Download Market size, Fixed cost and Natural resource

The Relationship Among
Market size, Fixed cost and Natural resource
Course: comm423
Professor: Jing Chen
Students: Yuting Zhao (230057923)
Tingting Lv (230061520)
Due date: 2006-4-6
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Contents:
Introduction -----------------------------------------------------------------Page 2
Mogao Cave ----------------------------------------------------------------Page 3
Loulan Kingdom------------------------------------------------------------Page 5
Fiancial analysis------------------------------------------------------------Page 6
Bibliography-----------------------------------------------------------------Page 9
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Introduction:
Since ancient times, people have fought for the limited resources on earth; the
most recent fighting is probably the developed countries’ conflict over oil. The survival
or extinction of one country depends on the capacity of its natural resources such as
land, water, and minerals. Once a country has exhausted its natural resources, it will
lose its ability to develop and will fall behind other countries; it may even move on a
downward trend that threatens its survival. Thus, the stock of a country’s natural
resources is important for this stock is the bedrock from which the country can feed its
domestic population. In this paper, we will explore the relationship between market
sizes, fixed cost and nature resources.
When the population of a country increases, the size of its domestic market will
increase. The survival of the population depends on the country’s food supply.
Food
is the fixed cost that people have to expand on to maintain their lives. Human beings,
as warm-blooded animals, need to consume more food than cold-blooded animals in
order to support their body heat. Most food comes from natural resources such as
land. Food and natural resources will be depleted more quickly when there a large
population to feed than when there is only a small one to feed. We can use two
ancient cities to explain the relationship between market size, fixed cost and natural
resources.
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The Mogao Caves:
The Mogao Cave one of the world’s cultural heritages; it was the center of the
"Dunhuang" culture built sometime during the Qin Dynasty (1900 A.D), and was
substantially expanded during the Sui Dynasty. According to Tang Dynasty records, a
monk had witnessed onsite a vision of a thousand Buddhas under showers of golden
rays. Thus inspired, he started the cave construction work that spanned ten dynasties.
The Mogao Cave is commonly known as the Cave of a Thousand Buddhas. It is the
best example of Buddhist cave art to be found in China. The geographic location of
Mogao was at a strategic point along the Silk Route; in other words, it was at the
crossroads of trade as well as religious, cultural and intellectual influences. Usually, a
temple such as the Mogao Cave should be built in a region with abundant people
because they would facilitate the worshipers on their pilgrimages.
Also, the temple
could get donations from faithful pilgrims. The Mogao Cave was not an exception; it
was located closed to Dunhuang city which was oasis town at a crucial junction of the
Silk Road, an ancient braid of caravan trails stretching for more than 7,000 kilometres
from China to the Mediterranean and which served as a highway not just for
merchandise, but also for ideas--religious, cultural and artistic. Silk Road travelers
used to stop at Dunhuang to gather food and supplies before venturing further into
the Gobi desert. By the 4th Century AD, the Silk Road had brought Dunhuang
commercial prosperity and a growing Buddhist community as well as a huge
population (about 38,335) that lived in the Dunhuang district.
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As reported by Lionel Giles, we have the following census figures for the Dunhuang
district
Year
2 CE
140 CE
280 CE
609 CE
740 CE
households
11,200
7,748
6,300
7,779
4,265
persons
38,335
29,170
na
na
16,250
It is a bit difficult to generalize from data that are spread so widely apart, since events
during a relatively short period could cause the population to fluctuate widely.
Nevertheless, the overall trend seems to be a decline from the middle of the Han to
the eve of the Tibetan conquest during the Tang period. One likely explanation for the
decline would be that the re-routing of trade led to a decline in population. The other
reason could likely be that the bulk of the Dunhuang population was engaged not in
long-distance trade but in agriculture or in military operations which agricultural
pursuits supported. The population (“market size”) increased, and the fixed cost or
demand for food and water increased. In order to fulfill the need for food in that huge
market, the limited land and natural resources were overused so that the fertile land
became more and more lean. At the end of the Tang dynasty, the natural resources
were used up and people had to leave their hometown and look for a new place in
which to live.
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The Loulan Kingdom:
Loulan, an ancient city, existed during 206 BC and disappeared around 220 AD.
The city was located in Ruoqiang County, Xinjiang Uygur Autonomous Region. At the
beginning of the last century, a Swedish explorer, in his exploration, accidentally
discovered the city, which covers an area of about 100,000 square meters, buried in
the desert. The discovery startled the world. The city is in the shape of an irregular
square, the east city wall is 333 meters, the south wall 329 meters, and the west and
north walls each 327 meters.
Loulan was a sprawling kingdom of 360,000 square kilometers whose domain
bordered Dunhuang in the East and Niya city in the West. It had a population of over
14,000, and, as a key traffic hub on the ancient Silk Road, it served as an important
trading center between China and the West, welcoming streams of camels loaded
with exotic goods from many parts of the world.
Many visitors and caravans were
from the Mediterranean region. The discovery supplies precious materials for the
study of the relationships between the empire located in the Central Plains and
ancient kingdoms in the Western Regions, which covers the area of the present-day
Xinjiang and parts of Central Asia. It is also of great importance to the study of the
cultural exchanges between the East and the West. At that time, the central location
of Loulan was surrounded by a rich water and forest network; uncontrolled felling of
trees turned Loulan into a desert. Loulan, a lost kingdom in the Taklamakan desert,
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tells us that human beings can only survive in this world when their ways of life
maintains the environmental equilibrium. A huge population needs more food to
survive on and that could lead to an overuse of limited resources; the result could be
the demise of a city.
In the case of Loulan, flourishing human activities,
environmental degradation, and wars seriously threatened Loulan’s existence.
Resources can be divided into two categories: reproducible and non-reproducible.
Resources such as electricity and food are reproducible; land, oil, minerals, and water
are non-reproducible resources. So, the development of a country or a region can
generate opportunities for people to have a higher standard of living; at the same time,
these developments require the investment of huge volume of resources, both
reproducible and non-reproducible. People should manage their need for
non-reproducible resources so that they never break the balance of the environment
they live in. Once the environment is seriously damaged, a country or a region will
face the threat of perdition.
Financial analysis:
The level of fixed investment in a project (also known as fixed cost) depends on
the expectation of the size of the market. If the investors predict that the market size
is large, they will invest in the projects with high fixed cost to earn higher rates of
return. Thus, for human beings, food equals fixed cost and energy equals the rate of
return. If people want enough energy to maintain their life, they need to invest in the
fixed cost---food.
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From the above figure, we can see that with a higher fixed cost, the rate of return
is higher, and with a lower fixed cost, the rate of return is lower. Thus, if people want
more energy or a higher standard of living, they need more fixed cost, or more food or
natural resources.
Food comes from nature resources such as water and land. The above two
examples show that if the need for food increases as the population increases too
quickly, the land or natural resources would be exhausted.
With the rapid
consumption of natural resources, the natural resources become more and more rare.
And then people will fight for resources because the people who own the limited
resources will survive. That is also the reason why every dynasty starts with a war
and ends with a war. At the beginning of a dynasty, the population is small because of
the wars, and the resources for the small population are abundant. A stable
environment encourages people to multiply, so population will increase along with
time. When the population reaches a peak point, the resources will be insufficient for
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feeding the people. So the limited natural resources such as the land become more
and more rare. Thus, the conflict between people becomes more and more intense
because they want to seize the limited resources. Although the dynast can use harsh
laws to reduce the possibility of conflict, the laws cannot completely solve the
problems. Thus, wars between people cannot be avoided. During war time, a portion
of people will lose their lives, and a portion of people will remain. Then once again,
the limited recourses will be enough for the remaining population, so war stops and
society stabilizes again.
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Bibliography
1. “Dunhuang Ruin”, 2000, http://www.yutopian.com/travel/W/dh.html
2. “Loulan: Vanished in Sand”, January 15, 2005
http://www.uyghuramerican.org/about_uyghurs/history/loulan_
3. “Vanished in Sand/City Site in State of Loulan”
http://www.chinaculture.org/gb/en_artqa/2003-09/24/content_39404.htm
4. “The Ancient State of Loulan”,
http://www.chinaculture.org/gb/en_curiosity/2003-12/03/content_44421.htm
5. “Loulan – A Lost Kingdom in Taklamakan”
http://www.china.org.cn/english/travel/45241.htm
6. Jing Chen. “An Analytical Theory of Project Investment: A Comparison with Real
Option Theory”, 2006.
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