haha here's an economics-related (slightly!) comic in today's straits times :) demand and supply! :D
Ching Man
Thursday, March 26, 2009
Wednesday, March 25, 2009
Price war flares up at petrol pumps
March 17, 2009
By Christopher Tan
A PETROL price war has ignited, hours after Caltex - the smallest pump operator here - re-introduced 92-octane petrol and priced it below the prevailing market rate.
No fewer than three rounds of cuts were made within the day yesterday, as the four oil companies tried to outdo one another.
ExxonMobil was the first to react by lowering its 92-octane fuel by 2.2 cents a litre to match Caltex's $1.536 (before discount). The giant, which has the largest pump network of 67 stations, made the change at 10am yesterday - 10 hours after Caltex's surprise move.
Singapore Petroleum Co (SPC) followed suit at 12.30pm.
And by around 4pm, Shell - which is the second biggest player with 63 stations - did a double-barrelled reduction. It matched its rivals' 92-octane price and cut 95-octane by 2.9 cents a litre to $1.537.
Its price advantage was short-lived. At 5pm, Caltex and ExxonMobil matched Shell's 95-octane rate.
Caltex upped the ante by bringing its 92-octane - which it re-introduced after phasing it out in 2000 - 2.9 cents lower to $1.507 a litre.
And at 5.30pm, SPC matched the market's prevailing 95-octane rate. An hour later, this home-grown player matched Caltex's 92-octane rate.
The industry has not seen this thrust-and-parrying for several years now. In recent times, pump price movements have been relatively tame, with one player making a change and then others matching it uniformly within a day.
Asked why it reacted so swiftly to a far smaller competitor, ExxonMobil Singapore retail manager Loh Chee Seng said: 'It's not about size but about Esso's commitment to providing our loyal customers with competitive prices.'
A Caltex spokesman said her company was likewise striving to be 'price competitive'.
'We'll continue to keep watch on the market,' she said when asked how much farther it would go.
Yesterday's adjustments widened the gap between 'premium' and 'regular' petrol.
At the end of the work day, 98-octane fuel was 16.3 cents pricier than the two cheapest 92-octane fuels.
The price premium for Shell's so-called ultra-premium V-Power is even wider. At 34.2 cents a litre higher than the two cheapest 92-octane fuels, it will cost $20 more per tankful on a medium-sized car.
V-Power is alone in this price segment as Caltex has since lowered its Platinum grade - a V-Power rival - to $1.67 a litre, the same price as all other 98-octane fuels.
Asked about the state of the price war at 6.30pm yesterday, and whether a 'ceasefire' had been reached, Mr John Sam, retail manager at Chevron Singapore, which markets the Caltex brand, said: 'It has just started.'
Motorists here have been favouring 92- and 95-octane grades since pump prices started soaring from 2007. The current downturn is fuelling the shift. Data from the Ministry of Trade and Industry showed sales of 92- and 95-octane fuel growing 13 and 14 per cent respectively last year, while 98-octane sales shrank by 18 per cent.
The two lower grades accounted for 64 per cent of sales last year. As recently as 2005, 98-octane sales outstripped the sale of 92- and 95-octane grades combined.
Observers reckon the next round of rate cuts would be for the 'premium' grades.
Article Review:
This article is about the 4 oil companies here in Singapore slashing pump prices at least 3 times on that day itself. This certainly means good news for consumers. This scene is different and unusual as these companies have not engaged in this kind of “Price war” for a few years. In that case, why are oil companies so concerned about cutting prices now?
- Oil companies are reducing prices due to the decrease in demand for oil.
As seen in the graph above, as the demand for oil decreases, suppliers would need to cut prices such that quantity supplied is equal to quantity demanded.
- The decrease in demand is a result of the economy recession that had drastically reduced consumer income. Many people are either retrenched or have lower salary as compared to a year ago. This resulted in people giving up the option of driving cars and opting for public transport instead.
- As seen in the article, motorists are favouring ‘regular’ petrol (inferior goods) over ‘premium’ grades (normal goods). As consumer income decreases, the demand for inferior goods rise and the demand for normal goods drop. Shell’s premium petrol would “cost $20 more per tankful on a medium sized car” than regular petrol. Consumers are switching from consuming normal goods to consuming inferior goods as they have lesser to spend now. The increase in demand for regular petrol also caused Caltex to reintroduce its 92-octane fuel which it phased out in 2000. The marginal benefit of supplying the goods now exceeds the marginal cost of supplying it due to the influx of people preferring cheaper grades of petrol.
- Petrol companies are pitting against each other to reduce prices to competitive levels because demand for their product is also affected by changes in price of substitute goods. Substitute goods refer to alternatives that satisfy the same consumer wants. If Caltex has lower prices than the other 3 companies, consumer would prefer Caltex to the other companies. Therefore, the other companies matched Caltex’s prices so that demand for their own brands would not fall.
- This also shows that the demand of the individual brands of petrol is price elastic. As there are close substitutes available in the market, consumers can always switch to other brands if the companies do not offer competitive prices. A market strategy would be making consumers loyal to their own brand of petrol. The different companies here have been offering points reward system such that customers would earn points when they top up petrol and accumulated points can be exchanged for other goods. Thus, consumers would tend to buy from that company even though it has a slightly higher price.
Kenneth Soo
By Christopher Tan
A PETROL price war has ignited, hours after Caltex - the smallest pump operator here - re-introduced 92-octane petrol and priced it below the prevailing market rate.
No fewer than three rounds of cuts were made within the day yesterday, as the four oil companies tried to outdo one another.
ExxonMobil was the first to react by lowering its 92-octane fuel by 2.2 cents a litre to match Caltex's $1.536 (before discount). The giant, which has the largest pump network of 67 stations, made the change at 10am yesterday - 10 hours after Caltex's surprise move.
Singapore Petroleum Co (SPC) followed suit at 12.30pm.
And by around 4pm, Shell - which is the second biggest player with 63 stations - did a double-barrelled reduction. It matched its rivals' 92-octane price and cut 95-octane by 2.9 cents a litre to $1.537.
Its price advantage was short-lived. At 5pm, Caltex and ExxonMobil matched Shell's 95-octane rate.
Caltex upped the ante by bringing its 92-octane - which it re-introduced after phasing it out in 2000 - 2.9 cents lower to $1.507 a litre.
And at 5.30pm, SPC matched the market's prevailing 95-octane rate. An hour later, this home-grown player matched Caltex's 92-octane rate.
The industry has not seen this thrust-and-parrying for several years now. In recent times, pump price movements have been relatively tame, with one player making a change and then others matching it uniformly within a day.
Asked why it reacted so swiftly to a far smaller competitor, ExxonMobil Singapore retail manager Loh Chee Seng said: 'It's not about size but about Esso's commitment to providing our loyal customers with competitive prices.'
A Caltex spokesman said her company was likewise striving to be 'price competitive'.
'We'll continue to keep watch on the market,' she said when asked how much farther it would go.
Yesterday's adjustments widened the gap between 'premium' and 'regular' petrol.
At the end of the work day, 98-octane fuel was 16.3 cents pricier than the two cheapest 92-octane fuels.
The price premium for Shell's so-called ultra-premium V-Power is even wider. At 34.2 cents a litre higher than the two cheapest 92-octane fuels, it will cost $20 more per tankful on a medium-sized car.
V-Power is alone in this price segment as Caltex has since lowered its Platinum grade - a V-Power rival - to $1.67 a litre, the same price as all other 98-octane fuels.
Asked about the state of the price war at 6.30pm yesterday, and whether a 'ceasefire' had been reached, Mr John Sam, retail manager at Chevron Singapore, which markets the Caltex brand, said: 'It has just started.'
Motorists here have been favouring 92- and 95-octane grades since pump prices started soaring from 2007. The current downturn is fuelling the shift. Data from the Ministry of Trade and Industry showed sales of 92- and 95-octane fuel growing 13 and 14 per cent respectively last year, while 98-octane sales shrank by 18 per cent.
The two lower grades accounted for 64 per cent of sales last year. As recently as 2005, 98-octane sales outstripped the sale of 92- and 95-octane grades combined.
Observers reckon the next round of rate cuts would be for the 'premium' grades.
Article Review:
This article is about the 4 oil companies here in Singapore slashing pump prices at least 3 times on that day itself. This certainly means good news for consumers. This scene is different and unusual as these companies have not engaged in this kind of “Price war” for a few years. In that case, why are oil companies so concerned about cutting prices now?
- Oil companies are reducing prices due to the decrease in demand for oil.
As seen in the graph above, as the demand for oil decreases, suppliers would need to cut prices such that quantity supplied is equal to quantity demanded.
- The decrease in demand is a result of the economy recession that had drastically reduced consumer income. Many people are either retrenched or have lower salary as compared to a year ago. This resulted in people giving up the option of driving cars and opting for public transport instead.
- As seen in the article, motorists are favouring ‘regular’ petrol (inferior goods) over ‘premium’ grades (normal goods). As consumer income decreases, the demand for inferior goods rise and the demand for normal goods drop. Shell’s premium petrol would “cost $20 more per tankful on a medium sized car” than regular petrol. Consumers are switching from consuming normal goods to consuming inferior goods as they have lesser to spend now. The increase in demand for regular petrol also caused Caltex to reintroduce its 92-octane fuel which it phased out in 2000. The marginal benefit of supplying the goods now exceeds the marginal cost of supplying it due to the influx of people preferring cheaper grades of petrol.
- Petrol companies are pitting against each other to reduce prices to competitive levels because demand for their product is also affected by changes in price of substitute goods. Substitute goods refer to alternatives that satisfy the same consumer wants. If Caltex has lower prices than the other 3 companies, consumer would prefer Caltex to the other companies. Therefore, the other companies matched Caltex’s prices so that demand for their own brands would not fall.
- This also shows that the demand of the individual brands of petrol is price elastic. As there are close substitutes available in the market, consumers can always switch to other brands if the companies do not offer competitive prices. A market strategy would be making consumers loyal to their own brand of petrol. The different companies here have been offering points reward system such that customers would earn points when they top up petrol and accumulated points can be exchanged for other goods. Thus, consumers would tend to buy from that company even though it has a slightly higher price.
Kenneth Soo
Battling Ethanol-Propelled Food Prices
Friday, April 18, 2008
Demand for corn-derived fuel is driving up food prices, but new technologies could help.
By Kevin Bullis
Food prices worldwide have risen dramatically in the past few years, due in part to a similarly dramatic rise in the amount of corn used for ethanol production in the United States. Now, in an effort to make food less expensive, experts are calling for limits on ethanol production, subsidies for corn, and more incentives for biofuels made from nonfood sources.
According to statistics released Wednesday by the U.S. Department of Labor, food prices for the first three months of the year rose at a rate that translates to an annual increase of 5.3 percent (adjusted for seasonal variations). That's slightly higher than last year's increase, and much higher than the increases in previous years. From 2001 to 2006, the price of food increased each year by an average of only 2.5 percent. According to the World Bank, the situation worldwide is more dire: food prices have nearly doubled over the past three years. That's erased a decade of economic gains for the poor in some countries.
Part of this increase is due to corn being diverted from use as animal feed and food to use as a feedstock for ethanol production. Many other factors are also important--such as growing demand for food imports in India and China and a drought in Australia that hurt grain harvests. But the use of corn for biofuels has been singled out because it is one factor over which governments have some control. Some analysts, such as C. Ford Runge, a professor of applied economics and law at the University of Minnesota, say that the use of corn for fuel rather than food could account for about one-third of the rise in prices worldwide. The other two-thirds is split between the effects of weather and increases in demand, he says. (Runge presents his argument in "How Biofuels Could Starve the Poor," in Foreign Affairs.) A look at the grain markets gives a good idea of the role that ethanol demand plays in food prices, says Patrick Westhoff, codirector of the Food and Agricultural Policy Research Institute at the University of Missouri. In the past two years, global consumption of grains has risen by about 80 million tons, he says. About half of that increase, or 40 million tons, comes from corn used to make ethanol.
To reverse the effects of corn going to fuel rather than to food, some experts are calling for an end to the biofuel mandates signed into law late last year. The mandates require an increase in biofuel production in the United States, including 15 billion gallons of corn ethanol production by 2015--considerably more than the 6.5 billion gallons produced last year. Repealing the mandates would certainly have some effect on food prices, Westhoff says. According to an analysis done by his organization, the mandates will decrease U.S. corn exports by more than 13 percent from 2011 to 2016. That decrease will tighten corn supplies worldwide, driving up not only corn prices, but also the prices of other staples, such as wheat, that could serve as a replacement for corn. Removing the mandates could improve export numbers, Westhoff says. (Notably, higher demand for corn for use in ethanol production has actually increased corn exports in the short term. High corn prices have led farmers to plant more corn, and last year, not all of the increased supply went to ethanol. Much of the excess went overseas.)
But the effect of repealing the mandates on food prices depends strongly on the cost of energy. If oil prices stay around $100 a barrel, ethanol will remain an attractive alternative even without the mandates, Westhoff says. As a result, ethanol production could reach levels as high as those set by the mandates anyway, putting just as much strain on the corn supply. High energy costs increase food prices in other ways, too, says Simla Tokgöz, an economic analyst at the Center for Agricultural and Rural Development at Iowa State University. Growing crops takes energy, and countries that have to import food are now paying a high price for shipping because of fuel costs. Bringing down food prices requires addressing these problems as well.
One thing that could help is reducing or eliminating subsidies that give corn ethanol an economic advantage over ethanol from other sources, such as sugar cane, Runge says. Ethanol can be made from sugar more efficiently than it can from corn, so diversion of sugar to fuel production wouldn't have as much of an effect on food markets.
Scaling up technology for making ethanol from nonfood sources, such as grass and wood chips, could also help. Federal grants are already starting to make that happen, and certain provisions in the U.S. biofuels mandates call for the use of cellulosic ethanol. But so far, technologies for producing cellulosic ethanol have not been commercially deployed. The jump in food prices "increases the urgency to get them developed," says Bruce Babcock, director of the Center for Agricultural and Rural Development at Iowa State University.
Here again, reducing subsidies could help. Runge says that corn ethanol is squeezing out cellulosic ethanol. With corn prices at record highs, farmers have no incentive to plant the best cellulosic crops. Reducing or eliminating corn subsidies could help level the playing field. "You've got to induce farmers to grow the plants you're going to use for [cellulosic] feedstocks, rather than corn," Runge says.
But even if alternative approaches to increasing energy supply catch on, he says, ultimately, people need to use less. "I think the most important thing we could do in the United States would be to develop incentives and regulation encouraging aggressive conservation," Runge says.
Source: http://www.technologyreview.com/Energy/20641/
Article Review
I found this article rather relevant to what we learnt about supply and demand, and how it affects the price of goods and services. In this article, we can see how the demand for corn-derived ethanol has an impact on food prices, which is as follows:
• Corn has alternative uses; as food and as a biofuel. Since the usage of corn for ethanol increases the demand for corn, this raises corn prices and gives farmer incentives to supply corn to biofuel producers, making less corn available for food. As we have learnt in price determination, an increase in demand and a decrease in supply leads to a rise in equilibrium price of corn as food.
• Biofuel mandates require an increase in corn ethanol production by 2015, increasing the demand for ethanol. Also, the high prices of oil drives people to source for cheaper alternative sources of energy, whereby ethanol is one of them. As ethanol is derived from corn, this increased quantity of ethanol demanded leads to the increase in quantity of corn demanded, which consequently raises corn prices.
• Higher prices of corn affects the supply and price of other staples as well. Corn and other food crops such as wheat are competitive in supply, using the same factors of production. The rise in corn prices increases quantity of corn demanded, causing farmers to divert resources from production of other food crops into corn production. Consequently the supply of other food crops decreases and overall, less food is available to meet demand, thus the price of food rises.
In short, this article is an example of how the alternative uses of a resource/good can affect its demand, supply and price, illustrating how the demand and supply theory can be applied in real life.
Ching Man
Demand for corn-derived fuel is driving up food prices, but new technologies could help.
By Kevin Bullis
Food prices worldwide have risen dramatically in the past few years, due in part to a similarly dramatic rise in the amount of corn used for ethanol production in the United States. Now, in an effort to make food less expensive, experts are calling for limits on ethanol production, subsidies for corn, and more incentives for biofuels made from nonfood sources.
According to statistics released Wednesday by the U.S. Department of Labor, food prices for the first three months of the year rose at a rate that translates to an annual increase of 5.3 percent (adjusted for seasonal variations). That's slightly higher than last year's increase, and much higher than the increases in previous years. From 2001 to 2006, the price of food increased each year by an average of only 2.5 percent. According to the World Bank, the situation worldwide is more dire: food prices have nearly doubled over the past three years. That's erased a decade of economic gains for the poor in some countries.
Part of this increase is due to corn being diverted from use as animal feed and food to use as a feedstock for ethanol production. Many other factors are also important--such as growing demand for food imports in India and China and a drought in Australia that hurt grain harvests. But the use of corn for biofuels has been singled out because it is one factor over which governments have some control. Some analysts, such as C. Ford Runge, a professor of applied economics and law at the University of Minnesota, say that the use of corn for fuel rather than food could account for about one-third of the rise in prices worldwide. The other two-thirds is split between the effects of weather and increases in demand, he says. (Runge presents his argument in "How Biofuels Could Starve the Poor," in Foreign Affairs.) A look at the grain markets gives a good idea of the role that ethanol demand plays in food prices, says Patrick Westhoff, codirector of the Food and Agricultural Policy Research Institute at the University of Missouri. In the past two years, global consumption of grains has risen by about 80 million tons, he says. About half of that increase, or 40 million tons, comes from corn used to make ethanol.
To reverse the effects of corn going to fuel rather than to food, some experts are calling for an end to the biofuel mandates signed into law late last year. The mandates require an increase in biofuel production in the United States, including 15 billion gallons of corn ethanol production by 2015--considerably more than the 6.5 billion gallons produced last year. Repealing the mandates would certainly have some effect on food prices, Westhoff says. According to an analysis done by his organization, the mandates will decrease U.S. corn exports by more than 13 percent from 2011 to 2016. That decrease will tighten corn supplies worldwide, driving up not only corn prices, but also the prices of other staples, such as wheat, that could serve as a replacement for corn. Removing the mandates could improve export numbers, Westhoff says. (Notably, higher demand for corn for use in ethanol production has actually increased corn exports in the short term. High corn prices have led farmers to plant more corn, and last year, not all of the increased supply went to ethanol. Much of the excess went overseas.)
But the effect of repealing the mandates on food prices depends strongly on the cost of energy. If oil prices stay around $100 a barrel, ethanol will remain an attractive alternative even without the mandates, Westhoff says. As a result, ethanol production could reach levels as high as those set by the mandates anyway, putting just as much strain on the corn supply. High energy costs increase food prices in other ways, too, says Simla Tokgöz, an economic analyst at the Center for Agricultural and Rural Development at Iowa State University. Growing crops takes energy, and countries that have to import food are now paying a high price for shipping because of fuel costs. Bringing down food prices requires addressing these problems as well.
One thing that could help is reducing or eliminating subsidies that give corn ethanol an economic advantage over ethanol from other sources, such as sugar cane, Runge says. Ethanol can be made from sugar more efficiently than it can from corn, so diversion of sugar to fuel production wouldn't have as much of an effect on food markets.
Scaling up technology for making ethanol from nonfood sources, such as grass and wood chips, could also help. Federal grants are already starting to make that happen, and certain provisions in the U.S. biofuels mandates call for the use of cellulosic ethanol. But so far, technologies for producing cellulosic ethanol have not been commercially deployed. The jump in food prices "increases the urgency to get them developed," says Bruce Babcock, director of the Center for Agricultural and Rural Development at Iowa State University.
Here again, reducing subsidies could help. Runge says that corn ethanol is squeezing out cellulosic ethanol. With corn prices at record highs, farmers have no incentive to plant the best cellulosic crops. Reducing or eliminating corn subsidies could help level the playing field. "You've got to induce farmers to grow the plants you're going to use for [cellulosic] feedstocks, rather than corn," Runge says.
But even if alternative approaches to increasing energy supply catch on, he says, ultimately, people need to use less. "I think the most important thing we could do in the United States would be to develop incentives and regulation encouraging aggressive conservation," Runge says.
Source: http://www.technologyreview.com/Energy/20641/
Article Review
I found this article rather relevant to what we learnt about supply and demand, and how it affects the price of goods and services. In this article, we can see how the demand for corn-derived ethanol has an impact on food prices, which is as follows:
• Corn has alternative uses; as food and as a biofuel. Since the usage of corn for ethanol increases the demand for corn, this raises corn prices and gives farmer incentives to supply corn to biofuel producers, making less corn available for food. As we have learnt in price determination, an increase in demand and a decrease in supply leads to a rise in equilibrium price of corn as food.
• Biofuel mandates require an increase in corn ethanol production by 2015, increasing the demand for ethanol. Also, the high prices of oil drives people to source for cheaper alternative sources of energy, whereby ethanol is one of them. As ethanol is derived from corn, this increased quantity of ethanol demanded leads to the increase in quantity of corn demanded, which consequently raises corn prices.
• Higher prices of corn affects the supply and price of other staples as well. Corn and other food crops such as wheat are competitive in supply, using the same factors of production. The rise in corn prices increases quantity of corn demanded, causing farmers to divert resources from production of other food crops into corn production. Consequently the supply of other food crops decreases and overall, less food is available to meet demand, thus the price of food rises.
In short, this article is an example of how the alternative uses of a resource/good can affect its demand, supply and price, illustrating how the demand and supply theory can be applied in real life.
Ching Man
Friday, March 20, 2009
jokes
A COWSMIC VIEW OF WORLD ORGANIZATION
FEUDALISM: You have two cows. Your lord takes some of the milk.
PURE SOCIALISM: You have two cows. The government takes them and puts them in a barn with everyone else's cows. You have to take care of all the cows. The government gives you as much milk as you need.
BUREAUCRATIC SOCIALISM: You have two cows. The government takes them and puts them in a barn with everyone else's cows. They are cared for by ex-chicken farmers. You have to take care of the chickens the government took from the chicken farmers. The government gives you as much milk and as many eggs as the regulations say you should need.
FASCISM: You have two cows. The government takes both, hires you to take care of them, and sells you the milk.
PURE COMMUNISM: You have two cows. Your neighbors help you take care of them, and you all share the milk.
RUSSIAN COMMUNISM: You have two cows. You have to take care of them, but the government takes all the milk.
DICTATORSHIP: You have two cows. The government takes both and shoots you.
SINGAPORE DEMOCRACY: You have two cows. The government fines you for keeping two unlicensed animals in an apartment.
MILITARIANISM: You have two cows. The government takes both and drafts you.
PURE DEMOCRACY: You have two cows. Your neighbors decide who gets the milk.
REPRESENTATIVE DEMOCRACY: You have two cows. Your neighbors pick someone to tell you who gets the milk.
AMERICAN DEMOCRACY: The government promises to give you two cows if you vote for it. After the election, the president is impeached for speculating in cow futures. The press dubs the affair "Cowgate".
BRITISH DEMOCRACY: You have two cows. You feed them sheep's brains and they go mad. The government doesn't do anything.
BUREAUCRACY: You have two cows. At first the government regulates what you can feed them and when you can milk them. Then it pays you not to milk them. After that it takes both, shoots one, milks the other and pours the milk down the drain. Then it requires you to fill out forms accounting for the missing cows.
ANARCHY: You have two cows. Either you sell the milk at a fair price or your neighbors kill you and take the cows.
CAPITALISM: You have two cows. You sell one and buy a bull.
HONG KONG CAPITALISM: You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with associated general offer so that you get all four cows back, with a tax deduction for keeping five cows. The milk rights of six cows are transferred via a Panamanian intermediary to a Cayman Islands company secretly owned by the majority shareholder, who sells the rights to all seven cows' milk back to the listed company. The annual report says that the company owns eight cows, with an option on one more. Meanwhile, you kill the two cows because the Feng Shui is bad.
ENVIRONMENTALISM: You have two cows. The government bans you from milking or killing them.
FEMINISM: You have two cows. They get married and adopt a veal calf.
TOTALITARIANISM: You have two cows. The government takes them and denies they ever existed. Milk is banned.
POLITICAL CORRECTNESS: You are associated with (the concept of "ownership"is a symbol of the phallo-centric, war-mongering, intolerant past) two differently-aged (but no less valuable to society) bovines of non-specified gender.
COUNTER CULTURE: Wow, dude, there's like... these two cows, man. You got to have some of this milk. Far out! Awesome!
SURREALISM: You have two giraffes. The government requires you to take harmonica lessons.
JAPANESE DEMOCRACY: You have two cows. You give the milk to gangsters so they don't ask any awkward questions about who you're giving the milk to.
EUROPEAN FEDERALISM: You have two cows which cost too much money to care for because everybody is buying milk imported from some cheap east-European country and would never pay the fortune you'd have to ask for your cows' milk. So you apply for financial aid from the European Union to subsidise your cows and are granted enough subsidies. You then sell your milk at the former elevated price to some government-owned distributor which then dumps your milk onto the market at east-European prices to make Europe competitive. You spend the money you got as a subsidy on two new cows and then go on a demonstration to Brussels complaining that the European farm-policy is going drive you out of your job.
EASTERN EUROPEAN DEMOCRACY: You have two cows. You sell the milk (diluted with some water) at a high price to the neighbors or to anyone at the open-air market. If somebody asks for receipt, you charge for a two times higher price, so nobody will request an invoice. For concerned families with small babies you claim that the milk is "bio", though you collect the grass for feeding at the side of the highway and you keep the milk in plastic barrels used previously as containers of dangerous chemicals. Later, your neighbor or anybody from town will steal the cows and will buy their meat for a high price, and if you ask for a receipt, you will be charged for a two times higher price.
FINNISH SOCIALISM: You have two cows. Soon you have to kill one of them because in the Netherlands there is an overproduction of milk and the European Union rules say so. When you do so, you realize that it was not necessary, only the system was too slow in getting you the up-to-date news. From the stress, you get an ulcer in your stomach so you go to a doctor. The doctor realizes that this ulcer is a serious one, so you need an urgent treatment. Therefore, you soon get a call to the local hospital. The call's date is for 3 months later, because there is a queue with more urgent cases. Then your ulcer becomes even more serious because you remember that 40 percent of your income is taken for social tax.
HAHA look at the Singapore one. Its really funny :D Although i don't know if this is linked to economics anot.
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