Samsung takes over Nokia

Relatively, Nokia seems to have lost its spot in the cellphone industry.

One of the main problems with Nokia is that they are selling mostly inferior goods - nonsmartphones. But unlike goods sold at Walmart, another reputed and successful company well known for selling inferior goods, people generally are unwilling to invest in inferior goods for something like a phone. Only 14% of nokias shipments are smartphones, as compared to 35% of samsungs shipments which are shipments.

Its clear that Nokias strategy of trying to sell cheaper inferior goods with their service is not a profitable strategy. As other companies progress, the demand for Nokia phones will probably reduce even more, as it fails to keep up with the competition.

http://money.cnn.com/2012/04/27/technology/nokia-samsung/index.htm

Apple seems to not be worried

Although a variety of substitute goods were shortly released after the ipad, none of them seemed to have any effect. Despite the fact that some are even of similar quality, the apple brand name seems to be strong enough to hold in customers.

These tablets, although comparable in quality to apple tablets, seem to be scoffed at by the apple CEO as an inferior good. The brand name of apple is so powerful that this taste preference significantly shifts the demand. Assuming this is true, this is an example of horizontal price differentiation. Apple products are simply preferred [by most] over other products because of the brand, and are considered to be a superior product over less expensive brands.

This may all be about to change.

Windows is planning on releasing another tablet computer. Unlike the ipad, it can fold open and turn into a full fledged computer. Rather than aiming to beat out the ipad, this product seems to be aiming for horizontal price differentiation from the ipad, targeting a different market completely.

Cook may be scoffing now, but if their demand is reduced because of this new tablet taking away some of their customers, his reaction may change.


source: http://www.cnn.com/2012/04/25/tech/mobile/apple-ceo-windows-8/index.html?iref=allsearch

1 dollar coins not making the cut

The US is soon going to stop minting the 1 dollar coins that nobody tends to really like.

Its about time. The United states recently put in 650,000 to build another vault to just hold the 1 dollar presidential coins that people dont prefer.

But rather than stopping them completely, there are other things that the government could try to do to help build up the popularity of 1 dollar coins, if we already have them produced. By directly increasing the demand, it is possible that we can save these one dollar coins.

One method they could use is to try to increase the popularity of complementary goods, in a way. As of now, very few vending machines accept these dollar coins. If vending machines had slots for the dollar coins, its possible that the popularity of the dollar coins would go up. Dollar bills are also viewed as having a higher value than coins. The creation of more classy coin pouches or coin wallets could help in the decrease of this viewpoint.

Another option the government does have is to force everyone to switch from the use of dollar bills to dollar coins, or offer more incentive for the dollar coins than the dollar bills.

We also have to look at the opportunity cost of the coins. The coins cost significantly more than the dollar bills to make, and circulate slower, which means that we have to create more of them for the same amount of time. Though the latter could be changed, the costs of switching over to the coin do seem to outweigh the benefits.

As now, dollar coins just aren't popular enough yet to survive, and it doesnt look like they will be getting popular by themselves. The economical cost of the coins just dont live up to the standard either.

Source: http://abcnews.go.com/blogs/politics/2011/12/u-s-suspends-production-of-presidential-1-coins/
http://www.nytimes.com/2011/11/06/us/some-seek-to-replace-the-dollar-bill-with-the-dollar-coin.html

How one change in oil will affect us all.

Oil is the blood of our nation, and to some extent, our world. Without it, our standard of living would be significantly altered, for the worse.

That is why, when one of the big producers of oil will be boycotted, consumers will be the ones punished.

Barack Obama has made the sanctions on iranian oil even stronger. He has completely stopped buying iranian oil, and is putting more pressure on other countries in an attempt to force Iran to give up its nuclear program. Basically, he is forcing countries to choose between importing oil from iran, or doing business with the US.

China, one of the biggest consumers of oil, has decided not to boycott Iran, believing that the US does not have a right to punish other nations like that. This should be a relief in oil prices; it should reduce the amount of demand overall, which would help the prices a small amount because china is such a big consumer of iranian oil. All the other countries have cut down on oil importation from iran, or completely stopped importing oil, under the threat of sanctions from the US. China just isn't scared of us.

Analysts are expecting a 20% spike in oil prices. This spike can be explained by a simple demand/supply graph. If the demand remains constant, and the supply curve shifts to the left, the prices will increase. In this case, the 2.2 million barrels of oil decrease in oil will result in a 20% increase in prices for consumers. To make up for this, the federal government is trying to pump more oil out of Saudi Arabia and tap into reserves, but doing these two things would mean that in the account of any other reason for shortage, we would be in a lot of trouble.

All us consumers can do is hope that the US forgives Iran soon.

Source: U.S. tightens oil sanctions on Iran: http://money.cnn.com/2012/03/30/news/international/Iran-sanctions/?npt=NP1

Economics in action

The relationship between retailers and shoppers is an interesting one: the retailer sets prices but the shopper chooses whether or not they want to buy. Although the retailers do have a choice in what their starting price is, Mr. Vineburg and many others believe that the ultimate price it is sold at is exactly what customers want. Ultimately, they will not be willing to buy it at a price any higher than what they buy it at.

This can be shown on a demand curve. The marginal benefits for different customers seem to be in a very narrow range. If the price is too high, the demand will be very low. However, after it reaches a certain price, the demand curves slope will alter and the demand will increase.

This is a new belief. Before, companies used to have very high starting prices, making it down when nobody was buying it. Many companies are trying out a new plan, including J. C. Penney. Rather than starting at a high price, they start at a fair price, eliminating sales. This strategy has not been very successful so far, but Mr. Johnson, the CEO of JC Penney, believes that not enough time has passed to make a definite conclusion.

There is more to it though; other experts, believe it to be more than just simple supply and demand.

Customers love a good hunt for a bargain. We cannnot definitely say that the optimal price is x, because one of the factors which determine the ultimate price is the challenge itself. This is an example outside a classroom, and there are many things that will decide how likely a customer is to buy something other than just price.

Only time will tell if Mr. Johnson on the experts are right. He still firmly believes that customers will buy if it is a good price to begin with.

Source: New York Times: "knowing cost, the customer sets the price"

Hybrid cars and their impact on the rest of the industry

With the increase in gas prices these days, there is an increase in the demand for hybrid cars. As the demand for hybrid cars rises, more companies are trying to jump in and profit. And so the supply increases as well.

At first, nobody expected hybrid cars to take off. And the only people buying these cars were "environmental hippies", those idiots wanting to protect our planet for future generations.

But when the oil prices jumped, so did people at hybrid cars. What was a ridiculous price for a hybrid car was no longer as ridiculous; it could pay itself back within a couple years, or shorter at the rate oil prices were rising. In essence, they were a substitute for gas guzzling cars.

Now as the demand is staying constant, other companies are jumping in on this market as well. Expect to see an increase in both the quality and quantity of hybrid cars on the market. And of course, as the supply increases, the price will probably decrease as well.

It's too bad there is still the horrible side effect (extremity) of our environment being protected, and the world becoming a cleaner place. But have no fear, the demand for other cheap, but polluting products keeps coming, and despite the sabotage by the "hippies" to force us all to recycle, many are still holding true and choosing to abstain from recycling. There is no need to worry, although this may delay the process, the earth should be horribly polluted before long.

source: http://money.cnn.com/2011/10/04/autos/hybrids_prius_porsche.fortune/?npt=NP1

The effect of overfishing - but will the government be sensible enough to stop it before its too late?

Gloucester, Massachusetts has always been a fishing town. But maybe not so much anymore.

Because of environmental concerns, the federal government is thinking about heavily restricting or completely banning cod fishing in the Gulf of Maine, an area known for its cod. If the government chooses not to restrict the fishing, scientists predict that the cod supply will reduce by over 80% over the next year, reducing supply.

This in turn will most likely drive up prices of cod in the industry, as the Gulf of Maine is a very large supplier of cod fish.

In my biased opinion, this could be an opportunity for a very positive change; the demand could very easily switch to vegetarian products, freeing these fish from being consumed. But the more likely substitute good will be cod obtained from fish farms, where the cod are raised in inhumane environments, with very high levels of chemicals in their bloodstream. In many ways this could be considered an inferior good, as most people prefer to buy fish that are caught from the ocean. Other inferior goods that could act as substitutes could be other types of more inexpensive fish.

Another substitute good that may see an increase in demand could be vitamins, specifically vitamins with high levels of omega-3 fatty acids, vitamin b12, and vitamin b6. Cod is known to be a very rich source of these vitamins, helping promote cardiovascular health.

We shall have to watch and see if the government chooses to put this law into effect. If they choose not to, then the effects on price will merely be delayed, but they will occur as the supply of cod decreases.

source: http://www.cnn.com/2012/02/28/us/fishing-life-threatened/index.html?npt=NP1 (2/28)