Economics Commentary
Portfolio Commentary Economics Commentary Number: HL Number 1 Title Of Extract: "Criss-crossed capitalism" Source Of Extract: The Economist Date Of Extract: 6/11/2008 Word Count: 713 Date The Commentary Was Written: 19/11/2008 Sections Of The Syllabus To Which The Commentary Relates: 2.1, 2.2, 2.3ii Candidates Name: Esteban Gutierrez Aparicio The collusive1 market structure that the Japanese traditional industry has traced over previous years has increasingly become to fail. The tendency of companies abandoning cross-shareholdings2 has generated a in deep economic loss resulting from a reduce in the total revenue of corporations in the country. The attempt of industries such as steel, paper and energy as well as car making companies and electronic firms3 to consolidate economic partnership through means of oligopoly, has decreased deliberately from 50% of the market values to 20% over the last 17 years. The benefits of share holding companies were determined in preceding times to maximize profits by jointly agreeing in a fixed price which will avoid "price wars" and therefore substantial revenues4. Also assuming the interdependent behaviors, cross-shareholding companies act together to establish high barriers of entry to the industry in order to preserve ascendancy and evade competitiveness to have a high indices of demand. As the extract mentions, there is a
Economics Commentary
The demise of the United State's largest insurance company, American International Group has instigated shockwaves through Wall Street causing the government to intervene. The article uses facts and figures to show the affects of AIG's plummeting stock on the world market. Due to the firm's disastrous plunge in the market, the government faces the decision of bailing out AIG for a hefty sum of 85 billion dollars or allowing the firm to collapse. This monumental bailout from the government is possible because the United States' has a mixed economy. A mixed economy is defined as an economic system where the fundamental economic question of 'who, what for whom' is solved by a mixture of government ownership/intervention/planning and the dynamics of market forces. The AIG intervention is a prime example of how the United States demonstrates this economic structure; the government is able to help failing institutions like AIG while allowing the free price system determine the demand and supply of other goods and services. There is a balance between individual ownership and government regulation. America's financial authorities plan to rescue the large insurance company to prevent a crisis that can possibly create a domino effect throughout the United States' economy. However, the government faces another dilemma with the expensive bailout. The opportunity cost involved in 85
Economics Higher Level Coursework
Economics Commentary 2 Section 3 Title: Novartis becomes world's biggest generic drug firm Source: Independent, The (London, England) by Rachel Stevenson In the article, the firm Novartis has taken over two other generic drug producers, namely Hexon and Eon Labs, to form the world's largest generic drug manufacturer. It will be shown that this will lower Novartis's production costs to increase profits, as the article suggests, and also that other parties will be affected in a good way. When it is said the acquisition will allow cost savings by 'bringing it to scale', the firm is having internal economies of scale (EOS) from the result of expansion of the firm. The take over in this case is a horizontal integration, with Novartis buying firms Hexon and Eon in order to acquire them, all three which are in the same production stage in generic drugs. This provides an external growth of the firm as the factors of production are acquired from the taken firms, while it does not expand its scale by investing on these factors which is more costly and takes more time. The average total costs of production (SRAC's) will decrease by expanding the scale of the firm in the long run from increasing productive efficiency, which is called economies of scale. Internal economies of scale are enjoyed by Novartis for the following reasons. Firstly, as Novartis becomes larger, it would
Economics- Portfolio
ECONOMICS SL COMMENTARY NUMBER 4- Economics/1B Title of extract: IMF exec sees Asia's developing nations 'moving up the ladder' Source of extract: Business World Online Date of extract: 22 March, 2010 Word Count: 690 Date the commentary was written: 24 March, 2010 Sections of the syllabus to which the commentary relates: Section 5- Developmental Economics This article addresses the structure, stability, and growth system of developing countries. One major point this article makes that is important to note is that all developing nations have different, wide-ranging preconditions and problems. However, most of the time, solutions to problems and main issues are similar. Specifically, the article addresses certain problems faced by struggling countries in Southeast Asia. For example, the need for basic public services such as health-care, food and shelter. Stable programs like these are necessary for sustaining an organized economy and a strong government infrastructure. The article mentions that increased integration into the global economy is a very important aspect in the growth process. What creates a stable economy is a country's ability to cooperate with other countries, balancing imports with exports. Boosting competitiveness is also a crucial aspect of making sure that a country creates a stable role in the trade system. Most of these developing countries are
Risk management
Homework #4 FIN 377.2 Due: Thursday, March 4, 2010 . ABC Corp and XYZ Inc have been offered the following rates per annum on a $20 million five-year loan: Floating Rate Fixed Rate ABC Libor + 10 bps 5.0% XYZ Libor + 60 bps 6.4% ABC requires a floating rate loan, XYZ requires a fixed rate loan. Design a swap that will net a bank acting as an intermediary 0.1% per annum and that will be equally attractive to both companies. There are many different ways to structure this solution and the one below is just an example. First determine the quality spread differential between ABC and XYZ. Fixed Rate Floating Rate QSD ABC 5.0% Libor + 10 bps .4% Fixed Rate XYZ 6.4% Libor + 60 bps 50 bps Floating Rate Total QSD = 90 bps. The swap is structured as such: LIBOR LIBOR 5.3% 5.4% 5.0% Libor+60bps Pay 5.0% Libor+60bps Pay in Swap Libor 5.4% Receive (5.3%) (Libor) NET: Libor - 30 bps 6.0% If no swap, ABC would have had to pay Libor + 10bps to get a floating rate loan, but instead pays Libor - 30 bps (a savings of 40 bps). XYZ would have had to pay 6.4% for a fixed rate loan, but instead pays 6%. The 10 bps difference goes to the intermediary and is funded entirely by XYZ Corp which is the low quality borrower. 2. Explain carefully the difference between
Price Elasticity of Demand
PED Price elasticity of demand (PED) is the responsiveness of quantity demanded to the changes in the price given. The main factors that affect PED of good are the number and closeness of substitutes, necessity of the product and how widely the product is defined, and also time. One of the most important determinants of PED is the number and closeness of substitutes; it can briefly be explained as when there are more substitutes for a product, the demand will become more elastic. Also when the substitute available is closer, the demand would be more elastic too. For example, there are many different brands of sports wear available on the market and if one of the brand increases the price of their product, this will lead customers to a change in demand to another brand. Generally products such as sports wear, food, house products tend to have elastic demand whereas products like oil have inelastic demand since there are very few substitutes for it. The necessity of the product and how widely the product is defined also affects the PED of a good. If we take food as an example it is a necessary product and food is very important to our lives so it is inelastic. However if we define food more deeply (chicken, beef, pork etc...), the demand would become less inelastic since there would be substitutes. Basically the more the product is narrowed, the less inelastic it gets. Time