Blog 23: How the Singaporean Government Deals with Pollution

As more and more products are made by firms, it can either result in positive externalities or negative externalities. The negative externalities created by a firm are things like pollution, firms either pollute the society with live in through their product itself or in the making of the product.

An example of a negative externality in a society is air pollution from cars. As we know, cars pollute the environment with its smoke as it releases carbon dioxides and such, this would then cause a negative effect for the society as a whole.

But here’s when the government should play a role to reduce this externality to benefit the society entirely. The government would put up taxes to that would reduce the supply of cars there are, which would help reduce the amount of negativity it causes.

In Singapore, a country known to be incredibly clean, the government plays a strong role in taxing the people to reduce the supply of cars. To buy a car in Singapore, the people must buy a permit, which would reduce their demand to buy the car. The price for a car is really expensive as well, which would also reduce their demand for a car. All the money from this, the government would use to develop a mass transit system which handles 4 million rides per day, more than trips with individual cars. Doing this would encourage the people to not spend lots of money and use the public transportation, which would reduce cars, reducing air pollution.

The government applies taxes to reduce the amount of product that causes the negative externality.

Blog 22: Unemployment Insurance

In some countries, when you lose your job, it might seem like it is the end of everything, however, the governments provide you with unemployment insurance when you do. Unemployment insurance means that, if you are unemployed, you will receive some income from the government. Individual job status affects the economy as a whole. This is the reason why most developed countries provide unemployment insurance to those who lost their jobs. The amount of money you would receive depends and varies on where you live. In the United States, the amount of insurance you receive typically depends on how much you have earned over the past year.

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This of course does sounds nice but it still has effects on doing so. Sure that it helps unemployed people to stay stable until they regain employment. The other effect is that it also affects the incentives of unemployed people. Instead of rushing to find a job in order to stay stable, they are instead taking time in order to find a better job for themselves. 

Unemployment insurance would then contribute to the labor market. It is still confusing on how much unemployment insurance should provide. If the government is being too generous, then unemployed workers will be tempted to defer getting a new job for a long time and that may continue. A solution for that is to restrict the period of time for which a worker can collect insurance to provide an incentive for them to search for a job. Though it is still a time limit, it still provides a longer amount of time for unemployed people to find the jobs that match really match them well. 

Unemployment insurance helps to stabilize the economy and the labor market. People can receive higher pays because of the insurance provided. This might lead to the economy improving since people are having jobs that match them and companies can get good employees that fit well with the job as well. 

Blog 21: What Happens When Robots Take Over Humans in the Work Industry

With the development of technology, things are made to be easier thanks to Artificial Intelligence (AI). For example, phones which is an AI has all the essentials like calculator, clock, camera, etc. The AI had made us do things easier and simpler withuot having to go through a lot.

Currently, jobs are made better as well with the help of technology. We can see that in big firm industries like Amazon, uses robots to organize costumers’ orders which would decrease mistakes that a human would’ve made.

However, in the long run, with more and more AI being introduced into firms, it isn’t a good look for people looking for jobs. AI will be considered extremely helpful for firms, they don’t have to pay them wages, and they would be able to produce more things with less inaccuracy than human workers.

In this case, if the AI helps get things done quicker and better than humans, the firm’s demand for hiring people to work in their company would decrease greatly, the AI can be used as replacements. This would cause the quantity to increase and wages to decrease.

Blog 20: Effects of Corona Virus on Labor Market

As we all know about the virus outbreak of Coronavirus or as we called it specifically, Covid-19 has a strong impact on the global market in which as well as the Labor Market. The coronavirus has struck down companies, restaurants, shops to close while instructing that their citizens to stay home. 

Base on concepts that we have learned, the supply curve in the labor market stands as people willing to work, however, at a time like this, in order to be safe from the spread of the virus, people would, of course, choose to stay at home. The supply curve in the labor market will shift to the left. Although some shops are open in order to stay in business because here in Cambodia, the bank is still open thus people need to work in order to pay for the bank. The labor demand at this point would be high since some shops require employees. 

While in some other countries such as the UK, the government has pledged to pay 80% of the wages to their citizen instead. According to CNN, The United Kingdom on Friday pledged to pay 80% of wages, up to £2,500 ($2,895) per month, for employees who can’t work because of the pandemic. Capital Economics believes that in the United Kingdom, unemployment will now rise from 4% to 6%, instead of to 8% as had been “previously feared.”. Base on another source, Warsaw business Chanel, Katarzyna Dąderewicz said that the coronavirus pandemic has a strong impact on the global economy, which can also be seen in the labor market. “Production companies are starting to run out of components. Companies in every single branch suspend recruitment processes, both mass and individual,” Dąderewicz said.

At a time like this, Cambodia’s government should do the same and help pay for the citizens’ wages in order to stop recession as well as helping to stop the workers to be forced to go to work in order to still have a living and might even cause the spread of the virus to be more out of control. 

Blog 19: The Effects of Government Subsidies for University Students

What would happen if the government financially aid university students during their school years? You might think that the government giving out such subsidies is an advantage however, firms like a coffee shop will be disadvantaged.

To support themselves financially, university students would most likely choose to be baristas at a coffee shop, helping the shop sell their goods to consumers. If the government were to support these people financially, working wouldn’t be much of a priority as they are being supported, so they can focus on studying.

Coffee shops will be disadvantaged as the supply of baristas would decrease drastically as the majority of the workers there would be university students who no longer needed to work for money. Because of this, the quantity of coffee would decline as well as there is not much people making the drinks. On the other hand, the wage rate would increase causing the firm to lose more in terms of marginal factor cost, costing more since they have to pay more to the remaining baristas.

Blog 18: Immigration can help flourish a country’s economy

Immigrations will lead to a shift in supply for the resource market. A survey in 2013 went out to economists with a question of “Would average American citizens be better off if the US let in more low-skilled immigrants?”, only 10% of the economists said no. Most people agree that immigration would lead to people getting their jobs taken away. Though this may not be everyone’s opinion, most economists think that “economic migration boosts the overall economy for the place the migrants are going but can cause problems for people already at the bottom of the economic ladder.”. This may concern those who are unskilled or uneducated but it overall boosts the country’s economy.

If we were to put it in a graph,

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As bad as it seems that the wage is going down, in reality, it’s not as bad.Immigration will lead to more jobs and businesses. A website shows that immigrants tend to be entrepreneurs who would start businesses and create things that help their economy grow. “Immigrants are also entrepreneurs who create jobs. According to a study of the bipartisan immigration bill passed in the Senate in 2014” This also means there would be more employees. That can mean 2 things: the immigrants who become employees or the immigrants who create jobs so locals can be employed. That means that poverty would be less and the economy would grow. The study also shows that it can get 9% smaller size for the economy in the UK without the help of immigrants. “In the UK, if immigration had been frozen in 1990 so that the number of migrants remained constant, the economy would be at least 9 percent smaller than it is now.” Clearly we can see that immigrants have boosted the economy a considerable amount. Although, immigrants contribute to our communities in ways that go far beyond their impacts on the economy.

Blog 17: Google

As we all know by now, Google is what most of us use in order to research something. It is not coincident that every time we want to search for something, google is always there, not as an option. Sure google may not seem like a monopoly from other perspectives but google is dominant in the area of the internet. 

According to Hackernoon, “So it’s not that you are not paying, it’s the way you’re paying. In Q4 2017 Google earned $31.91 billion, $27.27 of which are due to its ads business. That’s approximately 85.5% of all revenue. So the quick answer to our question is ads.”. How? Google makes money from searches by selling promoted advertising based on search keywords, interests or geography. Google makes money from searches by selling promoted advertising based on search keywords. 

The search market is a perfect example of data as an unfair barrier-to-entry. Based on what Harvard Bussiness Review said, “Data monopolists’ ability to block competitors from entering the market is not markedly different from that of the oil monopolist Standard Oil or the railroad monopolist Northern Securities Company.”. This creates a situation where new firms, even those with better algorithms, cannot enter the market and compete with the established players (google). The new firms are almost certainly doomed to fail or not be as successful. This is the exact challenge Microsoft faced when it decided to enter the search market years after Google. They later formed an alliance with Yahoo search, though, with their past years’ users search, Bing is still far behind from google. 

Small new firms entering the market might not be a problem for Google but other big companies such as Facebook. Facebook dominates the world of social media. They plan to have their own ‘websites’. Users spend the majority of their time on the site. Facebook uses its algorithms and social recommendations to find content users find engaging. Of course, if this strategy becomes successful, it could make searching less profit for Google, as people would spend more time on social media and less time on the Internet.

Blog 16: Oligopoly’s Game Theory

Oligopoly is a few sellers in the industry that is characterized by interdependence, a relationship in which the outcome of each firm depends on the actions of the other firms in the market. Each firm’s decision significantly affects the profit of the other firm. The two firms does game theory to predicting the outcome of games of strategy in which the two have incomplete information about the others’ intentions.

To see how the oligopoly firms use game theory in real life, we can use the payoff matrix given above.

First, we’ll have to find out the dominant strategy of each firm, in this case of our competitor and our firm on whether we should market a new product.

If our competitor choose to market a new product, we have two different choices which are to market one as well or to not market. If we both market, our firm will earn $100 profit, but if they market, and we don’t, we will earn $0 profit, so it’s better for our firm to market as well. If our competitor doesn’t market their new product, and we do, we will earn a profit of $400 but if we both don’t market a new product, our firm will earn $0 profit. So, no matter what decision the other firm makes, our firm will always choose our dominant strategy which is to market a new product because $100>$0 and $400>$0.

On the other hand, to look at the other firm’s dominant strategy, we should look at how our decisions will affect them. If we choose to market a new product, and they choose to market as well, they would earn a profit of $100, if they choose not to market they will earn nothing. If we choose to not market a new product, they will earn $400 from marketing a new product or $0 if they don’t market a new product as well. In this case, our competitor’s dominant strategy is to market since $100>$0 and $400>$0.

Using game theory, we can find out the outcome of our firm as affected by the other firm’s decision. By knowing that both firms have the dominant strategy in marketing a new product, we will know that the highest outcome/profit from this is $100.

Blog 15: Why Plane Tickets Price Differ

Assume that you’re a student and is buying a round trip plane ticket a month in advance for $150. Also, assume that you’re a business traveler and is buying a plane ticket for a trip the next day for $550. Two different prices for the same flying experience. Why?

This is because of the airline, who’s the monopolist practicing price discrimination. What is that? The price discrimination is when monopolists sell the same good to different customers at the different prices to increase their profit.

In this case, if the firm has the marginal cost of one seat for $125 then the firm selling the tickets to students for $150 or $550 would give them a profit.

Customers will take the flight depending on the price. Looking at the business travelers, they have to take the flight, it’s for business after all, but the price shouldn’t be higher than $550. The price doesn’t have to be under $550 either because changing the price won’t really bring in more business travelers, putting the price at $550 is the best way to gain the most profit. On the other hand for the students, the firm’ll have to put the price above $125 to gain some profit, but not over $150 because the student have less money and more time, they can easily switch to a substitute good like a bus.

Here’s the figure of the monopolist firm for plane ticket price for two customers

Blog 14: Being Price Taker in the Water Industry

Firms produce the product but the price of the product cannot be set by the firm itself. The price is set by the market. The price is set where the demand curve and the supply curve meets. Firms that cannot set their prices are called price takers. What causes this is because of companies selling the same product, there are a large number of buyers that leads to more sellers, and buyers would rather buy a cheaper product. 

With that being said, water industry faces many challenges as there are many other competitors in the market while also not being able to change the price of their product. Even if they decide to change the price, no one will buy it since other brands are cheaper. 

Price of water and the rates charged for water are not the same thing. Rates are used to give water companies their quality level. A rate-setter may be used to thinking about accounting costs and trying to set rates to recover some of these accounting costs using a rate that will be acceptable to the consumer. 

If a water company decides to set the price above the point of marginal revenue, it may not be a price taker of course. In this type of market, the law implies that MR = MC in which MR is also price so it now becomes MR>MC and they are not maximizing their profit.