Natural disasters and its effect on the affected countries.

http://www.bbc.co.uk/news/science-environment-19254685

When a natural disaster occurs within areas prone to disasters, economically they need to spend a lot of money in order to re-establish the area and protect it from future disasters.

The price elasticity of demand refers to the responsiveness of the quantity demanded of a good to a change in its price when all other influences on buying remains the same. Demand itself can be elastic, inelastic or unit elastic. If the quantity of a good demanded does not change when the price changes, the price elasticity of demand is zero and the good has a perfectly inelastic demand.

This graph shows a perfectly inelastic demand.

Within an area that has been affected by a natural disaster, the government would have to spend a lot of money in order to maintain the affected area and to sustain the other areas which haven’t been affected. We must take into account that many people have lost homes, crops and means of transportation have been made scarce by the disaster, so the people will rely greatly on the government to help them. The people who have been injured would need medical attention and this will have to be done through the government who will allow helicopters to go around the affected area in order to help. This costs money, as people have to be paid to provide these services and these means of transportation are not cheap.

In areas such as Japan as much as US$210 billion was spent after the tsunami hit them in 2010. People would demand more and the price for these items would have gone up due to the limited amount made available. The sellers from outside regions could sell their products to the people in the affected area at a higher price because they are catering for an area outside their usual working domain and because they have to cultivate more than they normally do to provide for these people. This would lead to the momentary supply being perfectly inelastic as the quantity supplied immediately following price change remains constant.

However, if there was a rise in income goods which are considered luxuries to some such as coffee, there may be a group of people who are willing to exchange the coffee for tea as tea is cheaper. This is turn  would mean that coffee is an elastic good because a raise in price will cause a large decrease in demand as consumers start buying more tea instead of coffee.

Many people would have to stop working due to accidents caused by the disasters which would mean that people would have to stop working for a while and recover; this would come to mean that people be using their savings in order to take care of themselves and this would be seen as an expense. There would therefore be an increase in demand for medical supplies. Income elasticity of demand would measure how the quantity demanded of the medical supplies would respond to a change in income with other things remaining the same. Since there is no increase in income, people will have no choice but to lower their demand for some products as they may not afford it in order to be able to recover. Therefore there will be an elastic reaction in demand.

The disasters will cause market failure to occur as social cost of production to exceed private cost. It would lead to the government having to deal with matters of health care and education causing the social benefit of consumption to exceed the private benefit.  

Market failures occur due to under or over production which arise when there are price and quantity regulations, taxes and subsidies, externalities, common resources, monopoly and high transaction costs.  For example, climate change can cause the natural disasters to occur and because of that it can cause market failure due to under and over production in competitive markets. Hence the people have to be educated on how to keep the environment clean. This is when the government will step in. 

Depending on the government’s budget after redeveloping the affected areas, taxations on goods could be implemented together with trading and regulations. The government has to create policies and new technologies which are eco-friendly and educate the people about what harm their products have on the environment and how it can be mended. In For example some goods would have to reach the standard appropriate to that demanded by the government or else companies would be fined.

To conclude, as seen above, the demand of a good can vary on many factors such as income and the supply available. It can be seen as a price elastic demand when there is a substitute, whereby when prices get too high for one good, the people can move to another similar good which is at a lower price. Income also has a role to play in the sense that if it does not increase but the price of the product increases, the amount that someone could afford of that product decrease which in turn causes that person to change product altogether to one cheaper.

In some cases however, although the price increases the quantity demanded will stay the same because the product could be seen as irreplaceable and hence, no matter how high the price of the good will rise, the consumer will still buy the product.

Market failures can also occur as a result of natural disasters due to under production. This will cause the government to think of incentives in order to educate the private companies in ways to have a more eco-friendly outlook and to get them more involved in environment protection. This in turn will not only benefit the government but can also reduce the effect of natural disasters. 

Individual 4

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Piracy and its Effects on the Economy of Seychelles

http://www.un.org/africarenewal/web-features/%E2%80%98invest-people%E2%80%99-says-seychelles-president

The economy of Seychelles depends largely on its exportation of fish and Tourism. With the Somalian pirates entering the waters of Seychelles, this causes a large loss in the tourism and fishing industry. The government has to use the resources they have in order to ensure the security of the people with the help of other international delegations.

As Seychelles relies greatly on its fishing industry, there will be a decrease in the supply of fish entering the country as fishermen are unwilling to go out at sea with the fear of being attacked by the pirates. This in turn will lead to a higher demand in fish, not only from the locals but from people who import fish from the Seychelles tuna factory. The high demand in fish and the low supply available would lead in the price of the fish going up. Therefore as the law of demand states; other things remaining the same, the higher price of a good, the smaller is the quantity demand. This in turn would lead to the substitution effect whereby people would look for a substitute for fish as the price would increase due to its decrease in quantity available.

The fact that there is a decrease in supply, there will therefore be a change in quantity demanded for the fish; that is, the amount that people will be willing to buy during the piracy period will change. The quantity of fish that people are willing to buy will change at every price so that there is a new demand curve. Basically, the rise in price of the fish would mean that the quantity demanded would decrease and there would be movement up the curve.

As the Law of Demand states; other things remaining the same, the higher the price of a good, the smaller the quantity demanded and the lower the price of a good, the larger is the quantity demanded. The law of demand results from the substitution effect and the income effect.

The Income Effect will come into play as prices of the fishes will increase but since income will not be a factor that changes. This would influence the demand for fish. That is that people would either be willing to pay although the increase in price due to that fact that they can afford it and see it as a normal product, while others may now see it as a luxury meal as the increase in price would mean that they would not be able to afford it as they used to. This would lead to the substitute effect for those who cannot afford fish.

The Substitute Effect simply comes to mean that people would start looking for the next best thing as fish would no longer be in their price range.

The Demand curve may alter due to factors which affect it and change its state. If people knew that there would be a change in the price for fish before-hand, this would also lead to a change in the demand curve. If the price is meant to rise, then the current demand for fish would increase leading the curve to move rightwards.

Boats who would charter within the area would decrease; this would be due to the heavy piracy activities that would occur. Sometimes, these boats would bring in fish caught from the trip and would sell it to the people, however, their lack of fishing activities would lead to a decrease in the amount of fish which in turn would encourage the increase in the price of fish and the shift rightwards on the demand curve.

When the demand curve  shifts to the left it would be due to the fact that the preferences of people within the country have changed or that the substitute of the fish would have decreased its price hence people would buy more. In terms of expectations, if people expect that the price of fish would decrease after the talk of piracy settles, then they would hold out on buying fish until then.

Taking into account that most of Seychelles’ basic goods come from overseas and come by cargo vessels, there will be a decrease in the amount of goods made available within the country. Hence, as the Law of supply states, other things remaining the same, the higher the price of a good, the greater the quantity supplied and the lower the price of a good, the smaller is the quantity supplied.

 Producers are willing to supply a good only if they can at least cover their marginal cost of production. Therefore, with the lack of supplies the marginal cost will not be the price will increase together with the quantity demanded of that product. This in turn would tend to shift the supply curve to the left. Although there might not be a great amount of fish that is being brought into the country, there are still people who are supplying the fish despite the cost and therefore, these suppliers would move the supply curve to the right.

As there would be an increase in demand for goods within the country, there would be an increase in demand for labour for locals. This would come to mean that where there was a market surplus there is now a higher demand for the local products which could lead to a surplus if there is more demands than products can actually be produced. Although there is a willingness from suppliers to increase the amount that they want to supply to the people, they may not be technologically advanced enough to cater to everyone’s demand as although they are selling their products, the cost of living in Seychelles is very high, hence the suppliers might not afford to enhance their mean of production even if they increase the price of the product.  I would propose that the government would create innovative ways of investing the money which they are given from other countries, to help support the suppliers in advancing their products as so to make Seychelles a more self-sustainable country as so that next time a disaster would occur it would be less harmful on the economy and the people. The money that they would invest within these innovations would also lead to an investment for the country, they would be making and assuring that money from production flows only in Seychelles.

It must be noted however, that in order to keep the clientele, the suppliers must find the market equilibrium-which is when the price balances the plans of buyers and sellers. The sellers must take into consideration that there is a decrease in fish and they know that there is a price that the consumers are willing to pay that is higher than what they would previously sell that would satisfy them as well as the buyers. If the price is above the equilibrium price, a surplus forces the price down, at any price below the equilibrium price, a shortage forces the price up.

The graph indicates the increase in demand and the supply of fish within the market. The focus however is on the market equilibrium. The graph shows that when the demand increases the demand curve shifts rightward. At the original price there is now a shortage. The price rises and the quantity supplied increases along the supply curve.  It also indicates that when supply increases the supply curve shifts to the right. At the orginal price there is now a surplus. The price falls and the quantity demanded increases along the curve. The surplus would occur when the act of piracy would be over. Hence it would occur in future. With the act of piracy, there would be a shortage of fish within the market.

In the case of piracy and its effects on the economy of Seychelles, it could be noted that it is not a long-term effect although it is currently being badly affected. There will be an increase in demand and a movement up along the supply curve which would lead the equilibrium price to rise.  In future with an increase in supply there will be movement along the demand curve. The equilibrium price falls and the equilibrium quantity increases.

Individual 4

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Demand and Supply-The Increase of Sugar Supply

According to an article called ‘Sugar supply to be increased from Thursday’ from The Star (29 June 2010), the author stated that the Government will add 10% more sugar supply to wholesalers and retailers nationwide starting from Thursday until September. Below is an excerpt from The Star,

 "The additional supply is to meet the high demand for sugar, especially during the coming festive season," he said when winding up the debate on the 10th Malaysia Plan for his ministry in the Dewan Rakyat, here, Tuesday. Early this month, the Government added 5% to the sugar supply to meet the current demand. Ismail Sabri said to ensure sufficient sugar supply always, the Government had appointed the relevant associations to supply and distribute the essential commodity to their members.

Two years ago, the demand for sugar has increased because of the upcoming festive season. Therefore, the demand curve for sugar can be demonstrated below.      

As the price of sugar decreases, the quantity demanded for sugar increases. This reflects on the law of demand when the price of a good falls, the quantity demanded will rise. This usually happens because of two things, which are the income effect and the substitution effect. People can afford to buy more (the income effect) and they will switch away from consuming alternative goods (the substitution effect). However, in the case of sugar, there are no alternative goods for it which means that the quantity demanded for sugar increases due to the income effect. The word quantity demanded refers to the amount consumers are willing and able to purchase at given price over a given period. Since the festive season is a determinant that causes demand to rise, the whole curve shifts to the right, consequently, increasing the demand. This shows that at each price, more sugar will be demanded than before.

However, according to the article, the author stated that the government is forcing the retailers and suppliers to increase the supply of sugar by 5%. The quantity supplied of any good or service is the amount that sellers are willing and able to sell. The law of supply states that the quantity supplied rises as the price of a good rises, other things remain the same. At that time, the supply curve of sugar is shown below.

                

The supply curve for sugar shows how much sugar producers offer for sale at any given price, holding constant all the other factors beyond price that influence producers’ decision about how much to sell. Because the government decided to make suppliers and wholesalers to increase the supply of sugar by 5%, at any given price, the suppliers are now willing to produce sugar at a larger quantity. Thus, the supply curve for sugar shifts to the right.

   Having analyzed supply and demand separately, they are now combined to see how they determine the quantity of sugar sold in the market and its price. The graph below shows the market supply curve and market demand curve together. The one point at which the supply and demand curve intersects is called the market’s equilibrium. The price at this intersection is called the equilibrium price. On the other hand, the quantity at this intersection is called the equilibrium quantity.

               

Here, the equilibrium price is RM2.50 per packet of sugar and the equilibrium quantity is 35 packets of sugar. At the equilibrium price, the quantity of the good that buyers are willing to buy exactly balances the quantity that sellers are willing to sell. The actions of buyers and sellers naturally move markets toward the equilibrium of supply and demand. However, we should consider what happens when the market price is not equal to the equilibrium price. Suppose now the market price is above the equilibrium price. At a price of RM4 per packet, the quantity of sugar supplied (52 packets) exceeds the quantity demanded (18packets). There is a surplus of the good where suppliers are unable to sell all they want at the going price. When there is a surplus of sugar market, the sellers of sugar would find a lot of stocks of sugar they would like to sell but can’t. They respond to the surplus by cutting their prices. Falling prices, in turn, increase the quantity demanded and decrease the quantity supplied. Prices continue to fall until the market reaches the equilibrium. Suppose now that the market price is below the equilibrium price. In this case, the price is RM1 per packet, and the quantity of the sugar demanded (54 packets) exceeds the quantity supplied (11 packets). There is a shortage of the good where demanders are unable to buy all they want at the going price. When a shortage occurs in the sugar market, buyers have to wait long lines for a chance to buy one of the few packets of sugar that are available. With too many buyers chasing too few goods, sellers can respond to the shortage by raising their prices without losing sales. As the price rises, quantity demanded falls, quantity supplied rises and the market once again moves toward the equilibrium.

Next, what happens to the price of sugar when both the demand and supply of sugar increases?

In my opinion, this actually depends. The festive season affects the demand curve because it alters the amount of sugar that households want to buy at any given price. At the same time, the government forces the suppliers and retailers to increase the supply for sugar because of the high demand. The curves shift in the same directions as they did in our previous analysis. The demand curve shifts to the right from D2 to D1 and the supply curve shifts to the right from S2 to S1. As I see it, the market equilibrium has gone up, the quantity increased from q2 to q1 whereas the equilibrium price remains the same as it was originally at p1. Hence, I believe that the price of sugar remains the same when both demand and supply of sugar increases.

However, this was two years ago. The situation of the supply of sugar at current time is completely different. The government now helps to subsidize sugar for consumers from RM0.20 per kg to RM0.54 per kg. In my point of view, I don’t think that this is a smart move by the government. According to statistics, Malaysia is already ranked at 6^th place for obesity rate among the Asian region. From how I see it, subsidizing sugar for Malaysians is only going to move the rank for obesity rate in our country higher. People are obviously going to purchase more sugar and at the same time consume more of it. I feel that what the government should do is to remove the subsidy for sugar and provide more gymnasiums in our country. This way, the people in Malaysia would have a healthier lifestyle.

Individual 3

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Price Floor- Minimum Wage in Malaysia

   According to an article called PM: Minimum Monthly Wage is RM900 from The Star (30April 2012), the author stated that the Prime Minister of Malaysia has set the minimum monthly wage as RM900 for the private sector employees. Below is an excerpt from The Star,

PUTRAJAYA: The minimum monthly wage for private sector employees in the Peninsular has been set at RM900 and RM800 for those in Sarawak, Sabah and Labuan, said Prime Minister Datuk Seri Najib Tun Razak on Monday.

It works out to RM4.33 per hour for those in the Peninsular while employees in Sarawak, Sabah and Federal Territory of Labuan are to be paid a minimum of RM3.85 per hour.

                 

 Based on the article above, the government has imposed RM900 as the minimum wage. This is due to the fact that Malaysia’s Prime Minister, Datuk Seri Najib Tun Razak wants to drive our country towards becoming a high-income nation. In my opinion, this move by the government will cause a roller coaster effect to the workers in Malaysia where some people will be thrilled whereas the rest of them will be unhappy. Even though most workers in Malaysia are pleased with the idea of having a higher standard of living, but there are some pros and cons that these workers might have to deal with because of the enforcement of the minimum wage.

   Before getting into details with that, let’s take a look at what is happening now.   For each one of us, the labor market is the market that influences the job we get and the wages we earn. Firms decide how much labor to demand, and the lower the wage rate, the greater is the quantity demanded. Households decide how much labor to supply, the higher the wage rate, the greater is the quantity of labor supplied. The wage rate adjusts to make the quantity of labor demanded equal to the quantity supplied. At this rate, the minimum wage of RM900 is called a price floor. Minimum wage laws dictate the lowest price for labor that any employer may pay.

                 

                                               

     Referring to the graph above, the x-axis represents the quantity of labor and the y-axis represents the rate of wage. When the minimum wage is higher than the equilibrium wage, the market is going to be distorted. From the employer’s point of view, since the wage rate increases from W0 to W1, now the quantity of labor decreases from L0 to L2.  This means that the employer can afford lesser labors to work in his or her company. From the employee’s point of view, since the wage rate increases from W0 to W1, the quantity supply of labor will be increased from L0 to L1. This means that more people are going to be willing to work.

   When this happens, there will be an oversupply of labor where quantity supplied of labors exceeds the quantity demanded for labors. Because of the oversupply of labor, at current time, there will be more people looking for jobs due to the increase of wages. Unemployment rate increases at this stage since the employers are forced by the government to pay more wages to their employees and consequently, they can’t afford to hire more employees. Thus, the minimum wage raises the income of those workers who have jobs, but it lowers the incomes of those workers who cannot find jobs.

   As mentioned earlier, there will be happy and unhappy people at the same time after the government imposes the minimum wage in our country. In my opinion, unemployed people especially inexperienced teenagers are definitely categorized into the happy people. These types of people are probably unemployed because of their lack of skills, abilities and experiences. Even though they know that they are lacking in so many ways, I think that unemployed people will definitely take advantage of this situation to apply for available jobs in the private sector and get at least RM900 as their monthly wage. Because of this, there will be unhappy people, which are probably the labors who are already receiving RM900 as their monthly wage before the enforcement from the government. These people would not be pleased with the idea of the newcomers getting the same wages as themselves when they have worked so hard for it. To overcome this problem, I am sure that their current wages must be increased so that their seniority would be compensated properly and everyone will be satisfied.  Therefore, the increase of the minimum wage would result in the increase of wages for all employees in the private sector. As I see it, this increase in wages is not a worry to the Malaysian government. On the other hand, it should worry the private sector indeed. According to the statistics, Malaysia’s wages are already higher than all the Asean countries except for Singapore. But it is indeed higher than China. This might deter both domestic and foreign investors. If investments don’t come in, the number of new jobs created would be diminished. Thus, increasing the unemployment rate.  

    In my opinion, there are also some benefits of the government imposing the minimum wage in Malaysia. One of them includes higher contributions to the Employees Provident Fund (EPF) as the leftovers will go some way to shore up the retirement savings of many Malaysians. Hence, companies will see an increase in their payments to the EPF. Introducing a minimum wage policy can also address the issue of the over-presence of foreign unskilled workers by attracting more Malaysians to enter the labor market. This is crucial in some sectors such as plantation, agriculture, construction and services. As Malaysia aspires to become a high-income developed nation, it is vital for wages to be increased. It is another way to escape the middle-income trap. Furthermore, I believe that the minimum wage increase will benefit firms and employers in terms of reducing the turnover rate of workers and improving productivity of their workers. By increasing their wages, the employees will feel better about their own respective jobs. This way, the job performance of the employees will be enhanced. Consequently, the tendency to quit their jobs and looking for other jobs will also be reduced.

     Despite the established economic theory, there is still some active debate regarding the consequences. Setting a rate that provides employees with a sustainable wage while minimizing the impact on unemployment requires a delicate balancing act.

Individual 3

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Individual 2- Baby Milk Price

Parents want Milk for Babies to be made a Price Controlled Item

According to the news, Parents want Milk for Babies to be made a Price Controlled Item, 6 October 2012 which taken from the Star online, http://thestar.com.my/news/story.asp?file=/2012/10/6/nation/20121006163308&sec=nation, the manufacturers seems to raise the baby milk prices to a higher price in the market to gain more profit. Nowadays, the price for the baby milk is getting higher and higher and many of the parents cannot afford it, so many of them will hope for government to control the situation of the baby milk. Therefore, this news will leads to the demand and supply and also hoping for government intervention. The demand for the baby milk has decreased as the price had increased. When other things remain the same, price for goods had increased and the quantity demand for the good has decreased, is it known as the law of demand.

Furthermore, the law of demand will result from substitute’s effect and income effect. Substitutes effect is when the relative price which is opportunity cost of a good rises, people will seek substitutes for it, so the quantity demand for the good decreases. Therefore, I believe that many people will buy the cheaper product to replace the expensive product when they can’t afford the high price. In this case, many people will buy cheaper baby milk instead of the expensive milk. However, it will leads to income effect in the law of demand. Income effect is when the price of a good rises relative to income, people cannot afford all the things they previously bought, so the quantity demand for the good will decreases. People’s income has not increased but they are forced to buy things which the price is in the higher price level. The price for the baby milk has increased by the manufacturers but the people’s income remain the same, people will not able to afford the previous baby milk they bought, so they have to buy the cheapest milk which will cause the demand for the previous baby milk decreases.

Besides the demand has some changes, even the supply will has some changes too. As I know, suppliers will never do a business without gaining high profit, so it fulfill the law of supply that when other things remaining the same, the higher the price of a good, the greater the quantity supplied. Furthermore, the law of supply results from the general tendency for the marginal cost of producing a good to increase as the quantity produced increases. Producers are willing to supply a good only if they can at least cover their marginal cost of production. In this baby milk case, the suppliers which are the manufacturer will supplier even more expensive baby milk in the market. Every manufacturer wants to gain profit from the baby milk and they want to maximize their profit. These actions will not benefits everyone as not much people are able to afford the baby milk in higher price, the demand for it will decrease and at the same time the suppliers will not gain their profit from here. Therefore, many people are hoping for government to control this situation in the market in order to benefit everyone. This is known as the government intervention.

 As the baby milk price is higher, many parents are hoping for government to control the price for the baby milk as many people are not able to pay the price for baby milk in the market now. I believe that government should take some action such as set a price ceiling in order to let the people to afford the baby milk. A price ceiling is a regulation that makes it illegal to set a price higher than specific level. Any price that set above the price ceiling is considered as illegal, so the manufacturer will lower the price for other poorer people. With price ceiling, many people can afford the baby milk and the qualities of the baby milk will also as good as the others. Government should set the price lower than the old times, so that it is also benefits the poor. However, if the government set the price too low it will cause powerful effect which is shortage of the baby milk. In the lowest price, suppliers are not willing to supply more baby milk to others. The demand for baby milk will increases as the price is low because they can afford it. This will cause shortage because the quantity demand for the baby milk exceeds the quantity of supplies. Many people will demand more for the baby milk as the price goes low. When the price is set in too low, the search activity will increased and there is also a black market existing. The time looking for someone to do business with is known as search activity. Many people will search the lowest price of baby milk and do business with the person. People might end up in a black market where it is an illegal market. If the government set the price higher than the equilibrium price, it will also cause problem which is surplus of the baby milk. Surplus is the quantity supplied of the good exceeds the quantity demanded for the good. Therefore, government cannot set the price too low or too high which will cause big problems to everyone. In addition, I also believe that government should also provide subsidies to the parents such as letting the mother have work out time to nurse their children.

In conclusion, the price of baby milk in the market now is too high which cause some of the people who less income cannot afford it. Parents are hoping that government will control this situation by stopping the price of baby milk increasing by manufacturers. With government intervention, people’s life might be easier than previous time but it will also cause some problems to others which are mention above. In addition, sellers and buyers have to corporate with each other in order to gain benefit. Sellers must willing to sell their products in a price level that buyers are willing to buy and afford to buy. By this, both of the sellers and buyers can gain their benefit together at the same time. 

(1034 words)

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Individual 2- Analysis for Home Prices in China

Home Price Gains in China

According to the article, Home Price Gains in China Cool, 7 September 2012 taken from the Star newspaper, it mentions that prices for newly construct homes in China rose in fewer cities in August than the previous month. It also mentions the policymakers will not make any policies to hold back the price of the house which indicate that they will let the price of the houses continue to increase. In order to build more houses, China has to find many resources to build houses but resources are never enough for everyone which will cause scarcity. There is not enough land to build many houses, so land has become a scarce resource. In order to overcome this problem, China might build more high-rise buildings such as apartments and condominiums. Apartment and condominiums used fewer spaces to build and it can save a lot of space and many people can stay in it. The suppliers will build more this kind of houses which save space and maximize profit. This will solve the scarcity of resources but will cause changes to the demand and supply market.

Because of the scarcity of the land, the buildings will be charged in a higher price. This leads to the law of demand. When other things remain the same, the higher the price of a good, the smaller is the quantity demanded for the goods whereas the lower price of a good, the larger the quantity demanded for it. As I know, this is common situation for everyone in the world which no one is willing to buy high price product due to different reasons, so when the price of a product is getting higher, the lesser the consumer purchase the product. In this case, China’s house price has risen; the demand for the houses will decrease. This is because the people in China might not have the ability to afford the houses with high prices. When the price of the good or service rises relative to income, people cannot afford all the things they previously bought, so the quantity demanded will decrease and this known as income effect. People might be able to afford a house in China with the income they have, but the price of the house has risen recently, so many people cannot afford it anymore. People’s demand for the houses has decrease. Although the demand for the houses in China now is decreasing, but there are some other factors that might change the demand such as expected future prices and income. If consumers expect future price will goes up, the demand for the current housing will be increased. If it is not, then the demand will remain decreasing. Demand for the houses is also influence by people’s income. When income has increases, people can afford the housing prices and they will buy the houses which will cause the demand for houses increased.

Besides the change in demand, supply will be affect too. The law of supply is about the higher the price of a good, the greater is the quality supplied. Suppliers of the houses in China will supply more houses because they can maximize their profits by selling the houses. Every supplier wants to maximize their profit, so when the price is higher they will supply more of the goods. There are also some factor will affect the changes in supply. For example, expected future prices will decrease the current supply of the house if the future price of the houses rises. Another factor will influence the supply is advanced in technology. Nowadays, technologies are getting advanced that increased the supply. Many suppliers will use high technology to produce their product and it lower the cost of producing existing products, so suppliers will increase the supply and sell in it a high price.

In addition, as China’s home price getting higher it will cause the problems such as surplus of the house and also housing shortage. If the price is too high, there will be a surplus which is the quantity supply exceeds the quantity demanded for the houses. There will be too many houses in the market but consumers cannot afford it and it will become waste resources. In other hand, there will be a housing shortage if the price is low. The quantity demanded for houses will exceeds the quantity supply by suppliers. There are many people want to buy houses if the housing price is lower than previous month, but this will cause shortage because there are too many people but the houses are just supplied a few by suppliers. Suppliers cannot maximize their profit in the lower price, so they will not supply more houses to the people. In order to solve this problem, China should make price adjustment. They should set the price where the buyer’s plans and sellers’ plans agree and the price does not change until some event changes either demand or supply. This is known as market equilibrium. In equilibrium, demand equals to supply and everyone is happy with it. This will totally solve all the problems that mention above.

I believe that if the housing prices keep decreasing and the investment in it is steady, all the negative effect will not happened. In my opinion, government should set a price ceiling or also known as rent ceiling when applied to housing market. Price ceiling is a regulation that makes it illegal to charger a price higher than a specific level. Government should set the price lower which meets the equilibrium so that it can benefits the suppliers and also benefits the poor. While in equilibrium, all the buyers and sellers are happy with the business and it is suitable to do business.

In conclusion, there are many economics problem in this world. If all parties corporate with each other, problems will be solve easily. In China, there are many people who are poor; the policymakers should make some policies to control the housing price, so that it still can benefits the poor and the suppliers also can maximize their profit. Furthermore, with government intervention people who live in China can get their houses easily and the suppliers can supply the houses at the same time the suppliers also can maximize their profit.

(1041 words)

  

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Individual 1- About the tourism

     According to : http://www.worldwatch.org/node/3920  With the development of science and technology,and people's life become better and better,people gradually have higher requirements on their quality of life.Not only the material, the soul is the same,they don't want to always stay in the place where they always live,they want go out to see anywhere,in order to relax by themselves,and we call it--travelling.Tourism has increasingly become a way of life. And this is an important reason why tourism will become more and more development.And so many business man fancy an this important resource,and put money into the tourism,and want to get much money from tourism.Tourism has increasingly become an important driving force in promoting economic development.Tourism more and more can not be separated from our life.And from next,let we discuss about the tourism.

Let we use China for example.Now in China,most of people's life is beome better.And the holidays become more and more.Most people use these time to go where they want to go with family,and use these time relax themselves, and forget all the thing .of course include working,or studying.Just thinking how to enjoy these wonderful holiday.And this is why China's toursim improve the econome's development.In addition to the family itself ,for the company,they also will organzied their worker go out to travel together.One the one hand,help their employees to relax,let them not always thinking the woeking,On the other hand,they will work hard for the next time,because they will think they have a good boss,and they need to use the good working to repay boss.With the lapse of time ,tourism would become a habit,people can not without it,this is an important reason why the tourism economy can keep growth.For example,we can use one of town in China to become an example,the city's domestic and foreign tourists 3,220,000 passengers, the total tourism income of 1.169 billion yuan. Accounted for 7.4% of the city's gross domestic product (GDP), 111,200 people overseas visitors, earning $ 9,460,000.Through these data,we can be very clear how the tourism improve the economy development.

 In an addition to this,Tourism and hotel are closely related and inseparable,When someone go out to travel.they must be find the hotel to live,but,if the tourism is decrease,the hotel will follow it ,also will decrease.We can use demand and supply discuss this situation.If the quantity demand of tourism is increase,of course the hotel will also increase.Because they are complementary goods.On the contrary,if the quantity demand of tourism is decrease,the hotel's income will also decrease.But the price of travel is elastic, with the change in the time .For example,if you want go out to tarvelling in the holiday,like:National Day, Mid-Autumn Festival, May Day and so on,the price must be very high,but people use the normal day go out to travl,the price would lower than holidays,sometimes would have discound. And also have another one can effect the tourism --traffic.people go out to travelling,they need transport.They can not just use their foot.But nowadays,for some remote little place which is a good place,and deserve people go there to see,is not easy to reach in china.For example,Tibet--On the plateau,if people want go there,they need to by plane first,and then take bus,again and again.People want go there to play,but because of traffic trouble,allow them to dispel the idea go there travel.So need to improve the traffic problem,let have more traffic can be directly reached,and no need to always chang the traffic.And if the quantity supply of transpot,the price of transport will go dowm,people will more willing to to out to play,And that can improve the economy's development.Economy is cumulative growth like this. And then,will have so many people go the place where is poor but is beautiful.Therefor can improve that place's economic development.However,tickets is also an important issue.When people arrive to one place where have museums, recreational facilities.But for the ticket's price is so high,and they don't willing spend more money go to play.If the price of tickets is so high,the quantity demand will go down.Therefor,the museum will not be able to make money.And after this ,the tourism's economy would also go down,and it can not improve economy's development.It is appropriate to adjust ticket prices,no let visitor just see that,and don't want to pay money to play it.Let they can enjoy in the joy of travel,so that would had a good travel experience,so,for the next time,they will willing to go out to travel again,therefor,will improve the economic development.Because people become more and more demand of tourism.

Last but not least,we need to think how to adjustment this situation,ant let tourism keep growth,of course, other industries as well.Firstly,we need to change by ourself,and how to change?Be good at to catch the opportunities in crisis,turning adversity into opportunity.And most important one is need to understand the market about the tourism.And need to quiet clearly the changes in the market all the time about the tourism.And catch the other countries tourism's good aspects,correct our bad side,after that,combine the all good aspects,and make the best idea that can attract others to travel.Expansion the demand of domestic market .Secondly,change by the tourism itself.Need to get more and more better.They need to come up with the specific ideas that the others have never think.And then can make money at the same time do some promotions.Business man need to  consider some people whose income is lower,and they also want ro go out to traveling .Appropriate to reduce the prices a little, so that they can come and relax.    

To summarise,Tourism is an indispensable part of China's economy,It is an important force to promote China's economic.Tourism is let the others can quiet understand about China,and also let chinese people can quiet understand the other countries culture,When the foreigner people come to China,will promote economic at the same time and also understanding of Chinese culture.Obviously, the tourism industry contributed greatly to the understanding and friendship between the Chinese people and the peoples of the world. Everything also have two side.Also have some reasons effect the development of the tourism .For example:traffic,income,and so on.I personally believe that with the various aspects of the adjustment,coupled with their efforts,the tourism  will become more and more better.

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