Download ECON 1001-B BONUS PRESENTATION

ECON 1001-B BONUS
PRESENTATION
Why there are so many hazardous food in
Mainland China, but it is rare to find such food in
HK, where it’s food is mainly imported from
China?
BONUS PRESENTATION
Recently, there are news reporting
that watermelons in China are
being injected with dyes. But why
those in Hong Kong aren’t found
with dyes?
BASIC ASSUMPTION
• To Solve these question, we are going to
have 2 basic assumptions.
• 1. High Quality food is sold at higher price.
In other words, Low Quality food is sold at
lower price.
• 2.There will be fixed cost entailed when
the food is imported to HK.
FIXED COST
• Those fixed cost can be tariff,
transportation cost.
• They are regarded as fixed cost as the
amount of those cost has no relation with
the quality of the good.
EFFECT OF THE FIXED COST
• The existence of the fixed cost will lead to
change in relative price of the HIGH
QUALTY WATERMELONS.
• We can illustrate that by observing the
following scenario.
SCENARIO
• Lets say:
Price of the HIGH QUALITY watermelons
is $5
• Price of the LOW QUALITY Watermelons
is $2
• FIXED COST entailed is $1
CALCULATIONS
•
•
•
•
•
•
In China, where there are no fixed cost,
Relative price of high quality watermelons:
$5/$2, i.e. 1HQ = 2.5 LQ
In HK, where there are fixed cost entailed,
Relative price of high quality watermelons:
$5+1/$2+1= $6/$3, i.e. 1HQ = 2 LQ
• HQ = High Quality watermelons
• LQ = Low Quality watermelons
OBSERVATIONS
• We can observe that there is a drop in
relative price of HIGH QUALITY
watermelons in Hong Kong, which is from
2.5 LQ to 2.0 LQ.
• LQ = Low Quality Watermelons
EXTENSION OF IMPLICATION
• This implication is not only for explaining
the case of watermelons, but also other
kinds of food.
COPE FINDINGS WITH DEMAND
CURVE
• We realized there is a drop in relative price
for HQ in HK.
• When we use the Law of Demand to
analyze this incident. We can find that
there will be an increase in Qd for HQ in
HK. (As price and Qd are negatively
related, according to Law of Demand.)
• Qd = Quantity demanded
• HQ = HIGH QUALITY Watermelons
EXPLAINATION TO THE
PROBLEM
• A higher Qd for HQ means that HK people
preferred HQ, thus it is relatively difficult to
find LQ in HK.
• Where in most cases, it is the LQ that are
problematic. As suppliers may not want to
dispose them, therefore they may add
different kinds of additives, which may be
toxic, to them.
EXPLAINATION TO THE
PROBLEM
• This explains why there are less
problematic food found in Hong Kong.
Although it’s food is imported from China.
• The reason leading to this phenomenon
can be attributed to the fixed cost incurred
when the food is transported to HK.
OTHERS WAYS TO TACKLE
• This may also due to the good quality
control of foods by the government, or
there may be many other reasons.
• The one I suggest is only one of them.
• THE END