Economics

The straight-line method of depreciation of assets is the most commonly used method mostly because it is not overly complicated. This method considers the salvage value of an asset and estimates the useful life of it and spreads over the assets benefit across that timeline. The idea is the company is utilizing the assets equally in that time frame. At the end of its useful life, it would be sold or donated. The major criticism about this kind of depreciation is that, this model assumes that assets provide the same amount of benefit across time. Usually they are efficient in the first few years but later on, they will slump, causing operational delays.

Another depreciation method is total units-of-activity method (Manko, 2009). It computes depreciation based on units produced. However, this does not account for idle time. When the equipment is not being used, it still depreciates in value because it is a machine and it dies with old age or it becomes irrelevant as new technologies get introduced.

Other methods companies use are accelerated depreciation techniques. Amongst the most common in this area is the double-declining method. This method allows the company to depreciate its assets (incur more depreciation expenses) in the early years of the assets life. This allows company to get more tax savings in the first few years of investment because depreciation do not actually involve cash outlay (Manko, 2009).

Related Party Transactions
These are transactions between two parties who are joined before they enter into the contract by a special relationship (parent-subsidiary, sister companies, major shareholder  corpoaration, etc.) (Investopedia, 2010). Related party disclosures are required by American laws because these transactions may create potential conflicts of interest between the parties (Investopedia, 2010).

Essentially, what must be established is that the parties dealt with each other in an arms-length transaction or, that they have dealt within what is the standard business practicescostsestimated within the industry. No one party should be greatly benefitted by the transaction.

The main automobile manufacturers in the United States car market have flooded the market with so many cars in the last few decades that purchasing new cars is increasingly offered many incentives to a buyer. This effectively lower the cost a buyer would have paid for a new automobile, and the net effect is the increase in rate of depreciation in the automobile industry.

Typically, those who prefer buying used cars put much emphasis on the reduced prices born by an automobile that has been on the road for some time. Within the first year upon the purchase of a new motor vehicle, its market price depreciates on an average of 30 percent. For example, a motor vehicle with a showroom price of 30000 dollars would cost around 20000 dollars after just a few miles on the road. This is making many people prefer buying used cars that new cars while at the same time lowering the price of new cars.

Depreciation should be a consideration while a person is making a decision on whether to buy a new car or a used car. For one, it is important that the buyer decides on how long he or she is going to maintain ownership of the car. If the buying is just for a period of time, then the best decision is to buy a used car since its depreciation will be lower as compared to a new car after the same time or mileage on the road. However, if I was intending to buy a car that I was going to keep for a considerably longer period of time, I would prefer going for the quality and guarantee of a new car at a slightly higher price.

Trade is an activity which has been pursued since the dawn of human civilization and is an indispensable part of the modern day economic system. Being able to play an increased role in the global trade has is one the factors that has changed the fortunes of many under-developed countries and help the substantially reduce the development gap (Catch-up) with the developed world. Inspite of this, trade between African economies remains low and this dissertation seeks to answer this question and look at the possible steps that can be taken in order to rectify the situation. For instance, the dissertation will examine whether or not trade needs to be created (by specialisation and diversification) in order to late create instrument which can boost trade as a tool for achieving regional integration. The dissertation will focus mainly on the dynamics of regional integration and examine whether trade agreements have been effective for African countries in general and SADC (South African Development Corporation) in particular and look at the case of Namibia in SADC as a way of illustrating the key concepts.

Conceptual Foundation of the Research
This study intend to analyse the role of SADC for its countries members by using Namibia as case study and see if its situation are similar or different to others members in order to boost intra-trade among African which is very low. It use the actual situation of Namibia to measure the effect of SADC over its participants and access it effectiveness as a regional organisation and discover the SADC limitation as result of members conditions.The research will examine and use the following main concepts and variables as a means of answering the research question- Concept trade creation and diversion- A set of hypotheses from the theory of regional integration or econometric evaluations - Gains from exchange- Gains from specialisation- Comparative advantages- Pattern of trade - ModelConcepts as the above are paramount importance to accomplish this analysis and arguably explain the emergence of trade cooperation not just in Africa but the world itself.

Background
The very low trade among Africans countries is an endemic situation in the the continent. This lack of trade can be pointed out by some literature as one reason for their prevailing underdevelopment and economic stagnation. Trade, as means of exchange of goods and service, is of paramount important for any country. Trade can be especially beneficial in situations where there isnt an equal distribution of natural resources and can serve as a precursor to the a formation of regional integration as an attempt to further these exchanges. However, the distribution and the gains attained form regional integration is many time questionable (for instance in case of the North American Free Trade Area (NAFTA) it has been argued that gains of the regional cooperation have been tilted heavily in favour of USA).

However, trade creation as one non-monetary effect of regional integration can increase transaction among the participating members as a result of reduction of customs duties. This increase in transaction can have a spiral effect which stimulates countries economies and their growth (arguably in the case of ASEAN).

Foroutan and Pritchett (1993) show in their study that the actual share of Sub Sahara Africa (SSA) imports plus exports was slightly higher than model prediction (model of the determination of trade flows) trade among African countries still undeniably low and hasnt shown signs of growth. Hence, this raises the question of efficacy of trade for the African countries in general and SADC in particular. The inspection into African literature and SADC showed the surprising affirmation that developing countries sees integration under different perception from those of developed ones. While third countries use integration as an instrument to reach economic development (industrialisation), developed nations on the other hand see integration as a way boost relative growth performance by fasting growth on poorer members than richer one. This certainly has led me to question whether the right approach is being use by developing country to implement and see regional integration. This issue is extremely important and lends itself to several questions such as whether regional integration more important than trade itself Or regional integration should result from a need to enlarge an existent pattern of trade According to literature (Distribution of gains...) one of the problems with SADC countries and most Africa is the dependence in raw material exportation to developed countries (to sustain their economies), the lack of industrial diversification or inexistence of industries which redirect their import to developed nations as the only way to fulfil their need for manufacture and industrialised goods. And this can be pointed as the reason for South African huge comparative advantage over others SADC members. Yet with such low level of industrialisation and diversification among SADC is quite justifiable that trade among SADC is so small. For instance South Africa has the traditional trade structure of a developing country in its total trade but in intra-regional trade it is similar to a developed country. As there isnt too much option inside the region for South Africa for industrialised product demand it must follow pattern of others SADC members and import them from developed countries. While due to its advanced industrial level compared to others it can behave as developed country as main source of import for many countries in the region.

Therefore the creation or diversion of trade as long as it leads to increase the term of trade among SADC countries if not for all Africa is of crucial importance for SADC and Africa as direct affect by this conditionals and for the world as all as it also bear the cost of African underdevelopment by high immigration flow, increased welfare cost as in the case of UK. By using then the concept of trade creation and diversion an analyse of SADC will be done in order to see the benefit that to members countries by using Namibia as case study and see if Namibia condition is extended to others SADC countries in order to allow a generalisation of SADC effect of its members and if it has improve their condition. And finally see if the creation of regional is more important than diversification of goods t trade which force country to trade independent existing means of trade or no as infrastructures, institutions, etc. Obviously the importance of infrastructure, sound policies or institution is not in cause but whether there is utility for this instrument if there is no diversification or goods to trade.

Aims of the Research
In the context of the background and aims of research explained previously this research expects to illustrate the role SADC has played as economic regional integration for its members  and examine the following questions (making use of the main concepts mentioned previously)- Why SADC doesnt play the intended role in practical terms.- What benefit has it brought to countries states- By using Namibia as a case study it is intended to see what role SADC as an economic regional integration.- What benefit and drawback has Namibia acquired by join in SADC- Analyse either Namibia conditionals can be extended to others countries members.- Why SADC doesnt play the intended role in practical terms with Namibia.

A number of different research techniques will be employed to answer the research questions.
Methodology The collection of secondary data (either qualitative or quantitative) will serve as the main source of knowledge to about concepts which are relevant for this analyse represent one of the main methodology which will be used along this dissertation. Consequently the consultation of electronic library, the library, internet, etc will be strategic point of collection for secondary data. The use of Namibia as case study will also figure as one of the method use to do this work as well as evaluation of Namibias pattern of trade which guide me to an exploration of graph, table, etc. Additionally the use of SADC work as a sample which cans either be area sampling or size sample which shows a fair representation of the population (Africa) by manifest most of them a low intra-trade reason to lead to this study. Finally as an inexperience research a consult with more experienced person will be of crucial for my project specially an expert in trade, therefore a constant consult it my supervisor is primordial for the accomplishment of this study to understand concept, table and graph.

Conclusions Expected Outcomes
This research aims to produce a useful and practical analyse of SADC under the perspective of gains generation to increase the actual trade and hope that it may a practical use for SADC improvement. It is hoped that the information or conclusion drawn from this analyse can add value to SADC in particular as well as Africa and the world in general as a way to improve theories for economic regional failure of Africa and as externality alleviate burden on countries outside Africa. Lastly, I also hope that this analyse be of particular use for Namibia as a source of my case study and can fulfil the ultimate state in the aims exposed above to carry out this research.

Marginal analysis is an economic concept that facilitates the making of best decisions, by comparing incremental or marginal benefits to incremental or marginal costs. It results from the scarcity of resources.

MARGINAL REVENUE
Marginal revenue refers to the change in the total revenue resulting from an increase in the produced quantity by one unit. This is the revenue from producing one extra unit of a good.

RELATIONSHIP BETWEEN THE MARGINAL REVENUE WITH THE TOTAL REVENUE
In Maths, a marginal revenue function may be expressed as the first derivative of a total revenue (TR) function in respect to the quantity produced, Q. the marginal revenue can change with respect to volume or quantity, and therefore at every output level, our marginal revenue is the next produced units revenue.

MR change in TRchange in Q
MARGINAL COST
Marginal cost refers to the change in total cost arising from an increase in produced quantity by one unit. This is the cost pertaining to the production of one extra unit of a commodity.
RELATIONSHIP BETWEEN MARGINAL COST WITH TOTAL COST

In Maths, a marginal cost (MC) function may be expressed as the first derivative for the total cost (TC) function in respect to the Quantity (Q). The marginal cost can change with respect to the volume or quantity, and hence at every output level, our marginal cost is the next produced units cost.
MC change in TCchange in Q

PROFIT
Profit is the actual gain or benefit from production. Production costs are deducted from the sales figure to get the profit. It refers to the return to the entrepreneur from the input production factors.

THE CONCEPT OF PROFIT MAXIMIZATION
This is the process of determining the price, that is the selling amount and output quantity, which returns the huge or greatest profit. In marginal analysis, profit is said to be maximized at the point where the marginal cost equals the marginal revenue. Production beyond this point leads to a deduction in the total returns and the firm will not be maximizing returns to the factors of production.

HOW A PROFIT MAXIMIZING FIRM DETERMINES ITS OPTIMAL LEVEL OF OUTPUT USING MARGINAL REVENUE AND MARGINAL COST AS A CRITERIA
For every unit of sale, marginal profit will be equal to the marginal cost deducted from the marginal revenue. The optimal level of output will be at the point where marginal revenue is exactly equal to the marginal cost. This is because total profit will increase at the point with a positive marginal profit and it will start decreasing when marginal profit turns negative.

THE ACTIONS A PROFIT MAXIMIZING FIRM TAKES IF MARGINAL REVENUE IS GREATER THAN MARGINAL COST
Incase the marginal revenue is greater than the marginal cost, then marginal profit will be positive. At the point where marginal revenue is exactly equal to the marginal cost, at this stage marginal profit will be zero, by the marginal revenue being greater than the marginal cost, the profit maximizing firm will be incurring a marginal profit that is positive. It should therefore keep on producing extra units because this leads to an increase in the total profits. They however increase production till the marginal revenue equals the marginal cost.

THE ACTION A PROFIT MAXIMIZING FIRM TAKES IF MARGINAL REVENUE IS LESS THAN MARGINAL COST
Incase the marginal revenue is less than the marginal cost, then marginal profit will be negative. The firm will have gained a profit that is positive up to the point where marginal revenue equals the marginal cost. Any more production will be causing a marginal profit that is negative due to the fact that marginal cost is greater than marginal revenue. Any extra production will therefore be causing a reduction in the total profits. The firm should hence lower production up to the point where the marginal revenue equals the marginal cost.
(Sullivan and Steven, 2008 p.89-111).

Elasticity of demand is defined as the percent change in quantity demanded over a percent change in price. It is given by this equation

Elasticity of demand  Q2   Q1  P2   P1
      Q1  Q2    P1  P2

A good is said to be elastic if a change in price causes a change in quantity demanded, inelastic if a change in price causes only a little change in quantity demanded. Numerical elasticity coefficients (or elasticity values) can be negative or positive but the signs are usually dropped, for only the absolute values are of significance. The coefficients for inelastic goods is Ed  1, while for elastic goods, it is Ed  1.

For goods with a coefficient of 1, it is said to be unit-elastic. Take, for example, a look at the graph. Let us say that the price of good A is initially at 80, so the good demanded was only 1 unit. But when the price was dropped to 10, the demand for good A increased to 8 units. Computing for the coefficient of elasticity will result to 1.

Cross-price elasticity shows how responsive the demand for good 1 is to a change in the price of good 2. It is given by the equation

Cross-price elasticity   change quantity demanded of good 1 change in price of good 2

There are two kinds of pairing of goods that can be aptly described by cross-price elasticity. Substitutes are goods which have a positive price elasticity. Substitutes are goods which are interchangeable, thus when the price of a good increases, the demand for it decreases but the demand for its substitute good increases, example of which is butter and margarine. Margarine can be an alternative of butter. If butter increases in price, it is more likely that the demand for butter will increase since it is a cheaper alternative. On the other hand, complements are goods which have demands that behave similarly when a change in price is encountered. An example of complements is keyboard and computer. You would not buy a computer without buying a keyboard. It is evident that the keyboard is a complement of a computer, for an increase in the price of computers lowers the demand in keyboards, thereby resulting to a negative cross-price elasticity.

Income elasticity of demand relates the percent change in the quantity demanded for a percent change in income. It is given by the equation
Income elasticity of demand  Q2   Q1  I2   I1
      Q1  Q2    I1  I2

Commodities that have positive income elasticity are called normal goods negative income elasticity are inferior goods. Normal goods pertain to most commodities though they have varying income elasticity. Necessities (food, clothing, electricity, to name a few) are normal goods with low income elasticity ( i  1) while luxuries (cars, gadgets, travels, etc.) have an income elasticity greater than 1. All these goods experience an increase in demand if income is increased. On the other hand, inferior goods are products that undergo a decline in their quantity demanded if the income has increased, an example of which is subway rides. A person prefers to ride the subway, a cheaper means to commute, but if he gets an income increase, he can now afford to ride a cab.

Elasticity of demand, cross-price of elasticity and income elasticity of demand should not be confused with one another. Elasticity of demand examines the effect of the product s price change with its own demand. Cross-price elasticity is the elasticity of demand of a product relative to the price changes of its substitute or complement. Lastly, income elasticity of demand relates the elasticity of demand of the product with respect to the income of the consumer   necessities and luxuries are a priority when an increase in income is experienced. 

There are three determinants of elasticity demand, namely, availability of substitutes, share of consumer s income devoted to a good, and consumer s time horizon. Demand is elastic when there is a wide array of available substitutes. It is obvious when the price of a good increases, but there is a viable alternative which happens to be cheaper, there will be an increase in the demand for the substitute. However, this will not be the case if there are no other good choices present   the demand for the product will be inelastic. For example, ballpens had an increase in price and a good substitute of ballpen is pencil. Therefore, demand for pencils will go up due to the price hike of ballpens.

The second determinant is the share of consumer income devoted to a good. If the income allotted to a product is small, the demand for the product remains inelastic. An example is toothpick. It is a good which eats up only a tiny fraction of a consumer s budget. An upsurge in the price of toothpicks will not do any significant dent on the budget.

Lastly, the consumer s time horizon affects also the elasticity of demand. It is best described by the two laws of demand as stated in the following text

The first law of demand says that buyers will respond predictably to a price change, purchasing more when the price is lower than when the price is higher., if other things remain the same. The second law of demand says that the response of buyers will be greater after they have had time to adjust more fully to a price change  (Gwartney et al., 2006, pp.432).

To illustrate this third determinant, examine the demand for fuel. Fuel price hikes lead to instantaneous response of decrease in demand. However, given several months, people will find alternatives such as increase in the use of public transportation or use of eco-friendly cars thereby affecting a more substantial fall in the demand for fuel.

Business decision making makes use of the determinants in setting prices that will maximize revenues and yield. If there are available substitutes, it is not logical to raise prices because it will translate to a loss of customers which leads to a decrease in revenue. Unavailability of substitutes, in cases of monopolies or oligopolies, equates to an inelastic demand. Raising prices simply leads to increase in revenue and of course, profit maximization. The same is true to goods which only have a little share in the consumer s budget. A sharp increase in price will not affect the budget as a whole   the consumer will not resort to looking for substitutes and will simply purchase the good thereby increasing the company s revenues. Consumer s time horizon, on the other hand, gives the company some leeway. Initial increase of the price may decrease demand but will enable the company to generate profits. However, when the consumer has recovered from the price hike and had identified alternate means, the company should brace itself to the further decrease in demand (Gwartney et al., 2006). 

Elasticity demand also has two extreme cases perfectly elastic demand and perfectly inelastic demand. For perfectly elastic demand, any change in the price of the good (be it increase or decrease) leads to an instant zero demand of the product. The elasticity coefficient equals infinity. The graph for this type of good is characterized by a horizontal line as shown in the figure below.

EMBED Microsoft Excel 97-Tabelle 
But for the perfectly inelastic demand, the quantity demanded remains the same regardless of the price change. Its elasticity coefficient is zero and can be described by the graph below.

EMBED Microsoft Excel 97-Tabelle
For the given graph above, the price elasticity coefficient of demand only applies to the downward sloping portion of the graph. The upper part corresponds to an elastic range, the middle to a unit-elastic range, while the lower portion of the curve gives an inelastic range. Note that the upper part relates to few quantities but of very high price. A large percentage change can be seen if the quantity demanded changes by only 1 unit. The converse is true for the lower part high quantity demanded at lower prices. A change in the quantity demanded does not greatly affect the revenue. Therefore, for businesses, it is advisable to be within the inelastic range.

The Agricultural and industrial sectors in Venezuela are the main contributors to development. Agriculture in Venezuela contributes about 4 of the total GDP. It covers about a quarter of the land and uses 10 of the labor force. Most of the exports are manufactured goods. Others include fruits, cigarettes, sorghum, rice and cocoa. In 2005 for example, the major markets for the exports included Mexico (4.5), U.S. (57.5) and Colombia (4.5)(Food and Agricultural Organization, 2010). The agricultural sector in Venezuela is not sufficient enough to cater for the population. As a result, most of the food sources are imported (two-thirds). In 2008, it was one of the largest markets for the US with imports being worth  1.6 billion. These were mainly agricultural goods such as cotton, soybean, wheat, vegetables and other equipments. Food imports from the US are about one-quarter (Food and Agricultural Organization, 2010).

The major crops in Venezuela include rice, sorghum, corn and Sugar cane. Fruits such as oranges, mangoes, bananas and coconuts are also produced. Coffee, sisal and tobacco are grown in most parts (Food and Agricultural Organization, 2010).

Most of the lands (about 35 million hectares) in Venezuela are suitable for agriculture. About 7.3 million hectares are used for arable farming while livestock grazing uses 18.4 million hectares. In some parts of the country, there is mixed farming which combines both arable and livestock farming (9.3 million hectares). The arable lands however, are not used to their full potential (Food and Agricultural Organization, 2010).

Cattle keeping in Venezuela contribute about half to the incomes which the country gets from farming. Therefore, most of the lands have been set aside for grazing. Production is both large scale and small scale. Most of the large producers use a larger percentage of the available lands (about 58) for farming. Small scale farmers are left with poor pieces of land for farming. Most of these lands have been degraded and located in flood prone areas (Food and Agricultural Organization, 2010).

In order to enhance an increase in production, the government in collaboration with Food and Agriculture Organization has established a program to enhance food security. This programme is known as Program for Food Security and Rural Development. Its main objective is to manage lands and natural resources. The program establishes irrigation schemes in the rural areas. There is also the distribution of improved seeds to small scale farmers. With the help of FAO, the agricultural sector has also received technical support to improve on production (Food and Agricultural Organization, 2010).

The United States is one of the countries in the world that has dominated many the world   aspects for many years. The country dominance in the world stage is due the strength of its many superior structures and institutions it has than any other nation in the world. The main pillars of superiority are its economic endowment, its human capital, abundant natural resources, its military potential as well asa tradition of the liberal politics and economic traditions. TheUnited States over the years has enjoyed a vibrant economy which accounts for about third of the gross domestic product in the world. The economy is also one of the most competitive, adaptable and innovative in the world (The Bullet, 2009). The United States boastsgood demographic trends with a relatively young population andhas the highest spending in military accounting for about half of the world spending inmilitary that no other nationcan match itsspending in military. TheUnited States also has the bestuniversity and research institutions in the world and which has made it to lead and dominate many technology sectors such as medicine and engineering.

The geopolitical hegemony of the United States for over a century in the world can be attributed to its economic mighty which has outclassed any other economy in the world through the years that no other nationhas arisen to challenge theeconomic dominance of the United States. This economic might has been used by the United States to advance the cause of international multilateral agreements such as those of the World Trade Organisation. The hegemony of the US currency is another factor that has contributed to its dominance of the world. There has been a policy by many governments in the world to stage andmaintain the dollar asthe key currency in the world (Layne, 2009). This has made the United States to be flexible in funding their foreign and international policies due to lesser foreign exchangeand fiscal limitationsit encounters in trade than any other nation in the world. The hegemony has also been attributed to the way the government has existed over half of the century as an almost uniform alliance of states and other factors such as the influence of the American popular culture and the strength of the media. These have all been factors that havebeen used to project the power of the United States to the world. There is a notion among many analytics of politics that the global dominance and thehegemony of theUnited States are under decline due to thecurrent financial crisis and the economic status of the nation.

For over half a century, the United States has not encountered a challenge to its hegemony in the world stage even with the expansion and growth of the economies o other countries in European Union and the Asianeconomies like china, India and Russia. Hegemony of the United States in the world just began to be thrown into question with the start of the global financial crisis that affected theeconomy of the Unites States adversely and the world as awhole which made doubts to be cast about the continued domination of the world by the United States. The crisis has adversely affected the hegemony of the United Statesto cease (Dorman, 2009). The crisis which originated from the reckless lending practices by the US banks and mortgagefirms and the losses due to sub prime lending all led to thenear collapse of the real estate, a fall in property prices in the United States and the fall of loss of commercial banks which resulted into the government initiating massive government assistance to the troubledbank and mortgages amounting to billion dollars (Philippon, Ariell, 2008). This global recession in the United States, the housing crisis and the government plans for assistance was against the policies of the US governmentwhich allowed free markets to thrive and was seen as a policy of adopting socialist measures which threw the doubts about the continued hegemony of the United States. The financial crisis hascreateda downturn in the financial crisis and a fall in capital investments in the United States which has resulted in a fall in domestic demand. The crisis also led to fall in trade and industrial production, rising in unemployment numbers as well asa fall in small business lending in the United States which is a risk to small businesses.

The global financial crisis has made Americans to lose substantial part of their net worth. Theloses that have been incurred as a total are estimated to be about eight trillion dollars with thereal estate banking andmortgagee sectors being themost adversely affected sectors. The global financial crisis promoted theUnitedStates government to enact legislation that heightened the regulation of the financial sector and this will impact on the financial sectors. This will have an effect on the raeganism in the sector which has been identified by lower taxes deregulation. The regulation will have an impact on the reign of free markets in the United States which have made them to lead inthe world (Obstfeld, Kenneth, 2009). The effects of the global financial crisis on the finance sector and the downturn in the economy will greatly affect the global hegemony of the United statesbecause the financial crisis struck at time when there were other forces that were affecting the reputation of the United States as a global leader such as thewar in the Afghanistan and Iraq
The shrinking of the United States economy will give a chance for other economies such as China and India to rise andovertake or grow to equal that of the US. Even before the beginning of the global crisis in 2008, many projections by economist were indicating that other economies such as those of China, India and Russia were experiencing phenomenal growth and were to surpass that of the United Statein the future. The effects of the crisiswill impact on the speed at which these economies will surpass that of the United States because   they were not adversely affected by the crisis as the United States and this will makethese economies to rise and operate in the same platform as that of theUnited States (Watson, 2010). The decision by the Federal Reserve to bail out the banks at the heart of the crisis amounting to7 billion dollarshas caused a major deficit in trade and budget which have been deemed to be unsustainable. The United States government will have to meet deficits through higher taxes in order to cover the deficit. The possibility of rise in taxes is a major political consequences and predictions indicate that the country will default which will cause a depreciation in the currency of the United States .The depreciation of the dollar will have an impact on its continued use as a foreign exchange reserve currency. The diminishing use of the dollar as the ultimate foreign exchange currency will end the hegemony of the US currency across the world (Reinhart, Kenneth, 2008).

Many countries of the world have become aware of therisk of the depreciation of the United States dollar and have started to use other currencies such as the euro as the ultimate foreign exchange reserve currency. The risk of the dollarceasing both be the ultimateworld reserve currency will continue to impact the deficits and thetrade ties with other countries which will impact on the US economy adversely.

The geopolitical influence of the United States over time willcontinue to decline due to the rise of other economic powers in the world such as China and India, the increased integration in the European Union and the rebirth of Russia. The rapid rise of these major economic powers will impact on thegeopoliticaladvantage of the United Statesand in future, the United States will be playing in the globaleconomy filled among a team of equal countries that will have the same hegemony and influence in the world as it. The effects of the global financial crisis have indicated that the United States has been making poor financialdecisions which have led to the double deficits in the budget and the trade (Hutton, 2009). These poor economic decisions are attributed to thefact that the United States acts largely as a recipient of international investment rather than an investor. This makes its current accountto gain surpluses. The financiers of these trade deficits are the countries that are considered to be rivals to the United States such as Russia, China and the Gulf States such as Saudi Arabia. Thesecountriesalso control most of the imports into the United States which makes them to interfere with the balanceof trade because they control the imports and finance the budget deficits in the United States. This process is known as vendor financing and it puts the United States at risk in case ofpulling out of these investments which can affect the United States economy significantly and can lead to the collapse of the economy (The Bullet, 2009).

Recently, there has been a clash between the United States and theChina over devaluation of the Yuan currency by China in order to maintain a competitive edge in global trade. This highlights the vulnerability of the United States over its policy of allowing its rivals to finance its trade deficits. For over 10 years, the trade deficits in the United States have been financed by foreigners and this puts thethe country in the risk of the use of finance  as a bludgeon  through the disposing  off the assets in the United States  or cutting the rate of financing to  the United States (Feldman, 2009). The global financial crisis has revealed the flaws in the economic policies and structures in the United States. The over reliance of the United States in foreign investments to fund trade deficits will have indiscriminate effects in the short term on the trade deficits but the continued  imbalance will eventually lead to situation  in future where the United States government will have to cut and tighten its monetary policies on other priority areas such as thespending in military andinternational developments projects which willlead to reduction in its hegemony and the dominationininternational matters (Ye, 2009).

The rise of other economic powers in the world like China, India, Japan and Russia does not impact on thehegemony of the US in economic terms only. The rise of these superpowers is also threatening the domination of theUnited States in other sectors as well such as technology, education, innovation, infrastructure and development. The lead in the United States  in these sectors have been lessened by the rise of other world class training and research centers in Asia and the European union and which have education institutions that equal those of the United States. There have been problems in the education system in the United States due to the rise of the number of uneducated youthwhile other nations in Asia and the European Union areachieving better numbers than the United States (Cohen, Bradford, 2010). The education systems of the United Statues have become outdated and have problems in their funding. In terms ofmilitary clout, the United States has beena global leader. The Septembereleventh attackshighlighted that America is still vulnerable even with the solid army. The military response to the attacks in Afghanistan and the Iraq have all highlighted that hegemony in the united states as a guard of  human rights is declining due to their failures in thefield  and the human rights record of the military (Ferguson, 2003).

Asa general rule, it has been observed that most hegemonic powersonly thrive in periods of rapid economic growth but all wither away when growth ceasesas was evidenced in the collapse of the Greta Britainhegemony in the 19th century. Focusing on the problems the United States is experiencing as a result off the financial crisis such as trade deficits, unemployment and problems in education andtechnology, it is likely that the hegemony will follow the same route. Although all indications point towards the decline in thehegemony of the United States in the global stage, the United States economy may show elasticity and might withstand the problems both of the financial crisis (Haldane, Piergiorpio, 2009). The economy still enjoys theresources and the political will to tackle the financial crisis since it is well endowed to wither away the storm of the financial crisis. The US currency in the near future will still continue to be the foreign exchange currency of choice since the currency of other countries such as theEuro are not yet adaptable to play the role of a global reserve in foreign currency.

In the immediate future, the United States shall continue to dominate the world economic and monetary affairs. Nevertheless, the rise of other economic powers such as Russia, India, Japan and the European Union and the effects of the credit crisis will make the United States to lose itshegemony in the world affairs. In future, the United States will be operating in the world affairs among other equal players.This shows that in the future, the governance of the world will be in a multilateral approach where the economic political and military power will be more fluid and not very effective and there will be no clearly defined leaders of the world stage (Baker, Eva, 2009). The factors that are fuelling the trend of decrease in the hegemony of the United States all relate to the over reliance on foreign investment and spendthrift spending by America which does not equal its power.

The disparity in the level of international investment and trade were putting a stress in the financial system which became apparent in the financial crisis in 2008 which necessitated the US to initiate economic measures such as the stimulus package and the bail out of the banks that were affected by the crisis. These measures prompted the deficits in the budget levels as well as increasing the pressure on the exchange rates and currency which will limit the access of foreign capital to the United States This will impact on its key institution that characterizes its hegemony its economic clout and the effects will spill over to other areas of hegemony as well such as military (Caraley, 2009). Decline in financial capability of the US will lead to the United States becoming less affluent, volatile and unstable in the world stage which will lead to the rise of other superpowers in the world. However, even with a recovery from the financial  crisis by the United States, in the long run, all projections indicate that  in future, the rise of other economies such as  India and china will eventuality overtake that of the United States which will greatly reduce the impact of the  hegemony of the US  in the global standing.

The growth of the internet has given retailers a new forum to hawk their goods.  The time when retail stores were limited to physical stores in malls and agoras is long gone.  Now, consumers can make purchases on the go and online with simply the click of a button.  This has changed the retail landscape and made it imperative for any retailer who wants to expend his or her market to explore the Internet Concept of Supply and Demand vis--vis online merchandising.

1.Discuss the ways companies use the Internet to sell andor market merchandise.

The birth of the internet has allowed vendors to expand their stores into cyberspace.  The face of conventional shopping has been changed.  No longer is shopping limited to physical methods such as going to visit stores but it has now turned into cyber-shopping.  As of 2006 figures have shown the growth of online shopping in the United Kingdom alone to be estimated at 24 million UK consumers who spend on average 1513 each during the year.  With forecasts predicting that e-commerce will grow by 36 in 2006 amounting to 49 billion, There can no longer be any doubt that the internet is a major part of the retail landscape, and that it will dominate the retail agenda for the next several years, according to IMRG managing director Jo Tucker.  Companies have taken to the web to advertise and even sell their products, launching online stores and retail outlets for shoppers.

2.Explain the ways the Internet has expanded the available supply of goods.

There is an enormous variety of the goods and consumer items available through online shopping makes it more advantageous for some people to shop online as opposed to traditional shopping.  The enormous variety of items available for online shopping makes cyberspace the largest mall in the world.  A single search query on any internet browser will yield hundreds if not thousands of results.  Combine that with the relative ease by which a person can also research on the pros and cons of items and a wise shopper is created.  The variety on ebay, the largest online auction store in the world, is enough to fill the entire state of Texas.  All the choices that are available online and the price advantage that is offered and the convenience all make the internet the shopping haven for any shopper.

3.Explain if the use of the Internet tends to increase or decrease prices.

The internet is currently the largest market and offers shoppers the largest stores and vendors the largest markets.  With the total number of online stores pegged at nearly 1 billion, the competition for the money of online shoppers is fierce to the point that anyone who does a fairly diligent search online will be able to find items at prices lower than one can find through traditional shopping.  For retailers this is also a big cost in expenses as it negates the need for a physical store for marketing their items and also greatly reduces overhead costs allowing them to offer the goods at relatively lower prices.

4.State whether the retailer faces more competition online or in its retail stores.

With fewer barriers to entry such as capital expenditure for setting a shop and overhead operational expenses, an online shop will offer more competition than a retail store.  The fewer barriers to entry exist, the more competitors there will be in a market.  In this case, the fact that all that is needed is a website or an account with eBay or Amazon makes it more accessible and viable for competitors selling similar, if not identical items, online.

5.Explain the concepts behind supply and demand for your clients.

The market price of a good is determined by both the supply and demand for it. In 1890, English economist Alfred Marshall published his work, Principles of Economics, which was one of the earlier writings on how both supply and demand interacted to determine price. Today, the supply-demand model is one of the fundamental concepts of economics. The price level of a good essentially is determined by the point at which quantity supplied equals quantity demanded.

6.Address the issue of supply and demand toward expanding the online merchandise.

As previously mentioned, there is more supply than demand in online merchandise.  The reason for this is that while there certainly are a number of countries that have internet access for their citizens, not many countries are equipped with the software and infrastructure to take advantage of online shopping.  In several countries, the terms of payment and credit card access is quite limited so that while they may have access to the stores they are unable to make purchases.  Since the clientele is limited by these factors, there is an over supply because the sellers to not face the same constraints.

7.Give your client a recommendation as to whether or not to expand its online merchandise.

Depending on the target market and the goods sold, online merchandising is an alternative.  In the case of consumer goods, it is advisable to sell online only if the cost of shipping justifies the reduced operational expenses.  It will also depend on the target market because, as previously mentioned, there are barriers that prevent people from buying depending on their location.  The safest bet is to advertise the products online and piggy-back on existing online retail sites such as eBay in order to reduce expenses and maximize opportunities rather than setting up the infrastructure for hosting and operating an online retail store.

China has undoubtedly been the economic success story for the last 30 years it has grown from being a centralized economy to a more independent system which is largely dependent on market forces and a fast growing private sector. The opening of foreign trade and investment has led to annual inflows of foreign direct investment of around 108 billion in 2008. However with the rapidly growing economy, China faces a number of problems which include corruption, environmental damages and work force related issues along with the recent global financial crisis that has adversely affected its exports (Schuman).

This paper will discuss the issue related to real estate bubble in China and the following section will define the parameters of this issue in detail. Currently, China is the fastest growing economy in the world and so far the main force pulling the world out of the recession however according to leading economist, the growth has its effects especially on the real estate sector in China. After the global financial meltdown in 2008, the prices of real estate have skyrocketed in the urban centers across China. According to regional experts, some areas have experienced a rise of around 150 in real estate prices during the last year and the demand for housing in China is still on the rise. Chinese growth rate is expected to be around 9 however, due to the global recession the export figures have declined which has led the country to shift its focus from global consumption to domestic demand as their primary engine of growth. Earlier, the Chinese government had tried to promote the real estate through easy real estate lending and development to boost growth. According to Chinas Central Bank, mortgages for new homes in the first nine months of 2009 have quadrupled from the amount borrowed during 2008 (Smith).

Analysts around the country are concerned due to the current aggressive stance of the government which has produced a tremendous rise in construction, lending and speculative buying. Many people fear, that if the Chinese authorities dont take quick action then the housing bubble would increase in its severity. Many experts believe that the lack of solid data to justify such high levels of housing sector prices is a proof that the bubble is developing as it is typically defined as the prices at higher level without any economic justifications. In this case, the investors purely base the purchase decision on speculation hoping that the prices would increase in the future without any solid reasons such as the change in the demand or supply of houses in China.

A similar situation developed in the Japan during the early 1990s when the real state and stock prices were inflated and according to many an economic bubble had developed. The reason it had developed was the same as financial assets became lucrative investments due to easy availability of credit and appreciation of the Japanese yen. However due to the corrective policy making the real estate bubble was elongated (some say until 2003) which minimized the losses. One of the measures taken by the Japanese central bank to combat deflationary pressures during these was that it reduced interest rates to approximately zero, thus the bubble collapsed gradually rather than catastrophically (Amyx 52).

However most people believe that the burst in still further and can be prevented through effective policy making and management. Looking at the following situation, the Chinese government has tried to calm the real estate bubble through variety of policies which include the higher mortgage rates and the larger down payments. However it is not only the government policies but other financial and cultural issues have also played a part in the development of the risky bubble.

After discussing the issue from the viewpoints of Chinas regional real estate experts, local and foreign people, investors and Chinese Central Bank and also comparing it with the similar case in Japan, the paper will now evaluate the issue in order to ascertain the main cause of the problem. China announced a stimulus plan of around 586 billion for the real estate sector which is 17.8 of their GDP as opposed to Americas which stands around 5.7 of their total GDP. There is visibly a link between the ultra loose monetary policy and real estate price hike the availability of easy money has lead to the rise in the demand for real estate which remains the one most lucrative form of asset investment in China. The central bank is under tremendous pressure to control the current situation through tightening of the monetary policy and credit restriction in order to control the price hike in real estate (Mufson).

Another reason for the price hike is rooted in the investors bet in Chinas currency, the Yuan which is expected to be revalued upwards in the near future. These bets are largely foreign in nature and are largely based on the expectation that the investment in Chinese assets such as real estates will increase in value once the revaluation of the currency takes place. The lack of performance by the Chinese stock exchanges has led the local and foreign investments to be poured into the real estate sector which is based on speculation about the future.

Another reason is Chinas overall economic growth which has led to the development of luxury houses in city centers which are designed for wealthy foreign corporate executives and consists of around 90 of new constructions taking place. These houses are unaffordable to average Chinese households as a result these new homes are sitting empty and are largely purchased as investment. Moreover, the current boom has led to a high price to income ratio and a high price to rent ratio for real estate, hence many Chinese firms in the industry such as chemical, steel, and textile are opening real estate divisions expecting higher return than their core businesses (Barboza).

Most of the land in China is owned by the government and a huge proportion of government revenue comes from land sales therefore the government needs money and any measure taken in order to curb the real estate market might be ineffective. The flip side also points out that the real estate boom has led to the development of other industries such as construction and steel industries which provides income to numerous families and is a source of growth to the country. There is also an increasing demand in the housing sector which is fueled partly by the millions of rural migrants moving from villages to large cities which would lead to the development of the country.

The lack of housing for the middle income groups which include most of the working class in China is a cause of great concern for the government as this would later develop into social instability and protests. The large number of mortgages in China and the continuing relaxed credit policies is leading China towards a housing bubble which would destroy the developing banking sector in China along with lifesavings of numerous investors. However, lately, the central bank has shown great concern and vowed to impose new limits on the speculative borrowing through deposit requirements for housing.

The evaluation also shows the other side of the issue that a bubble does exist but it wont explode due to a lot of factors to support the bubble which largely include the strong buying power of the existing consumers. Other factors include economic growth, rising family incomes, migration of labor to cities, high demand for housing, and banking system which is less vulnerable to mortgages compared to banks in the US or Japan. These are the reasons which can protect China from a real estate meltdown for years to come (Barboza).

In short, our evaluation of the issue of real estate bubble in China points out following key factors. Chinese citizens have limited access to foreign investments therefore it has artificially increased the appeal of domestic investments such as property which is the only viable option. Chinese culture also requires home ownership as a source financial independence therefore there is a high demand for housing. The low level of property tax has led to the development of real estate into speculative instruments without any carrying cost or risk. The unexpected nature of the stock market and regular slumps have left investors more interested in real estate options which are considered much more rewarding and less risky long term investments. Speculation in Chinese real estate is largely due to the easy availability of credit in the country which is both in the form of FDI and the local loose monetary stance however the dependency of local government on real estate as a source of revenue is another reason for the lax attitude of government towards the recent price hike. The government also aims to impose other restrictions in order to curb the crisis.

Now the paper will recommend some solutions for the issue of real estate bubble in China, but first we consider what Chinese government has done so far regarding the resolution of this problem. The government has stepped in to check the current situation and devised a few important strategies. This year a capital gains tax is to take effect on residential property sold within two years of purchase. In addition a new law is to be implemented which would require the owner of residential property to settle the mortgage before selling the property. However, these measures are moderate steps which would take time to calm the current crisis (Mufson).

For implementation of any proposal, the government has to act smart and take a balanced approach towards the situation, as from one point of view, the massive stimuli and easy credit has spurred a massive mal-investment in unneeded assets, marginal infrastructure projects and speculative luxury market which is sitting empty as investment. The other point of view signifies the critical role of domestic investment in supporting the growth and leading to an economic recovery locally as well as internationally, at the same time supporting urbanization in China. Hence the set of proposals should be implemented such that its net effect tries to contain the real estate bubble as well as maintain the required economic growth.

The government can take a number of actions such as increasing the interest rates in order to curb the money supply and the availability of easy credit and imposing capital gains tax along with sales tax. It can provide other venues for investment, making them more lucrative than housing, to direct the local and foreign funds to other markets such as capital, money, futures and commodity markets. It also has a proposal of making the first transfer of property exempted from tax so that middle income people from rural areas can find housing in urban areas. At the same time, the government can apply restrictions on transfer of real estate by imposing taxes on secondary transfers and full payment of mortgages before transfers which would reduce the volatility of the real estate sector (Smith). However, all these proposals cant be applied at the same time and for the right time to put checks on the growing real estate sector, the government should wait for other indicators of growth such as exports to show more positive signs which would provide the support for the overall growth targets without damaging the economy as a whole.

The fears regarding the implementation of these proposals are that these measures could backfire as the exports are still weak and the immediate effect would be detrimental for the growth. Restraining the real estate market too soon could effect growth as it accounts for 10 of GDP in the current situations. On the other hand, further tools of deflating the bubble could have other negative impacts on the economy, such as transaction tax on home sales aimed at reducing speculative trading may reduce the size of the bubble but would discourage real buyers which would suppress the demand unnaturally in the market.

Moreover, the revival of the real estate industry is the key reason that Chinas economy is emerging from the global recession. With China acting as the engine of global growth, any attempt to restrict its growth prospects because of such issues as real estate bubble might hurt the global economic revival. The world has also placed confidence in Chinese consumers to increase their spending to uplift the global trade. Hence it is the high time to boost domestic consumer demand and investments in China. Therefore the authorities in Beijing have to act smart in their attempt to shrink the bubble through balanced and delicate approach without adversely affecting the economic growth.

Furthermore, looking at the history of economic bubbles, it would be a point in time when the investor would loose the confidence which would lead to panic selling. The prices may fall reasonably low and the investors would wait on the sidelines waiting for the prices to hit the bottom which would shatter the whole real estate market in China. This would harm the major banks whose balance sheets consist of large number of mortgages and collaterals based on private property. Hence this requires the development of overall financial sector of China through introducing better practices and standards especially in the case of mortgages. This would ensure the integrity and firmness of Chinese financial sector in case a real estate bubble burst.

The simple conclusion of this paper is that whether the real estate bubble in China seems to be a myth or reality, the evaluation of the factors clearly reveals that there might be problems in the future which may affect the real estate prices. If the crisis does surface then the major portfolios of investors may substantially decrease in value and also financial institutions may face difficulty in handling the devalued mortgages. Moreover, world economy will be hurt as China presents itself as the engine of growth for the currently depressed world trade. Hence keeping all these factors in view, a more balanced and effective set of solutions should be selected for containing the bubble from escalating.

The most interesting matter about the article is the difficulty in handling existing bubbles in the economy.  Identifying these bubbles may seem to be simple but manipulating them is the major deal.  The gravity of the effects of these entities was very well felt through the problems that it caused the Federal Reserve and the economy in general.  The dilemma on deciding whether or not to prick these bubbles gives rise to various views for the welfare of the economy.  Attention was also drawn to the said matter because there is still no concrete way to deal with the bubbles and that the central bank according should not interfere with it.  The conventional solutions as stated in the article do raise queries.  Its like every bubble has this case-to-case basis of arriving at a solution in utilizing it correctly. 

In many ways or so, bubbles are related to economics.  As it is defined, economics deal with the proper allocation of the scarce resources.  In line with this, Federal Reserve aids in ensuring that there is good employment rate as well as regulating the financial system of the economy. Several concepts are linked with any kind of existing bubble.  The bubbles also have an effect on how economies work and how economic activities move about.  There is a possibility that pricking a bubble can worsen a financial crisis thus policy makers will work on it through the monetary and fiscal policies.  Monetary policy can increase or decrease the total money supply while the latter can be in the form of taxation and government expenditure. These policies are economic concepts which can be employed if bubbles cause damage to the economy.  Either way, both policies should aim to stabilize the economy alongside with regulatory measures.  A crash of a bubble can lessen the wealth of an economy, increase financial risks and at the same time, cause false allocation of resources.  It is also possible that bubbles occur because of an economys current state.  Bubbles are inevitable in any economy.  The central bank must make sure that bursting or letting the bubbles float on its natural course will cause a positive impact in the economy. 

The Great Depression taught us that falling prices or deflation and inflation are both destructive to the economy. Sustain fall in prices reduces incentives for businesses to increase production. The implication businesses will either cut available working hours or lay off some of its workers. Because wages tend to be inflexible in the short-run, the economy suffers from sustained recession (or depression).

Sustained double-digit inflation can weaken the economy. Rising prices adversely affects the input-output mix of the production process. If the prices of inputs increase considerably, then the prices of final goods increase proportionally. Because wages are inflexible in the short-run, real income will correspond to low-purchasing power. Inflation was generally absent during the Depression Era because of sustained fall in prices. However, during periods of recovery inflation is an issue. Single-digit inflation means that the economy is growing whilst a double-digit inflation means that the economy is in a state of shock. Now, central banks should ensure that interest rate will result in single-digit inflation.

There is a monetary aspect in the study of the Great Depression. During the Great Depression, deflation left the value of loans untouched, eroded the value of collateral, and shrank the borrowers equity. Wages can adjust to falling prices, but debts cannot because interest rates cannot go below zero. What should central banks do when deflation is sustained Central banks should ensure that the supply of money in an economy is sufficient to cover collateral and preserve borrowers equity. A relatively low supply of money in an economy results to short-term decrease in prices a relatively high supply of money in an economy results to short-term increase in prices. The Great Depression taught us that central banks should increase the supply of money when the economy is in recession and decrease the supply when the economy is recovering.

World Bank refers to an international financial institution which deals with the provision of loans for capital programs and for development. Its main goal is to reduce poverty level in the world (Bernstein and Pauly, p 66). It was established in the 1940s as an agency for international development. Its main purpose was to provide and advice on loans to more than one hundred countries. Its one hundred and eighty member countries own and operate it. It raises its funds through the contributions made by the government of the member countries as well as from the world markets. It has several divisions inclusive of the multilateral Investment Guarantee Agency, The International Finance Corporation, The International Development Association and The International Bank for Reconstruction and Development. In the whole world, it is the organization which offers most development assistance. Through investment in people and sustained growth, it seeks to improve peoples living standards and reduce poverty (Gilbert and Vines, p 127). 

The World Bank has grown to great heights since its conception. It started with very low levels of lending which involved thorough screening of applications for loans and fiscal conservatism. At that time, the staff used to monitor how loans were used and the bank had very strict rules about its lending. As the bank continued growing, its concentration was to meet the needs of developing worlds people. It aimed at improving their various sectors like education and health (Bernstein and Pauly, p 86).

It increased its borrowers and the amounts borrowed as its loans targets extended to social, educational and other sectors. Up to 1980, the bank sought for more capital for example by using global bond market. This enabled the bank to alleviate poverty levels as well as increasing their lending to the third world which increased by 20. Up to the present date, the World Bank has continued lending to different countries and it is known to have been a contributor to the improved educational, nutritional and health levels in the developing world and more so Africa, Latin America and Asia (Bernstein and Pauly, p 72). It has combined forces with some of the non governmental institutions which it lends funds. These organizations start several projects to help the people from the developing nations to meet their needs. They have branches in the third world countries to facilitate the running of their operations more effectively. Some go ahead to employ the people in the countries they are situated thus increasing the employment levels in such countries. This is one way to alleviate poverty in these countries through the help of the World Bank.

The World Bank has contributed to the multilateral political orders and disorders in several ways. For example, it has contributed to the alleviation of poverty in the developing countries. It has also improved the education and health in such countries making them better. It has as well contributed to other development programs all over the world which have contributed to the political order. On the other hand, the World Bank through its various programs has contributed many problems that humans have now. These are related to trans-national crime, migration, environmental pollution which have created multilateral political disorder (Gilbert and Vines, p 158). 

America has the following interests advocating and preserving of continuation of the U.S. hegemony, through exploring opportunities, highlighting threats and disseminating information regarding the same. The American interests can be said to converge to the World Bank due to its presence in the World Bank. This gives America a strong voice regarding the key issues of global development which are fundamental to the U.S. business and national interests. It is recognized by the World Bank as a steadfast partner and important financial contributor as the organization strives to reduce poverty in the developing world. These issues give evidence that the U.Ss. interests converge with the World Bank (Gilbert and Vines, p 36). 

Political risk is a problem faced by government and businesses due to changes in politics that alters the result and quality of an economic process leading to failed business objectives. It also means the interference of Government in the trade affairs of foreign investors or firms doing business in a certain country. The Government may interfere with the foreigners assets by taking them away by force or even cancel their contracts in favor of Government firms. Even though the USA has specific guidelines to guard against such occurrences, China is extremely hazardous when it comes to political risks. In 1949, China was involved in nationalizing foreign firms. Also, cases of forceful ownership, inflation, cancellation of contracts and devaluation of their currency have been reported. The main political risk in China is the Battle of Supremacy between the central government with local and provincial administration over the law to be applied when dealing with foreigners and whether it is being observed or not. This has given the foreign firms difficulties of knowing the exact rules hence the saying The Mountains are high and the Emperor is far away.

Political leadership
China is divided into two types of reformist leaders. The liberal leaders who wanted to learn from the past mistakes of China and lead the country towards socialism. The conservative leaders, who wanted to eliminate those corrupting the moral society of China and bring back the moral integrity of their Republic. Apart from inflation, the governments economical policies of rapid economic growth through interference with retail energy prices have increased the market prices of raw materials, oil and coil in the world. It has also caused an increase in food products. The government is being advised to give subsidies to enable the poor citizens purchase products at low prices and also accelerate economic growth. This is necessary in avoiding the social unrest among their communist supporters which will cause financial losses to government, reduction of profits in government firms and increase of non-performing loans in banks. This will automatically lead to the withdrawal of foreign investors. 

External conflict
Chinas Political risks have either directly or indirectly affected the entire globe. Chinas Economy has been growing very first as the income inflation has been on the rise leading to an increase in prices for commodities like oil and food stuffs. This has been felt by the entire world. Also, the increase in the income of their citizens has changed their lifestyle making them abandon the grain products for meat products. This has reduced the agricultural produce in China yet many developing countries in Africa and others like South Korea depend on China for the exports of the products. The ever rising inflation has hindered foreign firms in investing in the country. The battle of supremacy between the three main points of power is affecting Chinas relationship with foreigners who wish to invest in the country.

Corruption in China
Corruption is a vice that occurs when an individual intentional interferes with the normal functioning of administration processes for personal gain. They may either be Government officials or even people in the private sector. The individuals try to keep the deals a secret making it difficult to determine the level of corruption in the country. Corruption in China scares off foreign investors because of large amounts of money they are to part with to give the corrupt officials. Corruption is wide in China at 16 with heavyweights in business and government being arrested. Government has come up with anti-corruption measures like media freedom, reduction of excessive power of CCP, advocacy of independent judiciary, and crackdown on corrupt government officials.

The knowledge on international political economy (IPE) can significantly help in understanding matters related to globalization. The changes in the domestic and the international policies can bring about the interaction of the international economies which is an aspect of globalization. This change in the policies and that of the economic beliefs and practices gives rise to the technological developments in the political economies that are essential in globalization (Spero  Hart, 8). From this point, the improved technologies will reduce the costs of the communication and business processes hence increasing the internationalization of the economies productions and finance. There is a great link between the international economies policies and their systems of governance. With the different forms and levels of governments and systems throughout the globe, there is an increased adoption of different policies, regulations and the international liberalization. As a result of these differences, the trade exchange controls are reduced or removed, the trade barriers are removed and the bans to investments are removed. This will result to better trade within economies globally hence leading to globalization (Spero  Hart, 8).

Globalization is, in a greater perspective, involved in the development of the international political systems of different economies. It controls the governments ability to manage their economies using the international economic policies such as the exchange rates policies between countries (Spero  Hart, 9). This enables the governments to continue with the achievement of other national goals to be able to meet the international standards.  Since the international economics are not mainly addressing the global crisis, globalization challenges the international institutions and the international rules that govern the international economic relations to solve the global crisis.

In general, learning more about international political economies can bring about a cheaper understanding of globalization in the modern economies of the world since the two aspects are related.

Taxation can be defined as a levy usually by a government for a mixed contribution of money. This money is usually used by governments in the development of a country. A taxation system can therefore be defined as the way governments manage their taxes and how they use it. A taxation system may be of three types. These are Territorial, Residency and Exclusionary. Territorial taxation deals with taxation of only in-country income. This includes all business activities carried out within a country borders. Residency deals with taxing all the residents of a country. On the other hand, exclusionary taxation deals with inclusion of specific amounts of money to specific items ( Sopensky, E. 2002).
                                                         
Taxation in Syria
According to Lawrence, the taxation system in Syria is partitioned into three main categories. These categories are profits gathered from all commercial, non commercial and industrial activities the wages of the citizens in the country and lastly the income got from all the movable capital assets. These are listed in the Legislative Decree No.85 of 1949 which regulates all the income tax received. The tax laws in the country are administered by the tax department and the ministry of Finance is responsible for supervising them.
       
Main Taxation Areas
Taxation from companies
A business profit tax is charged on all net profits that have been accumulated from commercial and non commercial activities, net profits acquired through industrial and professional activities and any net profit got from activities which are not subject to wage tax, income tax or property tax. There is also a business profit tax which is levied on individual profits and the profits of corporate entities. This tax is applied progressively from ten percent to forty five percent, according to the amount of taxable income. Share holding companies are charged a flat rate of thirty two percent while industrial limited liability countries are charged at forty two percent.

Individual taxation
According to Roeder, each person is liable to the same taxes as those of a company on income from real property, movable capital and business income. Individuals also pay other taxes in addition to these. These taxes include wage and salary tax. Income tax, taxable under the wage and salary tax mainly includes additions of the basic salary, all the personal allowances, bonuses, overtime and foreign benefits. This income is taxed in rates of five percent to 12.5 percent progressively. Any foreign individual working in Syria is also subject to the same rules and rates of taxation as those of Syrian citizens.

Other taxation areas
Tax on Income from Movable Capital
This tax applies to interest, loyalties and also foreign source dividends. All royalty payments are also subject to this tax and are paid by the recipient unless they are subject to the tax on business profits for the recipient. This tax is charged at a flat rate of 7.5 percent to all Syrian residents and fifteen percent on the income received from non Syrian residents unless the rate has been reduced by an applicable tax agreement (Oerton, 1999).

Real property tax
A property registration fee should be paid upon registration, sale, assignment and inheritance of a real estate. All real property gains are taxed at rates which range from seventeen percent to sixty percent. According to the ministry of finance estimates, these fees amount to ten percent of the value of the property (Underwood, 2004).

Stamp duty
A stamp duty is imposed on all documents that are related to the formation of a company, a contract, any deed, a variety of instruments and also many transactions in Syria. This tax is levied at a rate of 0.624 percent on all contracts signed inside Syria. The stamp duty is also charged at fixed or proportional rates depending on the type of transaction being carried out.
     
Services provided as a result of Taxation in Syria.
Taxing in Syria despite others things serves the community and provides balance between its people. The government has been able to carry out many operations from the taxes collected from the people. For instance, free education has been introduced in the country. As a result, almost all citizens in the country are learned. The schools and institutes have the required facilities to carry out their operations. Another case is on health insurance. Treatment in all government hospitals is free and the hospitals have been equipped with the relevant facilities. The doctors in the hospitals are also highly qualified. The living standard of the people has been improved also and the poor have been provided with better housing. These factors and others are discussed in detail below

Education policies in Syria
The level of education in Syria is very high despite the low income of the country with a high growing population. Lessons in the classes are taught in Arabic. English and French are also taught as foreign languages with English being given the top priority. According to the 2007 census, the records indicate that 98 percent of schools in the country are state run and only 2 percent being private. The total number of students who had enrolled in the schools was eight million. The school system is divided into six years of primary education followed by a three year vocational training course then the student is admitted to the university depending on the grades obtained.

Due to the tax being levied on the citizens, the education level is very high. Syria has introduced free education on all levels. The government has been able to sponsor all the non private education institutions. Many schools have been built as a result of taxation. Scholars have been given free access to these schools and institutions depending with the results obtained in the final school leaving examinations. Many primary schools are available to cater to the Syrian population which is growing at a high rate. There are many secondary schools as well, and the level of education for the Syrian citizens is rising rapidly every day.

Technical and vocational training is highly encouraged in the country with the government building large numbers of these training colleges. Most of the people recruited in these technical institutes are mainly school droppers and those who did not get the passing grade required for them to be enrolled in higher education levels. There is also University institutes of Technology which run for two years. Mostly students enroll into these institutes if results were not according to the university requirements. Many students who do not wish to continue with the lengthy education policies of a university also end up in these institutes. All this was built by the government with help of the taxation system in the country. Each of these instates is under a ministry, depending on the type of education it offers but many fall to the ministry for Higher Education ( Sopensky, E. 2002).

All the technical workers working in these institutions have been employed by the government. Keeping in mind that the Students do not pay any fee, it is the government which caters to all these expenses. These institutions and universities have almost all the facilities required by the students for learning. Most of the universities shelves are filled with books required to do the research work. The lecturers and the non-teaching staff area also employees of the government. Many operations in these institutes have been subsidized by the government and students spend very little cash while in school. Through these operations, we are able to appreciate the taxation system in the country. It is clear that the government is using the tax received from its people to improve the education levels in the country.

Health policies in Syria
According to Pages, the government of Syria has built many hospitals in the country. Treatment is free in all the government hospitals. These hospitals have been equipped with the necessary facilities so as to be able to cater to all the patient needs. These facilities include x-ray machines and also equipment with the latest technologies for doing various scan. The population in Syria is very large and many people report to this hospitals everyday. These hospitals have been built in every part of the country and in cases where there is no public hospital available the government has ensured that there is a dispensary where the people with minor sicknesses can go to.

There are government ambulance services also in all the public hospitals. These services are of great help to the people and especially in emergency cases. For instance, in cases where a road accident has occurred, the ambulances rush people to the big hospitals for emergency treatment and care without any charges. All these expenses have been catered to by the government through the taxes collected. These ambulances have been bought by the government and it also ensures that they are in good conditions. All the hospitals have been stocked with all kinds of medication. The government incurs the expenses of importing majority of these drugs from other countries. According to the estimates done, about thirty seven percent of the national and private health budgets in the country are being spent for drugs (Lawrence, 2001).

All the personnel in these government hospitals are civil employees. The doctors are highly trained and have all the required skills. As a result, their pay is usually very high. It is the government which incurs the expense of paying for their salaries. It has also been estimated that about 60 percent of institutional current health care costs in the public sector are for the personnel. This clearly indicates that the government needs the support of the citizens and it is only through tax payment. No one can deny that majority of the government employees are in the health sector. Many hospitals are being built up everyday to cater for the rapidly growing population in the country. All these hospitals have to be well equipped and should have enough personnel so as to be able to run well. It is upon the government to ensure that all this is taking place.

In many times, there has been disease spreads in the country. The government does all it can in its ability to provide the required medication. In many cases, it goes to the extent of importing drugs from other countries. It also carries out free vaccination operations to prevent its citizens from dangerous sicknesses. In order to curb the spread of HIVAIDS, the government has launched many awareness centers where people are getting tested to know their status. For those who were tested as HIV positive the government has provided free ARVs in the government hospitals. The launching of seminars to teach people on the disease is also the operation of the Syrian government. It is therefore clear that the government is doing all it can to promote the health situation in the country. It is only through payment of taxes these operations are successful.

Provision of better living standards
Through government projects, many people have been employed. This has been a big shot to the economy of the country. The government is considering the living standards of its people, and especially the poor and doing all its best to improve them. The poor are being offered job opportunities in the government departments. Through this, it has been able to curb the poverty levels in its country. Others who are unable to do the jobs are given free salaries to help them survive. This includes the poor and also the aged without people to take care of them. The government is doing all this using the taxes which are collected everyday in the country.

When a person retires, the government offers pension services to them. As a result, they are able to lead their lives just as before. Free housing is also given to the poor and aged. For instance, the government has built many homes for the poor and aged. In these homes, people are employed to take good care of them and as a result they are able to lead better lives. The government spends a lot of money in building these homes and also paying the employed personnel. Building of homes for the people living in the slums has upgraded the peoples living standards. Through all these operations, the government is able to improve the peoples living standards using money levied in taxes.

Many roads are being constructed in the country everyday. The ministry involved with road works is making sure that they are according to the citizens expectations. Building of courts and prisons has also helped to reduce crime levels in the country. Through them, criminals are detained and corrective measures are given to them. As a result, people have been protected from such people who can harm then. Personnel working in these departments such as lawyers and judges have been employed by the government. The government has also built parastatals where people and especially the farmers are able to sell their products. These include cereal boards and also dairy creameries. Through them, farmers are able to get pay from their produce and also people in the country can buy products from them at a cheaper price.

Conclusion
Many people always blame the government on collection of taxes claiming that the rates are high. This may be true but it is also important to look at what the government is doing with the taxes collected from people. There are many projects that the government has been able to carry out. All these are aimed at improving the living standards of the people. For instance, many schools have been built and the government is still offering free education and scholarships to many students. Looking at the health sector, there are many government hospitals where treatment is free and drugs are available. The living conditions of the people have generally improved from government policies such as giving pension to the retired. It is therefore obvious that without taxation the economy would be low and the poverty level would be high.

Recommendation
Many people evade paying taxes and majority blame the government saying that it is collecting excess money from the citizens. According to the discussion, it is clear that majority of the taxes collected are used in the development of the country. I would therefore recommend that citizens stop the habit of evading paying taxes and take the practice positively since it is to the benefit of the country and the government does not use the taxes collected for personal gains.

The concept of scarcity as applied in economics represents the aspect of unlimited resources used to satisfy human needs and wants. In an economy with unlimited resources, the concept of demand and supply arises. Demand in this concept is defined as the ability of an individual to purchase goods and services. Supply on the other hand means quantities that will be sold at certain price in any form of an economic system. Resources are the means through which a product is produced and can be land, raw materials, factories, machines and human resources.

Resources used in the production process determine the price of commodity in the market. Therefore, when a particular resource is limited or is in short supply, it adds the value of a product. Scarcity of resources occurs when the demand of human wants exceed the supply of products. In addition, the nature of individuals to want more and more leads to unlimited supply of goods and services (Howirtz, 2000, p.14).  Another concept that arises as a result of scarcity is the issue of choice. Once the resources are scarce, individuals have to make relevant choices as per the preference of needs and wants.

In an environment of scarcity, an individual is supposed to make decisions that compare costs and benefits of taking one opportunity and ignoring the other. The concept of opportunity cost thus arises in an environment of resource scarcity. Scarcity of resources necessitates trade-offs which results in an opportunity cost. Opportunity cost in terms of economy is defined as the next best foregone alternative (Snowdown, Vane, 1997, p.16). In an environment of scarce resources, every individual is supposed to make decisions on how best one is supposed to use limited means in pursuit of unlimited resources.

Scarcity is the most important and central concept of economics which is defined as the allocation of resources among competing ends. Scarcity therefore means an economic situation in which the supply of resources is not sufficient. Once an economy is faced with insufficient supply, the demand of goods and services in the market is never met. In a wide concept of society, scarcity implies that an economy is not in a position of attaining societys goals. This means that there is an imbalance in trade off on one good against others. Factors of production such as capital, land and entrepreneur in economics are the basics of providing resources. Scarcity of resources therefore is defined as the difference between the desire and demand of goods (Underwood, 2004, p.127). A good is said to be scarce if people consume more of such good if it was provided free of charge.

Scarcity is important in economics because it defines the availability of resources which cannot meet the ever rising demand of goods and services. Scarcity is based on the concept of limited supply of needs and wants against increased demand of goods and services. It is a central concept of economics in that, proper measures of resource distribution and utilization should be adopted to avoid inefficiency. Goods and services are usually scarce because people desire more than can be offered by the factors of production.

Scarcity can be artificial in the case of poor planning and execution of utilization ideas. Other factors that create scarcity of resources include limited supply of resources, human skill and technology capabilities. It is a fact that scarcity is an economic situation that should be dealt with accordingly. Scarcity therefore can be managed by making choices in relation to value so as to allow individuals exchange resources through proper trade (Ahiakpor, 2003, p.42). In ideal situations, pricing systems adjust in a proper manner thus leading to a balance of supply and demand. Once the demand and supply of goods and services is equal, a neutral economic situation is created. However, it is hard to achieve an equilibrium market situation due to forces within the market.

Limited availability of resources that is, the factors of production, limited technology and management skills determines the location of societys production possibilities curve. Inappropriate employment of production factors leads to a limitation in the level of production. In such a situation, the economy operates below its production possibilities curve or frontier. When an economy is not in a position of abolishing the inefficiencies of limited resources, it creates artificial scarcity. The society is forced to make proper decisions on how to allocate and use goods and services when supply of resources is insufficient (Akerlof, 2003, p.5). The production possibilities frontier is a good illustration on how societies are supposed to optimally allocate resources.

Production Possibilities Frontier (PPF)
Production Possibilities Frontier (PPF) is a graphical representation that shows the maximum combinations of two goods produced during a time period given fixed resources and technology. The curve is used to illustrate certain economic concepts such as opportunity costs and production efficiency. It is a representation of making efficient use of available limited resources. The shape of production possibilities curve is usually concave to the origin because of the extra output that results from allocating more resources to a particular good may fall.

An efficient production point represents maximum combination of outputs given resources and technology. An efficient economy is the one that produces a combination of goods and services that meet customer needs. Points that lie on the production possibilities curve are efficient because they raise the output of goods and improve economic welfare. Points inside the possibilities production curve are productively inefficient (Britton, 2002, p.32). Points outside the curve are infeasible for any given resources and cannot be attained in the short run.

In the context of production frontier, the shape of the curve is directly related to opportunity cost. The PPF in the concept of opportunity cost can be described in a situation whereby there is an increase in productive resources that leads to increased production of first good that entails decreasing production of a second good. This is because resources should be transferred to the first good and away from the second good.
                             
Production Possibilities Frontier
In the above figure, the points along the curve describe trade-off between production of tea and coffee. The sacrifice made in production of coffee is called opportunity cost. This is because increased production of tea means loosing the opportunity to produce certain amount of coffee. In this case, opportunity cost is measured in the number of units that will be foregone when additional unit of tea is made.

The day to day life of human beings is full of decisions made as a result of limited resources. A person makes decisions according to the surrounding environment. For instance, an individual may decide to cook food instead of eating in a hotel. This is associated with the scarcity of resources that makes individuals to make choices. Scarcity therefore is a concept of economics that tries to explain the reason of having insufficient resources. This results to the concept of opportunity cost which is the central theme of economics and scarcity. Institutions through their management make decisions in their daily activities (Snowdown, Vane, 1997, p.23). Government also makes decision every day and the decisions made are accompanied by opportunity cost. Scarcity is an aspect that cannot be avoided by human beings as long as they use goods and services.

The concept of scarcity in another perspective relates to a situation of defining an economic good. Economists define the quality of a good in the essence of scarcity whereby the factor of a commodity being scarce or not determines whether something is or not an economic good. An economic good has value due to its scarcity because goods that are freely available have no value and hence cannot be classified as economic goods (Underwood, 2004, p.136). The concept of scarcity is central to economics because it helps to determine the value of an economic good.

Scarcity affects individuals in respect to choices they make on how to use limited resources to satisfy their needs. This entirely affects the economy both in positive and negative aspects. When the resources are few, individuals are entitled to make decisions that correspond to insufficient supply of resources. The question of cost is replicated in the concept of scarcity which forces individuals to make choices about proper use of production factors. The limited resources should be allocated in a more efficient manner so as to maximize on returns.

Individuals usually want more than the economy can offer as a result of scarcity. In addition, individuals use resources in inappropriate manner which results to scarcity. The economy as a whole in such situations is affected by the aspect of failing to meet consumer needs. Scarcity affects the economy in a positive way through various measures that forces individuals to make the right choices. For instance, unemployment is one major problem that is created as a result of scarcity. This makes individuals to employ fewer finances in purchasing commodities that are scarce at high prices (Britton, 2002, p.39). In return, business operators will have fewer returns due to low purchasing patterns of consumers.

The economy therefore is adversely affected due to poor returns and insufficient supply of goods and services. In order for an economy to perform well, a balance should be maintained between demand and aggregate supply of goods and services. Scarcity therefore, can result to a micro economic problem which is a threat to economic development in any given country. The concept of demand and supply is the basis upon which many individuals base their plans on how to spend (Ahiakpor, 2003, p.65).

Conclusion
The forces of market demand and supply determines the price of commodities. When the demand is high and supply is low the price of the commodity rises. While when the demand is low and supply is high commodity prices are usually low. This is a concept that determines pricing model in the market place and thus the purchasing behavior of customers. The economy is therefore determined by individual purchasing behavior. The concept of scarcity affects individuals in various matters of economy that relates with opportunity cost.