the concept of a natural gas opec is becoming less far-fetched. on apr. 25-27, a little-known,...
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The concept of a natural gas OPEC is becoming less far-fetched. On Apr. 25-27, a little-known, four-year-old organization called the Gas Exporting Countries Forum will meet in Port of Spain, Trinidad and Tobago. Although the organization says it wants to promote cooperation with gas-consuming nations and "does not seek to control...pricing and supply," in past meetings members have discussed mutual efforts to capture a bigger share of the wealth generated by their own natural resources. That's exactly the line of inquiry that led to the formation of the Organization of Petroleum Exporting Countries 45 years ago.
Natural gas meets one key requirement for price-fixing: a high degree of market concentration. In the last quarter of 2004 members of the forum accounted for 53% of the natural gas imported by the industrialized nations belonging to the Organization for Economic Cooperation & Development. That's in line with the 52% share of OECD oil imports that OPEC provided in the quarter, according to the International Energy Agency. The Trinidadian hosts list the countries invited as forum members as Algeria, Bolivia, Brunei, Egypt, Indonesia, Iran, Libya, Malaysia, Nigeria, Oman, Qatar, Russia, Trinidad, United Arab Emirates, and Venezuela. Many are OPEC members and thus know a thing or two about price-fixing. Norway, Argentina, and Equatorial Guinea have been invited to observe.
Why now? For one thing, technology is making it easier to set up a cartel and enforce control over prices. Until recently almost all exported gas was delivered by pipeline under long-term contract. But with advances in natural gas liquefaction, more of the fuel is being delivered in refrigerated ships. That has led to a developing spot market, similar to that of oil. In a unified market with a single spot price, withholding output in one part of the world can affect prices everywhere.BusinessWeek, May 2, 2005
The Markets for Factors of Production
Chapter 18
Week 13
Three Factors of Production
Land
Labor
Capital
Derived Demand
The demand for factors of production is derived from the demand for the end products.
For example, if computer software is in high demand, then demand for computer programmers will be high.
Figure 1 The Versatility of Supply and Demand
Copyright©2003 Southwestern/Thomson Learning
Quantity ofApples
0
Price ofApples
Demand
Supply
Demand
Supply
Quantity ofApple Pickers
0
Wage ofApple
Pickers
(a) The Market for Apples (b) The Market for Apple Pickers
P
Q L
W
Definitions
Marginal product of labor (MPL): output of the last worker
Value of marginal product of labor (VMPL): value of output of the last worker
VMPL = P x MPL
Figure 2 The Production Function
Copyright©2003 Southwestern/Thomson Learning
Productionfunction
Quantity ofApple Pickers
0
Quantityof Apples
300280
240
180
100
1 2 3 4 5
Copyright©2004 South-Western
Figure 3 The Value of the Marginal Product of Labor
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0 Quantity ofApple Pickers
0
Value of the
MarginalProduct
Value of marginal product(demand curve for labor)
Marketwage
Profit-maximizing quantity
Shift Factors for Labor Demand
• Output Price
• Technological Change
• Supply of Other factors
Labor Supply
Labor supply reflects a trade-off between earnings from work and enjoyment of leisure.
Opportunity cost of leisure is foregone earnings.
Shift Factors for Labor Supply Curve
• Changes in Tastes
• Changes in Alternative Opportunities
• Immigration/ Outsourcing
Figure 5 A Shift in Labor Supply
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Wage(price of
labor)
0 Quantity ofLabor
Supply, S
Demand
2. . . . reducesthe wage . . .
3. . . . and raises employment.
1. An increase inlabor supply . . .
S
W
L
W
L
Figure 6 A Shift in Labor Demand
Copyright©2003 Southwestern/Thomson Learning
Wage(price of
labor)
0 Quantity ofLabor
Supply
Demand, D
2. . . . increasesthe wage . . .
3. . . . and increases employment.
D
W
L
W
L
1. An increase inlabor demand . . .
Table 2 Productivity and Wage Growth in the United States.
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Figure 7 The Markets for Land and Capital
Copyright©2003 Southwestern/Thomson Learning
Quantity ofLand
0
RentalPrice of
Land
Demand
Supply
Demand
Supply
Quantity ofCapital
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(a) The Market for Land (b) The Market for Capital
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Apollo: Global Healthcare ProviderApollo's range of medical services -- from the back office to the operating
room -- highlights the contradictions of the global outsourcing debate. In seeking to provide a wide range of services at a large discount to Western competitors, Apollo is yet another Indian company threatening jobs in the U.S. and other countries. On the other hand, Apollo's relatively inexpensive medical services have benefited patients from numerous countries. It also has helped India's overburdened health-care system. India has fewer than one hospital bed per 1,000 people, compared with more than seven in developed countries.
"We're showing that a field like medicine is very much a two-way street," says Prathap C. Reddy, 72 years old, a physician who founded Apollo and now runs it with his four daughters from Madras, also known as Chennai. "We can all grow from each other's strengths."