Chapter 2 Blog Entry

Shock Treatment


This article presents the idea that the increased price of oil does not bring upon as great as an impact as it did in 1973 and in 1979. After both of these instances, when the price of oil is increased, the economy is brought into a state of recession. This article explores the idea of the increased flexibility of the economy and the idea that countries do not rely on oil as intensively as before. Also, because this situation is an experience of Déjà vu within history, humans learn from the past and adapt to these situations. This article also explores the reasons why the ability to absorb price increases of oil will prevent the chain reaction which begins with companies increasing their prices to cover productivity costs and then leading to a recession as a result.


This article makes connections with many topics in Chapter 2. We learn in chapter two about elasticity, supply and demand. Well, oil is elastic. But, as we can see, time can help an elastic product make a transition into an inelastic product. One of the reasons why humans do not rely on oil as intensively is the discovery that other sources of energy can be used as a substitute or as a complementary source of energy which works along side of oil. Also, consumers learn to be more energy efficient resulting in less oil being used. Oil is still an elastic resource; therefore, the increase in price will also not have such a great impact on the demand. Finally, because the increase in oil prices is absorbed fairly well, it will result in lesser impact. When the article mentions the unavoidable consequences such as increase production costs, a company must respond by increasing the price to cover those costs. As this happens, the demand goes down for these products because workers are unable to pay for these high priced products. This results in the company laying workers, to decrease their expenditure and leads to a further decrease in demand. As you can see, this article makes many connections to supply, demand and elasticity.

In my opinion, even though oil is still an elastic resource, as time flows on towards the future, oil will be replaced with other forms of energy with greater stability within the economy. I also believe that because humans have learnt from the past and have learnt to adapt in such situations, it has prevented the expected recession. The ability for an elastic product to become inelastic is a good thing. As we have learnt in chapter 2, inelasticity means that there will be substitutes; substitutes mean that an economy will never run into a dead end. Studying economics will prevent future recessions. Predicting the reaction to an action and its result in the past will help the future by either using the solution again or by using a different one to prevent the same consequences from occurring once more.

http://www.economist.com/finance/economicsfocus/displaystory.cfm?story_id=10130655

September Blog Entry: Using Fuel to Grow Biofuel

Summarizing the media report

This article was written based on the idea of growing biofuel to replace the fossil fuels today. This can be facilitated by sprinkling iron filings into the ocean. By adding iron fillings into the ocean, it will encourage algae growth which will then take in carbon dioxide and then sink to the bottom when they die. After a few decades, our atmosphere will return to pre-industrial concentrations. John Munford, who is an independent British researcher, suggests that rather than sinking the algae, it will be better to harvest it. Algae also produce biodiesel which attracts the attention from scientists and entrepreneurs who are looking for another kind of fuel to replace fossil fuels. A comparison is then made between growing algae in pond or in the sea.

http://www.economist.com/research/articlesBySubject/displaystory.cfm?subjectid=348924&story_id=9831182

Making Connections

Biofuel is a land resource which comes from the land. Therefore, we can relate this article to the topic of resources. Looking at the diminishing supply of fossil fuels today, we can safely assume that the fossil fuels, which took millions of years to formulate, will one day run out. We can now also relate this article to scarcity. Fossil Fuels are scarce and also cause harm to the environment. As mentioned in the article, because algae can produce oils which could replace mineral oils, scientists and entrepreneurs are looking for biofuels to replace fossil fuels. Lastly, we can also make a connection between opportunity cost and the decision of using either a pond or sea to nurture algae since they are looking at freshwater algae. Using the pond means it occupies land which can be used for other things and requires attention, while using the sea means that it is free and can contain itself. Therefore, many connections can be made from this article to the topics in the chapter.

Personal Reflection

Looking at the continuous change in the climate and atmosphere towards the more dismal side of things, I can say that bringing the idea of harvesting biofuel into the picture is a good idea. Harvesting algae not only helps improve the atmosphere, but also replaces fossil fuels which is lacking in today’s rapid usage of this land resource. Not only that, but I think that the rapid speed of the replenishing of such an important supply of potential energy –although in a different form –can really help the constantly decreasing amount of the source of energy which powers our cars and other fossil-fueled powered objects and will push away the fear that one day, our planet will totally run out of oil. If humans harvest our own biofuel, it gives humans more control over the amount which we can yield and can use. Having control over an environmental factor is always good in business.