Chapter 2 - Demand & Supply

http://news.bbc.co.uk/2/hi/business/8305036.stm

Summary:

This article is about the Royal Bank of Scotland (RBS) and how they want to attract small business customers because they need to meet their loan targets. Royal Bank of Scotland and Lloyds committed to lend to firms and homeowners of this year. But despite this generosity the government feels that “the banks were demanding ‘unrealistic’ interest rates on their business loans”. The real problem was not the fact that there was a lack of demand in their loans but the fact that maybe the pricing was a bit too high to afford. So RBS and Lloyds have been told that “they must meet their obligations” and this was a condition of the banks’ taxpayer bail-out.

Connections:

Connections between the article and text were: change in demand, change in quantity demanded, change in supply, and elasticity. There was change in demand because their pricing was too high and "unrealistic" for potential borrowers. The quantity demanded decreased because customers actually paid back more this time than before. And there was a change in supply because RBS has actual lending targets to meet as of now. So this meant that RBS may have more to lend this year but not enough potential borrowers to use their services. All this leading to the situation being elastic because there was lending targets to be met that result in the pricing of loans going up, but it also meant that the potential borrowers have moved on to other lenders who they could afford.

Reflection:

I think that this is fair because if the banks were making “unrealistic” goals in the first place so these are the consequences that are paid to them. It’s only natural that people would research on the lowest possible interest on loans so they could have their money worth. RBS and Lloyds shouldn’t be surprised if this was happening because after all, they did increase their rates to meet their target loans. This is just a way that the potential borrowers are responding to it. If the demand is low then they should do something about it instead of trying to rip people off for the loss they've gained.

Chapter 1 - Opportunity Cost

http://www.smh.com.au/opinion/no-such-thing-as-a-free-market-20090908-fg2o.html

Summary:

In summary of the article, it was about the government’s slack in regulating all markets. The government’s irresponsibility led to a history of a global financial crisis and created fallible business people who we can no longer trust. Unreliable business will continue if the government doesn’t start enforcing their regulation upon all these markets. All in all, “there is no such thing as a free market” because “all markets are regulated by governments to a greater or lesser extent”. But it may have only seemed like a free market because the government hasn’t been adequately policing in the first place.

Connections:

A connection between the article and text was opportunity cost because while the government was putting and giving their attention and time to things (like the environment maybe) other than business markets, they gave up the time to regulate and enforce their laws. This gave the impression for all markets to have freedom and do what they wanted with little or no “supervision” at all in what they were doing, either right or wrong per se. So the cost of giving up the government’s time to certain markets and to maximize regulations, was a higher population of fallible people and a global financial crisis in history nonetheless.

Reflection:

I personally think that the government does need to take more action into enforcing their laws and to actually practice them because it’s not fair to the consumers of the business. Although, sometimes or most of the time life may not be fair it would still be nice if the businesses we were buying from, were somewhat more ethical than they are now. But even if it didn’t have to be fair to consumers or anyone else for that matter at least the government should be maximizing regulations because what’s the point in having a law if there’s no use to it in the first place?