Commentary

Cigarettes are highly taxed products. The article talks about the US State Indiana which is advising Kentucky to increase their cigarette tax in order to discourage young smokers and reduce tobacco related health costs.

Price Ceiling

A priece celing is set in retail markets to lower the prices of goods like chicken for the benefit of consumers.


http://thestar.com.my/news/story.asp?file=/2008/11/24/nation/2629708&sec=nation

Retailers cut back

While the American's are spending less, the retailers are cutting prices and employing fewer people.


http://www.lohud.com/article/2008811230324

Cigarette Tax

A US state putting a tax on cigarettes to decrease the amount of smokers in the USA!


http://www.courier-journal.com/article/20081120/NEWS01/811200405

-impact of tax
-dead weight loss
-elasticity

Hunger during Ramadan

The article “Nigeria: Ramadan Marred by High Food Prices” talks about the tremendous hardships the citizens of Nigeria were facing during the Ramadan period. The already high food prices have risen even more, after this holiday of fasting. This can be seen as a result of the reduced harvest which was due to poor rainfall. Retailers who have recognized which great profit to expect after Ramadan have raised the food prices and were therefore also a major cause of this. As the prices of particular foods are increasing the quantity in demand of these goods decrease so much that people fear starvation.

Demand is the economic statement which describes a consumer’s desire to pay a specific price for a good or service. The law of demand declares that Ceteris Paribus (as long as nothing else changes) as price falls the quantity of demand decreases. The prices in Nigeria have increased tremendously. "I usually buy fresh fruits like oranges, bananas and pineapple on a daily basis during Ramadan," Muhammad Aliyu, a civil servant states in the article. "But this year, I only buy them twice a week due to the high cost." The quote is a very good example of the decrease of the quantity of demand. While the citizen of Nigeria might have (just like Muhammed Aliyu) bought oranges on a daily basis, today they will only want to buy them twice a week, due to the risen price. The quantity of demand for oranges (and of course all other foods) has therefore decreased. A graph portraying the orange market can visualize this decrease of demand from point A (before Ramadan) to Point B (after Ramadan).

While at point A consumers tended to buy 7 oranges per week since the price of oranges were 10NGN. Now during Ramadan the prices have climbed up to 20 NGN per orange. Fewer citizen will be willing to pay this much and citizen like Muhammed Aliyu will buy less oranges per week. The quantity of demand for oranges will decrease. “Where in the past, households have purchased food items in bulk to be consumed through the fasting period, this year many have been reduced to buying food in small quantities they can afford.”Such law of Economics would also apply for other food high in demand during Ramadan, such as black-eyed beans, the main ingredient in the tasty deep-fried dumpling or Eggs and chicken. Excluded is only rice, because it represents a commodity and it is subsidized by government in order to keep it affordable for all.

Since the high prices that were due to the bad harvests and retailers price settings were the cause of this crisis, the price can be expected to sink again. A more successful next harvest will boost the quantity of food and will therefore lower prices. The retailer’s price settings can be predicted to lower down soon after the post Ramadan phase has passed. Eventually the quantity of demand for the particular foods can be predicted to move back to where it was before the holiday.As long as consumers will be predictable which means they want to buy Oranges like during Ramadan prices will probably rise again and our law of Demand will be applicable again. Macroeconomics economics likely will not change in Africa soon, which means Oranges will always not be affordable for everyone when prices are.

AIRLINES: HUGE DEMAND FOR OIL

(See Economist Article: "Airlines and the credit crunsh-Shredding Money")

While one of the worlds biggest insurers was financially rescued also the oil prices have finally gone down. The high prices of oil have caused a tremendous financial crisis and have only left huge airlines like Delta and Northwest in profit. Because of rare collective profits 30 airlines have gone into bankruptcy this year. Since the demand for oil is not decreasing it is estimated that about the same number will go down this year. The oil prices for example the British Airwaves are facing currently are enough to wipe out the profits that they had made last year. Still, new airlines have been hit the hardest, since most of them have gone bust out this summer.