Sei sulla pagina 1di 10

OEEM 6013

ECONOMICS FOR BUSINESS

INDIVIDUAL ASSIGNMENT
CASE 1: MIXI VS FACEBOOK

NAME:
SHARMILA DEVI SUBRAMANIAM

MATRIC NUMBER:
822511

LECTURER:
PROF. DR. K. KUPERAN VISWANATHAN
CASE 1: MIXI VS FACEBOOK
1. How does a social network website depend on network effects among users?
Social media networks have become a dominant force of almost every aspect of a
person’s communication strategy. Businesses are remaining competitive by reaching their
customers through social media networking. With effective management practices and
low cost social media marketing, businesses have been able to use inexpensive ways to
increase their visibility online. Network effect consider the network of your interactions:
your friends and family are probably on Facebook, were likely to join when you decided
to yourself — this made the otherwise empty site so compelling. The network effect
business model may also include instances when a company can increase their income by
raising advertising. Businesses are able to raise their rates due to the amount of visitors
that view their website or social media profiles. Social networking sites have given
businesses alternative ways to communicate with your audience. Blogging is another
effective method because of the ability to share articles about the business, products,
services or industry news.Network effects become significant after a certain subscription
percentage has been achieved, called critical mass. At the critical mass point, the value
obtained from the good or service is greater than or equal to the price paid for the good or
service. As the value of the good is determined by the user base, this implies that after a
certain number of people have subscribed to the service or purchased the good, additional
people will subscribe to the service or purchase the good due to the value exceeding the
price.

2. Explain the advantages of Mixi in competition against a totally new competitor?


The advantages of Mixi in competition against a totally new competitor such as
Facebook and Twitter are separeted into several important parts. When we look into what
Mixi and others competitor like Facebook and Twitter focus on, Mixi are developed
more focus in community entertainment, meeting new people based on common interest.
Meanwhile Facebook focus more in helps you connect and share with the people in your
life and Twitter has been developed more on Besides, Mixi is the first online social in
Japan. According the first period Facebook and Twitter has been introduced to user, to
break the dominance of Mixi in Japan appear more difficulty what they expected. Early
those year, Facebook and Twitter had site design problem where to penetrate Japan area,
it must been translate to fully Japanese language. This is main problem that Facebook
and Twitter faced when it try to compete with Mixi dominance. Mixi site is been
developed to Japanese people, so Mixi don’t have any problem to educate Japanese
people further. While Mixi was already widely used in Japan, so the users were not
motivated to switch to others application such as Facebook or Twitter. The network
effect was the main factor to Mixi that been establish in Japan.Mixi users feel loyal,
become more anonymous and authentic when they did not using their real name. The
anonymous status encourages people to come out of their shell and express themselves
more freely in the new platform of social network. Mixi users will be loyal as it was the
first site to offer this service.
3. How do the advantages in (2) apply to Mixi competing against Facebook? Consider
whether Mixi users post in English or Japanese?

For Japan, the identity of itself in traditional culture has been nurtured inside all citizens.
Traditional culture such as language, clothes, food is the most accentuated in Japan.
Especially the language, Japan citizens very concern about the language that been used in
their daily activities. Although English is the most language that been used in the world,
Japanese people still prioritized their native language. That is the main causes that social
network such as Friendster, Facebook through difficulty to succeed in country like Japan.
Following are the advantages of Mixi against Facebook;

 Mixi registration requires a valid Japanese cellphone number, which bars anyone who
is not or has not been a resident of Japan. The requirement to register Mixi account,
user must atleast 15 year old above and the Mixi membership is only by invitation
from other Mixi user. The original of Mixi since it was developed until today, the
Mixi users must be anonymous. The reason for stay anonymous because Mixi want
provides freedom for user to voice out their thought freely. Since Facebook started
practiced in open registration for all users, only needed an email account as the main
point.

 Mixi functionality is more like a community place for people to share their opinions
through an online forum and a way to express tastes and hobbies. Users can send and
receive messages, write in a diary, read and comment on others' diaries, organize and
join communities, and invite their friends to join Mixi. While Facebook more on
platform to users express opinion what they want and think.

 Research indicates that some users, particularly young women, are more likely to use
Mixi to connect in more private ways with close friends. Especially in contrast to
perceptions of Facebook as more public social network.

 The page of Mixi set up more likely a blog with calendar in left panel. This function
can been view only those who in a friend list with the user and it content are open
equally to all group members. It showed that close friends can always update about
each other’s. Those function is more secure and private proportionate than Facebook.

 Mixi has what they called “Mixi Station” is an application that detects songs being
played in iTunes and Windows Media Player. “Mixi Station” will upload them
automatically to a communally accessible list in “Music” section and it was
implemented late in June 2006. By July 2006, “Mixi Station” has improved it
compatibility by support for Winamp via a Winamp plugin which was quickly made
official by Mixi.

 Mixi is one of top social network in Japan which is fully Japanese language. So, it
gives advantages and opportunities for Mixi since Mixi was the 1st social network in
Japan. So there, Mixi has opportunities to gain market share without the initial threat
of future competitor. As Mixi is the 1st social network in Japan, Mixi users more loyal
although there is more application that has similliar function. Mixi users reluctant to
learn and switch to others application as it become available.

 When Mixi were launched in Japan on February 2004, the developer were concern
about the privacy issues. This extended issue was about privacy trickle in Friendster
during year 2003. That why Mixi take strictly focus more on privacy setting in place
which it to protected user’s information. User’s information is so valuable for third
parties for illegal activities such as clone credit card and other. Because of the large
volume of data that users submit to the service, Facebook has come under scrutiny for
their privacy policies.

4. For Mixi, compare the advantages and disadvantages of switching to a real-name


policy?

Advantages: Disadvantages:
 Posts will seem more authentic as  Loss of user anonymity.
was highlighted following the  Mixi would need to implement
earthquake and Tsunami in the privacy settings so user
Tohoku region. information would not be shared
 Businesses would be able to use equally to all group members.
Mixi to cultivate business  Mixi was the first social network
relationships. site, so there was an opportunity
 Users could connect on a more for them to gain market share
personal level. without the initial threat of
competitors.
OEEM 6013
ECONOMICS FOR BUSINESS

INDIVIDUAL ASSIGNMENT
CASE 6 : RESOLVING CHINA’S POWER SHORTAGE

NAME:
SHARMILA DEVI SUBRAMANIAM

MATRIC NUMBER:
822511

LECTURER:
PROF. DR. K. KUPERAN VISWANATHAN
1. Explain how the impact of a price increase on electricity consumption depends on the
price elasticity of demand.

Electricity Consumption & Elastic Demand


In the case of elastic demand, an increase in the price of electricity would cause quantity
demanded to fall by a greater percentage than the percent increase in price. The implication
here is that a price increase of electricity would reduce shortage issues.

Electricity Consumption & Inelastic Demand


Since the electricity market actually has inelastic demand, an increase in the price of
electricity would result in a proportionately smaller decrease in the quantity demanded. The
implication here is that a price increase for electricity would result in higher total
expenditures on electricity. Quantity demanded would not decrease enough to reduce
shortage issues. The degree, to which quantity demanded changes with changes in price,
depends on the price elasticity of demand.

In elasticity of price, we have the formula to calculate:

𝜟𝑸/𝑸
𝑬𝒑:
𝜟𝑷/𝑷

The formula includes two characteristics: the sign and the size of price elasticity of demand.
The sign will indicates about the movement of quantity demanded when price increase or
decrease. Firstly, Negative sign, which is usually observed in Ep, means that an increase in
price of normal good will decrease the quantity demanded for that good. Therefore, the
demand curve has negative slope. Secondly, how big the ratio indicates about the sensitivity
of demand regard to price. The bigger the number is, the higher customer’s price sensitivity
level thus measure whether a change in price can lead to significant change in quantity or not.
This characteristic will be represented by slopes of demand curves. For example: if the
demand elasticity for electric in Indian is -0.65 among residential users, 1% increase in
electric price lead to a decrease of 0.65% of quantity demanded for electricity.

By applying the elasticity concept into China situation, governors must estimate the price
elasticity of demand to understand whether their adjustment can be effective or not. Chinese
government expects a significant negative ratio whereby their change can reduce their large
gap between demand and supply. .

Basically, elasticity in turn depends in many factors. Firstly, price elasticity depends on
necessity level. The higher necessity the good is the less elastic the demand becomes. The
Chinese administrator hopes their country’s ratio to be larger. However, Electricity is a very
vital source of energy in modern world. Hence, if the price of electricity increases, people
cannot cut-off the quantity demanded. Therefore, the price elasticity of electricity of china is
somehow small or even inelastic. An increase in price might lead to very small cut-off in total
consumption.

The second factor, price elasticity will be defined by the availability. When a good has much
available substitution or the price of switching is cheap, its demand elasticity is quite high.
For both general electric consumption and consumption for thermoelectric, it’s impossible to
find a perfectly source of energy that match advantages of electric. Currently, Hydropower
and Solar-power can replace the thermal sources, but they are costly and unproductive
compare to thermal plants. Industrial sectors may see no advantages and benefits for
changing their energy supply source.

In conclusion, the demand elasticity for the whole industry seems to be inelastic compare to
individual firms. Thus, in the case of energy product, by applying theory of elasticity, the
impact of a price increase on electricity consumption depends on the price elasticity of
demand might be small and insignificant.

2. The price elasticity of the Indian demand for electricity has been estimated to be -0.65
among residential users and -0.45 among industrial users. If these elasticity apply to
China as well, how will the impact of a price increase be spread between residential as
compared with industrial users?

The demand elasticity of electricity in India is -0.65 among residential users and -0.45 among
industrial users. This indicates that any 1% increase in electricity price will lead to a decrease
of 0.45% in industrial sector and 0.65% in residential sectors. The different between two
numbers interfere that residential consumers are more price sensitive than industrial users.
Reasons for that can be the number of available substitute, cost of switching. Industries
demand huge amount of electric that other sources cannot efficiently substitute without
significant capital requirement. In general, Indian has many similarities to China, they are
both developing country with high population, and thus we can apply these numbers into
china’s situation.
%𝑸 − 𝒊𝒏𝒅𝒖𝒔𝒕𝒓𝒊𝒂𝒍 = −𝟎. 𝟒𝟓 ∗ 𝟏%
%𝑸 − 𝒓𝒆𝒔𝒊𝒅𝒆𝒏𝒕𝒊𝒂𝒍 = −𝟎. 𝟔𝟓 ∗ 𝟏%

In short, if we apply Indian ratios into Chinese case, we can interpret that a same 1% increase
in electric price lead to larger response in residential user (0.65%) than in industrial user
0.45% decreases). The spread (0.2%) have impact on how the government should price
between two users to reduce the shortage. The absolute value of residential sector is higher
than the industrial one,

3. Many Chinese organizations ignore the market system. For instance, they borrow
money from banks and refuse to repay, thus creating “bad debts” for lenders.
Likewise, they might consume electricity without bothering to pay the power supplier.
Do such organizations cause the demand for electricity to be more or less price elastic?

In this case, the demand for electricity will be considered as less price elastic based on the
fact that users behaviours tend to consume more which will increase in demandwithout clear
willing to pay. Thus, the pricechanges will not have any impact on the electricity
consumption.
4. Suppose that the Chinese government regulates the electricity industry through
marginal cost pricing.
a. How does the contract price of thermal coal affect an electric power plant’s marginal
cost?

b. If the contract price were raised to 99% of the spot market price, how would that affect
the electric power plant’s production?

If the Chinese government chose to regulate the electricity market using marginal cost
pricing, knowing that marginal cost pricing means the quantity demamded at a price equal o
marginal cost if the efficient quantity which means the quantity at which marginal benefit
equals to marginal cost. However, after sometime at the efficient output, average total cost
exceeds marginal cost so the government will faces an economic loss from market shortage.

a. The thermal coal price consider as an variable cost in electric powe production so if
the contract price increase by 10% which still under the market price, it would results
in ATC and MC increase. Hence, the efficient quantity at which the government
would to set a price higher.

b. If the contract price were raised to 99% of the spot market price, it means the price is
almost equal to market price. Then it will increase the total cost, resulting in a
decrease in production level and a higher price for electricity production.
OEEM 6013
ECONOMICS FOR BUSINESS

INDIVIDUAL ASSIGNMENT
CASE 8 : THE PETROLEUM MARKET

NAME:
SHARMILA DEVI SUBRAMANIAM

MATRIC NUMBER:
822511

LECTURER:
PROF. DR. K. KUPERAN VISWANATHAN
CASE 3: THE PETROLUEM MARKET

1. Why the price of oil rose sharply in 1973, 1979, and 1990. 1973?

The Organization of Petroleum Exporting Countries proclaimed an oil embargo against the
United States, Portugal, Rhodesia, and South Africa as their response to the Yom Kippur war,
a war between the Arabs and Israelis. In November, OPEC announced a 25% cut in
production which increase the prices of oil from $5.12 to $11.65 per barrel. 1979 - It was
considered as the 2nd oil shock because it led to a second drop in supply which drove the
price above $30 per barrel. The trouble in Iran led to massive oil shortages by which drove
the oil price to $24 per barrel. 1990 - In this year, crude oil prices increased to $32 per barrel
because of the invasion of the Iraqi troops to Kuwait. It created a decline of 4 million barrels
per day in world oil production.

2. Why the price fell between 1980 and 1982, and again between 1982 and 1985?

The 1980s oil glut was a serious surplus of crude oil caused by falling demand following
the 1970s energy crisis. The world price of oil, which had peaked in 1980 at over US$35 per
barrel (equivalent to $104 per barrel in 2008 dollars, when adjusted for inflation), fell in 1986
from $27 to below $10 ($60 to $22 in 2008 dollars). The glut began in the early 1980s as a
result of slowed economic activity in industrial countries (due to the crises of the 1970s,
especially in 1973 and 1979) and the energy conservation spurred by high fuel prices.
The inflation-adjusted real 2004 dollar value of oil fell from an average of $78.2 in 1981 to
an average of $26.8 per barrel in 1986.. The result has a six year decline in the prices of oil
from the year of 1980 and was culminated by plunging more than half in 1986 alone.

Potrebbero piacerti anche