11/23/2008

Charity

Yesyesyes, I know I am very late, but in Russia we say "Later is better than never". ^^
aww, it's my personal homework)

The point is that people who do not spend their money on something, preferring to keep the money, leave the things they haven't bought to some other people. So the world gains from those people. So, if there is more supply (because miser people don't spend their money on the goods) with demand staying the same, the price will go down, so more people will be able to afford it.

1. People don't spend their money and yet demand stays the same. Why will price fall?
Uhm. Well, first of all, if people do not spend their money on goods that means that producers don't have profit. But people actually have the money (but they keep this money as savings) and don't buy the goods. So the demand in this case is latent. To attract people, they will cut prices or advertise goods.
But, as I remember the book, miser people don't buy things which are actually produced for them. So when they don't consume those goods, they enable those goods to be consumed by someone else, therefore, it will be a shift of the supply curve to the right. Ceteris parabis, extension of the demand curve, new equillibrium price is lower than the original one.

2. if demand falls why will there be more supply, not less?
I'm not sure about this one, but I'll try..
People prefer to keep their money as savings, which means that it is not involved in the circular flow of income, therefore, it is not shown in the demand curve. As more people prefer to increase their savings, the demand curve will shift to the left. But, as I said, people who keep money as savings actually just don't consume the part of goods that were supposed to be consumed by them. Those goods are now available for others - more supply.

3. How can it be charitable NOT to support charities?
Supporting charities means giving money to someone to spend them instead of you. There is no guarantee, by the way, that those money will actually be spent on the charity.
But the point of that chapter was that miser people are the most charitable. How can it be? I will explain.
So, as I have already said, savings are out of circular flow of income, as savings are one of the so called 'leakages'. The other two leakages are taxation and imports, but that's not the point. As those money are not into the actual economy, that means that there is less money in the economy - the value of each currency has now increased. So poor people have now become a little bit richer as the value of their money they own has increased.
That's how miser people actually help the poorer ones.

More relaxation from my revision workbook

"Sell a range of soap bars that float so they don't get lost in the bath. One obvious way of making floaty soap - other than choosing ingredients that are less dense than water - is to add air bubbles to each bar during the manufacturing process." Would this sell well?

Well, it depends on many things.
First thing to consider - in which country it is going to be sold. Because in the UK people are trying to save water because they have to pay for it, therefore, British are more likely to take a shower instead of taking a bath. Or, according to the data I read in Cosmopolitan 3-4 years ago, French women would rather take a bath than a shower. Russians, hehe, don't pay for every litre, so we are for sure taking a bath more regular than the British people. So why British will consume much less than Russians and French.
Then competitors should be taken in account. If a famous company from the market is going to sell it, let's say 'Lush', the product would sell well. If the product is introduced by an unknown producer, then the product should be advertised very well to be able to compete with its substitutes for consumers' money.
The price is very important. The demand for this product will definately be price elastic, because a floating soap is not the thing that will be bought at a very high price level. The costs of production of this product will not be bigger than the costs of production of a usual soap, that means that the most profit will be made at the same price level with a usual soap.

A little break from working on my revision workbook..

"Produce CDs that sit in the CD player of rental cars so that, when a new driver gets in, the CD can tell them about the car, the local area, driving laws, etc. It could also feature advertising for local businesses." Would you invest in this product idea?

Well, the idea sounds fine to me.
CD will give most of the information the consumer needs and, possibly, advertise some local businesses. The information about the car or local area will save the time of people who work for this rental company, which means they will be able to increase their productivity, therefore, have more cars rented and increase company's profit. The information about driving laws or, for example, safety rules, will decrease the possibility of an accident which means less spenditure on car fixing. Finally, local businesses will pay for advertising on these CDs, which means more money earned by the rental company.
However, we can't be sure that consumers will actually listen to CDs - they might just remove it from their CD player and put there some music or audiobooks.

Actually, I wouldn't invest in this idea, because I'm not so close to car rental businesses and I might not now some details of this market.

11/21/2008

+3 Mind Maps



Websites evaluation

ok, let's move on with homework.

soooo.. websites evaluation! first of all, I want to point that actually they are not websites, it's just webpages.
as we can see, there are four links: an article on Christmas rants site, an article from "Telegraph", a question from Yahoo!Answers and an article from TDI (they deserve it) website.

1. Christmas rants.
"Your Entertaining and Impassioned Guide to the Christmas Season", says the subtitle of the webpage. Well, my first impression, when I saw the page, was that the site is really boring and not attractive at all - the layout is pretty simple, traditional Christmas colours (red and white) are used, but it looks not professional at all. So there is nothing that could be attractive to potential users of the site. Also, the navigation and the content seem to me completely unsturctured, which is also a great disadvantage. Advertisements are placed awful, they distract from reading and annoy users.
The article is absolutely unhelpful and even useless - except for the idea that teachers do deserve a present on Christmas. Four examples of presents for teachers, two of which are definately unmatchable with words "a good present for a teacher" and are chosen only because of author's taste. I mean - come on, how gold is connected with a good present for a teacher? Basing on the quality of the article, I came to the conclusion that the site would never be a success. But, who knows, some people believe in everything they read and don't care about layouts.. By the way, check the date of the article..

2. Telegraph article
'Telegraph' is known as one of the most popular and most successful newspapers in the UK. Their website no doubt is well designed and introduced to the public and great articles should be expected there. Telegraph's website succeeds almost in everything - as it is a very developed project, every detail is taken in account: layout, navigation, picture connected with the topic, very interesing content of the article.
The article is really touching and interesting, it shows to readers a range of possible ways to make your teacher happy with a Christmas present. The author gives examples of excellent presents but warns about some of not successful experiences. I've learned a lot from this article.
All these things, of course, attract new consumers of 'Telegraph', which means more sales and more profit. So, if you can offer a great quality, you will not fail with your business, watch and learn from this example.

3. Yahoo! Answers
Yahoo! Answers is a very popular service where everybody can ask any question they want and get many different answers, which can be helpful, interesting and informative but there also will be some pointless, absurd and not-so-clever ones. You should be aware of that. But, in general, this is a really helpful resource and a great number of people, who are ready to give you their point of view. And if you see the question in the different angles, you will probably understand it better and find an appropriate answer or solution.
The layout is simple and that's exactly what is needed for a forum like this.
As we can see using this example, the problem has many different solution and Yahoo! Answers service is really helpful when you need an advice or an experienced point of view.

4. TDI Site
Another website, a competitor of the first one, I suppose. 'They Deserve It' is a website which spesialises in giving advice about presents. The main page, by the way, has impressed me with a nice design and with the fact that the site is available in many launguages. But, when I saw the 'Christmas Presents for Teachers' sector, I was surprised - it looked like a totally different website! The layout looks like it was made by a newbie, and the number of advertisements per one page completely hit my brain! Yes, I know that they need something to earn money on, but because of that the site looks like a commercial fake.
However, the article is not so bad if you ignore all the ad links. Of course, it could not be compared with the Telegraph one, but at least it does not offer to buy some golden goods for a teacher. I can't say that the site or article are attractive to users, but I can't say the opposite as well.

In Russia we celebrate Christmas on 7th of January, but for me 25th of December is a great day anyway cuz it's my mum's birthday. Russians celebrate New Year and give New Year presents instead of Christmas ones. And we don't have Santa Claus, we have Grandfather Frost! :D I will ask him for a big box of Red Bulls this year)

11/18/2008

A product extension strategy?

"Make all car windshields out of photochromic glass that darkens to a moderate sunglass tint when exposed to sunlight. This innovation would improve driver comfort and safety, especially when traveling into the blinding glare of a rising or setting sun."

Well, first of all, I should mention that 'product extension' can be considered as a part of a product life cycle. The main aim of the product extension strategy is to make a product to stay in the market for a longer period of time, to make more profit and don't let the sales revenue start decreasing.
I don't think that this is an example of a product extension stategy. It's about cars as a whole technlogy, there is no brands mentioned. I think it is just a development of technology that will make cars better. Cars will be used until a new way of transportation will be found, therefore cars as a techology don't need product extension strategy.
If it was about a particular car, we would be able to call it product extension strategy.

Talking mugs

"Introduce mugs and cups with special sensors that would give a voice alert like 'This is your third coffee today', 'Your coffee is getting cold', 'I am empty; refill me if you want', and so on." - would these sell well at Christmas?

UUUH, I don't know about the others, but I would love that cup!!! I think it is the best present for coffee maniacs like me.))

But seriously...

well, this is a great business idea on the first site. Talking mugs with sensors, how unusual and how impressive! However, I can't deny that there are some disadvantages in this product:
- sensors and voice alerts in a mug will cost extra money.
- once the sensor is broken, mug loses it's originality (or goes to rubbish bin)
- people may use it not only for coffee. when you drink water and suddenly the mug says to you 'heeey, u drink too much coffee!'.. there should be different types of mugs I think.

But the advantages are:
- the product is unique - there is no such thing in the market
- it will be really popular over the holidays and will bring big profit to the producers
- a new way of using technolgy means further technology development
- you won't have cold coffee ever again!!!

'I'm not feeling lucky' Google Button

"Add an 'I'm NOT Feeling Lucky' button to Google that would automatically take users to a random webpage that would NOT be the topmost return for their query. This option would complement the 'I'm Feeling Lucky' button, giving the search process a creative twist." - would this be popular? Would this increase Google's revenue?

Well, first of all, let's start with "I AM feeling lucky" Google button. This buttom makes the search process easier and faster, though it is not effective sometimes. If you type something into Google search and then press the 'I'm feeling lucky' button, you will get on the page of the first given result of the search. However, according to a study by Tom Chavez of "Rapt", this feature costs Google $110 million a year as 1% of all searches use this feature and bypass all advertising.
I can't see any point in creating a button like 'I'm not feeling lucky' - it won't give a customer an expected result of a search, it won't be used at all, it actually misses up all the idea of online search - just gives you a random website! I mean if you wanted to get on a rendom website, it's not a good idea to use this button - you might get on a site with a porn (yeah, porn is everywhere, eww) or some virus site. It won't be popular - even 'I AM feeling lucky' button isn't popular. Me and Lex had know idea what is it until I looked up Google FAQ.

dixi.)

ASOS homework

a. possible reasons for the success of ASOS
as we know, the firm has reported about a huge growth in sales in profits in October. It seems very strange to me because I'm not interested in fashion stuff. But I think that the point is that most of the women are interested in fashionable clothes, so the demand on celebrity 'As Seen on Screen' clothes might increase because of the decrease in income. Because of current economic situation, people cannot afford some brand products such as Gucci or Prada, but for sure they want to look well. ASOS clothes is fashionable and much cheaper than brands. So when income level has fallen, many consumers has switched from expensive clothers to cheaper substitutes.

b. who the main competitors are
well, I think main competitors are still fashion brands and modeliers.

c. strengths/weaknesses of their products
strength: cheap, quality of the products is for sure good and demand is always high.
weaknesses: it is an online business, so there might be imperfect information about the products: wrong sizes, the product might look different on a picture compared to the real look etc;
also it is really difficult to be in touch with latest fashion changes if the business doesn't want to lose customers.

d. what steps can they take to ensure continued success?
I think the business should be run 'offline' as well - it will attract more customers and they will be able to buy more, because, as we all know, we want what we see.
What else? They can also introduce a line of male ASOS products - nowadays many men care about their look not less than women.
They also should think about complements - why don't they also offer some accesorise to the ASOS clothes?

Inflation MInd Map

11/12/2008

Review for As Unit F581 Revison book

First of all I want to say that in my opinion book completely does not fit in its purpose. However, I can't deny that there are some advantages.

The structure of the book is a very important thing. When you learn something, you should do it step-by-step, going from the key points into the details. In this book many topics are split in small pieces which are situated in diffetent parts of the book. A good example of this is how the authors introduce the demand curve, the supply curve and the price equillibrium topics. When the main topic is demand, the consumer surplus is also explained. Yes, we can't deny that they are close connected to one another, but still - demand is basics, the consumer surplus is not. I think that basics (e.g. demand, supply and opportunity cost) should be explained first. Other things like surpluses should have their own topic which will be hepful in understanding the AS. Elasticty, one of the most important topics in this Unit, is also misstructured.
Some of the definitons are given not from economic studies point of view, they are just explained clearly so noneconomists can understand what it is about. Still, when you are taking an exam you are required to define terms using economic terminology.
Another disadvantage of the book is the number of excersizes. We can take the production possibility curve topic as an example. They ask to draw the PPC for 5 times! As a student, I really think that this is wasting of my time, because the opportunity cost is not so difficult topic, which needs so much practise. Also I can say that the authors ask to write too many definitions which takes your time when it's easier just to read it and remember it.
Sometimes the extra data is given, but you don't need to remember it. They intoduce demand as a function of price, prices of other goods, incomes, tastes and fashion, the level structure of the population, advertising and expectations of consumers. Seriously, do students need all these things to understand what the demand curve is?

Now I'm going to talk about the advantages of the book.
One of them, surprisingly, is extra data like the types of scarsity ot types of industries. These things will be helpful if are considered at exams and they also give you a wide view on economics.
Another thing is past papers which show a student what will he need to know.
Some of the topics are presented really well with not so many helpful excersizes, which is good for revising. I really like how the market failure topic is presented, though there are things that I would change.

So, it is obvious that the book has more disadvantages than advantages. Actually, I would call this book "AS Unit F581 for Dummies", but not a revision book. Definately.

11/11/2008

Entrance requirements for the universities I'm interested in

London School of Economics (BSc Economics):
AAA, one of which should be Maths.
I also have read the Students Room and surprisingly found out that they admire people with AS in Phychology.

University of Oxford (Economics and Management):
AAA, Maths is strongly recommended

Warwick University (Economics):
AAB + AS level B (or C as a fourth A level) or A level AABB for successful applicants taking 4 A levels inc. Maths and Further Maths. Applicants are encouraged to avoid combinations of subjects with significantly overlapping curricula such as Economics and Business Studies.

University of Southampton (BSc Economics):
A levels: AAB
AS level: mathematics at grade C required, if not offered at A level

University College London (BSc Economics):
AAA including Mathematics

University of St Andrews (Economics):
AAB

I also wrote to LSE a letter asking for further information on entrance requirements.

11/09/2008

When Markets Collide by Mohamed El-Erian

Mohamed El-Erian is one of the most famous investors of our days and a author of many economic and financial oriented books and articles. So there will be no surprise for you that his latest book, When Markets Collide, had a great success.

The author deals with the problems of present and future markets, making an accent on the investment and analyses the main reasons for the markets to collide. With all these events happening nowadays it's difficult to build up a realistic picture of modern and future markets. However, Dr. El-Erian does that in his book, using his experience and observations on the markets.

A huge part of the book explains the current situation with markets. If I was discribing in one sentence the main idea of what I have read, I would say something like that: "The dynamic changes in modern markets cannot be ignored and should be used for your benefit". The author is talking about the changes in US economic positions - in a few years this country has changed its status from a creditor to a debtor. On the other hand, emerging markets, the countries, which used to be low developed, are now growing and have a great potencial. Markets collide right here - on the edge of past and current situation. Macroeconomic situation will be restucturing more and more. The 'transformation' topic continues these ideas.

Taking as a base all this market knowledge, Dr. El-Erian gives lots of advice how to invest successfully. The author talk about the main mistakes of investors - the so called 'mainstreaming', where people invest in those things, which are invested by the majority. Instead of using their own mind and intuation, investors fail or become 'data depended'. They think that they avoid the risk investing in something that other people also invest, but really the should consider the 'noise' to understand how market situation looks like now. There are also general advice like how to protect your portfolio, what the investors should do first of all etc.

The launguage of the book contains finance and economomic terminology a lot, which underlines the target auditory of the book - finansists, economists and investors. The book came out only 5 months ago, so there is no old data information. And some things were even predicted by the author, and this leaves no doubt that Mohamed El-Erian knows what he writes.

11/05/2008

"More Sex is Safer Sex" by Steven E. Landsburg

The name of the book represents one of the main statements that the author gives to the reader, discusses it and then represents it from economics point of view. It is true that the AIDS virus would spread less quickly if there were less monogamy, chasity and other forms of conservativity in sex. Because if uninfected people will have more sex that means that the possibility to have a partner with AIDS reduces. Nowadays there are many AIDS-infected people in the world (including those who don't know that they are infected), who still have sex with different people, and, at the same time, many uninfected people prefer to be monogamic to avoid the illness. So, people don't care about doing bad things and causing negative externalities but only seldom there are volunteers to do good things (which will cause positive externalities) without being payed and rewarded.

Through the first part of the book the author continues developing this idea, giving other, more complicated and less evident, statements. For example, did you know that the most charitable people support the fewest charities? Rubbish, you say? No, it isn't.

Everything in this world is somehow connected with economics; every action has its spillover effects, which sometimes cannot be predicted or be taken in account - even a birth of a baby.

People relationships and competition with each other are also a good example of how Mr. Landsburg represents some economics statements to noneconomists. Why do people want a promotion? To get a new status or to increase wealth. But why, when people reach a particular level of income, when it is enough money to live, buy good quality things and even travel n times a year to diffetent countries with their families, they don't stop and still want another promotion? The answer is simple and obvious: because 'that guy from the office' has a bigger car and a better house. It's people nature - we compare our wealth to the wealth of the others and, unfortunately, very often are not happy with the results. But if people don't know that somebody lives better, they are happy with their wealth.

All those things and many other interesting questions are explained in the book "More Sex is Safer Sex".

11/03/2008

Dr. Mohamed A. El-Erian


Dr. Mohamed El-Erian, 48-year-old world famous economist and financist.
Got an undergraduate economics degree in the University of Cambridge in 1980, then completed his master's and doctorate degree in economics in the Oxford University in 1985.

Since 1983 he was working in the International Monetary Fund through the "Economist program" for fifteen years, by the end of which he had reached the rank of deputy director and had gained some experience by teaching at the Harvard Business School.
In January 1998 he started working in Saloman Smith Barney\Citigroup in London, where he was managing director.

In 1999 Dr. El-Erian joined PIMCO as managing director. The Pacific Investment Management Company (PIMCO), founded in 1971, is a famous company, which runs the Total Return Fund, the world's largest bond fund. As of Sempember 30, 2008, in total this company had $790.3 billion assets under management. Now Dr. El-Erian is a co-chief executive officer with William S. Thompson and a co-chief information officer with Bill Gross, also he is a senior member of PIMCO's portfolio Management and Investment Stategy Group.

He left PIMCO for two years though: in September 2005, he became a head of the Harvard Management Company but then re-joined PIMCO, where he is still working now.

Dr. Mohamed El-Erian is a member of the International Center for Research on Women, the Peterson Institute for International Economics, the US Threasury Borrowing Advisory Committee, the International Monetary Fund's Capital Markets Consultative Group and also many other organisations. He chairs Microsoft's Investment Advisory Committee.

Many of his works on finance and economics topics were published and were successful, he also writes monthly market analysis and has publications in the Financial Times, Finance, Reuters and other financial media.

His latest work, 'When Markets Collide: Investment Strategies for the Age of Global Economic Change', came out in May 2008. In this book the author deals with the problem of emerging markets, total changes in the structure of global markets which will have a great impact on the whole economic system. Dr. El-Erian also warns investors to take all those changes in account to achieve success and avois failure. Then Dr. El-Erian analyses emerging markets and predicts that there will be increase in inflationary pressure for the US and that the US's debt is likely to grow. Many of the things he said has happened in real life.. he actually has seen the credit crunch from the beginning - in many interviews, which were before the total collapse of banking system all over the world, he said that it would happen.