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ECONOMICS CH2
ECONOMICS OF SEA TRANSPORT AND INT TRADE
| Question | Answer |
|---|---|
| WHAT TYPE OF DEMAND IS SHIPPING AND WHY | DERIVED DEMAND. NO ONE WISHES TO USE SEA TRANSPORT UNLESS ITS TO CARRY A PRODUCT. ITS ANOTHER FACTOR OF PRODUCTION. |
| HOW DID THE SEABORNE TRADE START | INDUSTRIALISATION OF THE WEST. RAW MATERIALS BEING BROUGHT INTO WESTERN EUROPE FROM THE EMPIRES. |
| WHATS THE MOST IMPORTANT INDICATOR OF DEMAND FOR SEABORNE TRADE. | THE WORLD ECONOMY MEASURED USING GDP/GNP FIGURES FOR THE OECD COUNTRIES (ACCOUNTS FOR APPROX 80% OF INTERNATIONAL PRODCUTION AND 70% EXPORTS. ANALYSTS HAVE STARTED TO INCLUDE CHINA AND INDIA. |
| EXPLAIN WHAT IS GDP | THESE ARE THE FLOWS OF GOODS AND SERVICES VALUED AT THE FINAL PRICE WITHIN THE UK BORDER IRRESPECTIVE OF WHETHER THE COMPANY IS UK OWNED OR NOT. I.E. NISSAN IN THE MIDLANDS IS INCLUDED. |
| HOW IS GNP DIFFERENT | THIS IS THE ANNUAL TOTAL OF ALL UK AND FOREIGN BASED UK CITIZENS WHERE EVER THEY ARE BASED IN THE WORLD. |
| HOW ARE BOTH GDP AND GNP MEASURED AND WHY | TWO DIFFERENT WAYS: 1. CURRENT MARKET PRICES 2. REAL TERM MEASUREMENT - UK CHANGES THIS EVERY FIVE YEARS. THIS MEASURE STRIPS OUT PRICE INCREASES SO UNDERLYING GROWTH CAN BE MEASURED. |
| WHO ARE IN THE OECD | SCANDINAVIA, UK,NORTH AMERICA JAPAN SOUTH KOREA AUSTRALIA AND NEW ZEALAND TURKEY AND MOST OF EUROPE. |
| WHAT ARE THE OTHER FACTORS THAT SEABORNE TRADE ARE DEPENDENT ON. | 1. WHAT VOLUME OF SEABORNE TRADE IS PRODUCED AND WHICH TRADE COMPONENTS ARE THEY I.E. AGRICULTURE, CRUDE OIL, MANFACTURED GOODS ETC 2.DISTANCE CARGO IS HAULED IE TONNE/MILE 3. OTHER EXTERNAL FACTORS IE POLITICAL, NATURAL DISASTERS SEASONALITY ETC. |
| WHY DO COUNTRIES TRADE. | THE THEORY IS THAT COUNTRIES HAVE A HIGHER STANDARD OF LIVING UTILISING THEIR RESOURCES TO PRODUCE AND EXPORT GOODS THEIR EFFICIENT AT AND IMPORT THOSE THEY ARE NOT. KNOWN AS ABSOLUTE ADV. IF YOU ARE RELATIVELY BETTER AT PRODUCING - COMPARATIVE ADV. |
| WHAT ARE THE THREE DIFFERENT ASPECTS OF THE WORLD ECONOMY THAT WILL CHANGE DEMAND FOR SEA TRANSPORT. ANSWER 1 & 2 HERE | 1.BUSINESS CYCLE:FLUCTUATIONS IN ECONOMIC GROWTH WORK ITS WAY THROUGH TO THE DEMAND FOR SHIPS. MOST IMPORTANT CAUSE OF SHORT TERM FLUCTUATIONS. 2.TRADE ELASTICITY:HOW SEA TRADE GROWS AS A % OF INDUSTRIAL PROD. HAS AVERAGED AROUND 1.4 SINCE 1976.LONG TERM |
| WHAT ARE THE THREE DIFFERENT ASPECTS OF THE WORLD ECONOMY THAT WILL CHANGE DEMAND FOR SEA TRANSPORT. ANSWER 3 HERE | 3.TRADE DEVELOPMENT CYCLE: 2 REASONS WHY OVER THE LONG TERM TRADE ELAS CHANGES IN INDIVIDUAL REGIONS. 1.DEMAND DEPLETES LOCAL RESOURCES NEED TO IMPORT I.E JAPAN 1960. 2.MATURING INDUSTRIAL ECONOMIES ACTIVITY MOVES TO LESS RESOURCE INTENSIVE MANUFACTURING. |
| DEMAND FOR SEA TRANSPORT DEPENDS ON THE DISTANCE ITS HAULED. EXPLAIN THE CONCEPT AVERAGE HAUL AND TONNE/MILE | AVERAGE HAUL IS THE TRUE DEMAND MEASURE FOR VESSELS AND TAKES ACCOUNT OF SHIP AVAILABILITY. |
| WHAT ARE THE RECENT TRENDS IN SEABORNE TRADE IN TON/MILES | * ALL CARGOES HAVE INCREASED THE LAST 10 YEARS * LNG HAS HAD THE MOST IMPRESSIVE GROWTH * CHINA'S APPETITE FUELED IRON ORE AND COAL DEMAND FROM PLACES LIKE BRAZIL/SOUTH AFRICA. * CRUDE OIL TON/MILES SLOW GROWTH. COUNTRIES DIVERSIFYING SUPPLY. |
| WHAT AFFECT CAN POLITICS HAVE ON SEABORNE TRADE DEMAND. | * GOVT USE PROTECTIONIST POLICIES AND TAX IMPORTS OR CABOTAGE. * COUNTRIES TRADING RELATIONSHIPS I,E MEMBERS OF WTO. IE CHINA 2001. * WARS, STRIKES, NATIONALISING MARKETS. FALKLANDS WAR UK CHARTERED VESSELS WITH UK FLAGS ETC. |
| HOW DO TRANSPORT COSTS AND LONG RUN DEMAND AFFECT SEABORNE TRADE. | THE COST OF THE FREIGHT WILL ADD TO THE CONSUMERS FINAL COSTS. THE DEVELOPED WORLD FREIGHTS ARE AROUND 6 - 7%. IN GENERAL THE DERIVED DEMAND FOR CARGO SHIPPING IS RELATIVELY INELASTIC. |
| GIVE A BRIEF REVIEW OF THE OIL INDUSTRY HISTORY. | * W/EUROPE AND JAPAN SWITCHED FROM COAL TO OIL IN THE 1960'S AND SAW RAPID GROWTH. *DEEP ECONOMIC RECESSIONS IN MID 1970 AND EARLY 1980 HIT VOLUMES. *PRICES HIT $30 DOLLARS PER BARREL IN 1982 AND COUNTRIES LOOKED AT SUBSTITUTE FUELS AND CLOSER OIL. |
| WHATS HAPPENING TO OIL OVER THE LAST 20 YEARS OR SO. | *LAST 10 YRS CRUDE SHIPMENTS GROWTH ONLY 1%PA. *WESTERN ASIA REMAIN BIGGEST EXPORT AFRICA NEXT *JAPAN,NORTH AMERICA AND EUROPE IMPORTERS *CHINA LOOKING AT RUSSIA, VENEZUELA FOR NEW SUPPLIES VIA FDI FOR OIL *CHINA AIMS TO USE FLAGED SHIPS TO TRANSPORT |
| GIVE A BRIEF REVIEW OF IRON ORE TRADE DEVELOPMENT. | *POST WAR EXPANSION OF JAPAN & EUROPE. *JAPAN & W/EUROPE HAD LITTLE CHOICE BUT TO IMPORT *THEIR STEEL INDUSTRIES MATURED AND DEMAND PLATEAU'D. DEMAND FOR SHIPS DID THE SAME *S.KOREA AND CHINA STARTED TO DEVELOP MID 1990'S *MAJOR EXPORTERS BRAZIL/AUSTR |
| WHATS TRENDS ARE HAPPENING FOR IRON ORE AT THE MOMENT. | *GROWTH 6% IN 2011 MAIN DRIVER CHINA. *AUSTRALIA/BRAZIL/INDIA TOP EXP *EUROPE REDUCED IMPORTS AS RECESSION STILL BITES. *JAPAN REDUCED IMPORTS *CHINESE IMPORT RESTRICTIONS OF VLOC AFFECT VALE IN BRAZIL. |
| GIVE A BRIEF REVIEW OF COAL TRADE DEVELOPMENT. | *TWO MKTS ONE FOR STEEL MAKING AND IS ALIGNED TO IRON ORE MKT COKING COAL.THE OTHER AS FUEL IN POWER GENERATORS KNOWN AS THERMAL. *AS FOR IRON ORE JAPAN & W/EUROPE IMPORTED AND STAGNATED IN THE 1970'S AS WELL. |
| WHAT ARE THE CURRENT TRENDS IN THE COAL MKTS. | INDONESIA THEN AUSTRALIA BIGGEST EXPORTERS. JAPAN AND EUROPE IMPORTERS.COKING EXPORTS DECLINED DUE TO REDUCED DEMAND.THERMAL INCREASED DUE TO DEMAND FROM DEVELOPING ASIA, HIGH OIL PRICES AND JAPAN FOLLOWING FUKAYAMA. |
| GIVE A BRIEF OVERVIEW OF GRAIN | DEMAND CHANGES AS A COUNTRIES INCOME GROWS.MEAT BECOMES MORE IMPORTANT.GRAIN HIGHLY SENSITIVE TO SEASONALITY AND WEATHER.USA CURRENTLY USING IT FOR BIOFUELS AND HAS CHANGED TRADE PATTERNS |
| EXPLAIN THE CURRENT TRENDS IN GRAIN. | DEMAND FOR WHEAT BASED ETHANOL WILL INCREASE. STRONG DEMAND FOR WHEAT FROM DEVELOPING COUNTRIES.ARGENTINA & AUSTRAILIA INCREASED EXPORTS |
| WHAT DOES E > 1 MEAN (PRICE ELASTIC) | IF PRICE DROPS BY SAY 10% THEN DEMAND WILL INCREASE BY 30%. TOTAL REVENUES WILL RISE. THIS INDICATES THE PRESENCE OF SUBSTITUTES. |
| WHAT DOES E = 1 MEAN (UNIT PRICE ELASTIC) | DEMAND MOVES AT THE SAME RATE AS THE PRICE MOVES. REVENUES WILL REMAIN UNCHANGED. |
| WHAT DOES E = < 1 MEAN (PRICE INELASTIC) | PRICE MOVES AND THE DEMAND DOESN'T MOVE AT THIS SAME RATE. REVENUES FALL AND THERE ARE FEW OR NO CLOSE SUBSTITUTES |
| WHAT DOES E = 0 MEAN (PERFECTLY PRICE INELASTIC) | TOTAL REVENUES FALL BY THE SAME PERCENTAGE PRICE FALLS. NO SUBSTITUTES AT ALL. |
| WHATS THE FORMULAE FOR FINDING PRICE | Y = MX + B M IS THE SLOPE B IS THE Y INTERCEPT |
| WHAT FORMULAE DO YOU USE FOR FINDING THE SLOPE | CHANGE IN PRICE/CHANGE IN DEMAND |
| TOTAL REVENUE FORMULAE IS | TR = P * X OR (MX + B)* X |
| WHAT IS THE MARGINAL REVENUE FORMULAE. EXPLAIN THE CALCULATION | MR = 2MX+B. THE MARGINAL REVENUE SLOPE INTERCEPTS THE Y AXIS AT THE SAME POINT AS THE STANDARD DEMAND LINE. BUT IT IS TWICE AS STEEP. WHERE IT INTECEPTS THE X AXIS IS THE OPTIMAL QUANTITY FOR TOTAL REVENUE. |
| WHAT IS PED AND WHAT DOES IT MEAN | POINT ELASTICITY OF DEMAND. IT MEASURES THE ELASTICITY ON ANY POINT OF THE DEMAND CURVE OR BETWEEN TWO POINTS. P/D * CHANGE IN D/CHANGE IN P |
| WHAT IS ARC ELASTICITY POINT | IT MEASURES THE MID POINT BETWEEN TWO SELECTED POINTS ON THE CURVE. P1+P2/2 DIVIDED BY Q1+Q2/2 TIMES CHANGE IN Q/CHANGE IN P |
| WHAT ARE THE MARSHALL RULES REGARDING ELASTICITY. | 1 VERY FEW SUBSTITUTES TO SHIPPING 2.FROM SHIPPING POINT OF VIEW VERY FEW SUBSTITUTE PRODUCTS AS ALL REQUIRE TRANSPORT. 3 FREIGHT RATES ARE A SMALL % OF TOTAL PRODUCT COST. 4 |
Created by:
KJPARKER28
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