase of between $40 and $165 a month, depending on their household type.
Instead of getting $290 a month, an elderly recipient living alone will receive $330 a month.
A family of four will see a rate increase of $165 a month to $1,020, reported Channel NewsAsia.
MCYS said it expects to spend around $64 million this financial year to help needy Singaporeans under the various ComCare programmes.
"In the face of rising food prices, the ministry is most conscious of the PA recipients.
"We want to give them an extra two months because there is a need," said the Minister for Community Development, Youth and Sports, Dr Vivian Balakrishnan, on Friday.
The increase in PA rates is the latest in a series of measures announced recently to help lower-income families cope with rising inflation, which could go as high as 5.5 per cent this year.
On Thursday, the National Trades Union Congress announced that it would give out $4 million worth of discount vouchers to less well-off workers in the form of 5 per cent discount vouchers.
The MYCS is also planning to set aside at least $1 million from the ComCare fund to help needy families make ends meet.

-- In light of the rising food prices and increasing inflation, the government can be seen doing its best to provide for the lower-income families. With reference to the previous post, food and other basic commodities are price INelastic and more needy families are fretting over their expenses. As recipients of PA are getting more monetary aid, coupled with other schemes like food vouchers, they would be able to set aside an appropriate proportion of their income on basic necessities and so-called 'make ends meet'.

If the government has planned to carry this policy forward, it shows that they are getting increasingly worried that the repercussions of inflation are surfacing more quickly than expected. Nevertheless, I feel that the government is wise as Central Singapore District Mayor Zainudin Nordin puts it, 'Rather than react when they really feel the pinch, we can now be proactive in helping them with the funds from ComCare.'

As seen from the article, the government is putting aside more money to provide for financial aid, so will this burden rub off onto the working population? Also, is Singapore becomming more and more like a welfare state? There may be a possibility that the working population will be taxed a little more, or that other development projects will have to be forgone. Though thankfully Singapore will never desire to become a welfare state and these schemes may revert back to the original once inflation curbs.

Jason

(feel free to correct me or add on to the points =] thx)

MPs expect more people to seek food aid (ST 10 April 08, H2)

With rising food prices, they welcome help for needy from ComCare By Zakir Hussain

FOR the past year, MP Lee Bee Wah has been giving hampers with rice, instant noodles, bee hoon and canned food to the poor every week in her Nee Soon South ward.
The food is donated by Chinese temples in her ward, which is in Ang Mo Kio GRC.
But rising food prices have seen a 'sudden surge' in the number of people turning up for the gifts, doubling to more than 70 constituents.
'It could be that more know about this, but two weeks ago, I had to tell them to come on alternate weeks so there will be enough,' she said, adding that many are new faces.

There is a shortage of food vouchers as seen below due to increase in awareness.
Since, these are not commodities and there are no prices fixed to them, is the demand and supply graph still applicable?

MP Baey Yam Keng is seeing a similar situation in his Queenstown ward, which is part of Tanjong Pagar GRC.
'Many familiar faces are coming more often for food vouchers, about once a month compared to once in two months before,' he said.

Form of subsidy as government pays the retailers/producers to sell food at lower prices. Food is price price inelastic as they are necessities, so would the benefit to consumers be greater than to producers?

But six other MPs interviewed say they have yet to see a rise in the number of people seeking similar help. However, they foresee an uptrend should food prices continue to climb.
Said Marine Parade GRC MP Muhammad Faishal Ibrahim: 'If prices keep going up, I expect the number needing help to rise, especially among the low-income and retirees. The extra funds will come in handy.'
Like Dr Faishal, the other seven MPs saw the Government's recent announcement of a fund to help the needy cope with rising food costs as a 'proactive' move.
The price of rice has soared, hitting a record US$21.50 (S$30) per 45kg this week - double last year's average price.
Rising rice prices had caused some Singaporeans to stock up on rice, prompting the Government to assure the people that Singapore has an ample supply of the staple food.
Rice trader Jimmy Soh of Chye Choon Foods said Singaporeans can expect another hike in the retail price of rice in two to three weeks' time.

Equilibrium price increases due to increase in fall in supply.

1) As consumers expect prices to inflate, they will stock up on non-perishable food items and demand for food increases, causing the equilibrium price to rise further.

2) As suppliers expect prices to increase, they may decide not to sell large quantities of food.

However the price inflation has been kept to a minimum. Through the media, the government assures the public of ample supply of food [Remember all those rice on the news?]

Meanwhile, MPs are adopting the Government's targeted approach in giving help to needy residents.
MP Sam Tan has a programme for 120 public assistance (PA) recipients who are given 30 meal coupons a month for meals at hawker centres in his Radin Mas ward, in Tanjong Pagar GRC. Ms Denise Phua has a similar scheme for the needy in her Kampong Glam ward, part of Jalan Besar GRC.
Welfare groups have also pitched in, with free meals for the elderly, including PA recipients living alone who will see their monthly $290 aid from the Government raised to $330 from July.
But more help for the needy will be arriving 'very soon', Minister of State Yu-Foo Yee Shoon promised on Sunday.
At least $1 million from the national ComCare fund for the poor will be used to ease their food burden, said Mrs Yu-Foo, who is with the Community Development, Youth and Sports Ministry.
She did not give further details, but North West District Mayor Teo Ho Pin believes the aid will take the form of food or grocery vouchers.
He believes last year's buoyant job market, which gave jobs to many who were on social assistance, has kept numbers of those in need low.
The hardest hit will be those with little or no income, said Central Singapore District Mayor Zainudin Nordin. 'They spend most of what aid they get on food, and rising prices mean $1 is not $1 any more,' he said.
'Rather than react when they really feel the pinch, we can now be proactive in helping them with the funds from ComCare.'

Food is income inelastic; even if you have one million dolllars, you will not consume one million dollars worth of food before they spoil.

But MPs such as Dr Faishal and Sembawang GRC's Dr Lim Wee Kiak feel vouchers have to be accompanied by advice on how to spend wisely, which they now give to residents receiving help.
Ang Mo Kio GRC's Ms Lee said she has heard of some people exchanging vouchers for cash of lesser value.
'They can't do it if they get food directly, but you need storage space for hampers and people to carry them. So vouchers are the easiest way to help,' she added.

In contrast to the tutorial question, food vouchers and hamplets are benefial to everyone.

Dear 08S6F

Yes the take-up rate to blog (demand) is high because there is an incentive to win $200 cash! But you have to design the blog and upload relevant articles, flash, videos (no need to be original but something interesting and related to economics), etc to ensure the winning. =)

FYI, you are the first to come up with the blog. So keep up the good work!

Miss How