Online Games Appeal to ‘Casual’ Players

Summary

When “online games” come as the subject, it is almost automatically associated to youthful men who devote their time and resources to playing games which usually involve violence, christened “gamers.” However, online gaming is currently expanding its market at the expense of a new breed of gamers: the “casual gamers.” This class is composed mainly of middle-aged women who patronize what was termed as “casual games”: cards, puzzles and arcade games, the rudiments of which can easily be grasped by anyone.

Walter Mossberg and Katherine Boehret explored on this development by trying out a few sites that offered “casual games.” In this article, they focused on their discoveries about the Big Fish Games Inc., which specializes in selling downloadable, family friendly casual games since 2002, and is currently hosting to over 300 games. Throughout the article, they cited the “appealing” elements of the website, such as the enticing presentation of the page, the enjoyable games that it offers, and the multilevel marketing scheme that it caters to. As a criticism, however, they explored on the 3-section log-in system of the website which, according to them, makes it hard to navigate and explore the website. Towards the end, it was acknowledged that the website promises to make a unified log-in system come December or January.

Economic Interpretation

If we are to interpret the market as a market of “online games,” the article presents that “online games,” as a good, faces an increase in demand since it now caters to an additional set of consumers (casual gamers). We take the casual gamers as the demand shifter: an increase in the number of consumers in the market that increases the demand for online games. As the demand curve shifts to the right, and the supply curve is held constant, prices will increase as well as the quantity of the good produced. In application, this means that since an expansion of the “online gaming” market happens due to additional consumers (casual gamers), the price of online games will increase, and the “online games” firms like the Big Fish Games Inc., will produce more “online games.”

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Change Comes to a Carolina

Summary

            With education spending sky rocketing to 137% over merely two decades and children’s academic performance plunging at twice the rate of gravitational pull, Carolinians seemed to be enlightened at last. A drastic change is happening these days as some Democrats now advocate Republicans in their race for South Carolina’s top spots. Specifically, Democrats such as Tullis and Mitchell, have gone out of their way to support Republican Karen Floyd in her bid for the state’s top education job. This, they said, is because they want changes in the way education is restricted and suppressed in the state, which results to the poor academic performance of their youth, if they ever get into schooling.

            More notable is the active efforts of the citizens of the state who are pushing for change by expressing their demands, especially through their ballots soon. For so long, the legislature has been restricting public education establishment, or anything that might empower the parents against the bureaucrats, leaving the parents helpless to improve the declining academic performance of their children. However, they are in the hope of achieving their desired developments come November elections, hopefully gaining seats enough to make possible developments either through support for vouchers, tax credits, charter schools, or anything that might produce more choices for them to send their children to school.

Economic Interpretation

            Looking at the article, we could view the market as a market of schools. If the efforts of the reformist citizens of South Carolina to effect changes in the legislature would loosen up the restrictions in putting up new schools and in granting tax credits and scholarships for more children to be able to go to school, there will be a boom of new schools to cater to the change. In economic terms, there will be a shift of the supply curve of schools to the right. The supply shifter will be the changes in the legislature (if ever the projected changes will materialize): favorable political conditions that will loosen up restrictions in putting up schools, thus increasing the supply of schools. Ceteris paribus, prices of consuming/availing service of the schools will decrease (P1 to P2) while the quantity or the number of schools in the state will increase (Q1 to Q2). This, indeed, could possibly solve the education problem in Carolina.

What Detroit’s Pain Means for Auto Buyers

Summary

            Since the turmoil in the Auto industry of Detroit, consumers started choosing foreign brands over the locals, in the midst of the instability of whether of the not the local brands were there to stay. With this decrease in the demand for local cars, local firms such as General Motors Corp., Ford Motor Co., and DaimlerChrysler AG’s Chrysler Group started cutting back sticker prices to on 2007 models to maintain their market shares. In addition, they also decreased their production. Meanwhile, while the demand for cars made by foreign-based auto companies such as Toyota remains strong, they also started following the backward trend in prices initiated by local firms to rise up to the competition.

            Almost unbelievably, while sticker prices were decreased, the 2007 came in with added features. However, the article points out by citing a number of examples and quoting some car experts that while sticker prices are said to have been lowered, this does not imply that the 2007 models come out cheaper. Often, 2006 models are still more affordable since they have lower transaction prices and come with manufacturer discounts, as compared to the 2007 models.

Economic Interpretation

Taking local cars as the market, the article suggests that the quantity demanded for local cars decrease as there happens an upheaval in Detroit’s auto industry. This is manifested through the downward shift of the demand curve. The demand shifter is the consumers’ preference of buying foreign made cars over locally made ones since they are not sure if the local manufacturers are there to stay: decrease in the consumer preference of Detroit made cars decreased the demand for it. As a result, local firms needed to cut back prices, as equilibrium price falls from P1 to P2, and to reduce production or quantity of local cars supplied, as equilibrium quantity contracts from Q1 to Q2 to respond to changes in demand. Ceteris paribus (holding the supply curve constant) since it is the consumers that dictate the pace in this case, these changes are reflected in the diagram.

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In the Salad Aisle, Spinach’s Pain Is Arugula’s Gain

Summary

            Last month, a spinach scare hit the country through those killer bacteria called E. coli 0157:H7. As a result, almost every business around which offered even a leaf of spinach in their menu and selections clamored for substitutes. In the search to replace Popeye’s miracle food, top businesses such as Applebee’s International Inc., Primi Piatti Ristorante in Washington, a couple of Italian restaurants and Chicago restaurant, along with Whole Foods and other grocers has decided to replace spinach with  “arugula.”

            Arugula, a peppery herb belonging to the mustard family, is sometimes known as rocket, roquette, rugula and rucola. It was not a popular green in the US, and has a strong and bitter taste, in contrast with the spinach. Restaurants modifies the exotic taste of arugula by adding a stroke of something sweet, like honey, in order to assimilate the spinach, or merely counter the bitter taste. Because of its promise in substituting spinach, arugula growers attest to 15-25% percent of added demand in their arugula crops. As the sudden boom is unexpected, growers could not respond immediately to suffice the demand. And while the future of continued arugula patronage is yet unclear in the face of the recovering spinach, some business owners are saying that arugula is here to stay, like 40 became the new 30.

Economic Interpretation

The demand shifter here is the increase in consumers’ preference of arugula over spinach: increase in consumer preference increased the demand for arugula. As the demand for spinach as a normal good decreased due to the E. coli scare, the demand for arugula increased as it became the most dominant substitute.  Taking the market of arugula, the diagram presented an increase in demand through a rightward shift.

This will cause prices of arugula to rise from P1 to P2 and the quanitity of arugula supplied from Q1 to Q2. The supply curve was held constant, especially since the sudden increase in demand for arugula left arugula growers with no possible way of suddenly increasing the supply. Looking at these changes in the market of arugula, a bright future is seen for arugula growers, hopefully compensating to the lost market for spinach.

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Gasoline Prices Could Fall More

Summary

            During the past two months alone, prices of gasoline have decreased by over 20%, and are still on the slide. Much of this decrease is oil driven, since oil prices have been declining at about 4% rate recently, and it accounts for more than half the cost of a retail gallon of gasoline. However, there are other factors involved in this decline. First, the hurricanes last year caused considerable damage at US oil refining industries. As there came a shortage in oil supply, gasoline prices and refining profits soared in the U.S.

This attracted imports from Europe. However, the summer driving season was over by the time imports arrived. Also recently, US refineries have been able to operate from 75% in the advent of last year’s hurricanes to a whopping 90%. Analysts also identified speculators to have contributed to the decline in oil prices. OPEC also had a special meeting organized to agree in the cut back of production and freedom to abandon quotas in order to respond to the situation.

The aforementioned circumstances decreased the earnings of independent refiners to an average of 65% less per barrel of gasoline compared to that in July. However, these have caused betterments for the consumers, and for the economy as a whole. Because oil prices are cheaper, households could divert their budget to things other than oil. In other words, there will be a surge in personal disposable income. It was estimated that for every sustained 10-cent drop in the retail price of gasoline, consumer spending will increase by $1 billion every month. If we are to consider that the recent 70-cent drop in gas prices during the past two months is sustained, there will be a free up of $7 billion per month. And while that won’t necessarily imply a heightened aggregate spending, it will mean more transfers from the oil industry to retail and other sectors of the economy.

Economic Interpretation

            The factors aforementioned in the summary lead to a dramatic increase, actually an excess, in the supply of gasoline in the US. This was characterized by a rightward shift of the supply curve in the diagram. The supply shifter was the high prices (P2) that US was willing to pay for oil as it increased its demand for imported oil at the event of hurricane impairments to local oil refineries: increase in the price of the good that increased the quantity supplied (Q1 to Q2). However, this increase in the quantity supplied, and shift in the supply curve over time, eventually caused the price of gasoline to decrease from P1 to P2’ at quantity supplied Q2.  This explains why gasoline prices fall and continue falling.

2.

OPEC Sets Stage to Cut Output Should Oil Prices Keep Falling

Summary

            Premature to their set meeting in December, the Organization of Petroleum Exporting Countries (OPEC) members convened last September to decide on their collective response to the slide of oil prices worldwide, especially in the US, as caused by a surplus in the oil supply. They arrived to an agreement that production quotas will be lifted, as the quantity of oil demanded falls short of their 28 million barrels per day quota by 500,000 barrels per day, and prices continue to decrease.

However, the official oil-production target of 28 million barrels a day was not altered. OPEC is in the hope that everything is for the temporary, as this contractionary measure is expected to achieve the desired result of bringing up prices at least back to where they were before. Further, they are avoiding cutting back output formally, partly in concern that this will whip up a repercussion from Europe, US, and other importing mammoths in the region.

Diagram

        P

                                      S

                                                   S1

                             e

   P*

                                      e′

    P1

                                              D

           Q* Q1            Q

Examination and Evaluation

            In relation to discussions in the article, “Gasoline Prices Could Fall More,” oil prices have been sliding due to an excess in the supply of oil, characterized by supply curve S1. The surplus causes the market to deviate from the equilibrium point e, towards a new equilibrium point e’, where prices fall from the former equilibrium price P* to P1, while there is an increase in the quantity of oil supplied in the market (Q* to Q1).

In order to return to equilibrium point e, the OPEC has lifted oil production quotas among its member firms, giving them the freedom to cut back production whenever they deem necessary in response to the demand of the consumers. Though there are OPEC members who face an increased demand, majority are facing a downward trend. In order to correct this, OPEC will cut back production from present equilibrium Q1 to Q*, so that through time, the supply will contract and prices could rise again, back to the original equilibrium level.

Factor that weakens the case for market sector allocation: Poor information

            Poor information seems to have weakened the case for market sector allocation for the OPEC. This is exemplified by their initial rush to send barrels of oil supply to the US after the damages to the US oil industries by hurricanes. The oil companies under OPEC were so much absorbed by the high prices and demand for oil that surged in the US after the hurricanes that they did not foresee the fact that they might oversupply exported oil and that by the time their exported oils reach the US, the summer driving season will have ended and the US oil industry might have been revived. When they realized these things, the damage has already been done. There was an oversupply of oil in the US that drove down oil prices, and they can do nothing to correct the mistake, except for cutting back production and prices.

Sweden Gets Into the Spirit Of Privatizing

         At the dawn of changes in the Swedish Government as Social Democrats were replaced in their seats, several state-owned companies have become the subject of selling off and privatization. A major concern in this is absolute owner Vin & Sprit AB. If ever it is sold, Absolut would be one of the major jewels to arrive in the liquor industry market.

Currently, Absolut ranks third in the world’s major liquors by volume, succeeding Smirnoff vodka and Bacardi rum. In the 80’s, it revolutionized vodka by making vodka a fashion statement through vigorous advertising. In general, vodka attracts the market since among the spirits, it is the fastest-growing. For the past 5 years, it recorded an annual marginal sale of 6.8 percent. Analysts estimate Vin & Sprit to value €4.3 billion ($5.5 billion). However, the representatives of the company are still unwilling to comment on the matter, and any sale is expected to be yet a year or more far.

            Meanwhile, the executives of the liquor industry have identified Pernod Ricard, Fortune Brands Inc., Constellation Brands Inc., Brown-Forman Corp., Anheuser-Busch Cos, and all of the U.S., and Bermuda-based Bacardi Ltd. as prospective bidders. Fortune is viewed as a likely victor since it is already a distributor of Absolut in the U.S. and is in partnership with Vin & Sprit in the distribution of vodka abroad.

Should any bidder win the race, Fortune should be paid around €300 million as penalty to break the distribution agreements. This makes the bid cheaper for Fortune, relative to other companies. The world’s top, Diageo, couldn’t join the bid as owning Smirnoff vodka would create issues of antitrust. Analysts say that the Swedish government should develop an auction in order to shoot up the price, probably beyond €4.3 billion.

Diagram

      P

                                      S

P2

P1

                                                  D2

                                             D1

                     Q1 Q2               Q

To put the predicted and advised circumstances for the sale of the Vins & Sprit company in the simple supply and demand diagram, creating an auction for its sale will result in the increase of the demand for it (or for purchasing its shares or the whole company). This is manifested in the diagram through the rightward shift of the demand curve (D1 to D2), which will increase the prices at which a share of the company or the whole company is to be sold (P1 to P2), and also the quantity (number of shares) demanded in the market (Q1 to Q2).  If this pushes through, the Swedish government will certainly magnify its profits in selling the state-owned company, by selling it in an auction.

Examination and Evaluation

            As explored in the article, the newly instated government is already making up plans to sell state-owned industries. While this move may have sensible and profitable basis, there are a lot of issues that should be considered to maximize the welfare of the state. As Vin & Sprit covers a major share in this concern, it is important to analyze the case of the company. It was discussed in the article that the company, though facing recently emerging competition from smaller brands, is still in demand for other liquor companies. And analysts are correct in saying that if ever the company is to be sold, the Swedish government should create an auction so that profits can be maximized.

However, the nature of the government as the seller of the commodity which is the Vin & Sprit, creates a possible failure. In order to proceed with any transaction, the decision of the seller should be well discussed and consolidated. However, the million-sided and mosaic nature of the government would make it hard to address this issue. Further, it should be analyzed if selling stakes in other state-owned companies should do the trick so that the government need not sell its crown-jewel.

Factor that weakens the case for market sector allocation: Externalities

            As explored on the article, Vins & Sprit is already partly owned by Fortune. This can be viewed as an externality of Vins & Sprit because buying it would be accompanied by a penalty of approximately €300 million to break from the distribution agreements with Fortune. If ever Vins & Sprit will be sold in auction, the externality will make the bid cheaper by €300 million for fortune, and €300 million more expensive for all other bidders. This causes inequality in the sale of Vins & Sprit in the market. Further, the externality of part-ownership by Fortune creates an issue of antitrust for other companies that own competitor brands such as Diageo which owns Smirnoff Vodka.

Hong Kong’s Polluted Air Erodes City’s Competitive Edge

Summary

            Coming from a battle with SARS three years ago, Hong Kong’s economy is bumping head on with yet another enemy today: air pollution. At the beginning of October, the World Health Organization issued new guidelines and warnings regarding air pollution in the cities. And while WHO set the danger limit to 20 micrograms per cubic meter, Hong Kong roadsides already recorded an average 75 micrograms per cubic meter in 2005.

These hazards are not only represented by figures, but are also felt by people in Hong Kong, who are already suffering from respiratory diseases and are restricted in doing outdoor activities due to the pollution in the air. There is no wonder that recently, businesses are preferring other lands such as Singapore, and workers are declining offers to work in Hong Kong. Further, even those who are already established on Hong Kong are leaving for places with fresher air. Even companies such as Marriott International Inc. and Morgan Stanley are expressing their complaints about the matter.

The past 6 years saw to the worsening of Hong Kong’s air quality as neighboring China sends toxic gases and soot. Moreover, locally generated pollution from power plants and diesel-powered car emissions are trapped in the streets as the skyscrapers act like a casserole cover. What is alarming is that Hong Kong is prosperous country in terms of the economy and social standards, and such a lack of action to solve the pressing problem is an area of concern for those who participate in Hong Kong’s economy. And though the city still holds its competitive advantage, the pressing pollution problem acts in opposition to its economy.

Examination and Evaluation

            Looking at the decisions in the market, much of the effects of the pollution problem are not yet blatant, with an increase by 37 percent in office rents, 11 percent in hotel occupancy, and 1.3 percent in Hong Kong based foreign companies last year. However, general reactions from workers and business owners in Hong Kong tell otherwise, as majority express either a demand for the immediate action, or willingness to leave or look for other markets in other lands.

            Critics say that this aggravating problem can only be attributed to the lack of political will on the part of the Hong Kong government, since it is economically capable of acting on the problem. However, there are recent signs of effort on behalf of the government, though nothing has improved at present, and departures continue.

Simple Diagram

       P

                                        S

    P*

    P1

                                               D

                               D1     

                    Q1  Q*

Treating Hong Kong as an economic and business site as the market, the article implies a decrease in the demand for doing business activities in Hong Kong. This is represented in the shift of the demand curve from D to D1. Holding the supply curve constant, and through time as the market seeks to equilibrate, prices in engaging in economic and business activities in Hong Kong will be offered at a decreased rate (from P* to P1).

Factor that weakens the case for market sector allocation: Externalities or Public Goods

            The factor that weakens the case here is the Hong Kong public good which is air, or the externality of pollution to Hong Kong as an economic area. Since air in Hong Kong has not only become not preferable, but had also become dangerous for economic activities, Hong Kong becomes disadvantaged in the market of economic zones. In order to correct this weakness, Hong Kong has to improve the quality of the air that it offers people to breathe or lessen pollution level to the safe level, so that it can once again be at par with other economic zones in the region, instead of the avoided area that it is becoming today.

This Spud’s Not for You

Summary

            In March 2005, the United Potato Growers of America was formed. It is an organization of regional farming cooperatives that are into controlling potato supply to increase and maintain demand. This is similar to the OPEC of the oil industry. The collective effort is a response to years of overproduction of potato, specifically in Idaho, that pulled prices down and buried profits.  Reviewing past potato industry performance, overproduction has been attributed to the growers’ habit of planting additional acres when there is small increase in profit. Dominant producers also absorbed the small ones, and demand for potato decreased as people became diet conscious. Overtime, this has caused prices to dive and the industry to show no promise.

            In order to control supply, UPGA consults analysts and study field reports to decide whether growers are reaching overproduction, and how much acreage to reduce. Other ways to control supply is by reducing the acreage of a potato variety over another, or by paying some farmers to deprive the market of more potatoes. The initially local organization extended to the whole nation as they were advised that they could only influence prices by engaging other major potato states.

The cooperation among potato growers, though coming with the disposal of 6.8 million hundred-pound potato sacks, has produced desired results as returns increased by 48.5 percent last year. The manipulation is legal, and consumers have not yet felt the burden of price increase as supermarkets and restaurant have been keen to absorb price hike for the time being so as to keep up with the competition. As for the UPGA, the major test will arrive by springtime as elevated price levels could lure members to grow more than the set quantity. UPGA however prepares for this by a monitoring plan involving satellite photography and global-positioning-system technology, and a $100 per acre fine for violators.

Diagram                                     

        P

                                              S

                                                   S1    

    P*                     e

                                       e′

    P1

                                              D

           Q* Q1            Q

Examination and Evaluation

            As the article expounds on, failure in the potato industry can be attributed to overproduction due to the potato planters’ practice of increasing production when marginal profit is little. This surplus in supply is shown in the diagram above through the supply curve S1, which deviates from the desirable equilibrium level of S and D. This failure in the producer’s sector finds possible correction through the United Potato Growers of America, which seeks to collude to decrease the quantity supplied of potatoes in order to increase the desired demand and price level for potato.

This action is represented in the diagram by the movement from Q1 to Q* so that S1 will shift to S and the equilibrium level of the potato market will move from e’ to e.  These movements will also result to an increase in the prices of potato from P1 to P*. Inculcating these changes to the profit equation, increased returns is expected and the potato industry in the US in the hope to be revived.

Factor that weakens the case for market sector allocation: Lack of competition

            Lack of competition weakens the case for the market sector since even if the market seeks the old equilibrium level with lower prices, it couldn’t be possible since there is no other large enough producer or organization of potato producers that can compete with the United Potato Growers of America in supplying potato. The UPGA has expanded enough nationwide such that no producer is able to compete with it. Thus, the UPGA can proliferate on dictating the supply level and therefore, the prices, of potato in the market. The only way to correct the inequality is to break the collusion of UPGA members so that the market can go back to a state of perfect competition, or for other producers or organizations to grow large enough to be able to compete with the UPGA to break their control in the market.

References Cited

Ball, D., J. Singer, and J. Hallinan. Sweden Gets Into the Spirit Of Privatizing. September 26, 2006; Page C1

Brat I. “In the Salad Aisle, Spinach’s Pain Is Arugula’s Gain: Applebee’s Changed a Recipe, Edited Its Ad Campaign; Adding Honey in Chicago.” September 29, 2006. p. A1

Levine S. and C Conkey. “Gasoline Prices Could Fall More: Natural Gas, Related Markets  Also Drop as Speculators Flee; Turnaround May Buoy Economy.” October 5, 2006. p. C1.

Martin, T. “This Spud’s Not for You: Growing Co-Op of Farmers Seeks to Become OPEC of Potatoes by Controlling Supply.”September 26, 2006;. P. B1

Mossberg W. and K. Boehret. “Online Games Appeal to ‘Casual’ Players: Violence-Free Web Service Offers Free Trials, Rewards; Log-Ins Can Get Confusing.” The Mossberg Solution. September 13, 2006. p. D4.

Saranow J. and G. Chon. “What Detroit’s Pain Means for Auto Buyers: Car Makers Cut Sticker Prices, Add Features on New Models; Will You Really Pay Less?” September 27, 2006. p. D1.

Spencer, J. “Hong Kong’s Polluted Air Erodes City’s Competitive Edge.” October 9, 2006. p. B1

Wall Street Journal.  “Change Comes to a Carolina.” REVIEW & OUTLOOK. September 27, 2006. p.  A18.