Economics Project:Economics Project:

Demand & Supply, Resources

Allocation, International Trade

and Finance

Economics Project:Economics Project:

Demand & Supply, Resources

Allocation, International Trade

and FinanceGroup Members:Group Members:

Chau On TingChau On Ting

Tsang Yin Fong, Tsang Yin Fong, FloraFlora

Chau Sing LungChau Sing Lung

Event to be elaborated: Event to be elaborated: The Arrival of the Real Madrid.The Arrival of the Real Madrid.

P.S. press the buttons for explanations.P.S. press the buttons for explanations.

News abstractNews abstract

Hong Kong, July 30, 2003 –

The Hong Kong Football Association (HKFA) today announced that tickets for the eagerly-awaited Real Madrid match will go on sale to the public from Thursday July 31 at 9pm at the Hong Kong Stadium. Eager fans began queuing outside the stadium on

Monday, and demand for tickets is expected to be high.

Why did people queue up?Why did people queue up?Fixed no. of seat in the stadium??

Price of tickets are setPrice of tickets are setbelow the equilibrium??below the equilibrium??

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Since the no of seat of the stadium is fixed, the supply of the tickets are hence perfectly inelastic. (i.e. a vertical supply curve.)

The price of the tickets is set below equilibrium. The Quantity supplied is less than the quantity demanded.Excess demand arises. So, queues appeared.

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A black market MAY be created!

REAL MADRID has raised a whirlwind here. REAL MADRID has raised a whirlwind here. Tickets for their match were instantly snapped Tickets for their match were instantly snapped up and have been resold at huge profits. up and have been resold at huge profits. Fans have flocked to see their stars.Fans have flocked to see their stars.

News Abstract:News Abstract: (From 9(From 9thth Aug. Ming Pao “Editorial Creative Soccer Business”) Aug. Ming Pao “Editorial Creative Soccer Business”)

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Even though the price is Even though the price is higher than the normal one,higher than the normal one,it cannot be set infinitely. It has it cannot be set infinitely. It has to be accepted by the buyers.to be accepted by the buyers.Or no one will buy the tickets.Or no one will buy the tickets.

(The black market is cleared at thisprice.)

Resources AllocationResources Allocation

What to Produce??What to Produce??

For Whom to Produce??For Whom to Produce??

How to Produce??How to Produce??

BeckhamBeckham

2323

P.S. Press the bubbles for explanations.P.S. Press the bubbles for explanations.

What to Produce?During this wonderful event, many Beckham’s fans dasDuring this wonderful event, many Beckham’s fans dashed for his “football shirts” (no. 23). This caused the dehed for his “football shirts” (no. 23). This caused the demand of the shirts to increase. The price and quantity tramand of the shirts to increase. The price and quantity transacted of the shirts therefore increased.nsacted of the shirts therefore increased.

As the demand for the “football shirt” (no.23) increased,As the demand for the “football shirt” (no.23) increased, more resources will be put into the production of the spo more resources will be put into the production of the sports shirts.rts shirts.The market price of the shirts serve as a signal to guide thThe market price of the shirts serve as a signal to guide the producers on what goods and what quantities to produe producers on what goods and what quantities to produce.ce.

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How to Produce?In order to reduce costs, producers (Adidas) In order to reduce costs, producers (Adidas) will produce the shirts in the mainland China, will produce the shirts in the mainland China, Malaysia, Indonesia, etc. and transport them Malaysia, Indonesia, etc. and transport them back to the HK market to sell.back to the HK market to sell.

Factory in the mainlandFactory in the mainlandLabor employed in the mainland.Labor employed in the mainland.

Transporting to the main market.Transporting to the main market.Products to be sold inProducts to be sold inHong Kong market.Hong Kong market.

For Whom to Produce?

For the Youth?For the Youth?For the For the Rich?Rich?

For the For the elderly?elderly?

For the For the poor?poor?

The answer is: in a market The answer is: in a market economy like Hong Kong, economy like Hong Kong, goods are distributed goods are distributed to those who are willingto those who are willingand able to pay for the and able to pay for the price.price.

International Tradeand Finance

Since the shirts Since the shirts are produced in are produced in different different countries (China, countries (China, Malaysia and Malaysia and Indonesia),Indonesia),we are going to we are going to look at somethinglook at somethingabout the about the conversion of conversion of different different currencies.currencies.

Due to the arrival of the super football

stars, fans from all over

the world come to HK to

catch a glimpse of their idols. Businesses ( the service sector) were

done!

International Tradeand Finance

Airport ServiceAirport Service

HostelryHostelry

Fans from all over Fans from all over the world come to the world come to HK. This stimulatesHK. This stimulates

the businesses the businesses of the local service of the local service

sector.(increases thesector.(increases the demand for it) This demand for it) This increases the export increases the export

of service of HK!of service of HK!

Food and CateringFood and Catering

International Tradeand Finance

To Hong Kong, the shirts are treated as imports. It is To Hong Kong, the shirts are treated as imports. It is mentioned that the demand for the sports shirts mentioned that the demand for the sports shirts (no.23) increased rapidly, in another words, producers (no.23) increased rapidly, in another words, producers need to pay more (in terms of foreign currencies) for need to pay more (in terms of foreign currencies) for the imports in order to meet the increasing demand. the imports in order to meet the increasing demand. Hence, the demand for foreign currencies increased.Hence, the demand for foreign currencies increased.

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International Tradeand Finance

Producers need more foreign currencies to settle Producers need more foreign currencies to settle the payments of the imported sports shirts. the payments of the imported sports shirts. Hence, the demand of foreign currencies Hence, the demand of foreign currencies increased. (e.g. RMB is said to be appreciated.)increased. (e.g. RMB is said to be appreciated.)

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End of the End of the presentationpresentation