Readers go electronic as machine prices drop

The article entitled “Readers go electronic as machine prices drop” examines the increasing popularity of electronic books. The article states that the driving shift towards e-books is primarily because electronic editions are in demand because “they are more convenient, take up less space and can be made available to more people”.

In economic terms, the E-book is a substitution good for traditional paperback books. Thus theoretically, we can assume that as the demand for E-book increases, we will consequently see a decrease in the demand for traditional books. As demand for traditional books decreases, so will the price of these books, which will ultimately result in less production of books—meaning increasing unemployment for those individuals who hold jobs in the production of paper-back books. With that being said, increasing production of E-books/devices will require more workers to supply sufficient output, and thus the unemployment in the traditional book market may be made up for in the Ebook market.

Moreover, as firms begin to recognize the increasing popularity of electronic books, and as there is no clear monopolistic power, we can expect to see more firms enter the electronic book market as market entry barriers are relatively low. This will essentially result in a greater supply of electronic books/devices, suggesting that we may see decreasing prices of electronic books in the future.

 

Article retrieved from:

http://www.sun-sentinel.com/business/sfl-ebook readers101809,0,5171677.story

 

Decrease in demand for electricity may cause bills to fall

A news article entitled “Electricity demand    sputters; bills may fall” on the MSNBC website  states that due to the largest decline in the demand for US electricity in decades, we may finally “be seeing some relief from rising utility bills”.

This article essentially reveals that increasing rates of unemployment, and the prospects for the job market remaining “gloomy”, have increased the efforts of consumers to limit any unnecessary consumption, specifically power. In additon to consumers, the article notes that power consumtion by industrial and manufacturing companies have fallen faster than anywhere else at an estimated 10% this year. These efforts to reduce power costs have ultimately led to a decrease in demand for electricity within the US, which economists predict will lead to, according the theory of supply and demand, lower prices of electricity.

With that being said, the article also notes that the decrease in consumers utility bills will ultimately depend on where he or she lives. Consumers that reside in the Northeast, West, or in a central states like Texas, where electricity rates are based on spot prices are likely to see some “relief” in terms of bills, while consumers whose bills are calculated based on long-term contracts will most likely benefit little from the decrease in demand.

However, although electricity prices are expected to fall, I expect these effects to be short-lived as news of economies coming out of recessions fill the media, suggesting that firms may require to increase production, consequently leading to an increase in demand for electrical consumption which will result in higher prices.

The link to this article is http://www.msnbc.msn.com/id/32709382/ns/business-oil_and_energy/

 

The Collapse of the Lehman Brothers

On September 15, 2008, the fourth-largest US investment bank, Lehman Brothers filed the largest bankruptcy petition to date. The nearly 158-year-old Firm was originally founded in 1850 by Jewish immigrant brothers Emanuel, Henry and Mayer Lehman, and successfully survived several monumental economic crises—such as the railroad bankruptcies, the Great Depressions, and the fall of Long-Term Capital Management. In fact, until June of 2008, Lehman Brothers Inc had not once reported a quarterly loss. Therefore the bankruptcy of Lehman Brothers came as a shock for markets around the world, causing them to take a plunge once Lehman Bothers Inc filed Chapter 11 with the US Bankruptcy court. Now how could the giant investment bank succumb to a bankruptcy estimated to be at 613 billion dollars?

One of the instrumental causes of Lehman’s bankruptcy was the sub-prime mortgage crises that was sweeping through both the Global and  US economy. In essence, people who possessed low credit scores were being given loans that they were essentially unable to pay back, creating a massive credit crisis for Lehman. With plummeting real estate prices accompanying the massive credit crisis, the investment bank lost over 60 billion dollars in bad real-estate loans.

In addition to the sub-prime mortgage crises, the collapse of Lehman brothers is often said to be triggered by the refusal of other banks to partake in business transactions with the Lehamn brothers. Because of the high risk entailed in providing housing loans to consumers with low credit scores and the rise of interest rates, when Lehman Brothers began to suffer losses, other banks ended all trading with the Lehman Brothers causing the investment bank to essentially lose almost all its business.

With that being said, the most prominent reasons for the collapse of the investment bank, in my opinion is that of the hubris of Richard Fuld, the CEO of Lehman Brothers. Despite the conspicuous signs that Lehman Brothers was heading towards a crisis,  Fuld continued to reject bids intended to save Lehman in hopes that buyers would recognize that his bank was worth much more than Wall Street was giving it credit for. In fact, many analysts have stated that had the bank been sold just a week before it filed Chapter 11, it could have in fact avoided the disgrace  of bankruptcy. However, Fuld was acting too selfish to see reason and as a result the 158-year-old investment giant is no more.

Sources

http://edition.cnn.com/2008/BUSINESS/09/15/lehman.merrill.stocks.turmoil/index.html

http://news.bbc.co.uk/2/hi/business/7615974.stm

http://www.guardian.co.uk/business/2008/sep/15/lehmanbrothers.marketturmoil

 

1:1 Computing Initial Thoughts

In response to “How will I face the challenge of distraction and the threat of loss or damage?”

One issue of concern that accompanied the idea of implementing a 1:1 laptop program within Economics classes was the possibility of distraction. However, as high school students it should be expected that we have enough self-discipline to be able to incorporate the use of laptops in class without getting off task.  As for the issue of loss and damage, if we are responsible enough to own and use  a laptop, then we should be responsible enough to be able to properly care for our laptops in a way that prevents it from getting damaged or lost.

 

The Economic Effects of Japan’s Election

As a result of the recent elections in Japan, the House of Representatives, in terms of its members, has seen imperative changes. The Liberal Democratic Party is now a minority within the house, while the relatively new Democratic Party of Japan is the dominating power, in control of both Japanese Diet houses. With that being said, I was interested to see if there were any Economics articles which discussed the possible implications of such drastic changes in government representation on the economy. Below is the link to an article I obtained from Newsweek which discusses the economic effect of Japan’s recent election. I found it highly informative and overall an intriguing macroeconomics article.

http://www.newsweek.com/id/212121

 

Helpful Economics Notes (Link)

I find this website useful for revision purposes.  Each section of the curriculum is clearly outlined- making it very easy to navigate through the website. In addition, this website also contains interesting blogs on current events which may prove to be useful when it comes to writing Commentaries for your IA’s.

http://tutor2u.net/economics/revision-notes/index.html