Up in Rankings

The University of Hawaii’s College of Business Administration’s (UHCBA) undergraduate program has move up in rankings. This year the U.S. News and World Report ranked the program 13th in the nation, compared to 17th place last year. UHCBA tied with Indiana University-Bloomington. The UHCBA graduate program also went up by one place in the rankings for International Business to 21st place, tying UHCBA with Dartmouth College and George Washington University. The article acts like a free advertisement for the UHCBA as it encourages more students to consider the college based on its rankings.Since the UHCBA is higher in rankings, it will attract more students to want to go to school there. Going up in rankings can be measured as a non-price determinant, because it is an increase in measured quality. According to the Law of Demand, a change in any non-price determinant will cause a shift in demand. In this case there will be an increase in demand. With an increase in demand there will be more students applying to UHCBA. This will cause a shortage of classes available, and will require the price to increase until the point of equilibrium.The problem with this is that the UHCBA, and most other school systems in the U.S., are not in a free market system. Schools cannot adjust the tuition price based upon supply and demand; it is dictated by the state. Therefore, the way to compensate for this increase in demand is to make it harder to get into the school by raising the admission standards. Raising the standard will actually cause a decrease in demand, back to its original equilibrium point. Thus, eliminating the shortage of available classes. There is actually another way to eliminate the shortage of classes; the UHCBA could simply obtain more resources, for example more classrooms and professors.up-in-rankings.doc

Oahu to get 6 new Taco Del Mar Eateries by Spring

A new chain of restaurants that serves tacos is opening up here in Hawaii, the firm called Taco Del Mar is opening a total of nineteen restaurants. This year two other firms have also came into the market here in Hawaii they are Wahoo’s and Moe’s. All of these firms are in the so-called “Fresh-Mexican” (Mexi-Fresh) market, which is a sophisticated new market for Mexican food that excludes Taco Bell. Each firm offers similar products but tries to differentiate its self, for instance Maui Tacos uses Hawaiian ingredients and Hawaiian sounding names. Taco Del Mar differentiates itself by serving in a style similar to Subway whereas the other firm’s cook their food in a kitchen. This will have many implications on the Mexi-fresh Industry.All of these factors will affect the Mexi-Freh market in Hawaii in two ways because of one reason, the number of firms in the market with a close substitute product. One factor that will be affected will be the elasticity of demand of the entire market, making the entire market more sensitive to change in price. Before the new restaurants came into the “Mexi-Fresh” market, Maui Tacos was the only firm in the market making it a monopoly, which has a relatively inelastic demand curve. According to the Law of Elasticity of Demand the more elastic a product is the more sensitive it is to a change in price, which means that if you change the price a little then there will be a greater affect on demand, and the demand curve will become more horizontal or elastic. According to the news article all three of the new firms coming into the market provide close substitutes to Maui Tacos product, which will in turn greatly increase the elasticity of demand. There is also another factor that will affect price and it is supply. As the number of firms in the industry increases the supply for “Mexi-Fresh” products will also increase. This will cause the market price to decrease and the quantity demanded to increase. Since the elasticity of demand has increased so much, it will be difficult for individual firms to raise the price of their product because it will cause the quantity demanded to decrease greatly.Since Taco Del Mar’s main goal is to maximize profit, they will try to decrease the elasticity for their individual demand curve. Once they open up they will try to distinguish their self from the other firm’s in the industry, Taco Del Mar will do this by advertising. They will also distinguish them selves by marketing the style that they serve. Since Taco Del Mar prepares their products right behind the counter, in fort of the customer, they will have a relatively inelastic demand curve allowing Taco Del Mar to become a price setter to a certain extent. Other firm’s will have to advertise in order to convince potential customers that their product is different or superior to Taco Del Mar and the firm that has been in Hawaii all along, Maui Tacos.tacos-elasticity.doc

Smoking Ban is Law of the Land

Hawaii recently passed a new law concerning smoking, the law makes it illegal to smoke in many public places including all, restaurants, bars, airports, and partially enclosed facilities that are open to the public. This new has made many smokers upset claiming that it takes away their right’s but nonsmokers are happy to have a law protect their right to breathe clean air. Inorder to look at this issue in a rational way one must look at the economics of smoking and of the new law.Hawaii has the 11th highest tax rate per pack of cigarettes at 1.40 per pack (Taxfoundation.org). These regulations are designed to protect nonsmokers from the negative side effects of second hand smoke, but the tax doesn’t make that many people quit smoking. According to the book Curbing the Epidemic by the World Bank “researchers have found that a price rise of 10 percent for a pack of cigarettes decreases demand by about 4 percent (an elasticity of -0.4)” this proves that the elasticity of demand for smoking cigarettes is relatively inelastic. So the Government must step in and enforce regulations against smoking.The new law will make it much more inconvenient for smokers to smoke in public places, the increase in inconvenience is measured as an increase in price, so it will decrease the quantity demanded for cigarettes. Figure-1 illustrates the shift in supply and reduction in quantity demanded, which shows the increased inconvenience. The new law was created inorder to reduce the amount of places that people can smoke thus reducing the supply of places to smoke. The demand for cigarettes is relatively inelastic because nicotine is an addictive substance and there are no close substitutes. According to the World Bank Smoking regulations reduce “tobacco consumption by between 4 and 10 percent, according to various estimates” this is a much greater affect than changing the price of cigarettes. According to Figure-2 the marginal cost to society will be reduced by this new law, it will shift from E-1 to E-2, which will be an increase in cleanliness. This new law will affect the polluters (smokers) by reducing pollution causing activities.Since nicotine is such an addictive substance it will be hard for smokers to quit, therefore the government will have to step in again and offer more nicotine replacement therapy programs such as “Smoking Cessation”. This will make it much easier for them to quit smoking because it will provide needed support for smokers. Another long-term implication that this law will have is that it will prevent more people from starting smoking in the first place because fewer children will be exposed to cigarettes and less non-smokers at bars will be around smoking, which is a time when some people would be more likely to take a chance and try something they wouldn’t normally do since they would be inebriated. Although many smokers complain about the new law, it will greatly benefit society in the future by protecting our children.Sources:”The Tax Foundation – Tax Data for Hawaii.” Tax Data Hawaii. 11 OCT 2006.Tax Foundation. Accessed 6 Dec 2006 .United States of America. The World Bank.Curbing the Epidemic:Governmnets and the Economics of Tobacco Control.Washington, DC: GPO, 1999.tobacco-paper.doc