Chapter 2

http://www.vancouversun.com/business/fp/Quebec+sellers+seek+price+limits/3673578/story.html

Summary

Small independent gasoline retailers are demanding the government to set price limits on the petroleum prices at the pumps. This will help in creating more stability in their market that might reduce the chances of unemployment and bankruptcy. The Association Québécoise des Indépendants du Pétrole think this will protect consumers and retailers from constant price swings. 82% of Quebecers agree with setting price limits on gasoline. This group of Quebecers includes both retailers and consumers. Quebec already has the “below-cost” laws that restrain the retailers from selling below the minimum price. However, they still want to set a minimum and maximum daily price that takes into account the operating costs of the retailers. If that doesn't happen, a price war will occur that will threaten competition. In order to prove that, Quebec has had the lowest gasoline prices before tax for the past three years in Canada according to statistics.

Connections

If government set price controls into the gasoline industry, it will create shortages and surpluses in the market. For example, when they set a daily maximum price on petroleum, they will be lower the original price of petroleum from some retailers that sell it at a price that is too high (too expensive). Therefore, this will prevent them from charging unreasonable prices to consumers. An excerpt from the article states this fact, “…prices that are too high …would penalize consumers…” This will create a shortage because more people will buy more gasoline as compared to before because it is cheaper. The price decreases and the quantity increases. On the other hand, when the government sets a daily minimum price, it will create surpluses. That is because the government will raise the price from some retailers that sell it at a price that is too low to a higher price. This will help the retailers to not lose too much money and go into bankruptcy because it will also include operating costs of the gas station. It creates a surplus because less people will demand it if the price is higher. A negative effect of low prices in this situation is if “...prices that are too low …threaten competition.”
 

Reflection

I agree that setting price controls might help both the consumers and especially the retailers. The 7.8 million consumers won't have to pay unreasonable prices for their gasoline since it is a necessity if they have gasoline cars. Also, the retailers won't have to lose money by driving down their prices for the purpose of competition. And then, go into bankruptcy in the process of trying to get more customers. This will help keep the economy as a whole doing a lot better because the small gasoline retailers will not have to fire employees and cause the unemployment rates to increase since there are about 3,459 gas stations in Quebec. However, I wonder if those gas stations will be satisfied with the price limits after a long time if those limits are set in place. Or will they create new reasons to get rid of them (like they don’t want government involvement in their affairs)? I truly wonder…

Graph for shortage and surplus due to price controls

Chapter 1

Summary of Article - Fisheries worth $246B worldwide

Article: http://www.cbc.ca/money/story/2010/09/14/fisheries-global-value.html

The study conducted on the fishing industry around the world by UBC showed that the fish landings value have soared from $80 billion annually to $246 billion annually once they factored in the can manufacturing to feed the livestock and boat building sectors. This also informs us about how much the commercial fisheries provide jobs and support the income of people around the world by earning revenue through the fish landings and the several service sectors in which they support as well. Some of the sectors that they support are the processing sector, restaurants, and as well as the agricultural sector. Asia makes $133 billion and North America makes $60 billion of the total value of the fisheries annually.

The oil spill in the Gulf of Mexico a several months ago really had a great impact on their economy due to the loss of many resources as well as the many sectors that they support. As technology continues to improve, it also increases the numbers of fish being caught. Therefore, it has caused overfishing in more than half of the economic zones in the world that could have been used to feed the people from poor nations. Also, there are “catch losses” (landings of overfished fish minus what could have been caught) that have amounted to a loss of $36 billion and 100 million tonnes (in fish landings) in 2004. Governments of maritime countries have also encouraged overfishing by putting subsidiaries into fuel and boat building instead of protecting marine areas. The subsidies have been as high as $27 million globally in 2003. Therefore, it will deplete the overall resource of fish globally that could further damage the whole world’s economy.

Connections

There are several main concepts that connect this article on fisheries to chapter one in the textbook such as scarcity of a resource, opportunity cost, and the law of diminishing returns.

 Fish is a resource and as a resource it is limited in amount, therefore making it scarce. Its scarcity makes it a ‘lucrative but fragile resource’ as mentioned in the article. It has been made even more scarce by overfishing during the past several years as improvement of technology continues to aid the process of capturing more and more fish.

Fish plays a significantly important role in the world’s economy because it turns in a lot of revenue and it offers many jobs to a huge percentage of people around the world in places such as Asia and North America. However, there are opportunity costs that are attached to fisheries. There are millions of undernourished people that could have been fed if their fish resource had not been overfished. Overfishing can also damage the natural  habitat of marine animals and it can also affect the future number of fish stock such as the depletion of Nothern Cod fish mentioned in the textbook.

So overfishing makes place for the law of diminishing returns to act accordingly. Since the amount of fish is limited as I have mentioned before and more overfishing occurs, there will be a decrease of fish landings in the years after. The reason is because fish will require a certain time to reproduce and grow. When overfishing happens, there are less fish to reproduce with each other causing less offsprings. Time also plays an important factor in the growth of the fish because not enough time will be given for them to mature to their full potential (bigger fish). Therefore, it creates catch losses (what could have been caught compared to what was actually caught). “In 2000, the authors contend, the landed value loss was as high as $36 billion, with catch losses estimated at 10 million tonnes in 2004.” As you can see a lot of money and fish are loss due to overfishing.


Reflections

I never really knew that the fishing industry made so much money, provided so many jobs, and supported many types of sectors around the world. It made me think that if fish were to somehow go extinct, it would throw the whole world into a financial crisis (total chaos) that would be really hard to get out of. This issue could be in par with the banking problems in the US that have caused a recession in these past few years and put many major companies at stake and caused a huge amount of unemployment. Many people in Asia that depend on fish would lose their livelihood and cause greater hunger and economic problems if fish were to disappear.

I agree with this article that better managing of resources could help solve one of the world’s biggest problems, starvation in impoverished countries around the world.  From this point of view, fishing industries and goverment that put subsidies to encourage fishing seem like cold-hearted people who are “depriving hungry nations of the potential to feed themselves with good, wild fish” (quote by Sumaila in the article). Instead they should implement laws on the amount of fish that is allowed to be caught for commercial reasons so these nation would have some sort of food source available to them to reduce starvation rates.

There are many who rather overfish because it is lucrative rather that protect endangered species of fish. It is like the shark fin problem in which many sharks are killed for only their fins. (I learned this in the documentary called ‘Shark Water.’) Even though they are very endangered, people continue to kill sharks (even if it is illegal) for their fins because they sell for a lot of money. I think that overfishing is wrong because it has a great impact ecologically (destroying habitats)  as well as economically (catch losses). Many opportunity costs are also increased when overfishing happens.