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BUS101 Case study--Katrina's Aftermath
 

BUS101 Case study--Katrina's Aftermath

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Case study: How economics effect business

Case study: How economics effect business

For Ms. Mahtab Faruqui's class

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    BUS101 Case study--Katrina's Aftermath BUS101 Case study--Katrina's Aftermath Document Transcript

    • Summer 2011Introduction to Business(BUS 101)
    • Case Study 01 by Group 02June 6, 2011Submitted to:Mahtab FaruquiSenior Lecturer, B.B.S.Office: BU 0626mfaruqui@bracu.ac.bdDone By:Group 2 of Section 06Sl. No. Name I.D. no.1. Pranto Bhowmick 103040562. Kazi Nikita Nur 101050083. Golam Asfia 113040574. Samiya Yesmin 113040435. Nikita NandiniPage 2
    • Case Study 01 by Group 02June 6, 2011Assignment 01:Case study: Katrina’s Aftermath[From Page 57, Understanding Business, (8thEdition), William G. Nickels, James M.McHugh & Susan M. McHugh, McGraw-Hill, 2008]Under Chapter 02:How Economics affects Business:The Creation and Distribution of WealthPage 3
    • Case Study 01 by Group 02June 6, 20111. No economic system has been able to respond quickly to the devastationcaused by war or natural disasters. Why is the free market system morelikely to respond faster? What advantages does a socialist system have inresponding to the need of the poor?ans: In a capitalist economy, it is the market that largely determines the goods andservices to be produced and at what price, according to the market’s demand andsupply quotients. Private entities have the complete freedom of trade. Therefore attimes of crisis a free market system is most likely to respond faster as they are ableto determine the requirements of supply through its demand and can divide andhelp through all kinds of different ways possible. People have the freedom ofchoice and ownership and with the minimum of government rules to wade throughhelps further form such a quick response. As was seen while fighting the havoccaused by hurricane Katrina, when a private company Acadian Ambulance setupcommunication satellite system and helped coordinate rescue teams.A socialist system is mostly owned by government, where profits are evenlydistributed among the people. Private businesses are highly taxed; thisredistribution of taxes in socialism gives privilege to the underprivileged. Socialistgovernment thus provides more free education, health care benefits, utilities etc.for everyone, unlike any other economic system. Enabling it to be more beneficialto the poor as it enforces equality and provides basic necessities of life.Page 4
    • Case Study 01 by Group 02June 6, 20112. What should the government do to better coordinate the efforts ofchurches, other nonprofit organizations, government agencies, business &individual citizens when emergency strikes? What factors have hinderedsuch coordination in the past?ans: When an emergency strikes everything swirls off-balance chaos reigns in. Theproblems that occur mostly during such times are rescue missions being delayed,victims do not receive relief supplies for days, some affected areas get all the helpwhile others do not receive any, it is also seen that 75% of the relief fund does noteven reach the victims and are instead filling pockets of various corrupted people,who were responsible for the fund and the biggest problem is victims who havelost everything have a very hard time starting over as they no longer have anythingof their own.To overcome all these hindrances government should make better organizedemergency plans which can be immediately effective for such times. In case ofnatural disasters, weather forecast should be given high importance and fastorganized evacuation started. To avoid delay in rescue missions and to properlydeliver relief supplies organized coordination between the government and all sortsof charitable NGOs is a necessity. Problem of government laws preventing outsidehelp to enter the affected country can be overcome by timely management or byremoval of such laws. Government could ensure total non-corruption by employingstrict laws and severe penalties against offenders and by employing officials whowill have the responsibility to ensure proper usage of funds. To help the victimsstart over, government could put more money into their banks, to provide loanswith low interest rates. And with such team effort by the government and everyindividual, we shall be able to help more victims during and after emergencies.Page 5
    • Case Study 01 by Group 02June 6, 20113. When disasters hit an area, the cost of everything seems to go upimmediately: food, water, housing, gas and so forth. Explain why thisphenomenon may be a good thing, using the laws of supply and demand toexplain your answer. What would happen if prices did not go up?ans: In a free market economy, price mechanism determines the price, i.e. theforces of demand and supply determines the price. When a disaster like Katrinahits a place, the supply of basic necessities like food, water, gas etc. fall and as aresult price increasesIt can be seen from the diagram below that as supply falls from S, to S2,there is a contraction QN in the demand of these goods and services. A newequilibrium point B is established. The price rises from OP to OP2.The price increase is good because if the forces didn’t adjust the price therewould have been no fall in demand even if there was a fall in the supply of thesegoods and services, resulting in demand exceeding supply and creating a shortageof the goods and services. If the price mechanism doesn’t work, the shortagecreated by excess demand will result higher afflictions for people because of lackof availability of goods and service, and as a result standard of living falls. As theprice is higher, demand is limited causing people to buy only the most basicamount needed preventing bulk buying. In addition, there will be an increase insupply of these goods and services in the long run because of suppliers will beattracted to the new increased price and profitability. Without a price riseproducers will not be motivated to produce more and hence the shortage willpersist. Hence a price rise in such situations ameliorates the situation.Page 6
    • Case Study 01 by Group 02June 6, 20113. When disasters hit an area, the cost of everything seems to go upimmediately: food, water, housing, gas and so forth. Explain why thisphenomenon may be a good thing, using the laws of supply and demand toexplain your answer. What would happen if prices did not go up?ans: In a free market economy, price mechanism determines the price, i.e. theforces of demand and supply determines the price. When a disaster like Katrinahits a place, the supply of basic necessities like food, water, gas etc. fall and as aresult price increasesIt can be seen from the diagram below that as supply falls from S, to S2,there is a contraction QN in the demand of these goods and services. A newequilibrium point B is established. The price rises from OP to OP2.The price increase is good because if the forces didn’t adjust the price therewould have been no fall in demand even if there was a fall in the supply of thesegoods and services, resulting in demand exceeding supply and creating a shortageof the goods and services. If the price mechanism doesn’t work, the shortagecreated by excess demand will result higher afflictions for people because of lackof availability of goods and service, and as a result standard of living falls. As theprice is higher, demand is limited causing people to buy only the most basicamount needed preventing bulk buying. In addition, there will be an increase insupply of these goods and services in the long run because of suppliers will beattracted to the new increased price and profitability. Without a price riseproducers will not be motivated to produce more and hence the shortage willpersist. Hence a price rise in such situations ameliorates the situation.Page 6