Gasoline and food prices push inflation upward
Associated Press
WASHINGTON (AP) - Consumers paid more for energy, food and a host of other items in February as a sluggish economy failed to extinguish inflation pressures. But in a hopeful sign for growth, factory output posted a better-than-expected increase.
The Labor Department reported Friday that the Consumer Price Index rose by 0.4 percent last month, double the January increase, as energy prices shot up and adverse winter weather in Florida and California sent citrus prices soaring.
The increase was larger than the 0.3 percent rise analysts had expected, although core inflation, which excludes food and energy, rose by just 0.2 percent, in line with forecasts.
But even there, economists saw problems with widespread increases in a number of categories including clothing, housing, education and medical care.
"Underlying inflation remains stubbornly above the Federal Reserve's target and these inflation figures put the Fed in a bind," said Mark Zandi, chief economist at Moody's Economy.com.
The Fed, which meets next Tuesday and Wednesday, would like to cut interest rates to give the sluggish economy a boost, analysts said, but the central bank cannot do so because of the stubborn persistence of inflation pressures.
On Wall Street, the Dow Jones industrial average fell 49.27 points to close at 12,110.41 as the inflation report deflated hopes that the Fed would start moving toward an interest rate cut when policy-makers meet next week.
In a separate report, output at the nation's factories, mines and utilities increased by 1 percent in February, led by a 6.7 percent surge in production of electricity and natural gas. The Fed report said this was the largest gain in utility output in 17 years and reflected colder-than-usual weather in February.
Manufacturing, which makes up fourth-fifths of industrial output, also showed strength, rising by 0.4 percent, only the second increase in the past five months, a period when factories have been caught in the downdraft from weakness in housing and autos.
Auto production was up 3.2 percent, helped by an increase in light trucks, a sign that automakers may be getting control of their bulging inventories of unsold cars.
"The rise in industrial production is very good news after all the downbeat data in the past two weeks," said Nariman Behravesh, chief economist at Global Insight, another private forecasting firm.
But other economists said it may take several months to reduce the backlog of unsold goods, particularly in industries supplying the slumping housing sector.
http://www.wiscnews.com/bdc/business/124768#
Abstract:
As consumers have shown to be paying more for their purchases, inflation continues. However, the factory output shows a “better-than expected” increase recognizing the increase in inflation as a good sign of growth. Statistics show the the Consumer Price Index has rosed by 0.4% last month, much larger than expected however, it is also stated that core inflations only rose by 0.2%. Analysts said that the Federal reserves is targeting to cut interests rates to give a boost in the economy but the central banks is unable to participate due to inflation pressures. Another report states that output at the nation’s factories, mines and utilities increased led by a great increase in the production of electricity and natural gas. Some economists think that the rise in industrial production is very good after all the downbeat data in the past two weeks while others worries about the backlog of unsold goods.
Wednesday, March 21, 2007
Monday, March 12, 2007
Pictures will be uploaded when I get home
http://www.thestar.com/Business/article/189364
Analysis:
The article discusses the problem of pollution in Canada, TD bank of Canada’s economists suggest that beyond emission regulations that is already in process, taxing, subsidizing, and a trade system for emission credits are the ultimate ways to “create long-term conditions for industries and consumers to cut down on their emissions.”
The article brings up the market failure problem of pollution and states that “consumers will not change their behavior as long as it’s cheap to pollute.” As pollution creates negative externalities or additional harm to the society for the production of emission gases it is widely known as a market failure. This proves the statement the article made as market failures such as pollution that produces negative externalities usually involves a social cost beyond the obvious private costs. As the emission gases harms and pollutes the environment, an extra cost is then needed to deal with the pollution and clean the environment. This cost is the social cost.
(picture)As market failures such as pollution creates negative externalities for the society, an addition social cost is then created beyond the original private cost. It is this cost that the consumers and the firms tries to escape leaving the government paying for pollution.
Graph 1: Demonstration of Market Failure and its addition social cost
Just as the above diagram demonstrates, it is this social cost of pollution that creators of it – consumers and firms, tries to escape and thus resulted in the government policies enforcing the consumers and firms to pay this cost.
As the article identifies the “crux of the problem” or the market failure as the fact that “clean air is considered a free commodity.” and that simply “legislating emission cuts, only masks this problem and doesn't create long-term conditions for industries and consumers to cut down on their emissions.” Here the article revealed the essential cause of the problem - “clean air is considered a free commodity.”, because of the fact that clean air is a common resource, consumers and firms uses the good thinking they that they do not have any responsibility over any harms it causes or any costs it requires. This is the classic parable called Tragedy of the Commons. The “emission cuts” the article referred to represents the regulation policies by the governments. This policy deals with the restriction of production which sets a price floor to the market.
(picture)With the price floor or restriction to production, the quantity of production for the pollution causing good is reduced while the price is increased. Soon the Private cost curve will be forced to shift up and become just like the social cost curve in order to reach equilibrium
Graph 2: Government regulations of emission cuts
Just as the above graph demonstrates, the regulation policy forces the consumers to pay the higher price and the producers to produce at the lower rate. However, as the article also referred this policy as “only masks this problem”, it suggests how the existence of just this one policy will not solve the ultimate problem in the long run.
The two strategies that the entire article really favored were taxing and emission trading system or simply tradable pollution permits. The collective taxing policy deals with the collection of social costs of pollution more directly while the pollution permits allows the firms to make the deal more profitable.
(picture) The corrective tax sets a price for the pollution while the demand curve determines the quantity of the pollution. Together the social cost of pollution is paid by the consumers and the suppliers through taxes.
Graph 3: Government corrective taxation on pollution
The corrective tax, also known as Pigovian tax, demonstrated on the above graph is equal to the external cost of pollution with negative externality. Thus taxation is able to force the people to pay for the external cost.
(Picture) By limiting the amount of pollution permits, the quantity of pollution is limited while the demand curve help determine the price of the pollution. With the limit amount of quantity and the tradable characteristic of the permits, firms are able to benefit off each other while paying for the social cost of pollution
Graph 4: Tradable Pollution Permits
The tradable pollution permits suggested in the article is another one of the possible policies for government to gain back the social costs of pollution. The tradable characteristic of the pollution permits allowed the firms to negotiate and trade among each other while benefiting through the process. This strategy enables the firms to pay for the external cost of pollution while the “proven profitable” strategy also gives them the incentive to obey such policies.
Therefore just as the article has been arguing, although government regulations on the production of emission gases deals with the market failure, the policy is not as effective as taxation or tradable pollution permits. Thus it is inevitable to have the other two policies in process in order to battle against the market failure of pollution.
Analysis:
The article discusses the problem of pollution in Canada, TD bank of Canada’s economists suggest that beyond emission regulations that is already in process, taxing, subsidizing, and a trade system for emission credits are the ultimate ways to “create long-term conditions for industries and consumers to cut down on their emissions.”
The article brings up the market failure problem of pollution and states that “consumers will not change their behavior as long as it’s cheap to pollute.” As pollution creates negative externalities or additional harm to the society for the production of emission gases it is widely known as a market failure. This proves the statement the article made as market failures such as pollution that produces negative externalities usually involves a social cost beyond the obvious private costs. As the emission gases harms and pollutes the environment, an extra cost is then needed to deal with the pollution and clean the environment. This cost is the social cost.
(picture)As market failures such as pollution creates negative externalities for the society, an addition social cost is then created beyond the original private cost. It is this cost that the consumers and the firms tries to escape leaving the government paying for pollution.
Graph 1: Demonstration of Market Failure and its addition social cost
Just as the above diagram demonstrates, it is this social cost of pollution that creators of it – consumers and firms, tries to escape and thus resulted in the government policies enforcing the consumers and firms to pay this cost.
As the article identifies the “crux of the problem” or the market failure as the fact that “clean air is considered a free commodity.” and that simply “legislating emission cuts, only masks this problem and doesn't create long-term conditions for industries and consumers to cut down on their emissions.” Here the article revealed the essential cause of the problem - “clean air is considered a free commodity.”, because of the fact that clean air is a common resource, consumers and firms uses the good thinking they that they do not have any responsibility over any harms it causes or any costs it requires. This is the classic parable called Tragedy of the Commons. The “emission cuts” the article referred to represents the regulation policies by the governments. This policy deals with the restriction of production which sets a price floor to the market.
(picture)With the price floor or restriction to production, the quantity of production for the pollution causing good is reduced while the price is increased. Soon the Private cost curve will be forced to shift up and become just like the social cost curve in order to reach equilibrium
Graph 2: Government regulations of emission cuts
Just as the above graph demonstrates, the regulation policy forces the consumers to pay the higher price and the producers to produce at the lower rate. However, as the article also referred this policy as “only masks this problem”, it suggests how the existence of just this one policy will not solve the ultimate problem in the long run.
The two strategies that the entire article really favored were taxing and emission trading system or simply tradable pollution permits. The collective taxing policy deals with the collection of social costs of pollution more directly while the pollution permits allows the firms to make the deal more profitable.
(picture) The corrective tax sets a price for the pollution while the demand curve determines the quantity of the pollution. Together the social cost of pollution is paid by the consumers and the suppliers through taxes.
Graph 3: Government corrective taxation on pollution
The corrective tax, also known as Pigovian tax, demonstrated on the above graph is equal to the external cost of pollution with negative externality. Thus taxation is able to force the people to pay for the external cost.
(Picture) By limiting the amount of pollution permits, the quantity of pollution is limited while the demand curve help determine the price of the pollution. With the limit amount of quantity and the tradable characteristic of the permits, firms are able to benefit off each other while paying for the social cost of pollution
Graph 4: Tradable Pollution Permits
The tradable pollution permits suggested in the article is another one of the possible policies for government to gain back the social costs of pollution. The tradable characteristic of the pollution permits allowed the firms to negotiate and trade among each other while benefiting through the process. This strategy enables the firms to pay for the external cost of pollution while the “proven profitable” strategy also gives them the incentive to obey such policies.
Therefore just as the article has been arguing, although government regulations on the production of emission gases deals with the market failure, the policy is not as effective as taxation or tradable pollution permits. Thus it is inevitable to have the other two policies in process in order to battle against the market failure of pollution.
analysis
hi mr. welker I got my analysis done, some how I cant really get it on here so Im gonna show u tomr in school hope u wont mind.
Dan
Dan
Wednesday, March 7, 2007
College application policies easing for homeschoolers
http://www.cnn.com/2007/EDUCATION/03/06/homeschoolers.universities.ap/index.html
This is an article I found about New educational policies that the government has done to basically promote the practice of this market failure with good externality. It gives a number of examples and talks about how several US colleges used similar techniques to try to ease applications for homeschoolers. I am currently thinking about discussing about what is good externality and how the techniques by the different schools help it. At the same time, i also have the idea that by making homeschoolers easier to apply, wouldn't that create more competition for education? Because by making more people be able to access to application easier while the number of acceptants are still the same, it is a market with increased competition ya? My only concern is whether the information given is enough and whether just talking about maket failure would be enough for our major analysis journal assignment.
Dan
This is an article I found about New educational policies that the government has done to basically promote the practice of this market failure with good externality. It gives a number of examples and talks about how several US colleges used similar techniques to try to ease applications for homeschoolers. I am currently thinking about discussing about what is good externality and how the techniques by the different schools help it. At the same time, i also have the idea that by making homeschoolers easier to apply, wouldn't that create more competition for education? Because by making more people be able to access to application easier while the number of acceptants are still the same, it is a market with increased competition ya? My only concern is whether the information given is enough and whether just talking about maket failure would be enough for our major analysis journal assignment.
Dan
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