'Made In China'

In the world of teenagers and social netweorking, there's a large number of jokes, such as 'the awkward moment when something isn't made in China', that mock the fact that very few items nowadays don't have those three magic, almost cliche words etched on the bottom.
However, in the world of Presidential elections and such, this is no laughing matter. Mitt Romney spoke in Utah recently about the horror that is 'Made in China'. He is trying to make the almost alien situtaion of finding something other than 'Made in China' into an everyday one: by stating that more manufacturing jobs should be given to the US and removed from China.
At this point, I feel it is necessary to point out these two things:
1) I do not, in any way, follow politics. This is down to one thing: that I don't understand most of it, and feel that it's too late for me to get into it, just like a really good TV drama, but without the frequency of drmamtic storylines that scripted shows have.
2) I am a strong Obama supporter. I really like him, and not because of his polocies, or his stance on war and healthcare (which I'm sure are both very good), or because of the party he represents. I don't even know what it is about him, but as my Barack Obama pen suggests, I really do like him.
So clearly, after these revelations, you probably wouldn't think that I was the best person to report back fairly on Romney's recent speech in Ohio, that discusses China (amongst other things) and slates Obama. Ahh well, it's never stopped me before:
Romney kindly explained the sitution to us...

"When a country artificially holds down the value of their currency, it means that the products that they sell to the US are artificially cheap. And that means that American companies that are making these same products, they go out of business if their Chinese products are so much cheaper than the real costs behind them"
 

Sure, this may not seem to make much grammatical sense, but I think the point he's trying to get across does. However, I would definitely prefer this whole thing if it was explained in terms of a TV show (because, lets face it, who wouldn't?) So, welcome, ladies and gentlemen, to the storyboard for episode one of 'The Election'...

Basically, Libby (Libby...Liberty...USA...Geddit?), a strong, dominant intern has a successful position as 'best intern' at the office she works in. People all around marvel at how good her coffee tastes when she makes it, and have no problems with the high price she charges to make it for her co-workers. However, there's a new intern on the scene, from China. Her coffee tastes just as good as Libby's, but it costs half the price, because the coffee beans that she uses are half the price of Libby's. Therefore, when word gets round, the workers in the office all ask the Chinese intern to make their coffee, and Libby is left without a role.
Libby's mom's boyfriend, Mitt, having heard that Libby's real father, Barack, isn't doing anything about the situation, decides that he needs to do something about this, so he's currently trying his hardest to get her 'customers' back.

Welcome back to the real world! So, as Mitt Romney tries tackling the looming prospect of coaxing back inamnimate jobs from the clutches of China, I shall try and explain how these jobs would affect the US economy:
The US is in $16,166,475,932,446.16 of debt, which is a lot of debt. Arguably, this whole debt situation could have been easily avoided had America sneaked a peak at the bottom line of their bank statement a little earlier, but that's not what I'm here to discuss. I'm here to predict the effect that a few manufacturing jobs would have on the US.
The US unemployment rate has fallen from 8.1% to 7.8% in the past month (which doesn't sound that much, but in a population of well over 313,000,000, every little helps), so would a couple of thousand manufacturing jobs make that much of a difference? And if they did, would the pay sustain a typical American family? It's no unknown fact that most American families (and, indeed, Western families in general) spend a lot more money than the average Chinese factory worker, and that's probably due to the pay package that they are given. The main reason why products are mainly manufactured in China is their price, which is practically impossible for a US manufacturer to produce at, and therefore, the wage that Chinese people recieve is also low.
This explanation has just touched the surface of the matter, and I reccommend that if you want a more in depth analysis regarding what the US will do next that you read up on the second debate between Obama and Romney, as one of the proposed topics is China (and will no doubt discuss manufacturing as well as energy). This is a simple concept though, and one that most people have grown accustomed to, but as the US can't manufacture the required products at the price China can, they lose those jobs to China. So how does Mitt Romney expect to get these jobs back to US soil without lowering mimimum wage, widening the gap between rich and poor and creating new levels of poverty in the US? He would, without a doubt, lower unemployment rates, but by how much? It is unlikely to be whole figures; but arguably he can also try and knock some figures off that debt too(even though that will seem relitavly insignificant in the whole scale of the debt too)
Basically, I think  Romney has bigger things to worry about than Chinese manufacturing jobs. he reminds me of a small child who's friend has taken something of his that wasn't his to start off with, wining 'Finders keepers'.
Face it, Romney, 'Made in the USA' doesn't have the same ring to it as 'Made in China' or 'Made in Chelsea', for that matter... Bring on the new season of my favourite reality TV show!

Meanwhile, in other political news, Mrs Obama and Mrs Romney wore the same colour to their latest public event. Normally, that would be so awkward, and definitely a moment when a spare outfit is of highest importance, but it was for charity, and wearing the same colour as Michelle Obama is never a bad thing...

Being Elastic Is So Fantastic (Price Elasticity of Demand or PED)

Meanwhile, in my other economics set, we spent a large proportion of the lesson stretching rubber bands. Well, I did at least, I'm not sure about the rest of the set (my teacher should have known that leaving me unattended with a rubber band was a mistake...)
What exactly does is have to do with economics? Truth be told, I don't really know. I still don't, other than to provide light relief from the pressures of school.
Elastic bands do, however, share one word of their name with our new topic 'Price Elasticity of Demand' (well played Mr Williams) and that is, indeed, what my next post is about.

I will now briefly summarise the sheet we were given to fill in, including the headings:

What is the concept of elasticity in economics all about?
"The concept of elasticity tries to identify the impact of changes that one variable (e.g price or income level) has on another variable (e.g quantity demanded)"
Hang on a second, doesn't that sound just like the demand schedule? (for further reading on the demand schedule, refer to this website which is oddly from my blog too.... Coincidence?). Well it basically is, but it's not a graph, it's the responsiveness of demand to change in the price level in theory and practise.

What is the formula for calculating price elasticity of demand? 
The formula we (and by we, I mean everyone, not just A Level students) use is percentage change for quantity demanded divided by percentage change for price (and percentage change is calculated as new amount - original amount divided by the original amount) 

For example, if, due to a heat wave, puffa jackets are put on sale in a store, then their prices decreases from £40 to £36. But the next week, there's a freak snow storm, and demand for puffa jackets from that store rises from 1000 to 1200 (god forbid), then the price elasticity of demand would be as follows: 

Price percentage change: (36-40)/40 = -10%
Quantity demanded percentage change: (1200-1000)/1000 = 20% 
Then we use the original formula as follows... (%QD)/(%P). So: 20/-10 = -2

So, this example would be described as Price elastic demand, as it's got quite a large negative number. If the end result would have been smaller, e.g -0.5, then we would describe that as price in elastic demand. And if we had a positive figure, then... Well, I don't really know. Apparently we don't come across those at A Level, so I'll cross that bridge when I will obviously go on to study economics at Oxbridge. 

I then turn the page on my highly informative sheet, and find an explanation of what the end result actually means. Handy, huh. 
So, when the answer is 0, the example is called perfectly inelastic and I'm informed that this is almost impossible, but if it were to happen, then the firm's revenue would go down as demand would stay the same when price was changing. 
When the answer is between 0 and -1, then the example is called price inelastic demand, and the firm's revenue would go down a very small amount as prices fall but demand increases at a smaller rate then price dropping. 
When the answer is -1, then it's called unitary price of elasticity of demand (bit of a mouthful) but that basically means that there's very little change to a firm's revenue as the change in price is proportionate to the change in demand. 
And finally, when the answer is bigger than -1, then the firm's revenue increases, and it's called price elastic demand (just like my chilling puffa jacket example), as a demand changes by a higher amount than price change.

I do hope I haven't disturbed the fashionistas or 'summer-lovers' amongst you, I know the prospect of puffa jackets and of freak snow storms will deeply affect you, as it has me. Time to bask in the mid-afternoon sun, whilst gazing at my trench coat in appreciation, I think. 

Obviously, however, there's more to be said, so I must postpone my lazy afternoon for just a few seconds longer, because we, my friends, must discuss tax.
I know, you don't want to. Tax should be avoided as little as possible (and no, that doesn't mean I'm condoning The Cayman Islands to you again, Jimmy Carr), but this section is going to be relatively brief.
There is, also, price elasticity for the incidence of tax, where tax is either shifted or unshifted. Shifted tax is the tax that the firm has to pay, but they offload that cost onto the consumer by increasing the price of the good, and unshifted tax is the tax imposed on a firm which they pay off themselves, therefore by not rising the price of the good or service. On a relatively elastic curve (one with a gentler gradient) there is generally less shifted tax, and more unshifted, meaning that the price won't go up that dramatically due to taxes. However, on a graph for a product with inelastic demand, then shifted tax is generally higher than unshifted, meaning that the price of the good is likely to rise to accommodate for the extra tax imposed.

And, there's more! As I mentioned earlier, there's also income elasticity of demand, which is pretty similar to price elasticity of demand, but it varies according to whether you're a high earner or a low earner, and whether your income is high or low.
I feel an example would be the best way to paint this picture, so assume that Ellie earns £15,000 (making her a low earner), has positive income elasticity and spends £20 on Primark clothes a week. If her income should increase to £16,000, then she will be able to spend £30 on Primark clothes a week due to her positive income elasticity (hey, big spendeeerrr!)
However, if Katy (the best name on the planet, and oddly, mine) earns £50,000 (making her/me a high earner, obviously), has negative income elasticity and spends £20 a week on Primark clothes. If her income rises to £53,000, then she will be able to spend £19 a week on Primark clothes, and significantly more on luxury items (for example, to name but a few, Chanel, D&G, Chloe, Gucci, Fendi, Prada, Burberry etc.) all due to her negative income elasticity.
So really, if you're a 'Katy' of the world, you're doing pretty well for yourself, and it's all due to your negative income elasticity, and glorious name.

Now, I shall finally retire to my garden, to bask in the midday sun, sipping at a glorious concoction of juices, thanking god for the prospect of all the designer brands I can invest in if I have negative income elasticity. Or, I'll imagine I am whilst ploughing through yet more economics homework (oh woe is me...)