Economics

Chapter 7
The Analysis of Consumer Choice

The concept of utility When a consumer buys goods, that give him satisfaction, economists term this satisfaction utility. We cannot measure utility, but Francis Edgeworth (contributor to theory of economic behavior) imagined a device called hedonimeter which could capture consumer reaction for those goods. Total utility (TU) It is total number of units of utility that consumer gets from consuming a good or service. The total utility curve rises with the increase in the number of goods and services. Marginal utility (MU) It is the amount by which the total utility changes with the additional unit of good consumed. The slope of total utility decreases with the increase in the number of units so marginal utility curve falls downward (Law of diminishing marginal utility).

The Budget Constraint Consumer always behaves in a way that maximizes its utility, but it is constrained by the available income and the prices of the goods.

Marginal decision Rule  The utility maximizing condition is MUxPx  MUYPY

Problem of Divisibility To apply the above condition it is necessary that goods must be divisible, that is
available in small quantities, though in real world it is difficult to satisfy.

Deriving the Demand Curve The demand curve can be derived, by determining the quantities of goods (the quantity determined using the marginal decision rule) that consumer buys at each price.

Deriving the Market Demand Curve The market demand curve is the horizontal summation of all the individual demand curves.

Substitution and income effects When the price falls, the quantity demanded of the goods increases, this reaction has two effects i.e. substitution effect and the income effect. When the consumers consumption of a good changes in response to change in the price of good or service while the consumer income is adjusted so that the consumer can buy the original bundle of goods and services (income compensated price change). The substitution effect involves change in consumption works in an opposite direction to that of a price change. The size of substitution effect depends on the rate at which MU of good change due to change in the price. When the change in the consumption of a good is due to the change in the income because of a price change is called the income effect. The size of the income effect depends on how responsive the demand for good is to change in the income.

Normal good and Inferior good A normal good is the good whose consumption increases with the increases with the increases in income. The substitution effect and the income effect increases the quantity demanded. Inferior Goods  An inferior good is the one whose demand decreases with the increase in the income. The substitution effect increases the demand whereas the inferior good decreases it.

Budget line The consumer budget constraint when graphically depicted is known as budget line. It shows the combination of goods that consumer can buy from the given budget. The horizontal axis is found by dividing the budget by the price of good X and the vertical axis by dividing the budget by the price of Good Y.
Indifference Curves Curves that shows the combinations of goods that give same utility are called indifference curves. Any point below and to the left of the indifference curve yield less utility compared to the right. Collection of indifference curves for a consumer illustrating preferences is called indifference map.

Curves, that is higher and to the right is preferred.

Utility Maximization Solution Two conditions- 1) the point must be attainable by the budget line. 2) The highest indifference curve is consistent with the above condition.

A change in the price would be shift the budget line and by tracing the quantity demanded we can derive demand curve.

Chapter 8
Production and Cost

Short Run It is the time period in which one of the factors of production is fixed as quantity.

Fixed Factor Of Production When the factor of production cannot be changed during a particular period is called fixed factor.

Variable Factor of Production A factor of production whose quantity can be changed during a particular period is called variable factor.

Short Run Production Function The relationship between the inputs and the output produced is called the production function. In this capital is the fixed factor and the labor is the variable factor.

Total Product (TP) TP shows the quantities of output produced with variable factor of production, while the other factor to be fixed.

Marginal Product (MP) It is the ratio of the change in the output to the change in the quantity of labor or capital. SlopeofthetotalproductcurveQL

Average Product (AP) It is the ratio of the output to the number of units of factor of production.

Relation between TP, MP and AP Marginal product rises with the increase in the slope of TP and vice versa. And reaches zero when TP is at its maximum value. MP intersects AP at the maximum point on the AP curve.

The MP experiences increasing returns initially when the output increase, but after a while the output starts decreasing i.e. decreasing marginal returns

Variable costs The cost of the variable factors of production is called the variable cost. Total variable cost is the cost that varies with the output.

Fixed Cost The cost of the fixed factors of production is called the fixed cost. And the total fixed costs is the one that does not change with the output.

When we add both the total variable and total fixed costs we get total cost.

Marginal cost is the change in the total output due to the additional unit of output a firm produces.

Average Costs is the total costs divided by the units of goods produced.

ATCAVCAFC AVCTVCQ AFCTFCQ

Relation between AC and MC MC intersects the AC and AVC at their minimum points. When the MC is below AVC and AC, AC and AVC slopes downward. And when the MC is above AC and AVC, they slope upward.

Long run The period in which both the factors of production of a firm are variable is called long run.
In the long run the firm chooses the factor mix using the marginal decision rule.
MPL PL MPKPK

Thus, a firm in the countries where labor is expensive uses capital-intensive production method whereas the countries with cheap labor use labor -intensive methods.

Costs in the long run The long run average costs, shows the firms lowest cost per unit where all the factors are variable. It is the envelope curve that surrounds various short run ATC.

Economies and Diseconomies of Scale A firm is said to have economies of scale when LRAC falls when firms expands and diseconomies when LRAC increases as firms expands. The economies of scale occur due to specialization and use of mass production methods. Whereas the management problems is the cause of the increasing cost in the long run. So initially the firm experiences economies of scale, but as the firm expands it starting facing the diseconomies too.

Chapter 9
Competitive Markets for Goods and Services.

Definition A perfect competition is an ideal market situation where there are large numbers of sellers selling the homogenous products at the same price.

Assumptions
1.Price takers No one can influence the price in the market every firm in the market is the price taker.

2.Homogenous Goods The goods sold in perfectly competitive market are same there are no brand preferences.

3. Large number of Buyers and sellers There are large numbers of buyers and sellers and nobody can influence the price no matter what quantity they buy.

4. Ease of entry and exit It is easy for the firms to enter and exit the market, which means greater degree of competition and sustainability of economic profits.

5. Complete information All the sellers have the complete information about the prices, technology of the good produced. Similarly, buyers also possess the complete information about the market.

6. AR  MR curve Prices in the perfectly competitive market are determined by demand and supply curve. Price equals average revenue. And AR and MR curves are the horizontal line at the market price.

Equilibrium in the Short run There are two approaches to determine the equilibrium conditions of a perfectly competitive market. A) Total revenue and total cost approach. B) Marginal revenue and Marginal cost approach.

In the first approach the economic profit is the vertical distance TR and TC curve. And in the second approach the profit is maximized when MRMC.

Economic Losses in the short run In the short run the firm cannot shut down as it continues to pay for fixed costs.

Case1 Producing to minimize Economic Loss When the price is below ATC the firm continues to produce as it exceeds Average variable cost.

Case 2 Shutting down to minimize economic loss When the price falls below AVC it is advisable for the firm to shut down. The intersection of the minimum level of MC and AVC curve is called the shutdown point.

Marginal cost and supply The marginal cost curve above the AVC is the supply curve in the short run.
Economic and Accounting Concepts of profit Economic profit is the difference between revenue and cost. The implicit and explicit both costs are included in the computation of the economic profit where as only explicit costs are deducted to calculate accounting profit.

Long Run and Zero economic profits In the long run the economic profits are zero. As the profits will attract the firms in the industry till the profit is zero. Similarly firs exit until the loss is eliminated.

Figure Eliminating profits in the long run Figure Eliminating losses in the long
Entry, Exit, and Production Costs When the input prices change (increase, decrease or constant) with the entry or exit of firms the production costs also change (increases, decreases or constant). Therefore the long run supply curve slopes upward, downward or is horizontal.

Changes in the production costs A change in the production costs reduces the MC and AC, which help to earn economic profit. In the long run the supply curve shifts to the right and earns zero economic profit.
Change in the demand Change in the demand can be due to change in the preferences, incomes, and price of related good, population, or consumer expectations. An increase in the demand shifts the demand to right and price rises. And firm earns economic profit in the short run which is wiped in the long run by the entry of new firms in the industry.

Chapter 10
Monopoly

A monopoly is a market situation in which there is a single seller selling differentiated goods to large number of buyers at different prices.

Assumptions
1.Single seller.2. No close substitutes.3. Prohibitions on entry and exit in the industry.4.Price setter.5.Downward sloping demand curve.

Sources of monopoly power
1. Economies of scale  A firm with the falling long run average cost throughout the range of outputs tends to monopolize the industry.
2.Location Central location in the market far from the competitors provides the monopoly power to the firm.
3.Sunk Costs Greater the costs to establish the business more difficult it is to enter the industry.
4.Restricted Ownership of raw materials and inputs.
5. Government Restrictions State and local governments provide franchises, patents etc that gives monopoly power to the firm.

Monopoly AR  MR curves The monopoly faces the downward sloping demand curve that is it can sell additional units of output at lower prices only. The monopoly always sells at a price, which is in the elastic region of the demand curve as it increases the total revenue. Marginal revenue lies below the price i.e. additional units sold at lower prices. They are plotted at the midpoints of the respective intervals.
Monopoly Equilibrium A monopoly firm maximizes profit by applying the marginal decision rule i.e. MRMC. And the profit is the difference between price and average total cost, given by the shaded rectangle.

Efficiency, Equity, and Concentration of Power Since the monopoly charges the price greater than the marginal cost, the consumer gets less of the monopoly good or service than is economically efficient. Thus there is deadweight loss to the society. Moreover the consumer surplus is also reduced and transferred to monopolist (issue of equity). Besides the monopolist is free from the pressure of finding new products and thus consumer is left with fewer choices, higher costs and lower quality.
The Fragility of Monopoly power The potential for high profits continue to attract firms and break the insulation of the monopoly. But technological change constantly challenges the monopoly power.

Chapter 11
The World of Imperfect Competition

Monopolistic competition It is a market situation where there are large number of buyers and sellers selling differentiated products with easy entry and exit. Since the market sells differentiated products (differentiation on the basis of advertising, convenience of location, product quality or other factors) the firm faces downward sloping demand curve. And the MR curve lies below the demand curve.
Short run equilibrium The monopolistic competition market earns maximum profit at a situation where MRMC.

Long Run Equilibrium The existence of economic profits induces entry till the profits are wiped off.

Figure Short run equilibrium             Fig Long Run equilibrium

Excess Capacity The price of variety A firm that produces to the left of the lowest point on its ATC curve has excess capacity.

Moreover the output produced is inefficient as firms charge more than the MC. But it wont increase the output, as revenue will decrease. Thus the inefficiency exist due to product differentiation,
Oligopoly It is the market structure, which is dominated by few firms, and each of which recognizes its own actions and reactions from the other firms. They produce both standardized and differentiated products.
Measuring Concentration in Oligopoly 1) Concentration Ratio, which reports the  of output accounted for by the largest firm in the industry, Higher the concentration ration, the more the firms in the industry notices rivals behavior. 2) Herfindahl-Hirschman Index (HHI) It is calculated by squaring the  share of each firm and then summing these values to get the index. The largest HHI is in the case of monopoly where one firm has 100 of the market.

The Collusion Model  Economists have used various models to deal with the uncertain nature of the rivals. In this case the firms in any industry select the monopoly price and output to achieve the maximum profits, i.e. they collude.

In this case the profits are maximized if each produces half of the total output of the industry. a) Overt Collusion In this case firms openly agree on price, output to make maximum profits. The firms that coordinate their activities on the overt collusion are called cartel. The problem is that they are illegal and there is not enough inducement to join. b) Tacit Collusion An understanding through which firms limit their competition.

Game Theory and Oligopoly Behavior Game theory is an approach where the actions of others affect the outcome of its choice and its possible action. The outcome known as payoff, and the firm earns economic profit as a payoff.

Applications of Game theory 1) Prisoners Dilemma- It is a situation where two criminals are before a attorney. To get the confession the attorney places them in different cells and provides them with different strategies to come to a decision.

When the player best strategy is same regardless of other player, it is termed as dominant strategy and reaches dominant strategy equilibrium.

Advertising  The monopoly, monopolistic competitive, and oligopolistic firms advertise a lot to earn maximum profits. It is always criticized that advertising lead to higher prices, as it is costly and creates barriers to entry. But at the same time it is defended as it provides useful information and encourages price competition.
Price Discrimination When the firm sells the same good to different customers at different prices, it is known as price discrimination. Conditions to be satisfied for price discrimination a) a firm should be able to set the price in the market. b) The customers should be easily segmented. c) The buyers should not be able to resell the goods at lower prices. A firm tries to sell the good at lower price where its demand is elastic and at higher prices where the demand is inelastic.

Chapter 12
Wages and Employment in Perfect Competition

In this model we study the labor market in perfect competition.
Assumptions 1 All the workers are identical.2.There is a single market for labor. 3.They earn the same wage W (equilibrium wage decided by the intersection of market demand and market supply) and the level of employment is L. 4.Workers and firms in the market are price takers, i.e. perfect competition prevails in the labor market.

Demand of labor Marginal decision rule The firm decides to employ additional labor only if additional unit of labor increases the output (MP) such that TR TC. And keeps on hiring till revenue (MRP) generated remains higher than the cost (MFC).

MRPMPMRor MRPMPAR (ARMR, under perfect competition)
Since the downward sloping portion of the MRPL exhibits the diminishing returns, hence considered as the demand curve for the model.

L(units of labor)OutputMP  MRP013--1332020025623230 3762020049014140510010100            
Any changes in the variables like technology, complementary or substitute factor of production, product demand etc. will correspondingly shift the demand curve for labor.          

Supply of labor  The supply of labor depends on how individuals tradeoff between work and leisure in the given 24 hours of the day. The more work a person does, greater his or her income but smaller the amount of leisure time. Therefore the opportunity cost of the leisure is the wages an individual can earn. Thus utility is maximized when (Utility derived from work should be equal to utility from leisure)

But the increase in the wages has both the positive (substitution effect) and the negative (income effect) effects on the supply of labor. Generally the supply curves for the specific labor markets are upward sloping, as mobility of labor stops it to react otherwise.

EQUILIBRIUM Wages in perfect competition is determined by the intersection of the demand and supply of labor. An individual firm takes the price as given (market wage), so the supply curve is horizontal and is also called the Marginal factor cost curve. Equating it to the marginal revenue product determines amount of labor to be employed by the firm.

Social problem Economists advise the solution of minimum wages where the less educated worker receives the wages decided by the government (generally higher than the equilibrium level) to narrow down the gap. This strategy increases the unemployment though provides high wages that continue to work. And the problem can be resolved if the less skilled workers are given support to enhance their skills through training workshops.

Chapter 13
Interest rates and the Markets for Capital And Natural Resources

Interest Rate is a mechanism through which financial investors are compensated for giving up the use of their funds for several years.

Relationship between interest rate and present value The value of the future amount if deposited today at a prevailing market interest rate is called the present value of that future value.

Demand for capital A firm uses demands additional units of capital, until the MRPMFC of capital. But the difference is that we need to determine the present value of MRP and MFC to calculate the demand foe capital.

Demand curve The demand curve shows the quantity of capital demanded at each interest rate. The demand curve is downward sloping curve. The variables that affect MRP, affect the demand curve of capital.
Theory of loanable funds The market in which borrowers and lenders meet is called the loanable funds market. We assume in the model that interest rate is same for firms and the consumers. The interest is determined by the intersection of demand and supply of the capital. Demand for loanable funds We assume in the model that interest rate is same for firms and the consumers. The interest is determined by the intersection of demand and supply of the capital. Supply of loanable funds Higher interest rates allow lenders to supply more funds in the market.  The Equilibrium interest rate is determined by the intersection of demand and supply curves of loanable funds.

Figure Equilibrium under the loanable funds theory

Natural Resource and Conservation The stock of a natural resource is the quantity of the resource that is endowed by the nature is limited and used to produce flow of goods and services.

Case1 Future Generations and exhaustible natural resources The demand D for exhaustible resources id given by the MRP.S1 is the marginal factor cost of extracting the resources. At the equilibrium interest rate the quantity demanded in Q1.But if the interest rise the supply curve shifts to its right causing the price to fall (and thus consumed more today). Whereas a drop in the interest rate shifts the supply curve to left leading to increase in its price (preserving for the future).

Case2 Future Generations and Renewable resources The quantity of the renewable resource that can be consumed without reducing the stock is called the carrying capacity of the renewable resources. The efficient quantity of the renewable resource is determined at the intersection of demand and supply at pt. E, which is below the carrying capacity. Hence the resource will be available for future generations

Case3 Market of land Land is used for the space and its carrying capacity is equal to its quantity. The price of land is determined by the intersection of vertical supply curve (as land is fixed) and demand curve. The sum paid is economic rent (shaded area).

Chapter 16
Antitrust Policy and Business Regulation

Antitrust laws and their interpretation Antitrust policy is an attempt by the government to control the monopoly power and encourage competition in the market place. History of Antitrust policy After the industrialization movement U.S. firms saw the emergence of monopoly power that allowed the government to interfere and challenge these monopoly powers. a) The Sherman Antitrust Act 1890-the cornerstone of the antitrust policy. Its takes care of the activities of firms that is illegal in and of itself without regard to the circumstances under which it occurs. Two landmark cases in 1911 were Standard Oil and American Tobacco. In deciding emphasis was placed on the conduct and not the size of the firms. It also prevent price fixing in which two or more firms coordinate pricing policies. b) Federal Trade Commission formed in 1914 to investigate firms using illegal business practices. c) Clayton Ac t, 1914, aimed at preventing mergers. d) Celler-Kefauver Act 1950 extended to blocking of vertical mergers. Current Antitrust Policy Emergence of new firms is evidence of dynamism where it is not necessary foe an industry to be perfectly competitive rather they are contestable. So current guidelines uses HHI index (Herfindahl-Hirschman Index) to determine the concentration of oligopoly power.

If the post merger Herfindahl-Hirschman Index is found to beThen the Justice Department will likely take the following action.Unconcentrated (1,000)No challengeModerately concentrated (1,0001,800)Challenge if post merger index changes by more than 100 points.Highly concentrated (1,800)Challenge if post merger index changes by more than 50 points.Though the definition of market is itself difficult to value HHI.
Antitrust and Competitive a Global economy In 1997,The International Competition Policy Advisory Committee (ICPAC) was formed by Department of Justice to change the stringent antitrust laws as U.S. firms did not had competitive edge in the international trade. Since many Japanese and European firms cooperated and colluded for their projects. Antitrust policy and U.S. Competitiveness The NCRA (National Cooperative Research Act of 1984 provided simple registration for joint ventures. The Omnibus Trade and Competitiveness Act (OTCA) made unfair methods by foreign firms punishable under U.S. laws. Moreover WTO was formed in 1995 to supervise and discuss issues relating to world trade.

Regulation Protecting People from the market  There are two types of regulatory agencies- a) one that protects consumer by limiting the market power abuse. b) Other to influence business decisions that affect consumer and worker safety. Theory of regulation seeks to find efficient market solutions. It says that firms need to be regulated to get the sure shot availability of certain goods. The Public Choice Theory of Regulation- it say that consumers are protected by controlling the decisions of the business. The approach is to determine how benefits are to be compared to its benefits.

Chapter 19
Inequality, Poverty, and Discrimination

Inequality a) How to measure it- the primary evidence of inequality is provided by the census data collected by the Census Bureau. Lorenz curve can represent the income distribution data graphically. The curve shows the cumulative share of income received by the individuals. The Lorenz curve would coincide with 45-degree line, if the households have the same income. But if the distribution were unequal the Lorenz Curve would be shaped like a backward L, with a horizontal line across the bottom of the graph and vertical line up to the right side. But the actual Lorenz curve lie between these two extreme. The ratio between the Lorenz curve and the 45-degree line and the total area under the 45-degree line is known as Gini coefficient, also used to measure inequality. b) Factors-the sharp increase in the number of families headed by the women, the increase in the use of computers, the demand for better communication skills in the workers (has created intellectual gap) has contributed to the problem of inequality.

Poverty a) How to measure it Absolute income test which sets a specific income level and defines a person a poor if his or her income falls below that level. And the other way to measure it is the relative test in which people whose income fall at the bottom the income distribution are considered poor. b) Characteristics of poor The six characteristics that describe a poor in U.S. constitute whether or not female, age, the level of education, whether or not the head of the family is working, the race of the household and the geography head of the family. c) Government Policies to alleviate poverty Government provides both cash and non- cash assistance to the poor people. The program called Temporary Assistance for Needy families (TANF) is a program funded by the federal government, which provides cash assistance to poor families. The Personal Responsibility And Work Opportunity Reconciliation Act Of 1996 passed by the federal government has proved to a major step in poverty removal.

Discrimination When people with similar characteristics experience different economic outcomes because of their race, sex, or other non-economic characteristics, it is termed as discrimination.

Becker got a Nobel Prize on the economics of discrimination. He suggested that discrimination is result of peoples preferences and if enough people have are discriminating its results can very well be seen in the market.

Suppose that employers have discriminatory attitudes and he assumes the black worker to be less productive than the white worker. So the demand for black would be lower than the white. Hence the black worker would get less of the work and lower wages. (LLB)

Graph                                          
The most important federal legislation against discrimination was passed in 1964, The Civil Rights Act, which barred discrimination on the basis of race, sex, or ethnicity in pay, promotion, hiring, firing and training. The wage gap after this act has reduced a lot but still lot needs to be done.

Chapter 18 The Economics of the Environment
Maximizing the Net Benefits of Pollution Firms pollute the environment as it allows it to produce goods and services at lowest costs, thus we benefit from pollution. But the cost of pollution is spilled to everyone, which causes market failure leading to misallocation of resources. Therefore economists analyses an efficient allocation of the environment and find ways to find the solution for efficient pollution.

Pollution and Scarcity If an activity emits harmful by products then its emission is an alternative to some other activity, thus scarcity exists, when harm occurs.

The Efficient level of Pollution It is the level at which total benefits exceeds its total cost. To determine the total demand curve we determine the amount each person emits at various prices. And the marginal costs curves are determined by adding the individual MC curves vertically. The two curves intersect and determine the efficient level of emissions.

Property Rights and the Coase Theorem The prize winning economists Ronald Coase proposed that if the property rights are well defined and bargaining is costless the private market can achieve an efficient outcome of pollution. Though there are still problems relating to enforcement, monitoring etc. but still provides a great insight into the problem. The notion of harm is reciprocal one and the harmed could avoid it by adopting various ways.

The Measurement of Benefits and Costs Benefits the demand for emissions- It shows the quantity of emissions demanded per unit of time at each price. We estimate by knowing the how much emission of one more unit saves we can infer how much would they pay to dump it. Its interpretation from right to left is the marginal cost and marginal benefit of emissions when read left to right. Marginal costs of emissions It is the additional cost imposed by the each unit of the pollutant. When the read from right to left it is the marginal benefit curve for abating emissions. Efficient level of emissions and abatement the intersection of the two curves gives the efficient solution.

Alternatives in Pollution control a) Moral suasion-an effort to change people behavior by appealing to their moral sense, it is a widely used tactic to control pollution. b) Command and Control-government tells by how much or what method to use in emission. c) Incentive approaches- market like incentives that allow individual to determine the emission level like emission taxes, marketable pollution permits.

Thesis Cloning of animals, plants and tress has several economic benefits, through increased productivity.

a) Gives a summary of the economic benefits of cloning animals, plants and trees.

Introduction
Cloning has numerous economic benefits on various economic activities. Through increased productivity of both animals and plants is increased both in terms of quantity and quality, cloning increases the profit margins of farmers. Livestock become more drought and disease resistant making them to be less vulnerable to harsh conditions and thus the loss associated with loss of animals to drought is highly reduced. Through cloning, the cost of production is greatly reduced thus enhancing the profits of farmers and at the same time reducing the prices being charged to consumers. Cloning of trees also has numerous benefits, the extinction of vital species of trees is avoided through cloning and thus the benefits of such trees can continue being available to mankind for extended periods of time and hence have more value for longer periods of time. The nutritional value resulting from cloning enables people to live more healthy lives since they are and thus be more productive economically (Kemp, 2004).

Economic benefits of cloning animals
One of the major objectives behind cloning is the creation of genetic duplicates that are exact to those of animals that are considered much superior as compared to other animals in their species in passing on the desirable traits that are naturally occurring such as high productivity and disease resistant. Cloning therefore has a lot economic benefits since the animals obtained through it are more productive. This implies that fewer inputs are required in substantially increasing the productivity of livestock. The increased productivity arising as a result of cloning increases the profit margins of farmers because they require much less costs in making their livestock more productive. Due to cost effectiveness achieved through cloning, it is easier for those in agribusiness to enjoy economies of scale as compared to farmers who are yet to embrace the new technology of cloning. In addition, the increased productivity realized from cloning can result to increased gross domestic product and in turn stimulate economic growth of a country (Longtin  Kraemer, 2002).

Cost of production is virtually in all cases passed on to the final consumers if those involved in agribusiness are to make any profits. This therefore means that if these costs are high, then the consumers have to be charged higher prices for such products so that the entrepreneur can be in a position to recoup the costs that were incurred in the production process. However, cloning has resulted in reduced costs of productivity and hence the entrepreneurs in agribusiness are in a position of producing more products at a much lower cost. The consumers are thus charged less for such products since it is possible for these entrepreneurs to break even by charging the consumers lesser prices for their products. While the consumers enjoy reduced prices thanks to cloning, the entrepreneurs can make even more profits since their sales revenues and volume will increase as a result of increased sales. This will be the case because just like any other products in the market, the cloned ones will be affected by the forces of demand and supply, which will dictate that their demand will increase following reduction in their prices (Lu, 2001).

Cloning leads to the breeding of animals with the superior qualities of drought and disease resistance. Diseases and droughts are some of the major challenges faced allover the world today by agribusiness people since they have to contend with them every now and then. Due to climate change and global warming, droughts have become more frequent and severe. Millions of livestock allover the world has been lost to this calamity, as animals are forced to go without water and pasture for days. This does not only impact negatively to the livestock farmers but also to the rest of the population since such losses results into reduced livestock productivity thus reducing the gross domestic product of a country and at the same time leading to increased prices of products. However, thanks to cloning, it is now possible to breed livestock that are more resistant to the drought. The cloned animals cannot die easily as a result of drought implying that the productivity of such animals is not greatly affected by the effects of drought. The farmers are therefore much cautioned against the devastating effects of droughts (Baird, 2002).

Livestock diseases are a major channel through which farmers incur a lot of costs in terms of treating animals and preventing them from falling sick. This is a challenge they are compelled to contend with on a continuous basis since new livestock diseases keep on emerging every now and then. The animals that are not cloned are less resistant from these diseases and hence they suffer frequently from various livestock diseases making their owners to incur heavy expenses and at times lose them to some of these diseases that are quite deadly. Cloning could therefore have not come at a better time than it did. Since the cloned animals are much resistant to most of these diseases, the farmers end up incurring much less expenses on treating and preventing them from falling sick. There are several economic benefits arising from the cloned animals being disease resistant. These animals can endure harsher conditions as compared to the ordinary animals and the cost of rearing them is much less thus benefiting both the farmers rearing them in terms of reduced cost of production and enhanced profit margins (Campbell, 2005).

Cloning offers a chance of more swift genetics distribution as well as the achievement of the targeted outcome consistency. Therefore, it is possible to easily achieve the desired superior qualities that are present in a certain animal without waiting for decades as with some forms of bio technology. The prompt achievement of these results makes it more economical to clone animals as they can be able to utilize the desired qualities soon before such qualities become obsolete. Cloning makes it possible for researchers to deal with problems involved in livestock rearing as soon as they arise. In some bio technologies, solutions are found when it is already too late to use them and despite the great amount of resources and time that are employed in their achievement, they rarely achieve their targeted objectives since by the time they are developed, circumstances have already changed. However, in cloning, the outcomes are achieved rather fast making it possible for the cloned animals to deal with the environmental challenges they were designed to cope with (Font et al, 2006).

Some animals are cloned so that specific traits with economic benefits can be produced. The best example is the transgenic cattle that were specifically created in order to make them produce milk which contains particular proteins of humans that are useful in human emphysema treatment. This has some economic benefits since the disease can be treated and prevented with minimal resource employment. There are other animals that are cloned in a manner that makes them to be used as models of diseases. Cloning in this case greatly improves the study and research of some complicated diseases, which consume a lot of financial resources due to their complications. When the study of such diseases is eased through cloning, then it becomes possible for them to be eliminated and thus save the economy the great financial burdens that usually arise from them (Starr, 2008).

For several decades, farmers have applied selective breeding in order to enhance certain superior qualities evident on their plants or livestock. However, the traditional methods were time consuming and were less accurate in achieving the desired outcome. However, cloning is much more efficient and results in quality results within a relatively short time making it economically viable for the farmers to have their plants and animals cloned. In addition, cloning has resulted into the breeding of cows that are producing milk with less cholesterol. This is a great achievement in the fight against heart diseases that are caused by excess cholesterol obtained from milk and milk products. Apart from the lives that are saved due to reduced heart diseases, there is also the reduction in the health care expenses previously used to treat and prevent such heart complications (Baird, 2002).  

Economic benefits of cloning trees
With consumption and deforestation of trees rising every year, the cloning of trees provides a great opportunity of growing more trees that are much superior as compared to the ones that are not cloned. Trees that grow much faster, consume less amounts of water and are more diseases and droughts resistant are being cloned and are resulting to a stream of benefits both economically and environmentally. Trees produce lumber, paper as well as other several products that are very essential to the human society all over the world. Due to cloning of trees, their growth rates has increased dramatically permitting people to harvest them much more faster as compared to the ones that are not cloned, and thus offer increased resources to people allover the world. Trees that are cloned usually produce more efficiently and faster making their yields to be more predictable. In addition, cloning has greatly modified the trees making them to produce more durable, stronger and higher quality products (Higgins, 2009).

Cloning of trees thus slows down the depletion of natural forests, whose depletion has numerous economic sequences on a country. One of the major environmental economic benefits of trees is the creation of carbon sink. Of late, the impacts of global warming have become quite evident. They are quite disastrous and can result to several natural calamities such as tropical cyclones, hurricanes, heat waves, tornadoes and eddy currents. It is also evident that these two phenomena are as a result of increased greenhouse gases in the atmosphere. The main green house gas that is causing global warming and thus triggers climate change is carbon dioxide. Through cloning, trees are made to regenerate much faster than they would in normal circumstances and thus create a deeper carbon sink. Carbon is used by the trees in their natural photosynthesis process thus reducing the availability of carbon dioxide in the atmosphere, thereby implying that global warming can also be reduced while climate change is brought under control. Cloning of trees therefore basically means that the consequences of global warming that have proofed to be very disastrous with enormous economic implications can be mitigated and thus avoid the economic consequences that are brought about by climate change and global warming (Kemp, 2004).

Cloning of ancient trees make it possible for mankind to retain these ancient species that can easily be endangered or become extinct. There are several economic benefits that are contained in the ancient trees that could be lost if these trees actually became extinct. They are usually harvested for medicinal purposes, high quality timber and several wood other products. The demand for these trees is much higher compared to their ability to regenerate. However, the products that are obtained from these trees are very essential to mankind and cannot do without some of them such as medicine. Cloning of these trees is therefore very important in ensuring that these benefits continue to be realized in a sustainable safe manner. There are some of valuable and rare ancient trees that are being cloned in Beijing, China. They are being cloned in order to ensure that the economic and environmental benefits obtained from them are not lost (Higgins, 2009).

Cloning of trees also ensures that the forests remain intact for a much longer period of time. Forests are major water catchment areas and they therefore contribute significantly to the hydrological water cycle. In several nations allover the world, water from forests constitutes a major source of income to millions of people who involve themselves in various economic activities supported by the water emanating from the forests. Without cloning of trees in such forests, the water resources can reduce to below levels with much economic benefits. Therefore, cloning indirectly supports the economic activities that rely in one way or another on the water resources (Kemp, 2004).

Economic benefits of cloning plants
By cloning plants, it makes it easier to predict their output levels and thus make the yields of such plants more reliable. Reliability is a very important aspect in all types of business and agribusiness is no exception. It enables all the stakeholders involved to better plan their activities in advance and thus boost their chance of making higher profits and reducing costs of production. Reliable productivity of agricultural crops makes it possible for the farmers to access loans from the financial institutions and thus enhances the productivity of their crops. Due to reliability of the yields obtained from cloned agricultural plants, it is possible for the sector to save a lot of money each season that could have been lost as a result of poor predictability. The plants that are cloned usually reproduce much faster, and hence limit the time taken between sowing and harvesting. In essence, this means that the land productivity is greatly enhanced through cloning since agricultural plants can be planted more frequently than in the case of ordinary plants. Increased land productivity means that farmers can make more profits from cloned crops since they have much more yields that are harvested after a short time, have a higher quality and their productivity is more predictable and reliable (Longtin  Kraemer, 2002).

Through cloning, it is possible to produce plants that are more resistant to pesticides in a more efficient manner. It is less costly to produce various seeds more efficiently through cloning as opposed to the production via traditional means. It is also possible to essentially optimize plants so that the individual gardeners or farmers always obtain the best seeds that are available. With increased yields being produced at a high rate, cloning can make farms to produce much more food and other agricultural products for a bigger population and at the same time reduce the overall costs of production (Baird, 2002).

Cloning of plants also has numerous benefits in preventing plants from being affected by various common diseases. Plant cloning via tissue culture is very crucial in the eradication of various diseases that are known to have devastating effects once they attack plants. Cloned plants are therefore very useful economically as they reduced chances of a whole crop being wiped by a certain diseases resulting into heavy losses on all the stakeholders involved in the agribusiness sector of the economy. Once the plants are made immune to most of the common diseases that affect most plants, the gardeners and farmers allover the world would be saved from incurring losses running into several billion of US dollars each year. Cloning of plants can also be very essential in making crop failures resulting from virus and diseases, a thing that only belongs to the past, which the gardeners and the farmers should no longer worry about since they cannot incur losses as a result of such crop failures (Kemp, 2004).

Through cloning of plants, it is possible for scientists to develop vegetables, fruits and several other farm products with nutritional quality that is superior. In turn, this could greatly reduce the deficiencies in nutrition that are being experienced in several parts of the world and hence result to a population that is much healthier. This would have several economic benefits especially due to the fact that less money would be spent on treating and preventing various diseases that result from nutritional deficiencies. Such financial resources, together with other resources can be used in other sectors of an economy and thus stimulate more economic growth. In addition, once a population feeds on food with more nutritional value, it will be healthier. A health population is in turn a productive one which is able to exploit more resources with increased efficiency and thus lead to more economic growth and development (Longtin  Kraemer, 2002).

Consequences of cloning
Due to the fact that cloning brings about genes that are identical and it is basically a process through which a whole genetic constitution is replicated, cloning can hamper greatly with the diversity that is needed a lot in plants and animals. This can result to weaker adaptability of both plants and animals to their environment. The weakened plants and animal generations can result to heavy costs being incurred since they are very vulnerable to the harsh climatic conditions. Cloned animals and plants usually have serious difficulties in their response to viruses, bacterium and other agents that are quite destructive. As a result, once a cloned animal or plant species is attacked by such agents, its chances of surviving are minimal thereby making the farmers and indeed the whole economy to incur heavy losses.

By permitting scientists to interfere with the plants and animals genetics, there are possibilities of intentional reproduction of traits that are not desired and which are known to be disastrous. Increased reproduction of such traits can have very serious cost implications once they are produced in great numbers. Cloning can make such traits that are less desirable to be dominant ones thereby suppressing the desired traits which might be more drought and disease resistant as well as more productive.

Conclusion
The economic benefits of cloning mainly come in the form of reduced operating costs resulting to higher profit margins for those people who are dealing with the cloned products. once the costs of production in a country has reduced substantially and the productivity levels have increased with huge margins, the growth of the countrys gross domestic product is much enhanced. The increased capacity of the economy generates more employment opportunities for the people at various levels. The real income of the people within a nation that is using such technology also increases substantially thereby raising their living standards.

The Battle of Matewan, also known as the Matewan Massacre, was a battle that erupted over the unionization of West Virginia miners. The incident that left 11 men dead eventually triggered the Coal War of West Virginia, in 1920-21. This paper explores the incidents leading up to the battle and its consequences.

Reasons behind the Miners uprising in West Virginia in 1900s
The coal industry had become increasingly competitive post 1900s. The larger companies faced a major problem from individual mining units, which had sprung up in thousands due to the read availability of coal, and the lack of standards for equipments as well as cost of labour. During the industrys more desperate years, prices for coal were so low that the larger companies could show a profit only by raising the prices at their company stores and the rent on the houses in their company towns. These tactics, of course, placed the main burden of economic maladjustment squarely upon the backs of the labouring miners. (Brisbin 20)
Because of these issues, West Virginia became a centre for some of the worst mine violence in U.S. history, after World War I. Though, United Mine Workers of America (UMWA) had started organizing workers about 1897, the unionization took hold slowly in this region because of anti-union injunctions from the federal judiciary and threats from mine managers and guards. When UMWA tried to organize or, when organized, tried to strike, mine management and the guards normally took extreme action blacklisting strikers, firing them, or using physical coercion. The result was outbreaks of extremely violence, a classical example of which was the Matewan Massacre  a shootout between mine detectives and local officials friendly to miners in Matewan. UMWA had agreed not to strike or demand for higher wages during World War I as a patriotic gesture. However, the situation worsened after the World War I as the prices continued to rise, prompting the UMWA to make strong wage demands. (Brisbin 21)

Details of the Battle of Matewan
Matewan is a small mining town in West Virginia. Before the Battle of Matewan, Matewan had witnessed an infamous bloody feud between 1878 and 1891 between two families, which cost the lives of more than a dozen persons. Because of this, Matewan was known as The Home of Hatfields and McCoys  after the two warring families.  However, the Battle of Matewan had much more significance and far reaching consequences.

Post World War I, Mingo County, where Matewan lies, had strong anti-union sentiment. When the local miners in Matewan had tried to organize themselves in a Union, the local mining company disliked and opposed it vehemently. However, in Mingo County, the law enforcement institutions were sufficiently divided so that the open warfare that broke out between armed miners and the operators forces, here made up of private detectives supplied by the Baldwin-Felts Detective Agency of Bluefield, West Virginia. On 19th may 1920 private detectives, hired by the mining company led by Albert  Lee Felts, arrived at the Matewan train station to evict the miners from their company-owned homes. They were confronted by the miners, the local sheriff Sid Hatlfield and the Mayor Cable Testerman. Suddenly a shot was fired and in the ensuing battle both Felts brothers along with five other detectives, two miners and the mayor were killed. Five others were wounded. (Hennen 96)

Consequences of the Battle of Matewan
The Battle of Matewan was at the time was considered one of the deadliest gun fights in American history, taking place in a community ripe for an explosion. The following year, on 1st August 1921, an unarmed Sid Hatfield, who had been acquitted for his role in the battle of Matewan, was shot down allegedly by the detectives seeking revenge. This generated further outrage among miners, who marched across West Virginia late in August, to show their support for organized-miners. They were joined by hundreds others, and finally clashed with groups of police. In an unusual show of force by the government, federal troops brought the uprising to an end after the Battle of Blair Mountain, in which 16 persons were killed, most of them miners. (Franklin 98)

By 1920s, American unions, which had been struggling for decades now, were in full retreat. The defeat of the miners at Blair Mountain severely damaged the UMWA, whose membership in West Virginias south-western coal fields dropped drastically, and by 1922 the UMWAs presence had all but vanished from West Virginia. The labour unions took a further step back due to the formation and expansion of American Constitutional Association (ACA) in West Virginia, by industrialists  chiefly coal operators, post 1920. The conditions further worsened during the Great Depression  a situation that continued through 1920s and early 1930s. The turning point came with the 1933 national Industrial Recovery Act (NIRA), Franklin D. Roosevelts fulfilment of his campaign promise to protect workers beaten down by the nations economic disarray. (Hennen 97)

Conclusion
Labour relations have played a very large role in the history of both policing and security in America. In addition, understanding the history of labour-relations is also important as it brought about the development of society as a whole. This is because organized labour brought together people of different ethnic groups and established numerous changes in workplace, such as benefit plans for employees and the establishment of disciplinary procedures based on the concept of due process.

The Battle of Matewan is an important historical incident that served to better the labour relations  though the immediate consequences of the same were not fruitful. The armed march and Mingo County strike resulting from the Battle of Matewan was doomed and the South West Virginia coal establishment were saved, as a result. However, the foundation for the labours being aware of their rights and demanding for the same, was laid resulting in labour reforms that were to start a decade late.

During the year of 1987 several memorable things happened.  Living on a prayer by Bon Jovi was a hit.  The Giants had won the super bowl the Hiesman Trophy was awarded to Tim Brown from Notre Dame.  Another important thing that happened was the NFL strike of 1987.  This strike was the basis of several movies, including the replacements, which mocked the replacement teams that were brought into play for the striking NFL players.  People have often wondered why the strike happened.  The reason why the NFL strike of 1987 happened, and looms closely again, was because of revenue sharing, money, and security.

The NFL is a revenue sharing company.  What that means is that in one company, the NFL, there are several companies, such as the Colts, Bills, Cowboys, and the Seahawks.  Revenue sharing is where the owner of each team shares a percentage of his or her revenues with the NFL and the players.  Revenues come from things like ticket sales, jersey sales, season tickets, TV contracts, and from stocks.  The revenues from 1987 werent even close to what they are now, but thats because the recent addition of the Internet market, which makes each teams target market a global market.  About 23 of the NFLs money comes from TV deals.  The players get about 23 of team revenue. So, more or less, the TV contract goes to pay the players. These contracts are typically for about 5 years, and every time they are renegotiated the price goes up. So do players salaries.  (Lawrence, 2005)  The strike of 1987 happened because the players felt like they werent receiving enough money for their efforts.  Many people thought the NFL players were being greedy, because they werealready getting paid millions of dollars to play a game, but it was the NFL owners who were being greedy.  They were not sharing their massive profits with the players.  The players receive escalating contracts.  That means that their contract is worth more each year than the preceding year.  For example, lets say John Doe made 8,000,000 at quarterback this year, then next year he will make 9,000,000.  This is because the salary cap went up.  The salary cap is a percentage of what the NFL teams earn.  Lets say the Cowboys earned 150 million in revenue this year.  That means the player salary cap is going to be around 120 million.  The players ear a little less than 80 of what the team makes.  Dont think that this means each year the teams spend 120 million on its players.  The truth is that most teams give themselves a cushion under the salary cap.  This way the owners save money.

Speaking of money, it makes the NFL players happy.  But what is money and how is it made  Money is produced by sales.  Teams can sell anything they want to make money.  Bobble heads, towels, helmets, footballs, seats, autographs, shoes, clothing, jerseys, snack foods, beer, hot dogs, nachos, stickers, license plates, or anything.  The NFL is one of the worlds most successful marketers because it is everywhere.  It makes money with TV, endorsements, advertising, goods, and games.  What decides how much the salary cap is, is how much money is made.  Everything counts.  This is called the collective bargaining agreement.  So when the NFL makes 150 million dollars in revenue for each team, its not just in tickets for the games, but the sale of everything.  The players in 1987 saw this and decided that they wanted more money, because they were getting the short end of the stick.  During the strike replacement teams were hired during the season with mock names of the real teams, and they played a total of 3 games. During these games the amount of money made, revenue, dropped by a fifth, which is what the NFL expected.  Luckily for the NFL and for the fans the collective bargaining agreement was made and the NFL season resumed.

Security is a big issue for NFL players.  The NFL players spend 10 to 15, and maybe 20 years on the field and make lots of money.  They can make anywhere from 10 million if they are a career journeyman to well over 100 million dollars if they are perennial pro bowlers.  With endorsements from companies like Nike and Gatorade, players can make even more.  Tiger Woods recently went over the 1 billion dollar earning mark because of his earnings and endorsements.  But the reason why security is so important is because these NFL players destroy their bodies and sometimes their brains with all of the jarring hard hits, and constant impacts.  Tackles in the NFL are like small car collisions.  Some linebackers can get as many as 100 tackles in a season.  With that many collisions over the span of a career its a wonder that these players can even walk after they retire.  The NFL players want security for their future medical issues.  They also want security for their families, so they can remain living the lifestyle that theyve grown accustom to.  Concussions are on high priority in the NFL these days, because of the consequences and side effects they cause down the road.  Some former players have become suicidal just from the concussions, so the NFL players want security.

The NFL strike of 1987 happened because the players felt like they did receive the proper revenue share, money, or security for their hard work.  The worst athletes in the NFL are still some of the best athletes in the world.  The fastest player in the NFL can run just under 30 mph.  This kind of speed and physicality make for a great and entertaining game of strategy and brute force.  With the uncapped season coming next year, there is a looking lock out expected for 2011.  Hopefully the owners and players learned from the strike of 1987 and dont let it happen again.

Concentration Ratio (CR(n)) is a standard tool which measures market concentration. It shows the degree of market control of the largest firms in the industry. Concentration ratio is computed by dividing the total sales of the firms comprising an industry with the sum of their respective market shares. There are two most common concentration ratios, CR4 and CR8.

CR4 is computed by getting the total sales of the four largest firms in the industry, divided by the sum of its respective market shares. CR8, on the other hand, measures that of the eight largest firms. The values resulting from the said formula shall describe the degree of market control held by the largest 4 and 8 firms, respectively.

Suppose you have an industry with 20 firms and the CR is 20. How would you describe this industry
An industry of 20 firms with a CR20 implies there is low market concentration. The industry has very competitive market and exhibits monopolistic competition, where market players, or each of the company belonging to an industry, offer products that are highly differentiated, if not, substitutes of each others products. Each of the firms may have a change to establish its own domination in the industry. Examples of industries that exhibit this kind of structure are jewelry stores, restaurants and clothing stores.
Suppose the demand for the product rises and pushes up the price for the good. What long-run adjustments would you expect following this change in demand What does your adjustment process imply about the CR for the industry

In a monopolistic competition or more commonly known as imperfect competition, there is low barrier for entry of competitors. Other firms can enter the market and establish their own mini-monopoly. With the fact that the company has some control over the price of its goods, as demand for the product increases, the company can freely push up the price of its goods and enjoy profit. Such economic profit shall attract new players, who will partake in the same. In the long run, some firms will only just generate if not normal profit, break-even point, and others will leave the competition.

Now consider that the industry has 20 firms but the CR for the industry is 80 instead of 20. How would you describe this industry What are some reasons why this industry has a high CR while the other industry had a low CR

An industry of 20 firms with a CR80 implies there is high market concentration. This implies that the top four firms have a high control over the market and that there is oligopoly in the industry. In this type of market structure, the industry is being dominated by a few large firms who can dictate the price of competition. Other market players will have a hard time passing through the entry barriers, as the existing companies may have already established their brand names or reputations and customer base. Examples of industries which exhibit this kind of structure include cigarettes and automobile

Is it possible for smaller firms to thrive and profit in such an industry How

In an oligopoly, smaller firms may still thrive and profit through collusion. In collusion, the firms cooperate and agree to fix prices, divide markets and set output levels.

The financial systems are complex and integrated systems through which finances are obtained from the households through the financial institutions and lent to the investors. According to Noland, the financial systems are made up of regulators and institutions that act both at the international and local levels. He argues that the financial system of any given economy is dynamic and is constantly changing in order to accommodate the ever increasing demands posed by the various players of the financial sector. In addition, Noland views the financial system as one that constantly seeks resource allocation in an efficient manner among the borrowers and savers. According to him, for a financial system to be healthy, it needs solvent and efficient financial intermediaries, deep and efficient markets, as well as legal framework which clearly define the obligations and rights of each and every agent involved in the system. He further argues that in order to ensure that a financial system develops in a sound manner and that it also protects the interest of the public, it should be constantly monitored and regulated under a central authority such as the central bank.

Evolution of financial institutions and instruments
In the past couple of decades, financial institutions all over the world have registered enormous growth and development. Noland argues that these institutions have learnt a lot in customizing their products in order to address the specific needs of their clients whose range of needs are diverse. The financial institutions have overtime learned combining payments from an assets pool into packages that are customized with attributes of risk preferred by specific investors. The financial leverage and intermediation in several parts of the world has in the last few decades shifted from the regulated commercial institutions realm, which was mainly composed of banks, towards a wide array of several other financial institutions. The new financial institutions include mortgage and consumer finance firms, brokerages, investment organizations, insurers, and mutual funds money markets.

Collectively, these new financial intermediaries are commonly referred to as the shadow system of banking. This is due to the fact that they offer services that either substitute or compete with the ones being provided by the commercial banks. Of great importance, the banks liabilities are the deposits, while those of the shadow institutions are not. Moreover, the risk taking and leverage of these shadow banks are usually not as transparent as those of the commercial banks. This has greatly affected the credibility of the financial institutions especially in advancing credit to their customers who in most cases feel that there are other hidden charges apart from the ones formally declared.

Financial innovation thus shifted greatly to the shadow system of banking this shift in turn stimulated the innovation in this sector. In 1970s, broadening market securities, greatly reduced the finance direct costs, such as those involved in issuing of equities and bonds, as compared to the costs involved in traditional loans issued by commercial banks. Plunging costs of information in both 1980s and in the 1990s made it more possible for a growing investors universe access more information concerning the borrowers risks, which ranged from those of companies to the household ones. The new investors range promoted the development of a faint array of several other new instruments, especially in the last decade thus making it possible to spread the risk more efficiently and widely, and also permitted more room for additional risk taking.

As the financial institutions have evolved overtime, so have the financial instruments. These are the virtual or the real documents that represent a legal accord which involves some form of monetary worth. In Nolands view, the treasury bills, insured deposits certificates, certificates of negotiable certificates, bankers acceptances, commercial papers and repurchase agreements were the main financial instruments that were offered by the commercial banks. However, due to constant stream of innovations in the financial sector, its landscape is by far denser and more complicated and has therefore called for several changes to be made to the financial instruments in order to accommodate increasing and divergent needs of the modern financial sector. The financial instruments have been revised thoroughly and also expanded in order to include a more comprehensive coverage of the financial needs. Clear and practical perspectives on the changes and shifts behind the current dizzying market techniques and tools proliferation have compelled the financial institutions to develop new financial instruments. It is out of this background from which such financial instruments as warrants, convertibles and preferred stocks have emerged in the last few decades.

Central and commercial banking
Central banking according to Noland is the form of banking in an economy from which the commercial banks and other financial institutions are regulated. Just like in ordinary commercial banking, the central banks do charge interest on the loans they advance to the borrowers basically the commercial banks and governments. However, in central banking, the central bank can only advance loans as a last resort. Unlike in commercial banking, central banking is basically characterized by monopoly. It is under central banking where the currency of a country is created and regulated in order to control the rate of inflation in the economy. Central banking exercise supervisory powers over the commercial banks in order to regulate their activities. The rates at which the commercial banks charge for loans they advance to their customers are also regulated under a central form of banking.

Noland views commercial banking as the intermediary between the savings of the households and the investments of the investors. In this respect, the commercial banks collect the household savings and later advance them to the investors in form of loans. They therefore act as intermediaries linking these two important groups in an economy. He also views banks as vehicles of economic growth and development since their activities can either stimulate or slow down the level of economic activities in an economy. When they charge less rates of interest, credit becomes more affordable to the investors who in turn borrow more money and thus increase the level of economic activity and the opposite happens when they charge higher rates of interest.

Role played by the financial institutions in the creation of the global credit crisis
Noland argues that the current financial crisis was triggered by unsustainable loaning behaviours of the commercial banks and the shadow system of banking. Their lending patterns led to reduced confidence in virtually all the markets whose securities were mortgage backed. The housing bubble that burst resulting into the financial crisis was supported by the financial institutions, because they lent money to the house owners with the hope that they could repay the loans at high rates of interest. However, the borrowers were unable to repay these loans since prices of their houses decreased substantially leading to high default rates in the payment of loans.

During the period preceding the bursting of the housing bubble, Noland argues that there were easy conditions for advancing credit to the house owners, which made them to over borrow. There was also sub prime lending, this is basically the quality of a particular class of borrowers who have been responsible for weakening credit histories thus increasing the risk of defaulting loan payments. Noland further argues that the predatory lending that was practiced prior to the bursting of the housing bubble made the crisis even more inevitable.

Main problems facing the financial systems and their solutions
Loaning is a major role that is played by the financial system in any given economy. The financial system therefore face an enormous problem of ensuring that all the loans lent to the clients are paid on time and that the rate of loan defaults is reduced as much as possible. In order to reduce the risk associated with loan defaults, the financial institutions should avoid advancing money to clients who are not credit worth. Again, before advancing any money in form of loans, the financial systems should first obtain security so that in case of a default, there will be an asset to attach and thus recover the money and the interest. Noland also views the regulation in the financial system as another source of a major problem facing the financial system. As far as regulation is important, it should be done in a flexible manner so as to allow the financial institutions take advantage of various opportunities.

Tax collection has been the bread and butter of the federal government to finance its programs and projects to better serve the public. But this income generating scheme of the government put too much burden on many less fortunate citizens while letting private corporations have the opportunity to shield their financial stance against any tax policy. Furthermore, most of the tax policy scheme only promotes unfair distribution of tax burden in the society and Measures 66  67 is one of those many tax policies. This paper will present why voters should think twice in voting Measures 66  67 and provide the benefits and costs analysis of implementing such kind of policy. Furthermore, this research will also suggest an alternative ways on which the government can justly raise the taxes being collected.

In the article of Warnke (2009), he stressed that Measures 66  67 are extremely poor legislation for they only increase the disparity between the income taxes of individual and corporate entities and creates significant raise in the corporate income tax at the expense of small and locally owned businesses.

Measure 66 primarily increases the individual income tax being collected by the government. What makes this legislation harmful on the part of every individual tax payers would be the fact that tax brackets are not adjusted to inflation, hence overtime, if the number of tax payers increased, they will be pushed to a higher tax bracket even if their real income does not increase.

On the other hand, even though Measure 67 aims to increase the tax being collected on corporations, it will primarily hit the small and locally owned businesses while letting the big and non-locally owned businesses to shoulder less tax burden. There is a quotation in the said legislation that it will target businesses with losses or no net income. In other words, those small and locally owned businesses, which are already in disadvantage in terms of market competition against big and non-locally owned companies, will be the one directly hit by this legislation.

If the government will continue to pass Measures 66  67, there is a great possibility that tax evasion cases will become more prevalent among individuals as they are unable to pay higher taxes. In addition to this, small and locally owned companies may start shutting down their operations or transfer their operations to other place with relatively low tax rate. In effect, unemployment will start to increase, hence causing much trouble to already in disadvantaged citizens of Oregon. The income gap between individuals and corporations will continue to grow, leading to unfair distribution of wealth in the economy.

As a solution, this paper suggest the federal government of Oregon to include inflation in determining the income brackets of individual tax payers as part of its mechanism in collecting a justreasonable tax on every citizen of Oregon. Also, government officials must ratify the provision in HB 3405, the legislative counterpart of Measure 67, the collection of higher tax among businesses with losses or no net income to prevent further burden among small and locally owned business. At this point where market competition is on the side of big and foreign owned businesses, it would be better for the government officials of Oregon to give a little more concern  on the welfare of small and locally owned business to protect the welfare of their locals and consumers.

In contrast, Sales Tax would be a better tax scheme as compared to Measures 66  67 since it includes inflation, which is already part of the price of the commodity, in determining how much tax is to collect on a particular individual, hence reflecting the real income of the individual tax payer. Furthermore, it also provides a breathing space for companies in tax collection since they will not shoulder the full cost of the said tax by passing a percentage of it to their consumers.

After all the discussions and arguments presented above, it is therefore clear that one should not vote for the passing of Measures 66  67 since these legislation has far-reaching adverse economic consequences, primarily increasing the income gap between individuals and corporations and providing more tax pressure among small and locally owned businesses.