Chapter 6

Home sales boost consumer spending

http://www.canada.com/nationalpost/financialpost/homebuyers/story.html?id=d232ca32-3ed7-41f3-b33c-1634710471e0&k=13987

The article talks about the economic affects of home sales. A family of 4 in Ottawa estimates that they have spent $12000 on moving-related expenses. Another married couple who moved from a town house to a single family home cost them over $30000 for renovations. An industry study says that this is not excessive. Each sale on average generates $32000 in addition to consumer spending says the Canadian Real Estate Association. It highlights the importance of the housing industry. The report says that, “Resale housing transactions across Canada generate significant economic activity.” A major economic impact is job creation and it generates employment in different industries. Association chief economist Gregory Klump says that, “…more than 94,000 jobs are created in Canada each year as a direct result of resale housing transactions.” The report says that nearly 40% of those jobs were in the finance, insurance, and real estate sector. Jobs can also be created indirectly. The greatest impact was in BC where nearly 1 in 55 jobs created over the 3 years was a result of home sales. The level of moving related expenses and jobs created has increased sharply in the past 15 years. The annual level of job creation has tripled since the first study in the 1990s.

In chapter 6, we studied the components of aggregate demand. In this article, it refers to the consumption, the level of household spending on goods and services. The article talks about how the housing industry has increased consumer spending and therefore, has contributed a lot to the whole economy including jobs. There are many factors that influence consumption. All factors could be a possible influence. Disposable income is the amount of money that is left after taxes. Depending on the amount, consumption will increase. Depending on the interest rates, if they are low, the cost of borrowing is less so people will be willing to borrow and spend more. Expectations could possibly be the bigger influence as people are probably expecting future prices for homes and renovations are going to increase in the future so they purchase now. The psychological factor is also an influence because I think new families are pressured to spend more on better homes. New products like furniture or new technology may have put interest into families so spending patterns have changed. One of the bigger factors is the distribution of income among the poor and the wealthy. The prices may have affected a lot or a not because moving related expenses have majorly increased in the past 15 years, it may be just consumers willing to spend and the prices may have or not affected their decision. All these factors or at least some of them have influenced people’s choices in consumer spending, specifically in the housing industry. The housing industry has influenced a big part of consumer spending. It is benefiting the whole economy with many jobs and more.

Comment on Brian's blog, https://www.blogger.com/comment.g?blogID=36907360&postID=8657372381841433360

Chapter 5

http://www.cbc.ca/money/story/2007/03/20/inflation-feb.html

Dollar soars as inflation rate jumps

According to statistics, Inflation rates have increased since last month. The canadian dollar rised to a three-week high after Statistics Canada said the country’s annual inflation rate increased in February. The loonie rose 1.25 to close at 86.17 cents US, this suggests that imminent interest rate cuts aren’t likely. February’s annual rate jumped to 2%, up 0.8% points from January which was much higher than people had expected. This is the biggest one month gain since Hurricane Katrina. Consumer prices rose by 0.7% in February which was due to gasoline prices as pump prices soared by almost 10% in Ontario. There were gas stations closed because there was production interruption in Ontario and Quebec. There was a 12% rise in the cost of fresh vegetables and an 11.3% rise in the cost of travel tours. The core inflation rate rose to an annual rate of 2.1%. Rising house costs added increasing pressure to the CPI. Statistics Canada said it costs more to carry a mortgage and homeowner replacement costs, which were estimated using new housing prices, were 7.1% higher than an earlier year. The annual inflation rate would have been higher, but for the the major drop of 19% in gas prices recently. Prices rose in all provinces in February but only 3 provinces experienced price rises faster than the national average. Alberta has the highest inflation rate in Canada with 4.9% higher than a year earlier because of the higher housing costs. B.C. and Manitoba also exceeded the country’s average. An economist from BMO Capital Markets said, “it will keep the central bank cautious about cutting interest rates in the face of disappointing growth numbers.”
In chapter 5, we learned about inflation which is used to increase the general level of retail prices. There are problems that occur in rising prices like individuals who are on a fixed income. Rising prices benefit people who have borrowed money and do not benefit the ones who lent money. The money that a person owes will be worth less than it could have originally been after inflation. With the increase in the report, it could hurt Canada’s world market because it can become too expensive for foreign markets. Once price starts to get higher and higher, it is going to be hard to control. There are two ways that cause inflation, Demand-Pull inflation and Cost-Push inflation. It is kind of hard to determine which one but this situation for Canada right now I believe is more of a Demand-Pull Inflation. People are worried about price increases in the future so the demand for a product is high right at the moment and when demand is high, price increases. Canada should fix this inflation problem because as the rate of price increases higher and higher, it will be hard to control. And that can lead to demand for higher wages and then prices for products increase again. This cycle problem which may happen, does not have an easy solution.

Chapter 4

Tax cuts, health spending in Quebec pre-election budget

http://www.cbc.ca/canada/montreal/story/2007/02/20/qc-quebecbudget20070220.html

This article talks about Liberal Premier Jean Charest’s pre-election budget. His plan is a $250 million tax cut and spend $1.3 billion more on healthcare. It was revealed a day before the electional call by Finance Minister Michel Audet. The total spending on health care is $23.6 billion will go to hiring new doctors and improving surgrey waiting lists. The Liberal budget also includes $7.9 billion for roads and bridges, with incentives for drivers who buy certain hybrid vehicles. They will be rewaded with a $2000 provincial sales tax refund. The budget also includes special mesures for montreal and Quebec city, “economic engines” for Quebec. The Liberal government budget invests $900 million over 5 years in Montreal which plays a crucail role in Quebec’s development. The province will invest $300 million in Quebec City and $15 million to refurbish the Jean-Lesage airport. Quebec wll also spend $300 million into regions where local economies have suffered job cuts and plant closures. Also investing more into education, spending in day-care tax credits, cleaning up the Saint-Charles River, eliminate capital investment tax for manufacturing business, the film indsutry, and Quebec City’s 400th anniversary celebrations. Quebec’s debt will reach $122 billion in fiscal year 2007-2008 and the province is warning of a shortfall of $1 billion for next year’s budget. Opposition parties are not impressed because they think it’s just going to be another dissapointment.

In relation to chapter 4, the chapter deals with the responsibilities and the role of the government in Canada. This article talks about government spending and taxes. The main areas of provincial spending are health, education, social services. In this article, it exaplins that the new budget plan which will take effect in 2008, will spend $1.3 million more on healthcare in order to hire more dictors and fix problems with surgrey waiting lists. This is great news to people in Quebec because of more doctors, people will be provided with service more quickly, and the surgrey waiting list will be shorter. This will prevent people’s health from getting worse or suffer more. The government has done a good change to what matters the most to society, health. The second most important government spending is education where they will invest $567 million, which didn’t report which areas specifically. The budget also includes $7.9 billion for roads and bridges so that transportation and communication will be easier for everyone. It allows more people with more chances of communication among everyone in Quebec. Quebec is also rewarding people who purchase hybrid cars of $2000. The reason for this is because they want to decrease the amount of harm to the environment. Quebec is also investing money into cities like Montreal and Quebeic City. They know the potential of those two cities that help develop Quebec. They are both considered econmic engines for Quebec.

Another big change in the new budget is that there will be a $250 million tax cut. The taxes that we pay are used for public services. People might think because of the reduce in tax, services are reduced in quality. But this is not it, the reason for the tax cut is because they think the economy is doing really well and there is no need to keep taxes that high. By doing this, financial problems may be solved because everyone will have more money. Another benefit to this is the growth of the economy.

However, is it true that these new budget plans will not happen according to the opposition parties? The opposition parties believe that it will not work because the previous budget promises didn’t work. I think it will happen this time because they can’t dissapoint everyone again. If it can really happen, it is a great step for a better economy in Quebec. It is a huge responsibility and they should keep their promises.

Chapter 3 - Media Article

Bush unveils health care tax breaks

http://money.cnn.com/2007/01/20/news/economy/bush_healthcare.reut/index.htm?postversion=200712012

President Bush announced a plan to use tax-code changes to encourage more people to buy health insurance. His answer to the problem, which many Americans lack it, was that he would emphasize private health insurance coverage rather than expanding government provided programs. Healthcare is the top concern among many Americans as the cost for private insurance rise. His proposal would use tax breaks to make it easier for people who do not have employer-provided health insurance for interest on their mortgages. Bush said the current tax code unfairly penalized people who want to buy health insurance on their own while offering incentives for expensive employer-provided health plans raising costs through the system. The proposal is trying to encourage the expansion of health-savings accounts that allow people to save tax-free for out of pocket health care expenses. Other states have been trying out their own proposals.

In chapter 3, we learned about the role of government in the market economy where we learned about why and how the government is involved. Part of the chapter discussed about how the government deals with healthcare, which this article is about. In Canada, healthcare is publicly and privately funded. While in the U.S., health is funded privately. In this article, it confirms that the Americans really are concerned about their health and private healthcare is not the best option. There are also third party effects. Canada follows public healthcare for the community’s benefit. Diseases won’t be spread because everyone can afford health care, while the U.S., some cannot. By making tax-code changes, people’s health will improve with benefits. In this situation, the government is trying to help the market by changing the tax code so that more people can buy health, which Americans lack. This is Bush’s way to balance the high cost of healthcare insurance.

Health is the most important thing in this world. The solution to high price healthcare will be to make it a public service, however Bush’s government still believes in private healthcare is best for the U.S. Therefore, their only solution to make things better is to make tax-code changes. If the U.S. followed Canada with public healthcare, it would eliminate the country’s biggest concern.

Chapter 2 Media Article

"Next-gen DVD war could be messy--or not"
http://news.zdnet.com/2100-1040_22-6106111.html

This article is about the competition between HD DVD and Blu-ray. There was an annual DisplaySearch HDTV: The Future of Television conference taken place which included analysts, HD DVD and Blu-ray manufacturers, retailers, studio executives, and software makers. The Blu-ray format, which can have up to 7 hours of video content onto a single-layer disc, has the support of 7 movie studios, 11 consumer electronics companies, four IT companies and leader in the gaming and music industries. A single-layer HD DVD has four hours of playback, which is double the capacity of a standard DVD. The format has support from 5 movie studios. Both sides agree that consumers will want HD content that will make the investment worthwhile because HD TVs have become more popular. The DVD market has been declining and experts believe that a technology transition is ready. Sonic Solutions’ Taylor believes the transition will be smoother since consumers are already familiar with what DVDs can do. Switching to either two will be an easier process. But both groups seem to agree that consumers will choose content over format. They will choose titles over the technology. Tsuyuzaki of Panasonic says, “I have no doubt (the next-generation format) will take off,” “the question really is can we create a healthy market and quickly.”

Relation to Chapter 2 - Elasticity of demand

How does this article relate to chapter 2? Chapter 2 is about the market, demand, supply, elasticity. Everyone has DVDs and DVD players at home. We have been using them for many years. The only format we ever buy now is DVD. DVDs are necessities but it I believe it is an inelastic demand. When the price changes, there doesn’t seem to be much affect on the demand. Most people think DVDs are still expensive as they don’t think they’re worth 25-30 dollars, but some people are still willing to buy it. There are not really any substitutes as downloading them is illegal, TV is different, and the theaters are also different. The DVD market is not doing that good. HD DVD and Blu-ray will be coming into competition. I don’t think the demand for the two new formats will be successful. The next-generation formats have not come out yet but I have predictions. These are luxuries and they have an elastic demand. The price will affect the demand. The prices for these new formats are more expensive than DVDs. DVDs are a better substitute and I think people are still comfortable with that format. Most people who choose what to buy, only care about content or the movie. Most people don’t care if the picture quality is much better and they don’t care much for special features. The new formats can do a lot but most people find it unnecessary. Overall, the new formats will take time to be success or not. For now, we can’t be sure but I wouldn’t buy these unless the price decreases.

Chapter 1 - Media Article

"If cod is so scarce, why can I still buy it?
http://news.bbc.co.uk/1/hi/magazine/6061872.stm

Cod is used to serve with many different kinds of favorite foods. Scientists say that North Sea cod are in danger of running out without complete fishing ban. Campaigners have tried to encourage retailers to sell only cod from sustainable sources. The majority of cod for sale on fish counters and in frozen meals is from sustainable sources such as Iceland or Baltic, where fishing is not a problem. The small amount of cod still being fished in the North Sea goes to a bit of catering, fish and chips shops, frozen food firms, and local fish markets on the North Sea coast. They can all be anonymous about where their fish is from unlike major supermarkets. Greenpeace published a league table of how the UK’s supermarkets fared when it came to selling seafood from sustainable sources and only two of the nine major chains had policies to do so and only sold line-caught cod from Iceland.

Relation to Chapter 1 - Scarcity

This article is related to the discussion of scarcity in chapter 1. Scarcity is a very important concept that is part of the definition of economics. Scarcity is anything that is available only in a limited supply. In this article, it talks about the scarcity of cod. Cod is one of the best examples of scarcity. During history, cod became increasingly scarce because there weren’t enough limitations or restrictions. Cod is used to make many different foods that people like to eat. People say that cod is a really scarce resource but we seem to be continually getting them without much trouble. Even if it’s a scarce resource, supermarkets figured out to get their cod from sustainable sources from other countries. A scarce resource should still be used but people should remain in more control over the limited supply because it can become extinct one day. Even though we are still continually getting scarce resources, it can mean that we’re lucky its only close to being extinct.