the euro.....

 

One of the looming topics in news, the long standing trouble in Greece, has grown to unstoppable heights. The euro in on the brink of failure and along with it the European union and the world economy. The hot topic now is whether or not Germany will bail them out..again.

In an article from the New York Times, the depth of Greece's economic problems are evinced: "Greece has been kept afloat by its fellow euro zone countries, but at a steep price: the austerity measures demanded by France and Germany in return for two massive bailout packages, totaling 240 billion euros, have ripped holes in the Greek safety net and plunged the country into a recession of near-Great Depression dimensions." 

However, much of the bailout money is not being used for Greece's benefit but flowing back into the troika's pocket. The troika is the European Commission, the European Central Bank and the International Monetary Fund. 

The Economist describes a strategic plan that could potentially bring Europe to economic stability: "First, it must make clear which of Europe's governments are deemed illiquid and which are insolvent, giving unlimited backing to the solvent governments but restructuring the debt of those that can never repay it. Second, it has to shore up Europe's banks to ensure they can withstand a sovereign default. Third, it needs to shift the euro zone's macroeconomic policy from its obsession with budget-cutting towards an agenda for growth. And finally, it must start the process of designing a new system to stop such a mess ever being created again."

Any way you look at it, Europe and especially Greece are in grave danger of the euro's failure along with economic downfall. Solving this major problem is going to take a lot or money and compromise which are both in low supply. 

http://www.economist.com/node/21529049

http://topics.nytimes.com/top/news/international/countriesandterritories/greece/index.html

http://www.economist.com/node/18899736 

The "Perfectly" Inelastic Demand of Starbucks

Every morning I MUST have my daily dose of coffee. Without it I am completely lost for the entire day. However, the coffee at Starbucks ( "Fivebucks" as my dad calls it) is somehow superior and I am willing to pay almost any price for their coffee. Obviously if it is 100$ for a tall latte I might cut back, but within reason my demand for Starbucks is perfectly inelastic. Firstly, their are few to no substitutes for Starbucks in walking distance or on my way to and from school and work. It is most definitely essential to my daily life. It does not require a large share of my wealth (or at least per each trip). And lastly must be purchased every morning...or else.

But what about the supply of coffee??

Surprisingly, there is a large supply of coffee beans grown and then imported into the United States. This accounts for the relatively  low cost (input price) to produce the venti skinny vanilla latte with a pump of carmel and light on the foam that I order every morning.

HOWEVER, because Starbucks has market power, they are what we call "price-makers" and can make large profits. Their coffee is highly demanded and consumers are willing to pay high prices. Therefore they charge a much higher price than the actual average total cost per cup of coffee.