A trading bloc is “a group of countries that join together in some form of agreement in order to increase trade between themselves and/or to gain economic benefits from cooperation on some level.”

Below is a list of some of the regional trading blocs that unite the world’s countries in interdependent relationships based on comparative advantage today. For each organization, click on the student’s name to be taken to an overview of the group, including:

• an annotated time line showing the steps involved in its establishment and evolution, including any significant achievements and/or setbacks.
• an evaluation of the impact that membership in the trading bloc has had on the economy of one member nation

Articles still to be written and published by Danny Witters and Manon Van Thorenburg

• Pacific Regional Trade Agreement (PARTA or PIF) - by Carls Siu
• European Economic Area (EEA) - by Lucas Topham
• Caribbean Community (CARICOM) - by Dennis Melzer
• Union of South American Nations (Unasur/Unasul) - by Marco Garafolo
• East African Community (EAC) - by Enno Zhang
• Southern African Customs Union (SACU) - by Kaj Neiman
• Greater Arab Free Trade Area (GAFTA) - by James Hannam
  
• North American Free Trade Agreement (NAFTA) - by Daniel Yeung
  
• Association of Southeast Asian Nations (ASEAN) - by Wan Jin Park
  
• Central European Free Trade Agreement (CEFTA) - by Manon Van Thorenburg
  
• African Economic Community (AEC) - by Danny Witters

China rations diesel as record oil hits supplies | Markets | Reuters

As I headed into the city for dinner with friends on Saturday night, I witnessed an unusual site: as our taxi passed a petrol station, I saw about 25 or 30 blue trucks (the ubiquitous medium of transporting good from Shanghai’s factories to her ports) spilling out of the parking lot into the road, apparently queued, waiting for a spot at the pump. I’d never seen such a line at any of the petrol stations around Shanghai, and briefly wondered whether it was just a busy night or whether something else was amiss.

Well, reading the headlines in today’s news, I stumbled upon a clear economic answer to the petrol pump mystery. It appears that China has begun rationing diesel fuel at petrol stations in the East Coat provinces.

Truck drivers reported long queues at petrol stations along a national highway linking Fujian and Zhejiang provinces, with each truck getting 100 yuan ($13) worth of diesel, or around 20 litres, per visit at a state-run station and 40 litres at a private kiosk…

“What’s wrong with the oil market? Our drivers had to queue the whole night for only a small amount of fill, slowing the traffic by almost one day,” said Gao Meili, who manages a logistics company.

Continue Reading »

Kremlin Secures Price Controls on Food Items Before Elections - New York Times

Okay, students. This article needs to introduction, no summary, no analysis, no passages quoted, I barely even glanced at the article myself! Read the headline… if you’re interested, read the article; but it should be nothing new to you at this point. It’s the same flawed economic thinking that led Zimbabweans to attempt to eat a poor giraffe, and the Chinese decision to freeze certain prices in the run up to the 17th meeting of the Chinese Communist Party Congress earlier this month.

What’s wrong with this sort of economic policy? Why do governments still attempt such policies, and why do people still fall for such tricks played by paranoid leaders obsessed with placating the masses through “generous” price controls? What do you expect will result from Russia’s price controls?

Hat tip to Greg Mankiw for the link.

Speaking of our old friend Robert Mugabe, the president of Zimbabwe has just announced he’s launching The Robert Mugabe Intelligence Academy. His stated purpose for opening this institute, which will train government officials from the greater Southern African region?

“The important role of defending our country cannot be left to mediocre officers incapable of comprehending and analytically evaluating the operational environment to ensure that the sovereignty of our state is not only preserved, but enhanced,” Mugabe said.

Before settling on the institutes’s official name, several options were tossed around, including the close runner up: “The Robert Mugabe Institute for People Who Can’t Do Economics Good and Want to Learn to Do Other Things Good Too.”

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by Caleb Liao and Drew Venkatramen

Just how important is the caramel frappuchino to Starbucks? This podcast will explore the demand for a particular product from the ubiquitous coffee chain, a new branch of which has recently been opened across the street from Shanghai American School.

SAS students overwhelmingly favor the sweet, caramel goodness of the beloved Frappuchino, but how much would they really be willing to pay for already the steeply-priced beverage. At its market price of 32 kuai, customers seem to arrive in droves from the SAS campus; but could Starbucks do better by charging a higher price? What if they lowered the price, would it make a difference in their revenues? This podcast explores the market for the crowd’s favorite coffee beverage, the caramel frappuchino, and tries to learn something about demand, elasticity, and firm behavior in the process!

 

 SAS Economists Podcast #5: What does the Caramel Frappuchino mean to Starbucks?: Play Now | Play in Popup | Download

Environmental Economics: 6th Grade Econ Question of the Day

Tim Haab at Environmental Economics pulls the following question from his 6th grade daughter’s “economics” homework assignment:

Suppose that a new Harry Potter book comes out and yet again becomes a bestseller. Thousands of people want to read this book. Stores will order more copies of this book from the company that makes it. To fill orders, the company increases the SUPPLY of these books in the marketplace. The increased supply has been made in response to an increased DEMAND for the book.

1. If the supply of a new product is low and the demand is high, what will happen to the price?
2. If the supply of a product is high and the demand is low, what will happen to the price?

Here’s the answer the teacher wants the 6th graders to give:

1. 1. Price will increase in response to a shortage.
   2. Price will decrease in response to a surplus.

My question for you is: what’s wrong with this picture? Is professor Haab’s 6th grade daughter being taught good economics? Without following the link and reading Dr. Haab’s entry, see if you can figure out what’s wrong with this question!

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NPR : Farmers May Switch Crops Due to Labor Shortage

Pure competition forces firms to produce their output in the most efficient manner. Productive efficiency is achieved when producers achieve their minimum average total cost. Any increase in costs may lead to economic losses for a firm, and if costs increase too much a firm may be forced to shut down.

 

 Farmers May Switch Crops Due to Labor Shortage [5:29m]: Play Now | Play in Popup | Download

The scenario above is basically a textbook explanation of the reality faced by farmers in the American Southwest this very day. Hundreds of fruit and vegetable farmers are facing higher variable costs as tougher border security and immigration laws has led to a shortage of cheap labor, which the farmers depend on in the labor-intensive fruit and vegetable industry.

Listen to the podcast above, then study the graphs that accompany this article. Can you identify the changes that have occurred in the American fruit and vegetable industry? What are the possible outcomes for Southwest farmers? How might technology help save these growers from having to shut down their operations? What other alternatives do they have to shutting down in the long run?

Rising costs for in a perfectly-competitive (PC) industry: Click on the thumbnails of the graphs to see the full-sized versions

by Helen Chu and Angel Liu

How do brownies relate to economics? First, most people can agree that brownies are, in general, a “good thing” because, well, they’re yummy. And because they are commonly perceived as a “good thing”, we have chosen them to be the subject in our exploration of the law of DIMINISHING MARGINAL UTILITY. How can such a “good thing” transform into something revolting in less than ten minutes? Take a look at the results below and listen to our podcast – you’ll see.

 

 SAS Economists Podcast #4: There can't be too much of a good thing... can there?: Play Now | Play in Popup | Download

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Asia Sentinel - A Falling Dollar Does Nobody Any Good

Many economists hail the decline in value of the US dollar as a boon to the American economy. It may sound counter-intuitive, but economic theory predicts that when a currency depreciates relative to other currencies, this could actually be good for the country’s economy? Why, you ask? Let’s consider an example:

In the last four months the value of a dollar in terms of euros has gone from 0.75 Euro cents to 0.69 Euro cents. For Europeans, that means that dollars are cheaper now than they were four months ago, therefore American goods are cheaper now than four months ago. Cheaper American products should mean more business for American companies as Europeans demand more of their stuff. Good for business, right? In the US, aggregate demand will shift out, unemployment should fall, and the price level should rise as more foreigners demand more American products. But what impact does the weaker dollar have on Americans? Continue Reading »

Understanding the World Trade Organization

Below is an audio introduction to the World Trade Organization, courtesy of my year 2 IB Econ students here at SAS. Our current unit (IB Unit 4) examines free trade, global economic integration, and the WTO among other topics. As an introduction to the WTO, student were asked to record a two-minute podcast of the main ideas from a specific page on the WTO’s website. Below are their summaries of the basic functions and agreements of the organization, summarized and podcasted for your listening pleasure!

 

 Marco Garafolo: "What is the WTO?": Play Now | Play in Popup | Download

 

 Enno Zhang: "Principles of the Trading System" [2:40m]: Play Now | Play in Popup | Download

 

 Manon Van Thorenburg: "Tariffs": Play Now | Play in Popup | Download

 

 Dennis Melzer: "Textiles": Play Now | Play in Popup | Download

 

 James Hannam: "Standards and Safety" [2:36m]: Play Now | Play in Popup | Download

 

 Kaj Nieman: "Anti-dumping, subsidies, etc.": Play Now | Play in Popup | Download

Introduction to the WTO, continued…

 

 Carlos Siu: "Intellectual Property": Play Now | Play in Popup | Download

 

 Lucas Topham: "Non-tariff Barriers": Play Now | Play in Popup | Download

 

 Wan Jin Park: "Services": Play Now | Play in Popup | Download

 

 Danny Witters: "Agriculture" [1:20m]: Play Now | Play in Popup | Download

 

 Daniel Yeung: "Plurilaterals" and "Trade Policy Reviews" [1:57m]: Play Now | Play in Popup | Download

Shanghai Daily, Oct 22, 2007: How happy are we?-Let’s measure Gross National Happiness

When I first talked to Mr.Welker about a writing a blog entry about an alternative measurement of well-being to GDP and GNP, called the Gross National Happiness quotient, he gave me one those “looks”. I perceived the look to mean, “you are like a peace loving, hippy dippy gal from the East Coast, Ms. Close… this is economics we are doing here!” Of course, Mr. Welker would never admit that was what he was thinking because he is far too nice for that. But, I am happy to say that I am finally writing this entry because I finally have Oxford University and Cambridge University in England to back me up on this, Happiness Research.

These famous educational institution have their economists developing new ways to measure well being from an holistic economic perspective. Economists and sociologists all over the world, especially those interested in international development models are seeking to, “establish scientific methods for finding our what makes us happy and why”.

Happiness and well-being are complicated. Researchers cite many factors, like education, nutrition, freedom from fear and violence, gender equality, and perhaps most important, having choices, write Authur Max and Toby Sterling.

Continue Reading »

By Nicole Wong and Katherine Yang

Podcast number 3 investigates the competitive market among groups selling baked goods here at Shanghai American School. The annual Relay for Life requires teams to raise 5,000 RMB (equal to about $650) in order to enter in the Relay. The most popular method of raising this entry fee is through bakes sales. This means that the month or so before Relay for Life SAS enters its “bake sale season” when countless teams try and push their products on teachers and students alike.

This podcast will explore the nature of the market for baked goods at SAS, determine the elasticity of demand for baked goods, and explore the prospects for increasing profits among teams hoping to make an easy kuai in the month leading up to the Relay for Life.

If the image is off, right click on the viewer and click “zoom” and “full screen”

 

 Competition in the Baked Goods Market at SAS: Play Now | Play in Popup | Download

Gulfnews: Economies of scale should drive China’s auto market

Last week in AP Economics we introduced the concept of Economies of Scale. The graph below was created and added to our Wiki page by student Kevin Chiu to illustrate the concept, as well as two other concepts: constant returns to scale and diseconomies of scale. Notice that the section of a firms long-run average total cost curve over which ATC is decreasing is identified as the period over which the firm is experiencing economies of scale.

The idea is that as firms open new plants during these early stages of production, they increase their efficiency in production, thus experience a decline in their average costs. Click the “read the rest of this entry” link below to learn how the Chinese automotive market is struggling with economies of scale in their attempt to compete with each other and foreign car manufacturers…

Continue Reading »

By Claire Moon and So Yeon Yoon

For our second installment of the SAS Economists Podcast, Claire and So Yeon survey 55 students to discover what determines where they prefer to get their coffee fix in the Shanghai neighborhood of Gubei. They discover through their research that consumers base their decisions on a variety of reasons, and that price, while important, is not the only factor that determines which particular products consumers will purchase. Location, tastes, size of the market, and various other factors all play a role in consumer’s decisions between two alternatives in a competitive market like that for coffee in Gubei, a trendy neighborhood with no shortage of coffee outlets.

Click below to hear this excellent and enlightening investigation into consumer behavior and the determinants of demand for coffee in modern Shanghai!

 

 Determinants of demand for Starbucks vs. The Coffee Bean [5:24m]: Play Now | Play in Popup | Download