Examples of Whistleblowing

In this example I want to explore the different forms of whistle blowing. The first and one of the most famous is called the Watergate scandal.

Watergate Scandal ‘Deep Throat’

Watergate scandal refers to the capture of President Nixon’s fraud. Five men were arrested on June the 17th 1972 on the sixth floor of the Watergate hotel building in Washington inside the offices of the Democratic National Committee. The five burglars had $2,300, lock-picking equipment, a walkie talkie, radio scanner, two cameras 40 rolls of unused film, tear-gas guns and bugs. These men were working for the president. The was one of the schemes he used in order to get re-elected.This incident lead to him being the first ever US president to resign as he was not able to cover up the incident because someone with the pseudonym ‘Deep Throat’ whistle blew.Former FBI agent W.Mark helped two reporters Bob Woodward and Carl Bernstein uncover the truth.

The second famous example of whistle blowing is one of Erin Brockovich.

Erin Brockovich was again an American whistle blower. She came to work in a law firm called Masry & Vitiate as a file clerk. Here she discovered medical records which worried her. What she found is that countless number of people who lived around Hinkley in California from 1960s to 1980s had been severely damaged because of the exposure to the chemical Chromium VI. The chemical had leaked into the ground from the Pacific Gas and Electric Company’s compressor station. She started legal case against them in 1993 – another example of whistle blowing.

The last famous example I will discuss in this article is one of Dr David Kellywhich didn’t end as happily as the others.

In 2002 the government asked Dr David Kelly a scientist ti check the draft version of a dossier on Weapons of Mass Destruction in preparation for the invasion in Iraq in 2003. He was concerned about the statement that Iraq was capable of firing battlefield biological and chemical weapons within 45 minutes if receiving an order to do so. Subsequently he made journey to Iraq later on that year to inspect two mobile weapon laboratories. He discovered that the statement he was concerned about was actually false and he told a journalist from the Observer that ‘They are not germ warfare. You could not use them for making biological weapons’. In the following years as Kelly spread the word he was given a warning by the Ministry of defence and had to appear before two committees of the House of Commons. Sadly in 2003 when he was working in his home in Oxfordshire he went for a walk and was found dead. They say it was ‘suicide’ – he ‘swallowed 29 Co-proxamol tablets before cutting his left wrist with a knife’.

Whistle blowing in the news – October 2010

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The Graphical Representation of PED

Price Elasticity of Demand (PED) can look like one of the three graphs shown below:

 
So what is the diagram above?

The diagram above shows the three different shapes you may expect to see a demand curve – remember that a demand curve can look like anything though. As I say in my theory of demand video, theoretically demand could even be upward sloping if for example we are looking at an antique painting or designer handbag where as price increases so does the demand.

What different PEDs do the demand curves represent?

D0 – This represents the standard demand that most products have which is that demand falls from the highest prices the curve is elastic. This is because when prices fall more people are able to afford it (income effect). Then as we go to that bendy bit in the middle (sorry to write in such an informal manner) we see unitary elasticity where the percentage changes in demand are equal to the percentage changes in prices. The last vertical but shows inelasticity. When prices are low to begin with there is a limit to how much demand can increase when prices fall further. Compare the difference when a price falls from £20 to £10 and that of £2.50 to £1.25.

D1 – This is an absolutely inelastic demand curve. No matter how much price changes demand is not affected. This is a more theoretical concept than one that exists in real life. An example of a good which has almost zero elasticity like this curve is the class A drug Heroin. No matter how much price increases demand is not likely to be affected because people are addicted and are prepared to pay the premium. However, even the demand for heroin is not absolutely inelastic simply because the price will affect the demand from those who want to try the drug for the first time. [Please note I am not trying to encourage drug abuse – I’m simply using it to prove a point]

D2 – This is the opposite to D1. This is an infinitely elastic demand curve. What this means is that any changes in price will kill all the demand as demand is only present for that particular price. Again this is a more theoretical abstract concept than one that actually exists in real life. For example, a good may be valued at £5 and any increase even £5.01 will kill demand 100% because people are not prepared to pay even a pence more. It is the same if the price were to fall to £4.99. The demand is absolutely elastic meaning that it is 100% affected by changes in price.

Equilibriums

The term equilibrium refers to the point at which demand = supply.

– It is believed that if you leave markets to their own devices, this will result in a market performing at an equilibrium level. This is based on the assumption that all other things are equal (Ceteris Paribus) such as that perfect competition exists in the market place.

– We can clearly see from any demand and supply diagram that if we operate at a price higher than the equilibrium price than this will result in excess supply. This is because if you look at the x-axis you can see that quantity supplied is greater than quantity demand. It is obvious from my other post that the reason for this is that as price increases less people are able  or willing to afford the good.

– Similarly, if a market operates at a price lower than that of the equilibrium price then this will result in excess demand. This is because again if we looked at a demand and supply diagram we can clearly see that the quantity demanded is greater than the quantity supplied. I can think of a great example to reflect this imbalance, when Topshop have a sale the price of their goods is reduced, the demand for sale products is great but the amount of goods that are available (the pretty ones that is) is very low. This results in people having their demand not met.

Important to note: That all movements along the curve are down to price changes. All shifts are down to non-price determinants such as weather, tastes, incomes, price of substitutes and complements etc.

The Basic Economic Problem

The basic economic problem is the problem that in the real world there are scare resources, that is limited quantities of resources and unlimited wants of these resources. Economists have to be able to make distinction between a want or a need in order to see whether they are limited or unlimited. Needs is something humans need for survival e.g. food. Wants are something, which are not needed for survival e.g. an iPod.

Resources have to be allocated which means choices have to made. The basic economic problems means that societies need to decide:
– What to produce
– How to produce it, and
– For whom to produce it

Every time we make a choice we fail to choose another option and the benefit lost from the next best opportunity is called opportunity cost. For example, right now you have chosen to watch this video your opportunity cost might be talking to your friend on the phone.

There are four factors of production that bring some form of output to the world. These are:
1. Land- includes premises and all natural resources e.g. timber, farming
2. Labour – workers and human resources
3. Capital – all manufactured resources e.g. machines, vehicle, building tools
4. Entrepreneurship – Involves risk taking, setting up a new business etc.

Out of production we get to two types of goods: economic goods and free goods. Economic goods are goods that are made from resources, which are scarce like oil. So free goods are goods made from resources, which are not scare like air.

Sustainable resources are those, which can be exploited over and over again because they can renew themselves e.g. sunflowers. In contrast, resources such as coal and oil cannot be replaced therefore are not sustainable.

The Theory of Supply

What is the theory of supply?
At higher prices, a larger quantity will generally be supplied than at lower prices, ceteris paribus (all other thing being constant). So at a lower price a smaller quantity is produced.

This simply describes the upward sloping supply curve. The curve denotes that there is a ‘positive’ or ‘direct’ relationship between price and quantity. As one factor increases so does the other.

But why does this happen?

Suppliers have the incentive of profits, if a crop is doing well they will try and shift supply up so that they can make more profits.
The law of increasing opportunity costs means that as you increases supply of one good you must sacrifice greater and greater amounts of other resources. Therefore, as output increases , costs of producing goods increases thus the supplier must charge higher prices.

The supply curve

A supply schedule is simply a table of data showing the quantity that suppliers plan to supply at each level e.g.

A supply curve is a line which shows the quantity that suppliers plan to supply at each level e.g.:

Notice that as price increases the level of supply increases. (Positive correlation)

Shifts

The supply can shift left of right if there is a change in the quantity that supplier would supply at every price.

For example in this diagram we can see that the supply shifts to the right which is an increase in supply.
At price of P1, we can see supply increase (Sorry not that clear on this particular diagram) Notice a shift in the opposite direction from S1 to S0 would be a decrease in supply.

What causes these shifts to occur?

A shift in supply is caused by non-price determinants. There are 5 main ones you need to know:

1. Changes in costs of production: The lower the costs the greater the profit for producers. Examples of this are; input prices (raw material, rent etc.) , changes in technology (e.g. internet) , organisational changes , subsidies and taxes.

2. Profitability of alternatives; if another good becomes more profitable then a firm will switch t produce more of that e.g. the transition between cd players to MP3 players.

3. Profitability of goods in joint supply; If the supply of one good e.g. cattle increases then so will the joint good e.g.leather

4. Random shocks e.g. strikes, weather, wars, earthquakes etc.

5. Expectations of future price changes; for example if a firm expects price to rise they will either produce more or hold onto stock.

IMPORTANT:
NON-PRICE DETERMINANTS CAUSES SHIFTS AND PRICE DETERMINANTS CAUSES MOVEMENTS ALONG SUPPLY CURVE.

Need more help…check my video out!

Market Failure: Public, merit and demerit goods

Some goods are not at all provided by the private sector because there is no incentive to do so. These goods are called public goods and they are generally goods which ‘good’ for you. For example the ‘fire brigade’.
Public goods are distinguished by three key characteristics:

1. Non-rivalrous/ non-diminishable: This means that the consumption by one person will not reduce the amount for another for example, if someone watches a firework display then this does not reduce the ‘benefits’- enjoyment that others can receive from it.

2. Non-excludable: people cannot be excluded from benefiting in the good in any way for example everyone can receive benefit from street lighting, people who cannot afford it are not excluded.

3. Non-rejectable: for example just because you do not want to be protected the national defence does not mean you can have the choice to do so, it is good which you have to accept.

Some goods only have one characteristic and therefore fit in a completely different category. These goods are called ‘quasi-public goods’. An example of this would be the beach because it may be designed to be non-rivalrous, non-excludable and non- rejectable but this is not the case in reality. It usually is but if there are too many people then your benefit gained from consuming the good may be reduced. Also, not all beaches are 100% non-excludable because some beaches restrict smoking or people with dogs or even better some beaches are private.

Merit goods

These are goods, which are good for you but tend to be under-consumed because they are supplied through the private sector and there tends to be an information failure as well. It is usually because people aren’t aware of the benefits so the demand isn’t as high as it should be. These goods also cause positive externalities. For example, schools can be private and state-run. However, it is important that government has stepped in to produce state-run schools because otherwise many people would not go to school and this would have cause things like increased crime. Therefore, a merit goods like schools cause positive externalities i.e. going to school reduces crime.

Demerit goods

These are the opposite to merit goods; these are goods which are bad for you e.g. alcohol and cigarettes. If left to the free-market economy, then as the demand for these products tends to be inelastic, prices would be too low to compensate for the externalities produced and the quantity would be too high. Subsequently, the goods are overproduced. That’s why the government must intervene to cut the production and inform peoples of the negative impacts. Some goods have such major negative impacts that they have to be banned for example; illegal drugs like heroin.

This is linked into market-failure because of the free-rider problem. Firstly, negative externalities hold a big cost to society that’s why they can cause a market to fail i.e. if left to free-market everyone would be smoking cigarette which would stress the NHS and people would be spending their income on the wrong things. With merit goods, people would not pay for certain advantages they gain through activities of others and so they get a free ride. This mean there is no incentive of profits for the private sector and if no one provides for these goods like (e.g. street lighting) then the market fails.

Still need help then why not check my video out: