Everyone Wants to Be a Homeowner. Why Not a Foodowner?
People like to invest in the housing rather in food because of the long term benefits associated with housing and for securing the future.
People want to make healthy investment decisions. This is because of The Individual’s Economizing Problem, the wants of people exceed their needs because of the scarce resources and limited income, so they want to make such decisions from which greater output can be obtained. Josh Barro describes the same phenomenon in the article Everyone Wants to Be a Homeowner. Why Not a Foodowner? In the New York Times, that people want to own the house, instead of owning the food. This is because of the reason that buying the stream of the food is expensive as well as risky, because the consumers prefer low prices of food. One has to take loan from bank for buying food steam, and in the case of a change in the preference of food, i.e., one now wants vegetables instead of meat, then the contract is sold at the prevailing market price, which is a loss for the food owners, as no profit is earned by selling at the current price.
The Theory of Consumer Behavior is also indicative of the fact that the consumers have rational behavior. Consumer is a rational individual that wants to use his money for deriving greatest possible satisfaction, or the utility. The consumers want to maximize their total utility, so they become involved in the rational behavior. So, for maximizing their total utility people are investing in the housing market, and not in the food market. Also, this is because the consumer has to compromise, he has to choose the most beneficial and satisfying mix of the goods and services.
Furthermore, the principle of the Profit Maximization in the Long Run is indicative of the fact that the firms and the individuals want to maximize their profits considering the long term perspectives. Similar is the case with the housing, the housing is introduced so that individuals can use it by investing in it. People prefer housing over food because housing provides investment opportunity that paves the way to securing the future. But, the consumers of housing take long run equity interests in the housing considering that it is an investment, as a matter of fact, this is distorting the housing market, creating restricted supply, increased prices and leading to speculation.
Furthermore, if the Characteristics of the Market System are considered then it become clear that the people want Private Onwnership or Private Property so that they can make further investment. The private property rights also encourage innovation, property maintenance, and the growth of the economy. Since, mostly the middle class families consider house equity as the most reliable form of investment, and consider other investments such as bonds and stocks as volatile, so they invest mostly in the housing sector rather than any other sector in pursue of a better future. But, it is also a fact that the decline in the prices of houses may entirely remove the interest of equity and make it a risky deal.
In a nutshell, people do not want to be a food owner, they want to be a house owner. This is because, people want to make such an investment that gives them more benefits. In this regard, the Individual’s Economizing problem principle explains that people people have limited resources, but their wants are not limited, so they make such decisions that assure them of greater output. Further, in the support of the argument, The Theory of consumer behavior describes that consumer is rational and he wants to maximize total utility, and for this person is investing more in the housing rather than in food, because they rationally consider that fact that making investment in housing will maximize their utility more rather than investing in the food sector. Furthermore, people want to maximize their profits in the long run, and in order to maximize their profits people are preferring housing sector. But long run equity interests leading to distortion of market, inflation, lower supply and speculation. Moreover, in order to invest further, people want private ownership, so by buying house they become private owner and can invest further, so they consider investment in housing as non-volatile and investment in the stocks and bonds as volatile.
Almost-Free Gas Comes at a High Cost
The use and demand of gasoline is rising, the supply is decreasing due to smuggling and poor policies of government, which is increasing the price of gasoline creating inflation as a whole.
Venezuela is a country where once the gasoline prices were quite low, but now even a low quantity of gasoline is available at a high price. This is also explained in the article ‘Almost-Free Gas Comes at a High Cost’ by Angel Gonzaez, which can be illustrated with the help of the concept of the Resource Pricing, the firms consider the significance of the resource pricing before supplying the product. They adopt a strategy of Cost Minimization. The resource price of the firm is its cost, and in order to get more profit, the forms produces the output that help in the maximization of the profit by utilizing the least costly resource combination. The firms consider the resource prices because they play a significant role in the determination of the quantities of the resources for producing the goods and services. So, the gasoline producing firms are considering their cost resource prices, they have adopted the cost minimization strategy, as they are using the best possible combination for producing gasoline, but in order to maximize their profit they are supplying less gasoline at a very high rate.
But, as a matter of fact The Market Demand for the gasoline resource is increasing in the country, the increase in the demand of the product also increases the demand of resource, so the gasoline producing firms are requiring more resources, and offering the product at a very high price to the consumers, which is paving the way to the creation of the inflation as a whole. Furthermore, there are Policy Issues that are associated with the supply of gasoline. The government officials of the country are not interested in taking this matter of rising gasoline prices into consideration, as a result of which people are facing difficulties in getting gasoline. Also, it is a known microeconomics fact that gasoline is a product whose increase in demand, decreases the supply and eventually the price increases. But, as a matter of fact Venezuela is not only facing this shortage of gasoline, there are many other developing countries that are facing this problem. The developing countries are adopting certain policies for boosting the industry that depends on gasoline, and for improving the living conditions.
Furthermore, the gasoline companies are enjoying Monopoly, and are setting the price of producing high. They are providing thing less product at very high rates, which is not meeting the demand as well as expectations of the consumers. The country is facing shortage of gasoline also because of the smuggling. Most of the gasoline is smuggled from Venezuela to Colombia via motorcycles, buses and taxes. Because of all these situations in the country is becoming a victim of the budget deficit, and the shortage of gasoline is becoming worst.
Additionally, the governments of many countries are providing subsidies in order to increase the production of gasoline, the subsidies are beneficial as they help the poor population of the developing countries to have access to the energy.
In a nutshell, the demand for the gasoline is increasing in Venezuela, supply is decreasing, the country is facing budget deficits, and inflation is prevailing in the country. All these can also be justified in the light of economic concepts. Such as the resource pricing view explains that the firms consider cost minimization strategy they want their production cost to be low, and want to reap maximum profits. Similarly, the firms in Venezuela are producing the product at the lowest cost, but supplying it at a high price, and supplying the product less, so that more profits can be obtained. This is also because they want to enjoy monopoly power in the country, as the market demand for the product is high. This is creating problems for people as they are not getting their work done. This condition is getting worst and shortage of gasoline is increasing as there are policy issues and the gas is smuggled to Columbia. The government officials are not taking keen interest in this matter. There are many other countries of the developing world that are facing the same problem, the governments are providing subsidies for making the access to the energy possible, which is advantageous especially for the poor people residing in the developing countries.
Can Imported CEO Fix Russian Cars?
With the change in the demand and technology, the previous strategies do not work. The strategies should be revised in order to meet the preferences of the consumers.
The Consumer Chioce plays an important role in the success of the business. Every consumer has preferences for a product or service that is available in the market, they have a very good idea of the fact that how much marginal utility they can get by consuming the successive units of different products that they may purchase. The preference and the tastes of individuals change with the passage of time, so in order to meet the changing demands and preferences of consumers the firms should produce those goods that satisfy the consumers, so that economic activities continue ensuring economic growth. This is also emphasized in the article Can Imported CEO Fix Russian Cars? By Lucas I. Alpert that previously the top executive of Detroit was working in according to the needs and demands of the market, and the company was making extraordinary profits, but now the new executive fails to achieve a remarkable progress for the company. This is because the preference of the consumers is not considered. Considering the fact that the company fails to do technological improvement for manufacturing of the Russian Cars, the company required more investment in the R & D in order to produce an innovative product tat satisfy the needs and demands of the customers. Further, the company has not considered the process of diffusion, even not adopted partnership with other companies in order to take advantage of their technology and innovative idea, so unable to achieve the desired results
Further, The company has not analyzed the Income Effect of the consumers. The company has offered the cars at high prices, and the cars were not technologically intensive, which lowered the demand of cars, because the income of the consumers has not permitted them to buy these cars, high in price and low in technology.
According to the Law of Demand, if the price is higher then the demand will be low, and if the price is low the demand will be high. The ex-executive of Detroit has considered this principle and worked according to it. He has given preference to the choice of customer and provided them the quality product at a lower price, which helped in boosting the business and ultimately enhances economic activities.
The support of government also plays an important role in this regard. It helps in controlling the fee on the import of the products that can be used in order to make technology intensive vehicles. Government can help the firm in controlling their Cost of Production, as the companies become aware of their opportunity cost, and will not import those goods in which they have to sacrifice more. Further, the company has also become able to analyze its implicit as well as explicit cost, and keeping them into consideration more quantity can be produced without sacrificing profits. So, Detriot should comply with the rules and regulations as set by the government in order to provide Russian cars at the reasonable price, which will ultimately again help in lifting up the present condition of the company.
In a nutshell, the preference, needs and demand of consumers hold great significance in promoting economic activities. The changing economic needs and the demands of products ad services should be considered by the companies in order to make progress. According to them the law of demand people purchase more product if the price is less, the same strategy is followed by the previous executive of Detroit, who has generated economic activity in the car market by providing the cars at a low price that raised the demand of product and helped the business to grow. Further, innovation, inventions and diffusions are necessary as they allow the company to adopt the latest innovative idea for making an exceptional product. It is also necessary to consider the income effect as buying decision is based on the income of individuals. The company should also consider the government policies, rules and regulations because the government can assist the company In controlling the cost of production, and in the import of the latest technology without imposing fees, so that the company becomes able to meet the varying tastes and preferences of consumers.
Chinese College Graduates Play It Safe and Lose Out
The demand for college graduates is decreasing in China, as the education system of the country is not providing innovative graduates.
The Market Demand depends on the needs and requirements of the market for getting the required work done. The market demand of college graduates is decreasing in China, this is because the country’s education system is not providing the graduates that match the market needs and requirements. The market is demanding innovative individuals for introducing innovative ideas and producing innovative products, but as a matter of fact, Chinese Universities are providing the required education that is necessary for improving the innovative capability of the individuals. The article ‘Chinese College Graduates Play It Safe and Lose Out’ by Bob Davis, explains the same fact, that the educational system is providing the required skills, as a result of which the number of graduates increased and many of have to work at lower wages, still most of them remain unemployed, because of which people are anxious about their future.
Moreover, the government has created Monopoly in this regard. The Chinese government is providing assistance in this regard. The government is not properly solving the problem of unemployment, and is not giving government jobs to the graduates. The universities have to beg from the government and even bow before the government officials for giving jobs to their graduates. This is discouraging the graduates and they are opting entrepreneurship.
Furthermore, the tastes and preferences of graduates are also changing. This is because people are considering government and civil jobs as corrupt and uncertain, as they are given on the basis of references and not to the deserving candidate. Graduates prefer a job in the private organizations, because the jobs in the private organizations are secure.
Additionally, In China there are Diseconomies of Scale. This is because the government is not properly managing and controlling the unemployment and is not coordinating with the universities in order to produce skilled graduates, which is ultimately reducing production of the country. Further, technological advance occurs because of the competition and rivalry that is existing among the individuals or the firms in the market. Since, the competition and rivalry are getting intense in the market, so demand for skilled workers is increasing. But, unfortunately, the supply of the skilled workers is less in the country. This is due to a mismatch between what is demanded and what is supplied. The market is in the need of the skilled and innovative workers, but the universities are not supplying the graduates according to the demand of the market. This is creating unemployment in the economy, ultimately leading to diseconomies of scale.
In a nutshell, the demand for skilled workers is high in the Chinese economy, but supply is less. The Chinese Universities are reluctant to provide the required individuals that possess innovative capabilities and the required skills. Further, the Chinese government is not supported in this regard. It is creating a monopoly by not offering the government jobs to the individuals, the universities are begging for employment of their pass outs, which is quite a discouraging attitude for graduates. But, now the tastes and preferences of people have also changed. The graduates are considering government jobs as corrupt and uncertain, and are preferring private jobs because of job security. Government is not properly controlling unemployment and is not coordinating with the universities, as a result of this unskilled labor force is increasing. The technological improvements are occurring in the market because of the fierce competition, so in order to cope with the changing needs and requirements of market innovative individuals are required that can help in the production of the innovative products, diseconomies of scale is prevailing in the country, and production is decreasing.