Election Eve

So, it's election eve. Around the world, millions of children are staying up late, hoping to catch a glimpse of whether it's Obama or Romney sneaking down the White House chimney. I am even indulging in some subtle campaigning for my side: by wearing all blue (and trust me, pulling off this many shades of blue is harder than it looks. Thankfully, I've got it down to a T).
Barack Obama. Oh boy, I can't wait to wake up on Wednesday morning to the sight of his face all over my morning newspapers. And even though everyone's dubbing this election 'too close to call', I've already called it. And I've already planned my outfit of all blue for the next day, and the Barack Obama tattoo I shall be brandishing on my arm using ball point pen (yes, I'm a die hard fan).
So, if you're like Florida, Ohio, Iowa or Colorado, then you should really read these following points as to why you should be pro-O (that sounded too good in my head to omit from this post)...

• He doesn't look like superman. Let's face it, anyone with hair that ravishing and a jaw line that strong has to be a fictional comic book character. And his name? Not even real. He's actually called Willard, but he just loves him some baseball.
• He's promised change before, and it happened. Sure, there's a lot of haters out there, but if you look at the mess Obama had to clean up after George W. Bush, he did cause a lot of change.
• War. No one likes war, and no one liked Bin Laden. Thanks to Obama, both have been removed from the agenda.
• The 1920's. I love the 1920's, don't get me wrong, they're my favourite era, but they were plagued by the Great Depression. In 2008, America was well on their way towards a repeat of that, but Obama swung in and pulled her out of the quicksand (now he sounds like a superhero, I agree. But he's a real life one, not like Willard 'Superman' Romney)
• Obama wants a bigger middle class. I love the upper class, and I'd like to see it expand, but I really dislike poverty, and it seems Obama and I are on the same page here where we'd like to see the middle class grow into something truly spectacular. I have hope. Now, if the wealthy pay just a little more tax, job training, education and healthcare can be improved, removing people from the streets and the job centres, making more space for designer stores and the like. Win win, no?
• As I'm applying to an American college, I really need all the money off I can get. Oh, and who's promised me that? Obama. 

America doesn't need another George W. Bush repackaged in a middle aged superman suit. The world needs another man like Barack Obama, and who better than the man himself?

And if all those reasons didn't convince you enough, this picture is enough to make anyone want to vote.
And if you're still on the fence, Bliss have done a special 'eau-lection' campaign, asking shoppers to choose between a free bottle of 'O-Bama' (an orange scented lotion) or 'Mint Romney' (mint scented). The votes (so far) are 62% to 'O-Bama' and 38% to 'Mint Romney'. Obviously, one of the votes to 'O-Bama' is mine, and I will be wearing said lotion on Wednesday in celebration. I always trust beauty products though, and if they predict that Obama will win then, well, he will. Check out the results here!

'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...)

The Economics Graph... Oh What A Laugh!

I know what you're thinking: 'Oh boy, she's lost it! Economics graphs aren't a laughing matter?'. Trust me though, any part of my studies where we are urged to use coloured pens is, indeed, an incredible incentive to actually do the work. And, I've always had a little bit of an obsession with coordinating my colours when using coloured pens.
So that's why I found myself sat in my economics classroom, just before lunch, doing an impression of a seven year old when she realises it's Christmas.... "Yesssssss!" (whilst pumping a single fist into the air). Truth be told, I didn't even hear what we were actually doing in the lesson, but the words 'coloured' and 'pens' ignited a spark deep within my soul.
So after a moment of deep contemplation as to which colours I should put where, I got to work on my first ever Demand Schedule. Yes, a proud moment indeed.

At a guess, you probably aren't reading this post to find out about my slight OCD for presentation, or my love of coloured pens. You're probably here to truly experience the meaning of 'The Demand Schedule', so I'll try my hardest to fulfil your thirst for knowledge.
As my notes say, "The demand schedule is one of the most widely used concepts in economics.... Blah blah blah"
In the most basic terms I can muster up, the demand schedule is the relationship between price per unit and quantity demanded. Simple, right? It gets a little harder, but I managed to continue the rest of the lesson with such basic and undetailed knowledge and a little pizazz from my coloured pens.
It was when I came to do the accompanying homework that my troubles really set in, so I faced the fact that I wouldn't be able to fly through economics A Level armed with nothing but a set of coloured pens (despite the fact that I possess multiple width nibs and a wide spectrum of colours).
So here are the five questions I asked myself in order to understand this topic further. Hopefully they're useful, if not then I don't know what to suggest...

Q1: So, what does this sneaky little demand schedule look like?

It can look like one of two things: a rectangular hyperbola, or a straight line (inversely proportionate, that is)

Q2: What is a rectangular hyperbola? Some kind of cross between hyperactivity and ebola?

Yes. Just kidding, but it doesn't have anything to do with rectangles, or over exaggeration, as it's name would suggest. It's basically a curved line that is constantly decreasing in gradient, never touches the x or y axes and never ever ever ever becomes flat (be that horizontal or vertical).

Q3: And what would cause movement along these lines?

A change in price.

Q4: What's the difference between movement along the demand schedule (moving from one end of the line to another) and a shift (when the positioning of the line changes entirely?)

Movement: increase in demand at a specific price (e.g if a sweater was featured in a magazine, the price wouldn't change, but more people would want to buy it... Ah, the power of print)
Shift: increase in quantity demanded at all prices (e.g cobalt blue is the new black, so no matter whether your new blue skinnys are Primark or Hudson, the price will go up on both items to make maximum profit from a new trending item)

Q5: Which variables can cause a shift in the demand schedule?

• A complementary good becoming cheaper/more expensive. A complementary good is an item that you'd buy in conjunction with the original good (e.g music for an iPod. If the price of music goes down, then more people are more likely to buy iPods, causing a rightward shift in the demand schedule. Likewise, if music became more expensive, then people would buy less iPods, or alternatively turn to illegal downloads... You see my point)
• A substitute good becoming cheaper/more expensive. A substitute good is one that you would buy instead of another (e.g if the iPhone 5 is raised in price by £100 (which would be unjustifiable, as it's already more expensive than its worth) then Samsung Galaxy sales would probably shoot up, causing a rightward shift in the demand schedule for Samsung's and a leftward shift (decrease) for iPhone sales) 
• Increase/decrease in personal wealth (e.g if your father has just bought a super car (not mentioning any names...) then you probably won't have enough money for a new iPad, therefore causing a leftward shift in the demand schedule for iPads. Not that one purchase would make a dramatic difference, but you get the idea) 
• Advertising. A good advert can boost sales by massive proportions (e.g 'Compare the Market' with that adorable yet slightly confusing little meerkat. There's no denying that the popularity of that advert lead to massive boosts in sales and also public knowledge of compare the market, as well as people trying to imitate that 'simples' catchphrase, therefore causing a rightward shift of the demand schedule for that website and a great deal of heartbreak and crushed dreams when children of all ages realised that they couldn't accurately imitate the meerkat... What's happened to humanity?) 

I know what you're thinking (yep, I really am a mind reader now), why haven't I been able to see some of the glorious graphs (alliteration... The English department would be impressed) that I spent hours slaving over. Well, after a long period of staring at my iPad in disgust and confusion, I realised that I didn't know how to upload a picture. The mind is a wonderful thing, but google is better, and I think I've finally worked it out. Hallelujah! 

A basic demand schedule...

 The differences between a movement in the demand schedule and a shift....

And finally, a rectangular hyperbola, if my descripion didn't suffice (which I doubt it will have done...)

So, I hope you've learnt at least one of three things from this blog post: A) that I really like using coloured pens. B) that I'm quite old fashioned: I could have easily drawn those graphs on the computer but I prefer good old pen and paper. And finally, C) anything about the demand schedule. Hopefully you learnt C, but if you really didn't, then I suppose A will suffice.

I Command (economy) you to read this...

For my homework assignment this week, I was given the task of defining three forms of economy, depending on the governments level of control. So I started off by simply defining those terms, which is surprisingly easy with the large content of Google at my fingertips. However, problems arose when I was urged to actually prove I knew what they meant. I must confess that I do know a little bit about them, but explaining them to the whole of my Internet community? Oh my goodness me. Here goes:

Numero Uno: Command Economies.
Definition: An economy where supply and price are regulated by the government rather than market forces. Government planners decide which goods and services are produced and how they are distributed.

My teacher started off our teachings on these three types of economies by giving us a list of six countries: North Korea, Cuba, Hong Kong, USA, Sweden and New Zealand, and we were then asked to put them along a continuum stretching from Command Economies, through Mixed Economies and ending at Free Economies. As he could have easily predicted, I didn't get that many in the correct positioning, but one I did get right was good old North Korea.
North Korea is a Command Economy, as the government controls what supply and trade happens within that country (because they're Communist... Even an ex GCSE history student knows that!). So basically, if the North Korean government decides it wants to make lots of iPhone 5s (topical, eh?) then they demand that companies do. That's an example of a Command Economy.
Another is Cuba (which I didn't put down on my sheet, as other than cigars, I know very little about what the Cuban economy does or how it is operated). So, using Cuban cigars as my example, if Cuba wants to maintain it's status as the best cigar making country on the planet, then the government will demand that industry creates more cigars.

Numero Dos: Mixed Economies.
Definition: An economic system in which both the private enterprise and a degree of state monopoly  (usually in public services, defence, infrastructure, and basic industries) coexist. All modern economies are mixed where the means of production are shared between the private and public sectors.

I, in my own mind, am regarding these economies as 'the middle ones'. They're like trench coats: they fit under the umbrella of summer coat and also winter coat, but are never warm enough for the winter weather, but always slightly too thick on a hot day. Mixed economies, in the same way as trench coats, possess some key components of a command economy in that they are partly controlled by governments; and they also possess the main component of a free economy (that is, free trade).
Oddly, I made a mistake in matching the list of countries to the mixed economy box. Even more oddly, in fact, is that when I discussed this post with my father, he made exactly the same mistake as I did (like father like daughter...) and there I was thinking he was economics oracle...
Anyway, we both made the mistake of not classifying the USA as a mixed economy, which (according to my Economics teacher) it is. Huh. Along with the US, New Zealand and Sweden both have mixed economies too, as their economies are partly controlled by their governments and partly by private businesses and organisations.

Numero Tres: Free Economies.
Definition: A market economy based on supply and demand with little or no government control. A completely free market is an idealised form of a market economy where buyers and sellers are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation.
(i.e. not an economy where everything is free. Oh, how wondrous that would be...)

I begin with a quote that my father delivered me (again, in our weekly economics discussion) from an origin of which I can't quite remember, but nonetheless, it got the point of free economies across: "Doing business in the US and UK is hard work; but doing business in Singapore and Malaysia is vroom vroom". Why is this, I hear you all crying. The answer is a simple one, and one that is featured in the above definition (which you probably haven't read, which is why I'm repeating it!): there is very little/no government intervention. We were given the example of Hong Kong as a Free economy, but I think that Malaysia and Singapore are more Free because they aren't controlled by a Communist country, mainly because of my father's recent interjection of business into those two areas, and of course, his colleague's fabulous quote.

To recap:
Command economy: where business and trade are commanded by the government
Mixed economy: where business and trade are controlled by a mixture of government and private business
Free economy: when businesses are free from government intervention.
So there you have it, my version of killing three birds with one stone: homework, blog post and revision. Not bad for an evening of 'hard work'.

Keeping Promises.. Burberry

If you cast your mind back to my first post (shouldn't be difficult, it was only on Monday), I promised you some posts about how my favourite companies are faring in the stock markets. And I'm always true to my word.
You can imagine my mixed emotions when I was casually flicking through news stories in bed yesterday morning (because I'm THAT dedicated to economics) when I came across a story about Burberry (let me repeat: err... Burberry!). You can imagine my delight when it dawned on me that I might have a possible first post that's actually about economics, but also my distraught frame of mind when I realised that shares had dropped, and big time.
The overview of the situation? Burberry's shares dropped by just over 20% to £10.88 (from £13.75), which is the lowest figure since last October, which wiped £1.3 billion off their stock market.
What, I hear you cry, caused this decrease? The answer, according to The Guardian, is a simple one: China. The Chinese love a good luxury item, to prove this, all you have to do is visit an outlet mall in any country. At the moment, however, Chinese luxury trends are a-changing. In a country where 'bling' was the new black, refined, more elegant styles are making a comeback. So how does this affect Burberry? The traditional camel, red and black check has been seriously blinged out and sold in China, so is this causing less sales? There's also the argument that as the Communist once-a-decade leadership transition is upcoming, people are being more frugal with their expenses, and gift giving is especially uncommon.
It is also argued that all luxury brands are taking a hit, with LVMH (Louis Vuitton Moët Hennessy) falling 3.4%. Although this isn't as bigger drop as Burberry, the future doesn't look bright for luxury brands.
What positives can we fashionistas take from such a devastating blow to our industry? Products that wouldn't be on sale until the holidays are coming into stores fresh for October - victory!
Whatever your opinion on the matter, it's quite a result.

Want more?
Bloomberg
This is Money

Bonjour, Bonjourno, Hello, Howdy (for the cowboys amongst you)...

If any of these first readers (which is probably a very limited number) have ever wondered what teenage girls who have a head filled with fashion, reality tv shows and gossip have to say on the subject of economics, you have come to the right place!
I'm a wannabe fashion journalist by day, but now I hope to be an apsiring economics blogger by night. In a world filled with doom and gloom and men in musty brown suits, I hope I can shed some light on what's caused this in a more interpretable way for the masses (althought I can't help with the brown suits: the explanation is well beyond my mental capacity).
So here we have it, the beginning of a new economic era (fingers crossed). Consider me the beginning of clearer explanations of what economics really is: from current affairs, to goverment plans, to how my favourite businesses are fairing in the stock markets (err... Burberry!), plus (if you're lucky) you may get to read some of my hair brained schemes to a) get rich from and b) to sort out the world's economic crisis. They're.... riveting, to say the very least.
This is a small step for the Economics department of my school (a very small step) but a giant leap for economies everywhere (maybe not...still). Enjoy!