Economics

Investment is the most situational of events that face an individual. The environmental factors deemed unfavorable could actually present the best opportunity for establishing a strong portfolio. The only necessity is a magnificent amount of information and sufficient funds to finance the venture.

Summary
The reprieve from the economic crisis that affected the availability of credit presents the best scenario of investors who are willing to reap huge benefits from investing in the high-valued stock. As a result, the contemporary mutual funds that have always accrued favorable returns are sill lagging behind. For the willing investor, the time is ripe for investment in individual stocks as opposed to a multiplicity.

Investing in individual stocks enables the prospective investor to choose those stocks with favorable characteristics. According to Brush (2010), the highly volatile prices that demarcate the risk levels have actually bee trimmed down and thus the stocks are bound to move up. The choice of stock will depend on the characteristics of capital and revenue gains. Investors are however advised to choose a portfolio through which they can spread the risk.Opinion

The ideas presented in the article are on point owing to the fact that mutual funds are characterized by investment in an infinite number of stocks whose returns may not match the level of returns from a favorable stock. The need to spread risk when investing in mutual funds spreads the returns too and thus erodes the earning power of the investment. As outlined by Brush (2010), it is imperative to seek expert advice from a trustworthy stockbroker in addition to the due diligence. 3. Economic Principle

The demand and supply of shares is based on the pricing in most instances. As a result, high prices will stimulate supply of the stock assuming that all factors remain constant. However, the economic climate is bound to affect the prices at which supply levels exists, thus leading to availability of the stocks at lower prices. Brush (2010) outlines that a rational investor should jump at this opportunity and buy when the prices are low. As a result, investors are always watchful of the price at which they are wiling to buy the tocks. Since with mutual funds the units are sold at prices that are not indicative of movements in stock prices, then an investor is better of buying stocks that he or she has ample information on.

Conclusion
During boom periods, revenue gains are high and on the other hand, investing during recessionary times ensures capital gains when the prices pick up. Thus for an investor, any time is the best time to invest, the only consideration to make is the qualities of the targeted stock.

The new Apple iPhone contains technological locks which tie the iPhone to the mobile telephony services of a particular third-party mobile carrier, a new development in technological tying, and much more likely to be unlawful in Australia. Clapperton  Corones (2007).

Why should the American economy be concerned with this new development in technological tying What is tying and what are the effects of tying If such new tying is on the verge of being considered unlawful in Australia should it be unlawful in the states This paper will provide an explanation of tying in its various forms and how it affects the purchase and distribution of the Apple iPhone.

Tying can cause real issues economically. For the companies involved the results of tying could be positive by increasing their sales or detrimental. Sales can initially take flight but, later, if a product is popular, tying could even limit their growth or even the consumers opportunity to buy the product.
The purpose of this paper is to define tying and to explain and enlighten the reader to the economic effects tying of Apples iPhone to a particular service andor provider has on the companies involved and the effects tying has on the consumer. First, what is tying

Commerce (Tying)
Tying or product bundling occurs when a consumer purchases one product or good. Once the good is purchased another product is accessible to the buyer. This can be anti-competitive. Buyers may feel forced into buying a product that they do not want in order to gain access to a good they do desire. There are two main types of tying. The two main types of tying are horizontal tying and vertical tying.

Horizontal Tying
Horizontal tying defines the most standard form of tying. Horizontal tying is the practice of companies selling a particular product with an unrelated or unwanted good. A company can also use the method of horizontal tying for promotion. Instead of making the consumer purchase two unrelated products the company may instead provide the unrelated product free in an effort to sell an item. (D.C. Cir. 2001)

Vertical Tying
Vertical tying is used among most major electronics companies today. Vertical tying is where a customer who purchases an item must then use that item with other products andor services strictly from that same company.

Economic Affects
A good example of what is discussed in this paper on the economic affects of tying is noted in the article Limitation of Sales Warranties as an Alternative to Intellectual Property Rights an Empirical Analysis of iPhone Warranties Deterrent Impact on Consumers (2009)

Apples success with the Apple iPhone has brought with it certain problems. Its success has revealed a community of hackers that have attempted to circumvent the exclusive arrangement that Apple shares with ATT for cellular telephone service. Unfortunately for Apple (and similarly situated manufacturers), intellectual property doctrines and laws do not prevent consumers from altering their products so as to circumvent relationships that manufacturers may have with others. Manufacturers inevitably lose capacity to control the product as a result of the sale of specific units. Roark, M.L. (2009).

Consumers Issues
Horizontal tying and vertical tying is used for the Apple iPhone.  First, when a consumer purchases the iPhone they soon realize that the capability offered of cellular service is restricted to one unique provider. Clapperton  Corones (2007). This poses a problem to the buyer if they do not want or do not have the particular cellular provider. They must now purchase cellular service from the unique provider. The product and cellular service become a packaged deal or horizontal tying.

Vertical tying comes into effect when the consumer brings home the iPhone and realizes that the necessary features they want are not available unless the company has vertical tying with the Apple Company related to the iPhone.  An example would be a particular game, music player or work program that the customer would like to use via their iPhone. If the program is not vertically tied with Apple then it makes it difficult for the consumer. This could be a reason for the buyer to decide not to purchase the iPhone.

Tying for consumers can be beneficial and pro-competitive if the bundled products provide financial savings for the buyer. Lower prices on bundled products benefit a customer. When tying becomes anti-competitive consumers are harmed (Clapperton  Corones 2007, pg. 351).

In the past, tying was conducted through contract conditions and user or license agreements. The new form of tying mentioned previously involves the use of tying items together using technology. One example of this is the Digital Rights Management (DRM) technology. This technology restricts buyers from purchasing from all venders that they wish via electronic venues such as downloads of music and movies. This is true of Apples DRM system Fair-play. Apple product owner can only download and purchase music from Fair-play. (Clapperton  Corones (2007), p.352)

Many customers who cannot or do not wish to use the products involved in tying use an illegal or frowned upon way to gain access to their own results. (Roark, M.L., 2009).

For Apple iPhone users tying or bundling of this in traditional and in technological ways sets several problems for them. First, the buyer can only use the unique provider that Apple has signed an agreement with. The buyer has limitations on the use of their product set by Apple. Now, the cellular service provider has their own terms and conditions that are set on the customer too. (Clapperton  Corones (2007), p.354) In order to unlock the iPhone, the buyer needs to sign up with the cellular service provider for a minimum of two years. The technology used to lock the phone also blocks the buyer from several applications such as the iPod features. (Pgs. 354-355)

There are other requirements that need to be met such as the user must be at least eighteen years of age and allow the provider to complete a credit check. This is a potential problem to many buyers and could affect the results of a sale.

As noted above, many who could not or did not wish to use the cellular provider but wanted access to the software applications of the iPhone began to develop or use illegal or frowned upon ways to gain access to software programs. One example is of a seventeen year old named George Hotz. He was able to create a way of unlocking the iPhone for consumers (p. 357). Many other methods have been created to date. What does this mean for Apple, the companies tying with Apple and the unique provider

Apple and the Providers Issues
Many who cannot or do not wish to use the cellular provider manipulate Apples DRM system as a way to gain access to their software programs. This is something that Apple could fight and take to court. Instead, they have restructured heir DRM systems. One way they have done this is by updating their software programs. If an updated software program is uploaded to an illegally unlocked phone it will shut the phone down permanently (Clapperton  Corones (2007), (p.357).  Another way they have worked to correct this issue is in the contract and terms section of the warranty. Apple states that unlocking the phone in any other way than by set in the contract terms would void the phones warranty.

 Although Apple is tied to the unique provider they have been extremely successful. Apple launched on June 29, 2007 and reported sales were over 270,000 in just two days. Apple went on to sell over 1,000,000,000 phones in the next seventy-four days. Apple receives payment for the iPhone regardless of whether the unique providers cellular service is gained. (Clapperton  Corones (2007), (pgs. 355-356). With this knowledge, why would inappropriate unlocking concern Apple
According to the contract between Apple and the unique provider the provider must pay Apple 18.00 per every month of cellular phone service provided on each Apple iPhone. Financially, Apple makes more from the cellular service per year than the actual product (Clapperton  Corones (2007), (p.355).

Typically, being tied exclusively to a provider hinders sales. Apples case is an exception to the rule but for how long The route Apple is taking with tying is controlled by technological locks and DRM systems that could potential harm the sale of the product in the long run. One example is the new promotion other cellular service providers have signed.

Several providers, rumors include Apples unique provider as a future contender, have contracted with Liberty International, a ten year, debt-free marketing company, in the effort to promote free lifetime cellular service that includes unlimited calls in the United states and Puerto Rico, unlimited e-mail, texting, internet and tethering, to any person who signs up and can refer three additional persons within thirty days.  The promotion also advertises a phone that is very similar to the iPhone. (WOW Mobile)

This promotion poses many financial setbacks for Apple. First, if this promotion does well tying with multiple providers, what happens to the sale of the iPhone Will consumers opt to buy the touch screen phone offered with many of the same features held by the iPhone What happens to Apples 18.00 per month on cellular service if their unique provider is a part of a lifetime free cellular service program What happens to the customers that the unique provider currently holds (WOW Mobile)

Tying to Benefit Consumer and Market
An article written by Russell Pittman Tying without Exclusive Dealing (1985) explained tying in its simplest terms. He quoted Justice Frankfurter who said that tying was serving hardly any purpose beyond the suppression of competition, (Russell Pitman, 1985).

Although Apple and its unique provider are questionable in their use of market power, they have been financially successful giants in the technological world. At this point, the tying between Apple and the unique provider is within the law requirements. The law states that tying becomes illegal when The seller holds substantial market power in the tying good (2) the tying goods are fully distinguishable as separate products and (3) there is a substantial adverse effect in the market for the tied good. (Russell Pitman, (1985) Tying Without Exclusive Dealing p. 279)

Even with their success, Apples approach to tying is at a disadvantage to the average consumer who cannot meet the lengthy requirements of their tying rules. Most companies who take this anti-competitive approach do not maintain the success rate for long and realize they place many limitations on the customer and on themselves.

A better route to take would be to follow the advice of one economist,
rather than attempting to categorize the conduct (as in tying or not) or looking at cost standards, a better approach would be to ask why are you doing this what are the efficiencies are there other ways to achieve the efficiencies do you expect it to block competition  (Justice Gov.)

The problem with tying is that, while it can work successfully, the company such as Apple, in the long run, will need to restructure their system in order to continuing making high sales. Is tying altogether wrong Not necessarily. When the above advice from the economist is followed companies can benefit themselves and the consumer.

A better option for consumers and sellers would be to follow the Liberty Internationals marketing plan. When dealing with tying, Liberty International combines products, service providers and bundles them in a cost effective plan that benefits the consumer. This gives Liberty International the marketing pull by offering free cell phone service if the buyer refers three additional customers. How do the cellular providers and Liberty International gain as well For a small or large fee (depending on the package the buyer accepts) can become a part of the marketing plan (as a dealer) making a percentage on each dealer package that they sell. The Providers gain a larger financial portion of the dealer package and the cellular service of those who do not refer three new customers.

Even with this incentive and the compilation of many providers working together, this form of tying will only be successful for a period of time but it, in the short term sense, is financially appeasing to both the consumer and supplier.

Tying grows and changes on a regular basis. If tying moves forward to better benefit both the consumer and supplier then the economy would flourish. More options and bundling with economically sound pricing would help increase purchasing among consumers thus increasing the sales of many suppliers.  

Money spent on education and training can be described as investment in human capital similar to investment in physical capital. Just like physical capital, human capital produces a rate of return inform of higher earning. In America, the rate of enrolment in school has been increasing continuously such that in 1970, the percentage of high school dropout in the labor force was 36 while in 2006, the rate reduced to 12. College attendance increased during the 1980s as the premium in the college-high increased. The society reaps the social benefits that emanates from education. Research has shown that educated people are less likely to be unemployed while education improves the quality of involvement in political activities

Capital is mostly viewed as an asset that is invested with the view of making profit over a given period of time. However, this is just an example of tangible capital that yields income. Scholars say that expenditures that relate to education, health care, and training is a form of investment in human capital. The reason they are referred to as human capital is because its impossible to separate a person from his skills, abilities, health, knowledge, or values just like you can distinguish him from his finances and physical assets. In addition, human capital can be compared to a means of production whereby additional investment in that sector leads to increased output.

Theodore W. Schultz, a Nobel Laureate, introduced the concept of human capital, arguing that people acquire knowledge and learn new skills in order to raise their value and competitiveness in labor markets. Major ways of acquiring human capital is through education, training and experience, whereby education is viewed as the primary level to many people. Education acts as a stepping stone of acquiring skills that increase productivity which in turn lead to creation of modern technologies, wealth and new businesses. Moreover, it eventually leads to high economic growth (Joel, 2005). Education is thus a public good whereby both the society and the individual benefit from increased education.
Research has found that in America, college and high school education increases individuals earnings with a big margin even after removing both direct and indirect costs of education. Educated people have a higher level of IQ and tend to earn more income than the less educated. Studies in 1960 concluded that college graduates were paid forty five percent more, compared to their high school counterparts. Analyzing education as a form of human capital investment enables us to know the reason why the percentage of graduates going through college fluctuates every now and then. The benefits of going to college as well as the cost of schooling increased between 1980 and 1990. Tuition fees rose by close to 39, a figure calculated by considering the effects of inflation (Joel, 2005).
However, tuition fess is not the major cost that students face while in college. Three fourths of the cost parents incur when paying college fees is the income that students forego for not working. The concept of opportunity cost comes into play since we are able to measure the income a college graduate could earn by entering full time employment. Formal education has to be supplemented with training so that a college student can fit into the job market.

The continuous increase in per capita income in several countries between the nineteenth and the twentieth centuries can be attributed to the spread of scientific knowledge and technical expertise. This increased the productivity of labor and other factors of production. Industries have continued to rely on sophisticated knowledge which in turn raises the value and importance of formal education, technical abilities, job training, and other forms of human capital. Economic growth is highly dependent on the relationship between the quantity of new information and human capital and is the reason why increase in education and modern technology stimulates economic growth (Joel, 2005). In conclusion, chinas economy has developed rapidly by depending on its abundant, well trained and ambitious population.

The economy is experiencing a sharp rise in the inflation rate. What change in the Federal funds rate would you recommend How would your recommended change get accomplished What impact would the actions have on the lending ability of the banking system

Any economic model under a monetary system is susceptible to inflationary pressure. A rise in inflation rate has dire consequences economic variables such as investment spending, consumption and income. This paper intends to discuss the impact of the federal funds rate on rising inflation, the lending ability of the financial institutions, investment spending, aggregate demand and the real interest rate.

The Federal funds rate is the rate of interest that commercial banks and other financial institutions levy on each other on overnight loans derived from their surplus reserves. The Federal Reserve usually uses the federal funds rate to maintain equilibrium between the supply and demand of reserves in the Federal funds market. For instance, to curb a rising inflation rate, the Federal Reserve must adopt a restrictive monetary policy by increasing the Federal funds rate to curtail borrowing and spending. An increase in the Federal funds rate in effect will reduce aggregate demand, investment spending and consequently inflation rate. The open- market operation is the most viable option to increase the Federal funds rate. The Federal bank will offer bonds for sale to financial institutions (commercial banks  thrifts) and the public to mop up excess reserves in the market. The impact of such a move is that fewer funds will be available for borrowing hence the ability of financial institution to lend will be limited (economic).

Conclusion
As observed above, the open- market operation is the best option to be used in raising the federal funds rates which absorbs excess reserves in the financial market. In addition, a rise in federal funds rate reduces inflation rate and increases the real interest rates and aggregate demand. Investment spending is also severely compromised (Economics).

U.S. Marine Corps Reserve Toys for Tots Program
For the purpose of this paper the charitable organization chosen is the U.S Marine Corps Reserve Toys for Tots Foundation. A charitable organization is taken to be a not-for-profit organization that normally provides or gives its services, at no cost to the beneficiary, to a particular group of people or in some occasions to the general public. Charitable institutions do not normally offer their services for a profit but they may record surplus revenue over cost.

The Mission of the U.S Marine Corps Reserve Toys for Tots program is to collect new, unwrapped toys during October, November and December each year, and distribute those toys as Christmas gifts to needy children in the community in which the campaign is conducted as outlined by U.S Marine Corps Reserve Toys for Tots Program. The goal is to deliver a message of hope to less fortunate youngsters that will assist them in becoming responsible, productive patriotic citizens. The main objective of Toys and Tots is to help less fortunate children throughout the United States experience the joy of Christmas.

The principal Toys for Tots activity which takes place each year are the collection and distribution of toys in the community in which a Marine Corps Reserve Unit is located. Local Toys for Tots Campaign Coordinators conduct an array of activities throughout the year, which include golf tournaments, foot races, bicycle races and other voluntary events designed to increase interest in Toys for Tots, and concurrently generate toys and monetary donations.

Cost minimization that help businesses maximization of surplus (revenue minus cost) Use of labor to improve efficiency.

As stated by Stackpole, labor is among the drivers of the economy through which the supplier earn income to satisfy both their needs and utilities and the parameters that define these needs or desires, including material gain ( money to buy goods and services) and emotional gain (recognition, power and influence).

In the case of charitable contributions, continues Stackpole, in which people provide pro bono time, money and labor, peoples returns for services are typically limited to the emotional rewards of their conscience. And it is their conscience that will often determine their contribution.

Like all organizations labor is used in the operations of the U.S Marine Corps Reserve Toys for Tots program in the implementation of its programs. To minimize its costs that help it maximize revenue over cost, the U.S Marine Corps Reserve Toys for Tots program conducts an array of activities throughout the year where they use volunteer services of the local Marine Corps League Detachment or group of men and women, generally veteran Marines. These people are authorized by Marine Toys for Tots Foundation to conduct local Toys for Tots campaign. These men and women organize golf tournaments, foot races, bicycle races and other voluntary events designed to increase interest in Toys for Tots that concurrently generate toys and monetary donations.

A look at Marine Toys for Tots Foundation financial statement for the year ending December 31, 2008 shows that the net contribution was 233 million. The funds expended for programs and contribution to change in assets was 226 million that is 97 and fundraising, management and general expenses was 7 million that is 3.  In effect the Foundation achieved a 9703 ration of programs to support services, expenses during the financial year 2008.   According to the Foundation, this means that 97 cents of every dollar expended in 2008 went to program services and only 03 cents was dedicated to fundraising and operating the Foundation.  This is an indication that most of the U.S Marine Corps Reserve Toys for Tots program is mainly done on a voluntary basis. It is hence evident that in carrying out its activities the founders of U.S Marine Corps Reserve Toys for Tots realized that they could tap the services from the local Marine Corps League Detachment or group of men and women, generally veteran Marines thereby making huge savings in terms of labor costs. According Foundations annual report for the year 2008, there are only ten people working as support staff while the local coordinators, who are volunteers, are 657. The Foundation is thus maximizing its revenue surplus by heavily utilizing free labor services from the volunteers.

There are a number of reasons as to why individuals volunteer services. According to Hernandez-Murillo et al individuals often volunteer time to charitable activities as this gives them a higher degree of satisfaction compared to working elsewhere and donating the proceeds to charities. In addition, Hernandez-Murillo et al adds, charities value free labor offered by volunteers since they could have paid these volunteers at the market wages, had they hired them. Presumably, the opportunity cost of volunteers is higher than this imputed wage as those who volunteer normally do work for which they are fully qualified and hence can comfortably perform.

Conclusion
It is therefore evident that one of the methods used by non-profit businesses to minimize cost is through the use of volunteer labor that will otherwise hire at market rates. The non-profit institutions take advantages of the willingness by individuals to volunteer their time and the dominant motivation, according to Hernandez-Murillo et al, is their internal satisfaction.

International trade has become indispensable to all countries in the world.   This trade involves trade between two or more countries. Many countries in the world have opened up their economies and employed specialization strategy in trade so as to gain from trade where they have a comparative advantage. International trade has become a sure way of ensuring economic growth and consequently economic development. The classical economists postulation that a country can gain from international trade is achievable if at all there a comparative advantage exists.

Kenya is one the countries in the world which have been involved in international trade.
According to US Department of State in the Bureau of Africa Affairs, most of exports from this country mainly come from agricultural sector. This includes coffee, tea, sisal, and horticultural products. Kenya also exports soda ash, fluorspar, hides and skins. Her major export markets are United Kingdom, Uganda, Tanzania, Pakistan and United States. The major imports include vehicle, machinery, crude petroleum, resins and plastic materials, iron and steel, phamacuteuticals, refined petroleum products, paper and paper products and wheat and fertilizers. Her major suppliers are Japan, United States, United Arab Emirates, India, China and South Africa. The report state that Kenyas total imports and exports in the year 2008 were 9.9billion and 4.4billion depicting unfavorable balance of trade since total imports value exceed total exports value.

Kenya terms of trade have not been favorable. Her imports include capital goods whose world prices are high and with less price variations. On the other hand, Kenyas imports mainly consist of agricultural products whose prices are usually low accompanied with great price variations. The terms of trade have been unfavorable for some years according to U.N. in  HYPERLINK httpunstats.un.orgunsdtradeWS20AddisAbaba04Country20powerpoint20presentationsCountrypresentationKenyaCustoms.pdf Processing of Kenyas External Trade Statistics work. Kenya trade balance in 1999,2000,2001,2002 and 2003 were (1,182.5), (1473.4), (1812.7), (1,137.5), and (1,298.6) respectively where data is given in million US . This shows that the country has been experiencing unfavorable balance of trade.
 
The Ministry of Trade of Kenya in its Kenya Bilateral Trade Statistics presentation show that Kenya balance of trade was 1,6667,467,244 and (2,059,531,469) in year 2006 and 2007 respectively data given in Kenya shillings. Another source of the data comes from World Trade Organization in Rank in World Trade. Kenya total exports both the merchandise and commercial services was 7,492 while imports were 12,737all this measured in million US .

Another work that gives more information about Kenya trade situation is the Kenya Central Bank review statement reported in (East African Standard   26). The report postulates that current account deficit increased by 38.5 in the year 2010.

All these shows that Kenyas terms of trade are unfavorable. She is importing more than what she is exporting.

The countrys budget deficits which had occurred in previous years have been funded through borrowing. The country is a borrower and for many years budget deficit been occurring and it has been mainly funded through borrowing from external and internal sources. Kenya is rated as a less developed country and has been experiencing deficit in her current account.

Data used includes
1. U.N.  HYPERLINK httpunstats.un.orgunsdtradeWS20AddisAbaba04Country20powerpoint20presentationsCountrypresentationKenyaCustoms.pdf Processing Of Kenyas External Trade Statistics.
Year Exports importsTrade balance19991728.62911.2(1182.5)20001749.83227.3(1473.71)20011877.33690.0(1812.5)20022177.63315.0(117.5)20032409.93708.5(1298.6)
2. Data from world trade organization (WTO)
Merchandise tradeValue 2008Merchandise exports ( million US)4972Merchandise imports ( million US)11074Commercial services( million US)valueCommercial services exports( million US)2520Commercial services imports( million US)1663

Trade pattern
Most of the coffee exports go to European Union. Horticulture and tea is also are also
exported to European countries. Tea and coffee is exported to Asian countries. COMESA
provide market for tea and processed products.  Most vehicles are imported from Japan while
capital goods imports are imported from US, European Union and China.

Kenya also imports rice from Pakistan. Phamacuteuticals are mostly imported from India. Libya
has also joined Asian countries in supplying petroleum to Kenya.

Since Kenya has a comparative advantage in producing tea and coffee as compared to
various countries  she has specialized in production of this trade to increase the chances of
gaining from international trade. As postulated in classical theory of comparative advantage
Kenya has opted to produce much of tea, export it to countries with less comparative advantage
in exchange of goods which are highly costly for her to produce.

Kenya trade prospects
Kenya is one of the countries in the world whose effort to promote trade been intensified
by the government. Export promotion strategy has been embraced by the government.  Import
substitution strategy has little space in this country. The government has been encouraging
exports through various ways. Tax on exports has been reduced substantially andor totally
scrapped off for some products. The setting of the Export Processing Zone (EPZ) was an effort
by Kenya government to promote exports. However given fluctuations in demand of agricultural
goods, the prospects in trade cannot be predicted with certainty. The fact that her exports consists
mostly agricultural products then various factors are likely to hinder the success of production of
such goods. Kenya has experienced several dry periods since 2000. This has highly affected
agriculture and consequently its share in international trade.

On the other hand, the opening up of the world in terms of trade globally will contribute to expansion of trade since market for Kenya goods will be large.  Kenya is also a member of various trading blocs. These blocs are meant to ease the trade among members. These organizations include Common Market for East and Southern Africa (COMESA) and Common Wealth. Africa Growth and Opportunity Act (AGOA) is also a great opportunity for trade to Kenya. Kenya is facing different problems that have hindered its growth in terms of international trade.

These problems include
Prolonged drought periods.
The country has been experiencing prolonged periods of drought which has adversely affected agricultural sector. The agricultural production has consequently reduced and this has led to reduction in exports from agricultural sector.

Political instability and corruption
Kenya political environment has note been calm. The conflict between the two ruling parties (Orange Democratic Party and Party of Nation Union) in coalition government has undermined decision making and proper governance. This has increased cases of corruption and the resultant conditions have not been friendly to trade.

Fluctuations of world market prices and high competition
The country usually exports goods derived mainly from agriculture. In the recent years the prices of these products have been fluctuating adversely. Low prices have acted as disincentive to farmers consequently reducing production. Coffee production has greatly reduced due to this reason. High competition from countries producing same product has also been faced. Coffee from Kenya has faced great competition from Brazilian coffee.

The way forward
Government should intensify its effort to increase irrigation schemes projects. The
current schemes should be expanded and be improved. As far political instability is concerned the ruling principles should campaign for unity between their followers. The national values should be emphasized. Strict laws to fight corruption should be enacted. Institutions that fight corruption should also be empowered.

Kenya should give incentives to farmers when prices are low due to world price
fluctuations. This may include subsidized inputs and low rates loans. Quality of products
should be improved to overcome world competition.

The classical trade model
According to (William 10-15), classical trade theory state that, a country may have absolute advantage in producing one commodity compared to another country. Absolute advantage means that a country can produce a certain product more efficiently.

Classical economists also state that a country may also have a comparative advantage in production of two commodities as compared to another country. A country will choose to produce a product which it have more comparative advantage and import the one which it has less comparative advantage.

Assuming that A represents Kenya and B represents U.S.A. Given that two goods, flowers and machinery can be produced in both countries.  Then using the below diagram, neoclassical model can be explained

CountryflowersMachineryUSA46Kenya21
Given that one unit labor is used to produce one unit of flower or machinery then the   following conclusion can be made. U.S.A has a comparative advantage in production of both commodities. One unit of labor can produces 4 units of flowers as compared to 2 units of flowers produced in Kenya. U.S.A also has a comparative advantage in production of machinery. One unit of labor will produce 6 units of machineries as compared to 1 unit of machinery produced in Kenya. U.S.A has comparative advantage in production of both commodities but greatest comparative advantage is in production of machinery (the ratio 61 is greater than 42). The trade between two countries is feasible and both countries will gain U.S.A will produce machinery and import flowers from Kenya. On the other hand Kenya will produce flowers export this to USA in exchange of machineries
 
In the graph below OII represent U.S.A offer curve. OI represents Kenyas offer curve. At X terms of trade are determined. Ray OX shows the rate at which flowers will be exchanged with
machinery. Machinery and flowers are represented by A and B respectively.

Conclusion
International trade should be emphasized in goods where not only absolute advantage exist but also even where comparative advantage exists. Since international trade leads to mutual gains the practices of protectionism that hinder trade should be eradicated. Liberalization of trade should be emphasized.

Economic development is often described as improvement in living standard of a countrys citizen as a result of increased economic growth of the economy. For economic development to be considered to have taken place there must be sustained growth to a high income economy from a simple low income economy. The United State of America is a good example of a developed economy while the economy of the Republic of China is an example of a developing economy. As more countries struggle to attain economic development, there is a claim that economic development and growth is essentially a process of economic exploitation and domination by major economies over less developed economies. This paper critically explores this statement with particular reference to USA as an advanced economy and China as a developing economy.

The economic development witnessed in China can be explained through the principle of unequal exchange. This is because though the profit realized by industries in China has been internationally equalized, the wage levels are not. Industries in China have taken advantage of the high population in that country to obtain cheap labor and hence make abnormal profits due to low costs of production. In ecological economics, the economic development in China can be considered to be a certain form of hidden exploitation where foreign companies reap high take advantage of the ready, cheap and available human resource to increase production output and pay low wages in order to reap high profits.

However, those who support this form of development have argued that it cannot be termed as unequal exchange because the people who provide cheap labour have a choice to sell their labour at a price that is either below or above the real value and cannot therefore blame any one for getting a bad deal. There are also claims that labor just like other commodities should be controlled by the forces of demand and supply and therefore if Chinas high population contributes to a higher labor supply and hence lowering the wage levels the high profit the industrial owners earn is justified.

Through monopoly, oligopoly and monopsony market structures countries like USA have been able to achieve economic development by domination of the economies of less developed countries. USA based companies like Coca Cola and General Motors have dominated and still continue to dominate many developing economies especially in Africa and China where the local companies are not able to compete with the foreign companies due to low capital investment. USA is able to outdo the developing economies by marketing their products at a lower price than that of the local companies because of low cost of production.

The US based multinationals companies also reap high profits when they increase their market share through blocking the local industries and disadvantaging their market position. This type of economic development can however be justified by the fact that when US invests in the developing economies it only reaches the unexploited markets and the local industries should be able to compete with US companies given that they also have some domestic advantages over the foreign companies such as knowledge of the local markets. From laymans language, business is about competition and therefore companies in less developed economies should not complain when outdone in market competition and should instead develop tactics to attract more customers.

A country such as USA buy raw materials from developing economies at low price and then sells finished products at very high price. This is a direct exploitation of the developing economies such as China because there is a very big difference between the value added to the product and the price (Lewis, 2003 pp 1-2). The trade effect of this trading activity is that USA industries make extraordinary high profits as a result of exploiting the less developed economies when they buy the raw materials from them and later sell the finished products at relatively higher prices.  But this has been justified on the basis that though unequal exchange may be said to have occurred, it is better than if no trade took place at all. This is because when trade occurs each of the trading parties gain even though some gain more than the others. Besides if such trade is as a result of an agreement between both parties, it cannot be said to be exclusively unequal as claimed by the opponents of economic development gained through such trade. Furthermore, traders aim at selling their products at the most competitive prices in order to make profits which can keep their operations running.

It is worth noting that developing economies lack the capacity to process raw materials into finished goods which is one of the most important resources in any industrial country. Hence, a country such as USA exploits other developing economies by making use of its expertise and capital advantage to buy raw materials at relatively cheaper prices and selling finished goods at higher prices. In the long run, the developed economies such as USA remain at a more advantageous position because they are able to reap back and cover the costs with which they bought raw materials by selling their finished goods at higher prices.

Another type of exploitation that has been witnessed is that USA has been making foreign investment in China and agitating for punitive measures to be undertaken to make the countrys economy more open. However, USA itself has policies that do not favor foreign investments in by outside developing economies and therefore it is said to be achieving economic development through unfair trade. But this has been criticized in that fair trade is subjective as it is not possible to achieve total equality when one country is more industrialized than the other.

Furthermore, the pricing policies applied by USA and China are quite different. For example, the domestically manufactured goods are low priced in USA as compared to USA. This is because USA offers subsidies to local manufacturers and the trickle down effects are that local goods remain cheaper than imported goods and services. As a result, local manufacturers in USA are more advantaged because they have a ready market for their goods and services. In China, the pricing policies are such that locally manufactured goods are expensive than imported goods from developed economies such as USA and thus imported products dominate a major segment of the Chinese market. Graphically, this can be explained in a demand curve as follows

                     USA and     6       China demand curve
                     China prices (steep demands curve)
                                         4
USA demand curve
                                          2 (less steep demand)
                                                    Q1 q2 Quantity demanded

From the above graph, the Chinese goods are high priced and hence the quantity demanded is low (q1) as compared to the  goods from developing economies such as USA which are low priced and thus the quantity demanded is higher (q2).

Thus the pricing polices applied in the two economies have contributed significantly in economic exploitation of China by USA because even in the Chinese market, goods from America are highly demanded due to their low prices.
 
The above forms of exploitations advanced by the developed economies on developing economies can better be described by Marxist theory which states that the world is hungry but lacks funds for food buying and in the developing countries where a majority of people are hungry, possible methods that can be used to expand production of food are met with strict opposition in order to ensure that people in the developing countries continue to buy food at exorbitant prices from the developed economies.  

This statement describes the form of exploitation where developed economies ensure that developing economies do not access vital capital investments which can be used to expand production. Since, the developed economies are majorly ahead in terms of technological expertise, technological transfer to developing economies is also made very expensive in order to ensure that developing economies remain vital markets for the goods and services produced in the developed economies. Hence, in Marxian theory, exploitation is taken to mean the subjection of proletariat or producers to work for bourgeoisie or passive owners who pay the producers insignificant amount of compensation which is not measurable to the work done by the producers.

Applying the Marxian theory it is quite evident that the form of exploitation used by USA in China can be referred to as the normal form of exploitation where USA businessmen in China own the important production means. In the same perspective, the proletarians or the workers or the non-property owners who make a majority of population in China survive by working in factories set up by foreign businessmen from USA and hence such owners take the advantage by paying the workers low wages. Hence, workers have no choice at all but to facilitate the progression of the foreign factories in terms of profits earned in order to get employment opportunities that can aid in their survival. The earned profits are then channelled back to mother companies in developed economies where they contribute significantly towards the economic development of such economies.

In addition to the above form of economic exploitation which facilitates the economic development and growth of developed economies at the expense of developing nations, it is also imperative to note that foreign companies from developed economies resort to human exploitation through the use of child labour. This is done in order to ensure that the amount of wages paid to the children is marginally lower than that paid in the home country. In addition to the low wages, such workers are also exposed to poor working conditions such as long working hours and unhealthy working environments which ensure that foreign companies reap high profits by incurring the minimum costs of production.

Globalization which is defined as the process through which regional societies, economies and cultures get integrated through globe trade and communication can also be used to explain the reasons why economic development and growth in developed economies is essentially a process of economic domination and exploitation by major economies over the less developed economies. Specifically, economic globalization has resulted into international trade, capital flows, foreign direct investment and migration. This has resulted into the emergence of free markets where goods and services from developed economies are dumped in large quantities and at cheaper prices thus killing the local manufacturers and producers.

As mentioned above, developed economies ensure that local production capacities are killed in order to get ready markets for their goods and services. In the same regard, the free markets brought about by globalization are also used as ready markets for expensive but harmful substances such as drugs which are sold by businessmen and companies from developed economies. In this regard, it is quite true that developed economies have largely taken advantage of globalization to dump, sell and kill domestic industries in developing economies by selling cheap products. This ensures that developed economies continue to enjoy ready markets for their manufactured goods at the expense of goods manufactured by local industries in developing economies.

Another form of economic exploitation which has been fuelled by globalization is brain drain. From an economic point of view, workers are attracted by high wages. Developing countries such as China which are characterised by low wage rates and poor working conditions have continued to lose key expertise and skills to developed economies due to the differences in wage levels offered in the two economies. For example, USA continues to attract numerous immigrants from less developed economies who move into developed countries in anticipation of getting higher wages in foreign economies than in their own economies. Brain drain affects the development and growth of less developed economies by slowing down the economic activities. In addition to the high wage rates found in developed economies such as USA, such economies have gone further to facilitate more immigrants into their economies through such policies such issuance of green card.

In this connection, the developing economies have continued to lose vital skills and expertise to developed economies. Hence, the continued domination of the developed economies in terms of favourable wage rates offered to the workers is one form of economic exploitation over the developing economies that lose numerous numbers of workers to such economies in anticipation of getting high wage rates.  Thus the weak polices that governments and firms in developing economies have had concerning the wage rates offered to the workers by factory owners are key contributory factors which has led to their persistent exploitation by the developed economies.

However, it is important to understand that a countrys economic policies are formulated by its own people and it is therefore not justifiable to blame the developed economies for the economic woes experienced by the developing economies. Poor economic policies results into poor economic development and growth experienced by developing economies. Developing economies have also been associated with rampart corruption where resources are used to benefit individuals rather than the key sectors of the economies. In this connection, developing economies have continued to lag behind not only because of the economic dominance by the developed economies but also due to increased levels of corruption.    
                
From the above discussion, a conclusion can be made that to some extent economic development can be justified, but to a given extent it can be said to be as a result of unequal exchange or exploitation of developing economies. It is also imperative to note that even though developing economies are endowed with a wide variety of raw materials, the pace of industrialization in such countries is still very low and hence the raw materials are under-utilized. In this respect, developed economies such as USA have taken advantage of their expansive capital outlay to buy raw materials from developing economies at cheaper prices and selling back finished goods at relatively higher prices. The discussion above has shown that even though developed economies can be said to be exploiting the developing economies, it is necessary to some extent because of the major gap that exists in the industrialization sectors of the two types of economies.