What attracts consumers? Expensive new Lululemon pants? Or is there something else that catches ones attention? The answer is cheap goods. Not everyone can afford expensive Lululemon pants, but everyone can afford items that are worth only a few dollars; that is why dollar store industries are one of the fastest growing retailers in Canada. The concept of goods only being a dollar attracts many customers. With a growing amount of customers, dollar stores are able to take risks; they started jacking up prices of goods to $2 or even up to $3. The success of dollar stores forces other major retailers such as Canadian Tire and Wal-mart to emulate their formula. Ultimately, they fail to do so because they aren’t as appealing as dollar stores (they don’t have dollar in their names!). Canadian Tire and Wal-Mart have started promoting their $1-3 goods in hopes of attracting consumers. When I go to Wal-mart, I always buy a 6 pack of Reese’s pieces because they’re only a dollar each! What these big retailers hope for is that consumers will be attracted by their $1 goods, but at the same time purchase more expensive products. With a combined 21,311 stores, dollar stores are closely becoming the largest chain in the U.S.

Sources:

http://www.theglobeandmail.com/globe-investor/how-canadas-retailers-discounted-the-rise-of-the-dollar-store/article4596897/

http://www.forbes.com/sites/investor/2012/04/16/dollar-stores-take-on-wal-mart-and-are-starting-to-win/

The increase in the price of health care in the United States has been astounding. In 1960, it was around 5% of the total GDP; now, it’s around 18% and predicted to be about 60% in 2105. What does this mean for the American consumer? Well, one first must understand the concept of cost disease. Let’s take a look at the economy’s average rate of growth. Some industries such as the car industry are able to cut costs because of new technology, therefore can afford to increase wages. Other industries such as the music industry, aren’t able to cut costs (A string quartet in the 18th century is as efficient as a string quartet in the 21st century); in order to compensate and keep up with wages, they are forced to increase the price of tickets. These type of industries are stagnant in terms of productivity, thus the term “cost disease” is given to them. Cost disease mainly applies to industries that require human interaction such as haircuts, health care, education, etc. Human input are the main costs in the industry and cutting labor would be counterproductive.

Since the 1980’s, the price of a university education has risen 440% while the price of medical care has risen 250%. The average prices of goods has increased by 110% while wages have increased by 150%. Although the price of health care is increasing at an alarming rate, it also means that consumers have more money to spend on other consumer goods (shown in the graph). Buying power is growing and innovation in industries are making many goods such as cars more affordable. This topic is relevant to what we have been learning in class. Many different sectors of the economy have to keep up with inflation in order to make it more efficient, and different sectors grow at different rates.

Sources:

http://www.economist.com/node/21563714

http://en.wikipedia.org/wiki/Baumol%27s_cost_disease

   Throughout the past few decades, there has been a significant increase in the average global temperature. This increase in temperature has caused the Arctic to melt at a faster rate. As the Arctic melts, the treasure hidden within it begins to uncover; It is estimated that 30% of the world’s undiscovered reserves of natural gas, and 13% of the undiscovered oil, lie in the Arctic. There are also many other resources such as coal, iron, uranium, gold, copper, and various gemstones. But wait, there’s also more! The melting of the Arctic will also open up a new trading path across the Northern Sea Route above Russia. This is an economic opportunity for many countries such as China, Japan, or South Korea. China has already constructed a ship called the “Xue long” (snow dragon) to navigate these seas; This ship was the first Chinese ship to cross the NSR. China also plans to construct a sister ship to the Xue Long.

What does this have to do with business ethics? The answer is that countries such as Singapore, South Korea, and Japan are Lobbying their way into the Arctic council while they have no rights in the Arctic.  Another issue is that the NSR will be dangerous to navigate; Who is responsible if someone dies? Many vessels travel along the strait of Malacca near Singapore and Malaysia; many ports have been constructed there for that sole reason. If countries like China start traveling through the NSR, what impact will that have on the economies of Singapore and Malaysia? Many countries are concerned with the matter of “Arctic Control”  as “Whoever has control over the Arctic route will control the new passage of world economics and international strategies.”~Li Zhenfu. In my opinion, we should be trying to prevent the melting of the polar ice caps instead of seeking the rewards that come from it. Countries such as China are already prepared for such a future by constructing ships in advance.

Sites/References/further reading

http://www.economist.com/node/21561891

http://www.economist.com/blogs/graphicdetail/2012/06/daily-chart-9

http://www.infoplease.com/ce6/world/A0921118.html