“Black Friday shoppers hear the call of Zhu Zhu”

During the recent Black Friday, Zhu Zhu, the robotic hamster was one of the top 10 most attractive product and was the “undisputed king” for shoppers. Numerous children as well as other Zhu Zhu fanatics were lined up in  Toys R Us in New York’s Times Square.In fact, hundreds of shoppers came several hours before the midnight opening just to purchase these robots. Those who desired to purchase the Zhu Zhu robot were given a red ticket by the Toys R Us staff, which guaranteed them a robot. Surprisingly, the moment the store opened, Zhu Zhu fans charged to the Zhu Zhu section where “the mob scene” was in great contrast with the New Moon section, despite the movie fans’ hype.

Along with the purchase of Zhu Zhu dolls, many shoppers claimed to be in the world’s largest toy store for the crazy discounts. Davila stood at the doorbuster line with a budget of $600 to purchase toys for his eight children.

Fortunately, this years deep recession didn’t seem to lower the eager toy shoppers’ enthusiasm. In fact, in hearing from one of the Toys R Us staff, it was found that lines in the 3 floor store were much longer than in previous years. She comments on the number of people, “[There are] a lot more than last year”. “I think the midnight hour is much more appealing to most people, because they just stay up, instead of having to get up later.” This year’s Black Friday retail sales (measure of the sales of retail good over a period of time) are expected to surpass 200. With hope of 5% more shoppers participating in Black Friday, it is indicative that the economy is heading in a positive direction.

Figure 1:

Figure 1 presents the elasticity of demand for toys in Toys R Us during Black Friday. It is quite elastic because of the heavy discounts. Heavy discounts on Toys R Us products causes a change in prices.  Despite the great recession, Americans did not stop themselves from entering Toys R Us. Many parents in fact, have felt that they should not hold back in spending for the children. Parents do not mind holding back on going out to eat, or spending for other things, but all in all, what they spend for their children is constant. However, children may earn their toys through completing chores, or choosing to receive a toy rather than having a birthday party. Figure 1 shows that with a decrease in price from P1 to P2, the quantity demanded increases from Q1 to Q2. This is a movement along the demand curve. The demand for toys is  elastic because the moment there was a drop in the prices of toys, consumers responded quickly by purchasing a lot.

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Making sacrifices for Thanksgiving trips

Many, if not most Americans have considered making sacrifices for their Thanksgiving celebrations this year. Air prices are too pricey and many Americans cannot afford it. The Miles family from Chicago, made their sacrifice by deciding not to travel by air, but rather by train which would get them to attend their Thanksgiving dinner in 1100 miles. “Economic considerations topped the list for us,” said Maureen Miles, the mother of the Miles family. “If the price was right, we would have considered flying,” she continued. This family of 5, managed to pay off for their train ride in $800, whereas if they traveled by air, they would have topped $2500 in total.

Many Americans who are not getting the chance to visit home for Thanksgiving, are those who are single and either working or studying. This includes many college students, as well as employed workers working in places away from their families. Due to economic pressures still hurting household budgets, Americans are opting out from traveling by air and are making their sacrifices or looking for cheaper alternatives that are reasonable within their budgets. Some people “are staying home completely — partly to avoid traffic and airport lines, partly to save a buck”.

The number of people who traveled during Thanksgiving in the year 2007 and 2008 plummeted 25%. The same goes for this year’s Thanksgiving travel, with just a slight increase of 1.4%, based on a survey of 1300 households.

Only 38 million domestic travelers have plans to take off during Thanksgiving break, a great decline from the 58 million who traveled in 2005, just before the beginning of the economic recession.

The graph to the left shows the elasticity of demand for air flights during Thanksgiving holiday. As seen in the graph, the elasticity was already quite elastic as people are quite responsive to changes in the price of flights. Because of the economic recession, the demand for flights became even more elastic. More Americans  find that traveling through air is too costly and have reduced their traveling on flights. The quantity has decreased from Q to Q1, and the price also decreased from P to P1.

http://news.yahoo.com/s/ap/20091125/ap_on_bi_ge/us_thanksgiving_travel

Roger Lee’s TAL Apparel

CNN’s reporter Eunice Yoon interviews Roger Lee, the director of TAL Apparel Group and reports how manufacturers in China are “gauging the spending power of the U. S consumer”. Roger Lee’s TAL Apparel Group is one of the biggest manufacturers of garments in the US as well as the world leader in the production of clothes including outwear shirts, polo shirts, blouses, woolpants and pants in the US. It supplies to famous brands such as Brooks Brothers, L.L Bean, Nordstrom, JC Penney, and Banana Republic. “One of every six dress shirts sold to Americans comes of one of these assembly lines”, says Yoon.
When Hong Kong businessman Roger Lee began to see that US consumers’ habits had changed, the supply of garments had decreased quite drastically. Lee’s workers went from producing 200 shirts a minute to 160 shirts a minute. Despite the decrease in consumers’ demand, the business still kept up fairly well. Especially during the economic downturn, most consumers bought basic shirts, typically white dress shirts. The demand for these were fairly inelastic as many consumers continued to purchase them for job interviews and offices.

Eunice Yoon reveals that “the slump in demand” for shoes, toys and DVD players manufactured in China forced thousands of factories in China to shut down. Millions of people were beginning to become unemployed.

In Roger Lee’s factory, nearly 5000 people work 10 hours a day. As Christmas is nearing, Lee is beginning to feel hope from an increasing number of orders. Manufacturers are now hiring rather than firing. Lee sees this as a positive outcome of the economic recession, as by 2010, US consumers will have built up the Global Economy.

The graph to the left shows the elasticity of demand supply for ordinary, everyday wear TAL Apparel shirts. The demand is fairly elastic because the production of garments decreased from 200 to 160 a minute. There is a shift in demand from D to D1. Equilibrium quantity decreased from Q to Q1 and equilibrium price decreased from P to P1.

 

 

 

 

 

The figure to the left shows the elasticity of demand supply for dressy or formal shirts. The demand for dressy shirts is inelastic. Although ordinary shirts are more wearable and dressy shirts may be considered luxurious, the demand for dressy shirts remained fairly stable. This is evident through consumers’ response during the economic downturn. Despite the economic downturn, people continued to purchase dressy shirts as it became a necessity for many. Many people going to offices and being called in for job interviews needed dressy shirts more than ordinary shirts.The demand for dressy shirts dropped only slightly from D to D1, not as great of a drop in demand of ordinary shirts. Equilibrium quantity decreased from Q to Q1 and equilibrium price decreased from P to P1.

Being one of the biggest manufacturer’s of clothing in the US, one can expect that TAL Apparel’s supply is quite elastic. If every one in six shirts in the US is made by this company, their production must be extremely big. They have loads of stocks available and can therefore respond quickly. In addition, because they have a rate of employees, they can quickly change to producing a good in high demand. Workers are hired and fired each day and are able to learn new skills fairly quickly. This explains the high elasticity of supply.

Case Study Analysis – Tummy Tuck Jeans

The company “Not Your Daughter’s Jeans (NYDJ) established in Los Angeles, California have featured the “Tummy Tuck Jeans” product. The market for these “life-changing”, “most uplifting jeans in the world” is targeted at women over 40-year-old and the suggested retail price per pair is $100. The product is targeted at 40-year-old + women because the Lisa Rudes, CEO George Rudes’ daughter  believes that women all over the world of all “ages, races, religions, and backgrounds” have trouble reducing weight on their tummy and therefore, cannot wear the jeans they long to wear. The way the jeans are made allow the fat or flab on the tummy to be flattened, and pushed towards the but.

During the time of the current economic recession, a company like NYDJ would probably “cut corners” by cutting on expenses. Some of these expenses include firing employees, purchasing cheaper material, cut down on advertising expenses, and to downsize their manufacturing facilities. The weak US dollar has affected sales of Tummy Tuck in jeans in foreign countries in their exports. The exports of Tummy Tuck Jeans have been cheaper and therefore, exports in overseas countries have increased. Expansion in foreign markets have expanded NYDJ’s facilities 3 times more and there are 30% more workers. The demand for Tummy Tuck Jeans is inelastic because no matter the price, women over 40 are willing and able to purchase the jeans even during an economic recession.

The graph of the elasticity of supply and demand for Tummy Tuck Jeans shows us that demand is fairly inelastic, while supply is  relatively elastic. The demand for Tummy Tuck Jeans appears to be inelastic because even in times of Economic downturn, women are willing and able to purchase a pair of $100 jeans. This means that price has a small effect on demand. Although the source does not directly indicate that the supply is elastic, I assume it is elastic. This is because Tummy Tuck Jeans is a big company and probably has a lot of stocks. The availability of stocks increases the company’s ability to respond quickly even in a short time.

Hovis losing bread wars

An increase in Hovis` bread prices have led to significant decline in sales. Along with that, Hovis has been in competition with other bread company rivals such as Warbutons and Kingsmill. The price of these other companies` bread was no increased as early as when Hovis` bread price was increased. “This differential in retail prices led to a significant decline in volumes.” This indicates that Hovis` bread consumers were extremely responsive to the increase in price, and therefore, Hovis` bread price is very elastic.

 

Economic sources–>Inter Press Service & AlterNet

During this recent fall break, I attended the Second Global Forum on the Power of Peace, organized by UNESCO in Bangkok, Thailand. During a plenary session regarding conflict management through Media and ICTs and New Opportunities for Collaboration, Mr. Imtiaz Muqbil, the Executive Editor of Travel Impact Newswire and a columnist of the Bangkok Post mentioned about a few websites that he visited daily to update himself with news. Upon visiting these websites, I came across one that specifically struck me as a great source for Economy, Trade and Finance news. This website is called the Inter Press Service, http://ipsnews.net/

It not only has news on Economics, but also several other categories of news. Since then, I visit the website daily and find it very useful.

Another such website that is not completely focused on Economics, but does once in a while include various articles regarding Economics is AlterNet, http://www.alternet.org/.  I find the ‘World’, ‘Politics’ and ‘Take Action’ categories very useful for my daily updates with Economics.

Afghan children at war, Afghan children fighting

The unemployment rate in Afghanistan is at critical levels; 40% of workers do not have jobs. For those families who are unable to “put food on the table”, their sons have no choice but to find a job to provide to their family. “I couldn’t find a job, so I was compelled to join the police. There were only two ways. Join the police or beg,” said 16-year-old Niamatullah. This isn’t the case only for Niamtullah, several other boys like him are enlisted in the Afghan police and army forces.

These boys who work as underage soldiers (underage is considered under 18), are provided with fake National Identity Cards (NIC). Their ages are increased, and they are thereby allowed to fight in the Afghanistan National Army (ANA) and the Afghanistan National Police (ANP).

In the case of many families, boys are encouraged to join the military or police. They are not only provided with paychecks, but other steady work and long-term job security. Families are in desperate need of income. A 48-year-old soldier, Marjan Gul refers to his son, “young people fighting Afghanistan’s wars are nothing new and now, his family needs the income provided by his 16-year-old son’s military paycheck”. Gul, who once served the army, has complete faith in his son. He himself is blind and can no longer serve the army. Gul is afraid that if his son quits the job, there will be nobody to support his family.

In many other cases, families and people like 38-year-old Obaidullah believe that underage boys should not be serving in the police and army forces. According to Obaidullah, agencies that should be protecting underage police are in fact causing more harm for them. “They do not know military affairs and are not professionals,” Obaidullah says. “They may not know how to use that gun they are carrying.” This proved to be true with 17-year-old Abdurrahman, who is currently recovering from gunshot wounds in the hospital. “I was standing with gun-in-hand…at the entrance to a hotel. When the fight started, a stray round hit me,” he said. In just another case last month, an 11-year-old boy named Eidullah, was ordered to carry a bag of flour to gift to a regional Afghan military commander. Eidullah was told he was carrying flour. The bag was in fact, filled with explosives. On his way, the bag prematurely detonated, and one of Eidullah’s legs was blown off.

Afghanistan has had a consistent 40% unemployment rate since the year 2006. Just 6 years before that, in the year 2000, the unemployment rate was 8%. Afghanistan became involved in the war as of 2001. The war is probably the biggest factor that led to the current, ridiculous unemployment rate. Even more so, Afghanistan’s government sources believe that there are no underage soldiers or officers serving in the army and police. The government is not aware of those many who own NIC’s and have faked their age to serve in these two forces. In interviews, boys have admitted that their only reason to join the security forces is to help their families survive. Afghanistan’s government should take measures to solving the unemployment rate and providing other suitable jobs for boys. The police and army forces should not be encouraging boys to make NIC’s as it is an illegal act. If many underage children are going to risk their lives by serving the security forces now, what will be left of the army and police forces in the next generation?

This article was retrieved from http://www.alternet.org/world/143659/with_unemployment_at_40_percent%2C_afghan_teens_enlist_in_army%2C_police/

Advice to JAL

JAL’s great debt is due to their understanding that the markets demands for their flight services are inelastic; the price variations do not affect the market’s demand. The recent economic downturn has shown that economies, markets as well as individuals are not willing and able to buy the goods and services provided. For this reason, JAL has not been able to maintain profit from the revenue received. Their standards of services are quite high, and therefore, consumers have not been able to afford the credit to pay for such services. Since consumers’ demand for JAL services has now become elastic, JAL should consider lowering their prices. Lowering their prices will earn them greater demand for their service. However, the revenue that they will earn from this may still not be enough to pay off for other costs that JAL may need to cover up for. Since JAL’s standards are extremely high, perhaps they should cut down on the offerings of their luxurious services, such as the sleeping seats, and consider targeting consumers to purchase their lower standard services of economy seats. Under the recent and ongoing economic recession, consumers are looking for the cheapest possible services. Businessmen will only begin to fly again if they are able to purchase reasonably priced services (as per the economic situation).

JAL can also look towards cutting down on their routes, mostly those that are domestic in which maximum numbers of passengers don’t fly to and from. By including extra flights in which not many passengers travel, JAL is simply throwing away money for charges such as fuel, flight attendants and their accommodations, and other services. JAL can save up a lot more profit from their revenue if they follow such guidelines, and this will eventually lead to the retaining of their high standards again in the future.

Cheap Flights – Europe

a)      Does the written article suggest that European air travel is price elastic or price inelastic in demand?

BA is offering their consumers fewer economy seats, and more luxurious seats (business and first class), at higher prices. These luxurious seats are therefore; inelastic. They are not worried about the quantity falling, because the revenue they will be getting from the costs of the luxurious seats will cover up for their profits.

On the other hand, Ryanair offers extremely low ticket prices as compared to the ticket prices of BA. In this case, Ryanair has more demand and so the air seats are very elastic.

b)      How Has Ryanair become the world’s most profitable airline?

There are a few strategies that Ryanair has undertaken to become the world’s most profitable airline. Firstly, they brought down the prices of air seats, knowing that this would result in greater demand and increased revenue. This would cover their profit and other related costs. Their second method was to fly to and from secondary airports at which airplanes landed outside the city centre. This led to lower charges for landing as well as efficiency in landing and departing time. There were more flights in a day and less delay as there was no air-traffic congestion. Ryanair also has only 2 flight attendants in smaller aircrafts and 5 flight attendants in big aircrafts. By having fewer attendants, Ryanair managed to decrease the costs for wage, health insurance, recruiting and training of attendants.

c)       How can Ryanair offer seats on some flights for under pounds?

Ryanair can offer seats for less than 10 pounds after they are sure that higher priced tickets have covered all other costs and have also given profit. They create a marginal cost structure that is effective for them.  When tickets are much cheaper, demand for the tickets is sure to rise.