Thus, J&L’s operating margin was exposed to the volatility of fuel prices. In order to stabilize operating margin, J&L has two options. One is to enter fixed-price contracts with its fuel suppliers, however, it does not work, because fuel suppliers tend to walk away when fuel prices rise and J&L will be left with unattractive options. The other (and the only available) option is to hedge by purchasing derivatives. Argument against hedging The most important argument against hedging this type of risk is that a corporation needs to, in exchange for hedging, (i) give up the upside of commodity prices going down (in futures, swaps and collar) or (ii) pay premiums (in options) or (iii) both.
Setting a price for gas today, would lead to the same effects whether the price is set higher than the equilibrium or lower. Setting the gas price higher would cause people to buy less of it because it will be less affordable to some. Supply for gas will increase as there will be less demand and this will cause a surplus. The market won’t be selling enough gas and gas stations will go out of business. Setting the gas price to a low price would cause a shortage.
Complete Answers here BUS 475 Capstone Final Exam Part 1 3. From the point of view of consumer surplus and producer surplus, what problem was created when Thailand subsidized the cost of energy to consumers to help alleviate the burden of higher energy costs? a) It encouraged the consumption of too much fuel at the expense of other goods. b) It has no effect; consumers gained consumer surplus, but taxpayers lost the same amount because they had to finance the subsidy. c) It hurt the poor and benefitted the rich.
First, when demand is greater than supply the gas prices rise; if it costs more to produce and supply it or if people buy more of it at the current price. On the other hand, when supply becomes greater than demand the gas prices fall; if it costs less to produce and supply or people buy less gas at the current price. When the price where the quantity consumers demand matches the quantity that producers supply the prices will stop rising or falling and become steady. Second, how high or low the price of gas is will be determined by how the consumers and producers respond to these price changes. The most important factor in the price of gasoline in the U.S. is the worldwide supply, demand and competition for crude oil.
However, the government prefers to impose tax on inelastic products like cigarettes and alcohol because this will not lead to the consequence of unemployment, which is caused by the large fall in demand for production. Therefore, we do not only pay for the demerit goods itself, however, we also pay the taxes that are imposed. As human beings, we do not only pay for the taxes we also ‘pay’ for the negative externalities
Demand side policies are those that manipulate the level of aggregate demand (AD) to achieve one or more economic objective. The policies can be fiscal policies (changes in government spending and/or taxation), or they might be monetary policies (which are largely changes in the short-term rate of interest). The four major macroeconomic objectives are a sustainable level of economic growth; low inflation; low unemployment; and a medium term balance on current account. Recently the government have used loose fiscal policy and the MPC have reduced the rate of interest. These are designed to increase the level of AD and increase in national income.
This causes the atmosphere to reflect heat back to earth and causes global temperatures to rise. Because of the costs associated with climate change, there are costs associated with carbon emissions, costs the firm does not have to pay. (Externalities n.d) (See figure 1.1) Whilst it is not feasible or economic for all carbon emitting activates to cease it is important to have methods of internalising the negative externalities to compensate the affected parties that did not benefit from the initial exchange.” To internalise a negative externality means to alter incentives so that people take into account the external effects of their actions.” (Gans, King,Mankiw 2010 p.204). Governments around the world have varied methods of internalising negative externalities. The three best means by which to internalise the negative externalities associated with emitting carbon into the atmosphere are a Pigovian tax, carbon emission regulations / quota and tradable pollution permits.
Therefore, in these locations the petrol stations have more market power, consumers less choice, demand inelastic; and this is why petrol is more expensive. • Maybe it means that the higher the market share the lower the PED. the less market power a petrol station has the more elastic demand
Therefore, an increase in the VAT rate negatively affected the sales revenue generated by Tesco. Sales revenue is the key source of income of the organisation and thus it holds a substantial effect on profits (Atrill, 2009, p. 33). The UK government has also proposed to adopt a fat tax with the aim to control obesity and limit the medical problems associated with it (The Guardian, 2011, n. p.). Such measure can adversely affect the sales revenue of certain products retailed by Tesco. Tesco is responding to such a threat.
In “Time to Recycle Recycling?” Ian Murray expresses skepticism at the widely popular and revered environmental movement, claiming that the way recycling is currently being conducted is inefficient, ineffective, and is doing more harm to the environment than good. Ian Murray is the Director of Projects and Senior Fellow in Energy, Science and Technology at the Competitive Enterprise Institute, and is also a conservative media commentator on science and global warming. In his article Murray attacks the efficiency of recycling, insisting that the actual process of recycling produces more carbon emissions than the initial “waste” of virgin resources. Murray also states that the convenient curbside pick-up for recycling is counterproductive due to the air emissions produced by the trucks, and the energy, labor, and water expended in the actual recycling process. He says such consequences are counterproductive to the goals of recycling and contradict environmentalist claims and intentions.