During World War 1, battles were severely determined by one kind of weapon: the trenches. The soldiers would dig many of these and position them in a way that when the enemies come close they are sure to showered with bullets and gun powder. In between the skirmishing respective nations’ territories, this span of land is known as “no man’s island”. The armies setup a lot of obstacles such as minefields, trenches with gunners, aluminum spikes and other forms of deadly devices which surely discourage the attackers from coming near. These are definitely great barriers for the generals before finally reaching the other side.

In modern times, the ambitious always think of ways of generating income. One risky way is by opening a profitable business establishment which either sells service or products. One must be really cunning and creative to come up with idea that will surely cater to the satisfaction of the customers thus, profit. However, the entrepreneur understands the risks and hardships involved in starting a business and trying to penetrate the market. We should always know that there will always be the obstacles discouraging and holding us back before starting something.

It is more likely for a developed product or service to fail. Statistically true, however, there is always the belief that products fail simply because of certain factors or barriers. Not including obviously poorly brainstormed ideas (such as a carry-on urinal bag which was once featured in the TV show American Inventor), the brilliant and high potential ideas for a business interest appears a fluke in the eyes of a normal consumer because of unfamiliarity. A product or service, if well thought of, should always have a purpose for being thought of in the first place. The thinker knows this particular “need” has to be satisfied. Every well thought product does a job that should be useful in certain times and this is why, optimistically speaking, it cannot be a failure.

There is definitely a bigger chance for a product to be successful if all the resources are present. These are great important barriers that are to be considered. If you don’t have the proper resources such as equipment, capital, labor and other important factors, might as well not expect an attractive cash flow. Limited natural resources such as oil will always discourage us from trying to sell gas.

There is also a bigger chance of success if the product carries a mother company’s prestigious name such as Microsoft or Sony. Because of the loyalty of the consumers with these brands, consumers will tend to stick with these brands and thus already creating the product an immediate market. This fact acts as a barrier for the newbie which has no name. The only chance for it to be recognized is for prestigious mother company to buy the business plan from its original creators which more likely will lead to success.

Another factor is the market feasibility to indeed penetrate. The competitors will always try to put newbies down in order to retain or even gain more market share. They use their set resources to overwhelm new establishments.

Basically, what matters the most even before starting a business, is to surpass the barriers to entry. Many establishments fail because they are not as profitable as those in the real market. Those products who survive the market are lucky enough to withstand the barriers because of reasons stated above. That is why we should be wise enough to be always sticking with the logical choice if it is proper to invest in a business interest. Risky, yes, but once we gather some momentum to surpass the barriers, then the end goal of achieving success is not far anymore.

Jon Gancayco

It is not only in UAAP games do hording occur. It also happens in the world of collectibles. As an action figure collector, it is crucial to take note of the release dates of certain figures because hording and scalping exist in this field as well. In collecting, you must be an aggressive buyer. If you see something that you like, purchase it right away because having second thoughts can hurt you. Most collectors are aggressive buyers which gives another reason for hobby shops to sell figures and other collectibles at a higher cost. I really hate them for doing such a thing. There would be enough toys for everyone if people would learn to be selfless! Greed starts with little things like these. I won’t be surprised if I find out that George Bush was a scalper during his early years. He loves oil and weapons too much that he’s willing to take several lives for it.

We shouldn’t blame the poor for being poor because poverty is caused by greed. I know that everything in this world is limited/scarce but I believe that there is enough for everyone. The only problem is several people take more than what they should have. Rich people get richer and poor people become poorer. Why can’t we be happy with enough? Why do we want to have more when we have enough? This mentality of wanting to have more is also a cause of certain illnesses. Cancer is brought about by putting in too much toxic material in our bodies like nicotine, alcohol, unsaturated fat and more. AIDS is caused by having too much sex which is bad. Maybe all of you are wondering what all of these things have to do with economics and the law of supply and demand. Everything that I mentioned has something to do with selfishness and greed. The law of supply and demand exists because people want to get an advantage over their fellow human beings. If everyone is willing to share, we wouldn’t even bother studying economics, finance, political science, and other disciplines that are related to systems of money and power.

Raymond V.

The economic term that has been running through my mind for the past month is opportunity cost. What is opportunity cost? It is defined as the cost of choosing one thing over the other. Mr. Richard Pilar, my former finance teacher used the example of investing stocks. When a person chooses to invest a certain amount of money in the stock market that leaving it in the bank, he is paying an opportunity cost. By choosing the stock market over the bank, he declines the annual interest that the bank offers. However, the money can grow at a larger rate when it is invested in the stock market. But we must also remember that the risk of losing the money is very probable. The risk is defined by its beta coefficient.

Like the stock investor in my teacher’s example, I chose to “invest” my money in a risky market because of the high return that it offered. As a result, I deprived myself of the interest that the bank offers. For the past two months, I’ve been playing at Games.com online casinos during my idle time. During my first visit, I grew my money by150%. No bank in this universe will offer an investor that amount of interest.

I was excited and scared at the same time. I was excited because I know I could win more but I got scared as well because I knew that getting hooked on gambling can ruin my life. Gambling is like a drug pusher. A drug pusher attracts customers or potential addicts by offering free drugs. On the other hand, gambling gains new players by allowing them to play for free through what we call the beginner’s luck. In my first day of playing Black Jack, I didn’t spend anything and I gained a lot of money. Blinded by the reward, I refused to see that it was the work of the devil. I carried on played together with my friends.

I am aware of the psychological effects of gambling on people and I am also aware of the things that I have to do to prevent them but being the hard-headed boy that I am, I ignored such things. For a week, the Black Jack table became my best friend but like any phony friend, it left me right away. The amount of money that I won was only 20% of what I lost in total. The opportunity cost that I paid was really big and it was really painful. The money that I spent gambling can provide a family of 5 with their basic needs for an entire month. I wish I have used my money wisely and bought the Jordan’s that I wanted and several toys. At least, my utility will be satisfied. But no! I was a fool and I am still a fool for playing in the casinos, hoping that I would have a lucky day and hit the jackpot in the slot machines. My desire for gambling is still in the early stage and can be managed but as early as now, I must do something about it to avoid paying a larger opportunity cost.

Raymond Varilla

]]> http://livingindemand.wordpress.com/2008/05/22/opportunity-cost-of-gambling/feed/ 8 donramon04 http://livingindemand.wordpress.com/2008/05/21/adieu-to-rice/ http://livingindemand.wordpress.com/2008/05/21/adieu-to-rice/#comments Wed, 21 May 2008 15:30:36 +0000 in2eco http://livingindemand.wordpress.com/?p=13 ]]>

Recently, I was able to read an article from the Time magazine regarding the rice shortage crisis that has hit Asia by storm. I was particularly interested with this article because I for one am a rice lover. I cannot imagine living the rest of my life without having rice with my meals. It simply won’t do. How can there be a rice shortage? It was quite disturbing to think of this absurd reality. However, as absurd as it may sound, it is real, it is happening and we should deal with it.

As I have learned, most Asian countries have been dealing with it, among them the Philippines, where the government has plans of issuing charges of economic sabotage to rice hoarders, a crime which is punishable by sentencing one to prison forever. This is the case here in our country because apparently, once word got around concerning the rice shortage, several people saw this crisis as an opportunity to make money and took advantage of the inelastic demand for rice by collecting the subsidized rice distributed by the government and by selling them for higher prices. Demand for rice is inelastic for Asian countries because there is still no other good that can replace rice as a major component of a meal. With this said, no matter how high the price of rice goes, the market will still inevitably buy rice considering how essential it is in most Asian diets.

The question is, why the sudden rice shortage? The crisis unexpectedly popped out of nowhere and caused hysteria all over Asia. According to the Rice Institute, we had it coming for a couple of years. Apparently, the world is consuming more than it is producing rice, where worldwide rice consumption rose by 0.9% last year while production rose to only barely 0.7%. As we can see, if this trend continues for the next few years, we might just have to face a rice-less world in the future. As of now, each country is looking out for its own welfare, and countries such as China and Vietnam have imposed export limits to be able to retain domestic rice supply for their own good. As this strategy may seem wise, it is not however a very helpful plan for the future and for their neighboring countries since this would just push global prices higher. I think that every Asian country, especially the Philippines, must first focus on how to make more rice rather than focusing on how to regulate their rice flow and this can be done by diverting their attention to improving Agricultural techniques. After all, isn’t our country known for its diverse ecosystem and rich soils?

- j.uy

Addison A., Horn, R., Overland M., Rauhala E., Robinson S., Tedjasukmana J., & Yang L. (2008, April 21). No Grain, Big Pain. Time, 32-35.

It’s impossible to love that something or someone “forever”. There will always be those times when you get sick and tired of eating your favorite food over and over again, or times when you’d want some “me” time and yearn to be apart from someone you love

(or even question his/her love for you). No matter how hard you try to deny reality, there will always, ALWAYS be that circumstance; hence, disregarding the concept of “forever”. Somehow, it will always come to a point wherein you’d get tired of seeing that certain thing after quite some time (regardless of the fact that there’s a high chance of you loving that thing again after a long period of hiatus ).

Take Tikoy (glutinous/sticky rice flour cakes) for instance. In celebration of the Chinese New Year, suppliers, families, and friends give our family boxes of Tikoy as presents. It’s definitely a heart-warming gesture, especially since almost all of us in the family are fond of eating Tikoy. The real beef with this is that although we enjoy eating Tikoy, we are somewhat forced to consume everything cooked (especially if most, if not all, of the Tikoy were emptied from the boxes and cooked at the same time) lest it goes to waste (honestly, cooked and refrigerated Tikoy doesn’t taste as good as newly-cooked Tikoy). The first few bites of Tikoy are fine and enjoyable; the next few are somewhat tolerable and filling; but as you consume the nth slice of Tikoy for the umpteenth time, there’s this sense of satiation–as if you’re no longer satisfied with what you’ve just eaten.

The same goes with getting a dose of Last Song Syndrome (LSS), wherein a really good song gets stuck in your head for a time period and you don’t know exactly how to shake off that song from your head. I remember back in first year college, I enjoyed listening to the song “The Day You Said Goodnight” by Hale (yes, I am was jologs). The song got so popular that they started playing it on the radio non-stop, and everywhere I went, people were singing or humming the song. It came to a point though where my satisfaction, appreciation, and love for that song slowly deteriorated. Like I’ve said, you can’t love something forever.

The concept of Diminishing Marginal Utility thereby comes into plays in these given scenarios. “Utility,” derived from the term “utils,” is the measure of the amount of satisfaction one gets from consuming a certain good.

The Law of Diminishing Marginal Utility simply tells us that we may love one thing for quite some time until we reach a point of satiation, where we are no longer satisfied and enjoying that very same thing that gave us satisfaction and enjoyment in the first place. Sure, eating Tikoy is fun, but to continually eat it to avoid wasting it can get a bit “tiring” to the point that I don’t want to eat it anymore. Yes, I like listening to my favorite songs on the radio. I like getting LSS-ed. But if the songs were to be repeated over and over and over again, my enjoyment decreases each time the songs are played.

These, my dear readers, are a few examples of how my utility or level of satisfaction diminishes for every additional item that comes into play beyond my optimal level of satisfaction. We all have our optimal points. We can’t love something forever. Going beyond that optimal level of satisfaction is just pushing your luck and testing your love to the limits. At the end of the day, you’ll only find yourself satiated (and possibly sick and tired from too much of what you “love”). In this world of Economics (mind you, I would like to stress the word ECONOMICS, since it differs from a Theological perspective), there’s definitely no such thing as “Forever Love,” but only “Love”

by Angela Eliza Lim

As a good driver, I remembered the fundamental words I had learned from my mentors: to check out the mirrors as much as possible. Then, I suddenly noticed in the mirror that this silver piece of metal was swiftly approaching me. It’s a rule breaker! It must be going around double my speed. I grinned remembering the tales I heard that the cops are more active in catching speeding cars nowadays. I just hoped that they catch this one.

Before I knew it, the speedster was on my left side. Hearing its noise, one of my asleep friends was forced to wake, look and say, “shit pare!” Thus, I glanced as well and suddenly I felt my eyes bulge as well! What the hell?! I was so star struck in recognition of what I witnessed. It’s a Ferrari! A rare silver Ferrari F430 whose shimmer was trying to lure me out of the car. It’s a vehicle any hopeful automobile enthusiast like me will be willing to lick simply for satisfaction. My friends and I stared at it for a long while (or did its presence just make it long?). It also took a while until the “woahs” and the “wows” disappeared from us. After this experience my lust towards luxurious cars were upgraded.

The luxury car. Of course, who wouldn’t want to own one? The market offers several tempting brands such as the Benz, BMW, Audi etc. which for most of us are very present in dreams. Even if you are not so much into cars, you understand the value and prestige they offer with their name and their expected quality. I can’t wait for that day when I’ll be able to park my own Ferrari in my garage, if ever it still comes.

Then I ask myself, is there really such thing as a luxury car? After my philosophy got better, realizations between me and the real world just got better. I concluded, luxury cars do not exist (even though it was hard for me to proclaim this, I guess this is the truth). Why? Simply because, rationally speaking, every owned vehicle IS a luxury. Toyota is a luxury. Even the owner-type jeep is a luxury! I guess that simply owning any kind of vehicle is a luxury because owning a car in general already means going over what we really need.

Obviously, people need to move from point A to point B. If it’s not walking distance, we’ll need the help of a car. Basically, the need here is just transportation and that is why public transportation was invented. I could call this a second order form of need, probably staying in the same level as clothing and social life. I believe we can survive the present world without really considering of owning our own vehicle (not minding the picky).

I’m speaking in line with economics. There is no such thing as a luxury car, because every owned car is a luxury. Now this is what the rational person would say. Yet honestly, when it comes to cars, I become too irrational. This is where my own preferences and utils would come into play. If someone out there can understand me, luxury cars such as the BMW are better than the ones economically manufactured by Kia Motors. It’s always best to keep rational because you’ll be able to save a lot of money, but when it comes to things you love and desire, you’ll do anything to acquire it no matter what. These personal desires come with a force which pushes us to the limit. It enhances our ambitions which should encourage us to work harder. Thus, sociologically, if everyone has desires to make them work harder, thus, making them work harder, then good this means good news for our country’s economy. Ayos ba? Wahahaha.

So, I guess it’s not all good to be rational at all times. We need our liberal expressions and desires create ambitions for the better.

-Jon Gancayco

In a lot of ways, the game Monopoly can be considered quite educational for young and aspiring entrepreneurs, as the game not only relies on luck but also requires strategizing and logic. To some, it may be just a game, but actually, it teaches a lot about real life, from making kids aware of how rentals and tenancy works to teaching them about mortgages and bankruptcy. Moreover, Monopoly does not just entail money matters, but it also reveals to its players how luck can either push your credit limits or possibly turn you into a millionaire with its “chance” and “community chest” squares.

Looking back, as much as the game excited me whenever I was winning, losing the game was very, very stressful and dramatic. I remember when my sister Jean struck luck and got a hold of all the properties on the “Upper East Side”—meaning the ones that asked for the most expensive rental fees. It was nerve-wrecking whenever I had to pass by those two properties at the end of the road. One wrong throw of the dice and everything I owned would be hers. Of course, the inevitable had to happen and after a few hours of being able to avoid stepping on her costly property, I got shot down. The damage was devastating. I had to return my hotels and houses for half the price, mortgage all my properties and surrender all my cash on hand, but, it still wasn’t enough to pay for my rental fee. At that moment, we declared that Jean was our Monopolist for the day as she beamed with joy and showed off her wads of colorful play money. When a Monopolist is present, there’s no way out, there’s no other way but to follow the prices being dictated and to pray for luck to be on your side. However, the bottom line is, as much as we might all dislike the presence of Monopolists, at the end of the day, we all want to be the Monopolist for the day, and that’s why we play the game.

- j.uy

However, I am still a student limited by my weekly allowance constraint. Recently, I felt the need to start saving up my money for future use. Realizing that each item I purchased from one of my favorite stores never fell below two thousand Pesos, I decided to challenge myself and see how well I could maximize my budget while continuing to satisfy the growth of my personal style.

I have actually long admired young Filipino designers that have gained popularity through various bazaars and exhibits. Sadly, these were very seasonal and those that are already established were quite pricey as well. Recently, one designer I had gotten to know quite well (from frequenting the Fort bazaars) told me about this new place at the Podium where she was planning to put up a shop. Once this new wing on the fourth level of the mall opened, I immediately checked it out. To my surprise and amazement, all my favorite bazaar labels were available with all the latest styles and with the comfort of a fitting room! Brands like Gaupo, Wisdom by Gail Angeles and V by Vanessa were all right next to one another.

There are many benefits that come with purchasing products from such stores. For one thing, you support the growing industry and the young Filipino talents behind it. In addition, clothing sizes and lengths can be customized to fit your preference. Prices are reasonable and come up to be just a fraction of a dress from an international retailer. Furthermore, it is highly unlikely that you can bump into another person wearing the exact same outfit since these designers produce only about five pieces of each design. Quality is surprisingly good as well. Truly, this to me is a perfect alternative or “substitute” to purchasing pricier dresses from bigger retailers. Wearing dresses from V, which average from

Php 800 to 1250, make me equally happy and allow me to explore a variety of takes on fashion, while making sure I stick to my budget. In this case, I am still able to shop while being able to putting away some money in the bank.

Shopping in the new Markati Palazzo Wing allows me to satisfy my desire for clothing and updating my looks, while sticking to what my allowance can afford. My happiness or “level of utility” (in more technical terms) remains constant, although the goods I purchase are now different. Everyone should check this place out for it isn’t just for the fashion forward. Indeed, this is a hub of new ideas and growing talent which speaks well of the Filipino and where we are headed.

- Karissa Herrera

Photos from http://leaflens.multiply.com & http://cinemapicadizo.multiply.com

Similarly, in Economics we learn the idea behind the Law of Diminishing Returns – where if a firm keeps increasing only one input such as labor, while holding the level of other inputs like supplies and grocery stocks constant, they experience inefficiency. During my first 8-hour shift behind the customer service counter, I witnessed the gravity of the situation. Considering I was one of several students in the JEEP program, so much extra workers were on hand while the level of work was constant. To my “ate”, the personnel assigned to me, I seemed like more of a distraction and the more I helped, the more idle time we had. By the end of the day, I was practically ready to write her life’s biography. As a grocery store employee, you can only do so much. Merchandisers roam about all day, while cashiers beep away and baggers simply bag. It’s not like the work is all that difficult really, it’s just that they can only do as they are tasked. In this situation, there is no room for growth and employee empowerment. Although Adam Smith says job specialization can be good for work is more concentrated, this too has its downside. Standing for 8 hours is no joke. Neither is it when you have to call a supervisor to correct a petty mistake that you can well do on your own.

Workers such as those employed in Supermarkets are employed contractually – meaning no job security and no benefits. As the law of Diminishing Returns indicates, oftentimes not enough work + too many employees = inefficiency. There always comes a point wherein if all else remains the same, increasing workers will no longer be beneficial to the firm. At times where shoppers are less, less workers are hired. The workers I met during my three-day stint in the grocery, were very dedicated to their jobs and took every 15 minute break very seriously. In spite of this, in another month or so, they once again go in search of new jobs no more challenging than the ones they had. What happens to the person stuck in this never ending cycle? I wonder what this says about the state of the Filipino?

- Karissa Herrera

Photos from http://www.robinsons-supermarket.com.ph/EWSL/ewsl.htm

As of press time, a liter of gasoline costs as much as a McDonald’s or Jollibee value meal (I reflected on this as I was ordering a Sausage McMuffin with Egg sandwich in McDonald’s, which costs 52 pesos as of press time). Has it gone a point where people have to choose whether or not they should purchase food to sustain themselves for the day or buy a liter of gasoline to get their cars to take them to places? Rice itself is getting to be costly. With an increase in gasoline as well, how can people cope?

Most recently I received an e-mail from a colleague of mine about the recent gas hike. It goes like this:

I hear we are going to hit close to P60.00 a LITER by next summer and it might go higher!! Want gasoline prices to come down? We need to take some intelligent, united action. The oil companies just laughed at that because they knew we wouldn’t continue to “hurt” ourselves by refusing to buy gas. It was more of an inconvenience to us than it was a problem for them. BUT, whoever thought of this idea has come up with a plan that can really work. Please read on and join with us!

By now you’re probably thinking gasoline priced at about P30.00 is super cheap. Me too! It is currently P45.00/liter for regular unleaded in my town. Now that the oil companies and the OPEC nations have conditioned us to think that the cost of a gallon of gas is CHEAP at P30 – P35/liter, we need to take aggressive action to teach them that BUYERS control the marketplace. ..not sellers. With the price of gasoline going up more each day, we consumers need to take action. The only way we are going to see the price of gas come down is if we hit someone in the pocketbook by not purchasing their gas! And, we can do that WITHOUT hurting ourselves.

How? Since we all rely on our cars, we can’t just stop buying gas. But we CAN have an impact on gas prices if we all act together to force a price war.

Here’s the idea: For the rest of this year, DON’T purchase ANY gasoline from the three biggest companies: SHELL, CALTEX, and PETRON. If they are not selling any gas, they will be inclined to reduce their prices. If they reduce their prices, the other companies will have to follow suit.

It does make sense to me; however, I can’t help but wonder if it really is feasible. I mean, upon closer analysis of the gasoline industry, it’s more of an oligopoly than a monopolistic competition market. Given this current situation, we can see that there is definitely a small group of firms that dominate and control the oil prices in the market (OPEC itself controls the production and price of oil). They are price-makers–not price-takers to a certain extent. Because there are few participants in this type of market, each gasoline company is aware of the actions of the others; thus, decisions made by one firm influences and are influenced by the decisions of the other firms involved in this oligopolist market.

It makes me wonder though whether the e-mail proposal of buying gasoline from the lesser-known companies will actually work. After all, these small firms are usually price-takers instead of price-makers, because they do not have the capacity to do so. The BIG THREE companies–Shell, Petron, and Caltex–definitely dominate the gasoline industry scene. It seems highly unlikely that not purchasing gasoline from them but buying from other smaller firms will make a huge impact. After all, this is an oligopolist industry and not everyone will also adhere to the suggested method of action/response to the rising cost of gasoline (like those consumers who couldn’t care less about the increase in gas prices because they can afford the luxury of spending so much for their cars).

The only time when gasoline will probably drop here in the country is when the world market’s price for gasoline decreases. I am pretty much very doubtful that our country would be the only one to drop the prices of gasoline, considering that the world market’s price for gasoline as of press time is about $110 per liter barrel. What makes us so sure that if the Philippines decides to drop oil prices, other countries will follow suit?

I don’t know exactly what form of remedy there can be to decrease the increasing price of gasoline, but as ideal as it sounds, all I can say is that if people all over the world were to trade their cars for bicycles or if they switch to more eco-friendly methods of transportation such as solar-powered cars or hybrid cars, then the demand for oil in the world market won’t be as high; thereby; forcing the oligopolists to drop their prices.

The prices of commodities are definitely skyrocketing. With the rise of gas prices, it is inevitable that people in general will have more difficulty coping with trying to make both ends meet. On the brighter side of things, with the rising price of gasoline, there would be less cars on the road and more people taking the public transportation. That would most certainly reduce air pollution!

by Angela Eliza Lim