Impact of Trade Barrier Elimination

Introduction

By 1993, nations in the European Union (EU) had eliminated all barriers to the flow of goods, services, labor, and capital across their borders. Even such things as consumer protection laws and the types of plugs required to plug in appliances have been standardized to ensure that there will be no barriers to trade. The Single Market, officially known as the European Single Market, was established through a series of initiatives and treaties, most notably the Single European Act of 1986. Its goal was to create a unified economic space where goods, services, capital, and people could move freely across EU member states. While substantial progress had been made by 1993, it's important to note that some barriers and disparities still existed and continue to exist today. For example, certain regulations and standards may vary between member states, and there may be differences in areas such as taxation, social policies, and healthcare systems. Additionally, the EU has expanded since 1993, with new member states joining, which has added complexity to the process of achieving full economic integration. The EU has continued to work on deepening and expanding the Single Market, and it remains one of the most ambitious and successful economic integration projects in the world. However, the complete elimination of all barriers to trade and full harmonization of regulations across all member states is an ongoing process and has not been fully achieved even by 2023.

Impact of Trade Barrier Elimination: Fostering Growth and Integration in the European Union

The elimination of trade barriers within the European Union (EU) by 1993, often referred to as the completion of the single market, had a significant and positive impact on EU output. This process aimed to create a unified economic space where goods, services, labor, and capital could move freely across national borders, fostering economic integration and cooperation among member states. I reckon that there are some of the key ways in which the elimination of trade barriers affected EU output. First of all, removing tariffs, quotas, and other trade barriers made it easier for businesses in one EU country to sell their products and services in other member states. This led to a significant increase in intra-EU trade, as companies could access a larger market without the hindrance of customs duties or other protectionist measures. The single market also allowed businesses to operate on a larger scale, taking advantage of economies of scale. Companies could expand their production and distribution networks, which often resulted in lower average production costs. This increased efficiency contributed to higher output levels.

In addition, the removal of trade barriers exposed businesses to more competition from across the EU. This incentivized companies to improve their products and services, reduce prices, and innovate, ultimately benefiting consumers. This kind of single market may also largely attract foreign investment as companies from outside the EU sought to establish a presence within the bloc to access the unified market. Moreover, the free movement of labor allowed workers to seek employment opportunities in other EU countries more easily. This helped to address labor shortages in certain regions and industries and contributed to a more efficient allocation of labor resources. The elimination of capital barriers encouraged financial institutions to operate more seamlessly across the EU. This facilitated the flow of capital to where it was most needed and reduced financing costs for businesses, further supporting economic growth. Overall, I believe the elimination of trade barriers within the EU led to increased economic output and growth. It promoted efficiency, competitiveness, and the allocation of resources to their most productive uses. It also deepened economic integration among member states, contributing to the EU's position as one of the world's largest and most prosperous economic blocs.

Challenges of Economic Integration in the European Union: Disparities, Sovereignty, and Labor Mobility

However, while the elimination of barriers to the flow of goods, services, labor, and capital within the European Union (EU) has brought many benefits, it has also been associated with certain disadvantages and challenges. Unevenly development is one of them. Economic integration may not benefited all regions and sectors equally within the EU. Some regions and industries have experienced significant growth, while others have faced economic decline and job losses. This can lead to disparities in income and living standards among member states and regions. In addition, as member states harmonize regulations and policies to facilitate integration, they may cede some degree of national sovereignty to EU institutions. This loss of control over certain policy areas, such as trade or competition policy, can also be a concern for those who prioritize national autonomy. The free movement of labor within the EU has led to increased labor mobility, which can be a double-edged sword. While it provides opportunities for workers to find employment across borders, it can also lead to concerns about competition for jobs, social services, and cultural integration in destination countries. 

The disadvantages of EU integration are subject to ongoing debate, and opinions on these issues can vary widely among different stakeholders, member states, and citizens. The EU has taken steps to address some of these challenges, such as by implementing regional development policies and social programs to reduce disparities among member states and regions. Nonetheless, these disadvantages continue to be important factors in discussions about the future direction of European integration.

Reference

Achievements and benefits. European Union. (n.d.-a). https://european-union.europa.eu/priorities-and-actions/eu-priorities/achievements_en

EU Single Market - Consilium. (n.d.). https://www.consilium.europa.eu/en/policies/deeper-single-market/ 

Single Market, Capital Markets Union. European Union. (n.d.). https://european-union.europa.eu/priorities-and-actions/actions-topic/single-market_en 

 

Empirical Evidence, Empirical Research, and Empiricism

Empirical Evidence, Empirical Research, and Empiricism

Psychologists and scientists often use the terms "empirical evidence," "empirical research," and "empiricism" in the context of scientific studies. These terms are fundamental to the scientific method and research process. Empirical evidence refers to information or data that is obtained through direct observation or experimentation. It is information that can be observed, measured, and verified by one's senses or through instruments and tools. In scientific studies, empirical evidence is crucial because it provides objective and concrete support for hypotheses and theories. Empirical research is a systematic approach to gathering and analyzing empirical evidence. It involves the use of the scientific method to collect data, conduct experiments, or carry out observations to answer research questions or test hypotheses. Empirical research aims to provide reliable and verifiable findings that contribute to the body of scientific knowledge. Empiricism is a philosophical and epistemological stance that emphasizes the importance of experience and sensory perception as the foundation of knowledge. In psychology and many other scientific disciplines, empiricism is a fundamental principle, as it promotes the idea that scientific claims should be based on observable and measurable evidence rather than speculation or intuition.

Gathering Empirical Evidence | Our Human Sensors

When gathering empirical evidence, our body rely on many sensory organs and cognitive abilities. We use our eyes to observe and gather visual data. Our ears enable us to perceive auditory information. The sense of touch allows us to feel and gather tactile data. Taste helps us evaluate the properties of substances through our taste buds. Our sense of smell helps us detect and identify various odors. Our ability to remember past experiences and observations is crucial in building empirical knowledge. Our thinking, reasoning, and problem-solving abilities help us process and interpret the data we gather through our senses. These sensory inputs and cognitive functions work together to create our understanding of the world through empirical evidence. 

Be Careful to Process 

One thing I would like to mention is that we are now heavily rely on many social media platforms to understand the world more than we did in the past. Indeed, social media platforms have become a significant source of information and a means of understanding the world for many people in recent years. However, while social media has brought many benefits in terms of information dissemination and access to diverse viewpoints, there are also misinformation, disinformation, and fake news are prevalent on these platforms, and users need to critically evaluate the information they encounter. Social media algorithms can create echo chambers where users are exposed primarily to content that aligns with their existing beliefs, potentially reinforcing biases and limiting exposure to alternative viewpoints. Excessive use of social media can have emotional and mental health effects, including feelings of anxiety, depression, or social comparison. I think that, while we rely on many sensory organs and cognitive abilities to gather empirical evidence, we must carefully process those information in mind. Although social media platforms have become a prominent tool for understanding the world and connecting with others, users should approach them with a critical and discerning mindset. Balancing the advantages of access to information and diverse perspectives with the potential drawbacks of misinformation and privacy concerns is essential in using social media effectively.

Experience and Observations

Day-to-day living experiences and observations can be considered a form of empirical evidence. This is because empirical evidence is information that is derived from direct observation or personal experience. When you see, hear, touch, taste, or smell something, and when you remember or think about what you've observed, you are engaging in empirical observations. However, it's important to note that not all personal observations are equally reliable or scientific. Empirical evidence in a scientific context is typically subject to certain criteria, including objectivity, repeatability, and systematic data collection. In scientific research, empirical evidence should be gathered and analyzed in a rigorous and systematic manner to ensure its validity and reliability. While personal observations are a starting point, the scientific method involves testing hypotheses and conducting experiments to draw conclusions from empirical evidence in a more systematic and objective way.

References

chris.drew.98031506. (2023, September 5). 15 empirical evidence examples. Helpful Professor. https://helpfulprofessor.com/empirical-evidence-examples/ 

Gentsch, A., & Kuehn, E. (2022, May 3). Clinical manifestations of body memories: The impact of past bodily experiences on mental health. Brain sciences. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9138975/ 

Hutmacher, F. (2019, September 19). Why is there so much more research on vision than on any other sensory modality?. Frontiers. https://www.frontiersin.org/articles/10.3389/fpsyg.2019.02246/full 

Merriam-Webster. (n.d.). Empirical. In Merriam-Webster.com dictionary. Retrieved December 3, 2019 from https://www.merriam-webster.com/dictionary/empirical

What is empirical research? definition, types & samples. Research.com. (2023, May 12). https://research.com/research/what-is-empirical-research 

The scientific method

The scientific method is indeed a systematic approach to investigating and understanding the natural world, including human behavior. When we refer to "science" as one way to explain nature and psychology as one way to explain human behavior, it means that the scientific method is a powerful and widely accepted tool for acquiring knowledge and understanding phenomena. However, it's important to recognize that there are alternative ways to explain behavior, although they may not be as rigorous or empirically grounded as the scientific method. In psychology, the scientific method involves formulating hypotheses, conducting experiments or observations, collecting data, and analyzing that data to draw conclusions. Psychologists use this method to study various aspects of human behavior, such as cognition, emotion, perception, and social interactions. The scientific approach emphasizes objectivity, replicability, and the use of empirical evidence to support or reject hypotheses.

Before the development of modern psychology as a science, philosophers such as Plato and Aristotle contemplated human behavior and offered philosophical explanations. For example, Plato's tripartite theory of the soul or Aristotle's virtue ethics are philosophical approaches to understanding behavior. In addition, many cultures have their own belief systems and explanatory frameworks for human behavior rooted in religious or spiritual beliefs. These explanations often involve concepts like fate, karma, sin, or divine will. People often rely on everyday intuition or common-sense explanations for behavior. These explanations may not be based on systematic observation or empirical evidence but are nonetheless influential in shaping our understanding.

Literature, art, and storytelling have long been used to explore and interpret human behavior. Literary works and artistic creations often provide insights into the human condition, although they are not typically empirical or scientific in nature. Sigmund Freud's psychodynamic theories, though based on clinical observations, are not strictly scientific in the contemporary sense. These theories delve into the unconscious mind and often rely on interpretations rather than empirical testing. While these alternative ways of explaining behavior may provide valuable insights and have cultural significance, they often lack the systematic and empirical rigor of the scientific method.

I reckon that the scientific method's strength lies in its ability to produce testable hypotheses, gather empirical evidence, and refine our understanding through repeated experimentation and observation. Alternative explanations, while valuable in their own right, may not always lead to the same level of consensus and generalizability that scientific findings can achieve.

Reference

Castillo, M. (2013, September). The scientific method: A need for something better?. AJNR. American journal of neuroradiology. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7965632/ 

JSTOR: Browse by subject. (n.d.-a). https://www.jstor.org/subjects 

Lorenz, H. (2009, April 22). Ancient theories of soul. Stanford Encyclopedia of Philosophy. https://plato.stanford.edu/entries/ancient-soul/ 

What is the scientific method? 7 steps to test conclusions. (n.d.-b). https://www.indeed.com/career-advice/career-development/scientific-method-steps 

Zhang, W., & Guo, B. (2018, August 6). Freud’s Dream Interpretation: A different perspective based on the self-organization theory of dreaming. Frontiers. https://www.frontiersin.org/articles/10.3389/fpsyg.2018.01553/full 

Gasoline "prices at the pump" go up and down and Oil "costs per barrel" go up or down, but they do so at different rates and even in opposite directions sometimes

Gasoline "prices at the pump" go up and down and Oil "costs per barrel" go up or down, but they do so at different rates and even in opposite directions sometimes.  We want to think that demand and supply controls prices where the cost of crude oil is set by the same economic conditions that determine the price of gas.  What are these mismatched trends telling us about how demand and supply work in the market?

To answer this question, first we have to understanding how gasoline is used(demanded) and produced(supply) is essential for comprehending the dynamics of supply and demand in the market. If we deeper dive into these aspects, we may better understand how they relate to the mismatched trends in gasoline prices and crude oil costs. Gasoline is primarily used as a fuel for internal combustion engines in vehicles, including cars, trucks, motorcycles, and boats. Therefore, fluctuations in gasoline demand are closely tied to factors such as vehicle ownership, driving habits, and economic conditions such as transportation. Industrial and commercial applications, such as generators and small engines, are also need gasoline.

In addition gasoline also serves as a feedstock or raw material for the production of various goods and chemicals. This application of gasoline is primarily associated with the petrochemical industry. Gasoline is a source of hydrocarbons, and it can be further processed to extract valuable petrochemicals. These petrochemicals serve as building blocks for the production of a wide range of products, including plastics, synthetic rubber, solvents, detergents, and chemical intermediates used in the manufacture of pharmaceuticals, textiles, and more. The petrochemical industry plays a pivotal role in transforming gasoline and other petroleum products into a wide array of valuable materials and products that are integral to modern life. The demand for these petrochemicals can be influenced by economic factors, technological advancements, and shifts in consumer preferences, further affecting the overall dynamics of the gasoline market. 

Now, let’s talk about the “supply” side of gasoline. The supply side of gasoline involves the production and discovery of crude oil, which is the primary raw material used to produce gasoline. Oil companies use geological surveys, seismic studies, and other techniques to identify potential oil-bearing areas. Once a promising location is identified, exploration wells are drilled to assess the presence of crude oil. If a well indicates the presence of crude oil, production wells are drilled to extract the oil. 

Crude oil is processed at refineries to separate it into various petroleum products, including gasoline. The refining process involves distillation, cracking, and other chemical processes to break down the crude oil into its component parts. After production, gasoline is transported to distribution terminals and then to individual gas stations. These stations store and dispense gasoline to consumers. When gasoline is ultimately sold to consumers at gas stations, the retail prices may vary based on factors like location, taxes, competition, and operating costs. Moreover, since crude oil and refined petroleum products, including gasoline, are traded globally, changes in international supply and demand, geopolitical factors, and currency exchange rates can impact the availability and pricing of gasoline in different regions. 

As we can see that he supply of gasoline is closely tied to the supply of crude oil, as gasoline is a product derived from crude oil through the refining process. Therefore, fluctuations in crude oil production, exploration, and transportation can have a direct impact on the availability and pricing of gasoline in the market. Additionally, geopolitical events like Russia invaded Ukraine and economic conditions can influence the supply chain at various stages, further affecting the supply side dynamics of gasoline.

Now, let’s summarize the demand and supply of gasoline to get our answer. First of all, gasoline must be transported from refineries to distribution points and then to gas stations. Factors like transportation costs, disruptions in supply chains, and logistical challenges can affect gasoline prices independently of crude oil prices. Secondly, gasoline is also subject to environmental regulations that can vary by region. Different regions may require specific gasoline formulations, which can affect production costs and supply. Thirdly, changes in consumer preferences toward more fuel-efficient vehicles or the adoption of electric vehicles can affect gasoline demand. Similarly, innovations in engine technology and alternative fuels can influence demand patterns. In essence, the mismatched trends between gasoline prices and crude oil costs highlight the intricate interplay of supply and demand factors throughout the entire gasoline production and distribution chain. These factors can diverge from the fluctuations in crude oil prices due to the complex interactions within the market and the influence of various external factors, as outlined above. 

The mismatched trends between gasoline prices at the pump and oil costs per barrel can be attributed to several factors that affect the pricing dynamics. Changes in oil costs per barrel may not immediately reflect in gasoline prices at the pump. There can be a time lag between changes in the cost of crude oil and adjustments made by gasoline retailers. This lag can be influenced by contractual agreements, inventory levels, and pricing strategies employed by oil companies. In addition, gasoline prices are not solely determined by the cost of crude oil. They also include costs related to refining, distribution, taxes, and marketing. These additional costs can fluctuate independently of crude oil prices and contribute to the mismatched trends.

Gasoline prices can be influenced by competition among retailers in a particular area. In regions with more competition, retailers may absorb some of the fluctuations in crude oil costs to attract customers, leading to slower or less pronounced changes in pump prices. Government taxes on gasoline are also a significant component of the price at the pump. These taxes can remain relatively stable or increase even as crude oil costs decrease, leading to a divergence in trends. Moreover, consumer demand for gasoline may not always respond immediately or proportionally to changes in gasoline prices. People may continue to consume fuel at similar rates despite price fluctuations, especially in the short term. Furthermore, financial markets and speculative trading can introduce volatility into oil prices, leading to rapid and sometimes unpredictable changes that may not align with underlying supply and demand fundamentals.

Overall, to understand these concept, you can image that you are one of the oil providers or consumers. When the oil supply anciently increase, what would you do? You may not immediately become aware of such changes. You just use your car and consume petroleum products as usual. Then, you begin to see more and more gas stations start to put on lower and lower price tags. At this time, you begin to think about changing your consumption. Similarly, when you are running an oil company, increasing significant amount of supply, is not an easy task. You have to carefully monitoring whether the demand is actually increasing in the long term, so you can start such investment. As you can see that the consumers and the producers are not always changing their mind as quick as possible. Moreover, we are making such choices at the margin, rather than completely down to zero, and our choices are not always sensitive and simultaneous to the prices.

In summary, the mismatched trends in gasoline prices and oil costs demonstrate the complexity of energy markets. While supply and demand are fundamental drivers, other factors, including taxes, distribution, market sentiment, and geopolitical events, can lead to temporary divergences between the two. The demand and supply model provides a useful framework, but real-world markets are influenced by a wide range of variables that can cause prices to move differently and sometimes in opposite directions.

Reference

Competition in Roadfuel - OECD.org - OECD. (n.d.-a). https://www.oecd.org/competition/CompetitionInRoadFuel.pdf 

Khan Academy. (2012, January 2). Market equilibrium | Supply, demand, and market equilibrium | Microeconomics | Khan Academy [Video]. YouTube.

Open and free content on JSTOR and Artstor - about JSTOR. (n.d.-b). https://about.jstor.org/oa-and-free/ 

Petrochemical Industry. Petrochemical Industry - an overview | ScienceDirect Topics. (n.d.). https://www.sciencedirect.com/topics/earth-and-planetary-sciences/petrochemical-industry 

Rittenberg, L. & Tregarthen, T. (2009). Principles of Economics. Flat World Knowledge.

U.S. Energy Information Administration - EIA - independent statistics and analysis. Refining crude oil - the refining process - U.S. Energy Information Administration (EIA). (n.d.). https://www.eia.gov/energyexplained/oil-and-petroleum-products/refining-crude-oil-the-refining-process.php 

U.S. Energy Information Administration - EIA - independent statistics and analysis. Regional gasoline price differences - U.S. Energy Information Administration (EIA). (n.d.). https://www.eia.gov/energyexplained/gasoline/regional-price-differences.php 

The price elasticity of demand

 Suppose you are the manager of a restaurant that serves an average of 400 meals per day at an average price per meal of $20. On the basis of a survey, you have determined that reducing the price of an average meal to $18 would increase the quantity demanded to 450 per day.

1. Compute the price elasticity of demand between these two points.
   
2. Would you expect total revenues to rise or fall? Explain.
   
3. Suppose you have reduced the average price of a meal to $18 and are considering a further reduction to $16. Another survey shows that the quantity demanded of meals will increase from 450 to 500 per day. Compute the price elasticity of demand between these two points.
   
4. Would you expect total revenue to rise or fall as a result of this second price reduction? Explain.
   
5. Compute total revenue at the three meal prices. Do these totals confirm your answers in (b) and (d) above?

To compute the price elasticity of demand between two points, you can use the following formula:

PED = (% Change in Quantity Demanded) / (% Change in Price)

In this case, the initial quantity demanded (Q1) is 400 meals per day, the initial price (P1) is $20, the new quantity demanded (Q2) is 450 meals per day, and the new price (P2) is $18.

First, calculate the percentage changes:
% Change in Quantity Demanded = ((Q2 - Q1) / Q1) * 100

% Change in Price = ((P2 - P1) / P1) * 100
% Change in Quantity Demanded = ((450 - 400) / 400) * 100 = 12.5%

% Change in Price = (($18 - $20) / $20) * 100 = -10%

Now, use these values to calculate the price elasticity of demand:
PED = (12.5% / -10%) = -1.25
The price elasticity of demand between these two points is -1.25.

With a price elasticity of demand of -1.25, this means that demand is relatively elastic (elasticity greater than 1). When you reduce the price, the percentage increase in quantity demanded is greater than the percentage decrease in price. Therefore, you would expect total revenues to rise because the increase in the number of meals sold will more than offset the decrease in price.

To compute the price elasticity of demand between the new points, where the price is $16 and the quantity demanded is 500 meals per day, you can use the same formula as in question 1:
PED = (% Change in Quantity Demanded) / (% Change in Price)
Q1 = 450 meals per day, P1 = $18

Q2 = 500 meals per day, P2 = $16
Calculate the percentage changes:
% Change in Quantity Demanded = ((500 - 450) / 450) * 100 = 11.11%

% Change in Price = (($16 - $18) / $18) * 100 = -11.11%

Now, calculate the price elasticity of demand:
PED = (11.11% / -11.11%) = -1
The price elasticity of demand between these two points is -1.

With a price elasticity of demand of -1, demand is unitary elastic (elasticity equals -1). A unitary elastic demand means that the percentage change in quantity demanded is exactly equal to the percentage change in price. Therefore, a further reduction in price from $18 to $16 would result in no change in total revenue because the increase in quantity demanded would offset the decrease in price.

To compute total revenue at the three meal prices, you can use the following formula:
Total Revenue = Quantity Demanded × Price

At $20 per meal and 400 meals per day:

Total Revenue = 400 meals/day × $20/meal = $8,000/day

At $18 per meal and 450 meals per day:

Total Revenue = 450 meals/day × $18/meal = $8,100/day

At $16 per meal and 500 meals per day:

Total Revenue = 500 meals/day × $16/meal = $8,000/day

These totals confirm the answers in (b) and (d) above:

When the price decreased from $20 to $18, total revenue increased.

When the price decreased from $18 to $16, total revenue remained the same.