Beer Story

The "Demand and Supply" Story of Beer and its ingredient - Barley.

A disaster has occurred in Germany: The staple drink—beer—is rising in price. The reason is that there is a worldwide shortage of barley, a major ingredient in the brew. This has pushed up the price of barley, and shifted the supply curve of beer to the left. I would think that the shortage is temporary—with higher prices of barley, more farmers will plant the crop. That should alleviate the shortage, bring the price of this input back down, and after a year or two lead beer prices back more or less to their current levels. Not much consolation for those wishing to quaff the brew of the holidays, but their pain is probably going to be short-lived (and, if they drink enough, they won’t remember it anyway!).

Link to this article on Freakonomics, and the many more from the Economics Thought of the day.

Now consider these scenarios
What if due to higher prices, the consumer shifts to cheaper drinks - perhaps carbonated drinks, or decides to reduce the consumption of beer. Thus reducing the demand for beer.

1) The farmers on the other hand continue to grow similar quantity of barley shifting the supply curve and bringing down the price of beer

2) Due to reduced demand for Beer, the cost of barley reduces. Thus alternate uses of barley (bread?) become available for a lower price

Left Turn Economics

UPS saved three million gallons of gas and reduced 28.5 million miles off its delivery routes. How? By reducing the number of left-hand turns. Read on

Some questions now.

1) How can we implement such a thing in India? Does the complementary rule - Reduce right-hand turns - help?
2) Can we derive an optimal number for the small vans (shorter trips) big vans (longer trips, complex turn schedules? ) combination.
3) Incorporate drop off schedule based on local traffic patterns?

Econ e-books and e-mags

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Cheap Economizing Officer (CEO)

An interesting article about an american family of 7 who were able to live on an annual income of $35000.

What can the corporate world learn from this family -

1) Plan. A very crucial aspect of any business. Even though the corporates come up with beautiful literary pieces in the form of mission and vision statements, where they fail is to form a plan to achieve the same.

2) Organize. A well defined organization hierarchy is very important. It should define the reporting structure and help in establishing accountability.

3) Shop wisely. Not every outsourcing deal can result in cost savings. Shop wisely for vendors.

4) Communicate Effectively.

5) Team work.


Passing Note. Citi group is also looking out for a CEO. They could definitely use one cheap economizing officer.

Lose Leader

After having witnessed four Black Fridays and Cyber Mondays, I am just not convinced about the "Real" savings that a consumer makes. All this seems to be a marketing gimmick. The stores try to establish credibility thru the early bird sale and then just walk their way back smiling to the cash registers for the rest of the day. See this article for a detailed example of how stores try to establish such credibility.

Bangalore Economics

Mint explains the out sourcing activity w.r.t Bangalore in economics terminology.

Internal transaction costs went up while market transaction costs fell after the mid-1990s. That was the economic cue for outsourcing to take off, as companies found it cheaper to get certain things done outside rather than from within the boundaries of the firm

In his theory, The theory of the firm, British economist - Ronald Coase explains why the economy is populated by a number of business firms, instead of consisting of exclusively of independent people who contract with one another. According to him, Transaction Cost determines whether firms seek hired help or contract out for some particular task.

In an attempt to expend this theory to how departments are formed within a firm, I see why we have separate departments for Sales, Operations, Business Units, Technology units etc. For any service provided by one department to the other, there is a transaction cost incurred. Ex - the (tech) support dept charges the technology dept for all its services, technology charges the business units for its services etc.

Further, individual departments can get contracted out and this is where Bangalore has a major share.

How to increase the value of falling U$D

What is the value of four $1 currency notes? Did you say the answer is $4? You maybe right, but it can be worth more than that. US Bureau of Engraving and Printing sells uncut currency notes of various denominations. For example, a sheet of four $1 bills can cost $15. (as of 11/08/2007). The Bureau is trying to market its product as a gift idea for the holiday season.

Even shredded currency is sold at a highly economical price of $165 per ounce.