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The Price of Cannabis is Falling Suggesting a Supply Glut

Categories: EconomicsPrice

This article appeared in the United States section of the print edition under the headline”Disjointed”SummaryHazy regulations encourage American marijuana firms to list in Canada. Although 29states across the USA have legalised cannabis and 7 states as well as the District of Columbiaallow recreational use the Federal government of America still considers marijuana illegalmeaning that companies that sell this cannot transport across borders.

As thus prices arebeginning to fall as a result of increasing supply and competition in those states. CritiqueCannabis manufacturers across the US face a lot of intense taxations from the stategovernment as they are legal in the eyes of the federal government they cannot appeal andhave to face crippling taxes like 70% of their revenue.

These companies are forced to complydue to their unique nature (illegal to the federal government but legal to some stategovernments). This has forced to dodge banks and conduct their business from armoredvehicles. This loophole allows them to work in complete secrecy being free from the law aslong as the keep business within the state and free from taxes as they do not operate throughbanks.

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Now all these companies still operate in fear of the Federal government so they havenot gone large scale but the sheer number of these companies is as a result of the low barriersof entry and relatively low risks assuming they keep the business within the state. Followingthe Laws of demand and supply the increased supply has caused a decrease in price tobalance out the market.

Apart from falling prices these firms are at a lacking when it comes toinvestors.

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The cannabis business although legal in many states is still very sketchy and mostinvestors would rather avoid the scrutiny of the federal government. The state governmentwere getting increased revenue from the exaggerated taxes they placed on these companiesbut now that they have found ways to avoid it all together the state should begin to reinstatethe laws that prohibited the drug.

I believe originally these corporations were only legalised by the state to use them asa source of extra revenue but now that they are able to avoid the tax they are just increasingthe concentration of cannabis in these states. The companies do face ups and downs also inthe sense that they are experiencing falling prices which can be explained by the law ofdemand and supply.

As the supply of cannabis increases there will be increased competitionand a surplus of the good in the market. Therefore the suppliers have to reduce the price ofthe good to increase demand and keep it at equilibrium. For the state government they havelost a source of extra revenue and control of the cannabis production in the state. The citizenand or consumers have little or nothing to lose in this case but they still do enjoy reducingprices.

In conclusion I feel state governments are losing control of the situation in the US andwould find it more advantageous to bring back the laws that made cannabis illegal incooperation with the federal government.

New initiative to Boost Foreign Trade and Investment(Economic Growth and Development)

Summary

The Nigerian Economic Diplomacy Initiative (NEDI) was launched by the country’svice president Yemi Osinbajo on April 5th. NEDI aims to improve Nigeria’s growth anddevelopment through the facilitation of market access. The article summarises the main aimsof the NEDI and the country’s plan to curb the predicted recession.

Critique

The country’s immediate response to the falling exports and foreign investments iscommendable as the country has been struggling with economic growth for a number ofyears. The quick response of the vice president to the decline shows motivation forimprovement in the country.

The NEDI plans to foster economic growth by firstly boostingrelations between local enterprises and foreign investors, this allows for more globalization asthe country’s most rural parts become integrated into the modern society. There will begrowth in the Gross Domestic Product as the local businesses grow and produce more.

Thefederal government should be doing everything in their power to protect the local businessesincluding adding tariffs and quotas on imported goods to discourage citizens from buyingimported goods. The economic growth of the country depends on a few factors that the governmenthas to control.

For example the government should avoid putting more money into circulationas that would cause more harm than good by drastically inflating the prices of commodities. FDI coming into the country will be increased if the local businesses become more covetedby these foreign investors. The recent drop in the FDI could be as a result in the change inadministration (the president).

The Central Bank of Nigeria (CBN) now has a lower exchange rate for the US Dollarthan the regular market price. This means that if you trade in dollars you would make moremoney going the the local exchange centres rather than The Central Bank and when you wantto convert back to dollars more money would be made going through the Central Bank.

Thismay be a a method of attracting foreign investors by making them see profit in investing inthe local businesses. The recent economic growth forecast for the country seems very gloomy but I agreewith writer in the sense that this pronouncement should not affect the progression of the panto increase foreign investments and also the export revenue to be continually dictated by theoil export.

I still expect an increase in the export of others goods mainly agricultural andelectrical (power) in the next few years. The article does cover a lot of facts and gives goodreason for the projected downward slope of growth the NEDI has yet to be fully realizedgiving space for improvement or growth or simply it might just be the recession stage in thebusiness cycle.

A Trade Truce between America and China is Over as Soon as it Began (InternationalTrade)

This article appeared in the Finance and economics section of the print edition under the headline”Peace in ourtime”SummaryOn December 5th the Canadian Justice Department reported that Meng Wanzhou,Chief financial officer of Huawei had been arrested. She was to appear before the court onDecember 7th.

The fate of this trade agreement depends on her encounter with the law as wellas both countries willingness to come to a consensus. CritiqueThe Chinese-American trade agreement is of a very high importance especially toChina. America is one of their largest trading partners and the trade agreement could goalong way to encourage globalization and the formation of other trade agreements worldwide.

The allegations involve something along the lines of selling technology to Iran at America’sbehest. This seems like political salvo and considering that the agreement was already veryshaky. If this trade agreement goes down the agricultural exports to China from the USAwould be highly taxed. China is the US’s largest trading partner with 505.5 billion US dollars worth of goodsimported last year.

This is a great loss for both the US and China. Considering that there areno written legislations forcing the foreign companies to give their proprietary technology tochinese partners so having the trade agreement wouldn’t stop this problem as it is not rootedin the law.

Another big problem of this trade agreement is China’s constant failures in thepunishing of people and or companies that engage in intellectual property theft. The gapbetween what the two countries are working towards is also a huge problem.

Whereas the USwants to push for big changes and drastic advances in the Chinese economy China wishes tosimply expantiate on the already present plans. This is a very big set back to an otherwisevery useful trade agreement. It would be more profitable for both countries for example;China does change a few of its existing protocol but not to drastically and the US can work toimprove on the existing protocols.

Concerning the arrest the from the Chinese aspect they are still struggling to see thatthe ill fated arrest was not to cause complications between the two countries. China hasalready begun accepting soya beans and natural gas from the States but they have to put inmore to change and become more adaptable for the trade agreements to go a long way to goin terms of change.

The US have to work on easing the Chinese by proing the arrest is notjust a show of power but also not be excessive in the push for change in the Chinese economy

Ontario unemployment rate hits 18-year low, six months after minimum wage hike(Unemployment)Rachelle Younglai|Published August 10, 2018|The Globe and MailSummary

Although the recent increase in the minimum wage expected a huge loss ofemployment the unemployment rate has been on an all time low ever since the law has beenexecuted in the Ontario province. CritiqueThe original prediction of the increase in minimum wage causing a loss of jobs wascompletely wrong.

They believed in the long run the labor force would being to demand forhigher and higher wages and they would probably not be met as the companies could notafford the more expensive labor as a result they would just leave the job.

However theminimum wage increase was more than good enough for the labor force and it resulted inamassive increase in productivity. Apparently the reported workforce shortages also help toencourage employers to not part with their workers.

The recent fallout of NAFTA could also be a reason for the rise in unemploymentduring the period between April and July. There is still a lot of uneasiness concerning the freetrade between the US and Canada which is causing factory production to be slower and a lotmore tariffs to be imposed on the good s at the border hence the reduction in the labor forceavailable.

The Ontario labor force has done well to cope with the sudden large 21% increase inminimum wage but there are still some slight negative effects like with the loss of workers infactories as well as the lower paying jobs like retail trade and wholesale. The plan forincreasing the wage with the inflation rate may not be as promising as it sounds.

The inflationin Canada is about 1.61 percent and this will lead to a very slow growth of the minimumwage whereas the output of the companies as well as the needs of people are growing rapidly.

Therefore the more steady rise in the wage would be more profitable for the economy in thelong run. The Ontario market withstood a very large increase in the wage and although most ofthe jobs taken up have been part time the general drop in unemployment by about 0.7 percentis a massive for the entire countries economy.

The article did fail to highlight in what areaswould this wage increases affect the other provinces. In conclusion it would be moreadvantageous for them to move in smaller (about a dollar) increments every few years ratherthan moving with the inflation rate.

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The Price of Cannabis is Falling Suggesting a Supply Glut. (2019, Nov 23). Retrieved from http://studymoose.com/cia4u-isp-example-essay

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