Chapter 2 - SUV and Truck Sales Plummet

http://www.washingtonpost.com/wp-dyn/content/article/2008/05/01/AR2008050103773.html

Summary

In recent months, the sale of SUVs and other large vehicles have declined significantly. The rapidly increasing price of gas has changed consumer preferences towards large vehicles. Prime manufacturers of SUVs and Trucks such as Chevrolet and General Motors, have suffered great loses. According to GM, their SUV and truck sales are 27 percent below norm. On the other hand, Toyota cars have had a 3 percent increase in sales. The majority of consumers are deserting their large vehicles and opting to buy smaller cars. Consequently, many manufacturers will change the type of cars they produce according to consumer preferences. The production of smaller cars, as well as hybrids, is increasing considerably.

Connections

To any vehicle, gas is a complementary product. The declining supply of crude oil has caused the price of gas to rise immensely around the globe. Since gas is required to run cars, the cost of driving has therefore increased. As a result of the change in price of gas, a complementary product, consumers are choosing to drive vehicles which use a small amount of gas in comparison to larger vehicles. Hence, the demand for SUVs and trucks has declined. On a side note, there has been a recent global economic recession. This will affect the decision to buy a vehicle for many families as they may expect a lower income in the future. As a result of these situations, the price of large vehicles has dropped drastically.

Reflection

Since gas is in limited supply, the price of gas will continue to increase. In addition to the global economic recession, it is not surprising that consumers are choosing, and will probably continue to choose in the future, cars which are more fuel efficient. For some, replacing their SUVs and trucks may be more expensive than simply suffering high gas prices. This is the result of a significant drop in value of large vehicles. For example, if a Land Rover LR3 used $1000 more a year in gas than a Toyota Camry, it would result in $5000 of extra money spent on gas for a period of five years. The prices of large vehicles however, are dropping by the thousands every month. Although the rising price of gas has caused trouble for many consumers, I feel that the shift in the preference of vehicles will help publicize the need for more environmentally friendly cars. More money will be allocated in research of hybrids and other fuel efficient cars, a great advantage for our hope of a green future.

Economics Blog - Milk Powder: Nutritious Calcium or Lethal Poison?

http://www.economist.com/business/displaystory.cfm?story_id=12304845

Summary
Milk produced by China’s Sanlu Dairy Farm, has been found to be lethal to humans. Four children are dead, 53,000 others have been taken ill, and the numbers keep rising. What is the cause of this dilemma? Melamine, an industrial chemical, appears to have been added to milk products, including milk power and fresh milk. Currently, the list has been expanding to include yogurt, cake and even China’s favorite brand of chocolate cookies. The Chinese Government is trying to intervene by hiring inspectors to enforce the quality of toxic chemical inspections. Astonishingly, inspectors have found melamine in milk powder produced in one out of every five suppliers. The chairwoman of Sanlu has been detained. In addition, four milk dealers have been arrested and 22 others are being held for questioning. Nevertheless, foreign countries, including those of Europe and Africa, have banned the import of Chinese dairy products. The damage to China’s economy has been done.

Connections
Healthy milk in China is becoming increasingly scarce. Parents, who fear for their children’s health, now only buy milk products imported from companies of foreign countries. The high demand for foreign milk products, as well as the scarce supply that is available to consumers, has caused the prices of foreign milk products in China to skyrocket. Accordingly, given their limited financial resources, parents now have to forfeit buying clothes, toys and other daily necessities for their children, not to mention forfeiting educational funds and the like. Moreover, parents cannot use the extra money in investements. That is to say, the opportunity cost in relation to obtaining healthy milk for their children has been soaring.

Reflection
This incident is an embarrassing failure for China's product safety system. Considering the fact that a similar incident had already occurred in 2004, it may seem that a pattern is emerging. The laws the Chinese Government has set in place does not seem to be the crux of the problem, rather it is the fact that these laws are not duly observed and strictly upheld. A solution to this crisis must be found. Otherwise, the parents will have to continue to suffer a high opportunity cost for the health of their children.