Elasticity of Demand
Elasticity of demand is an important concept within the consumer sphere. Businessdictionary.com defines “elasticity of demand” as
The degree to which demand for a good or service varies with its price.
The typical play is for demand to INCREASE as price DECREASES and vice versa. I will buy one delicious Cadbury Cream Egg if they are a dollar apiece. I will buy two if they are 75 cents apiece and I might well buy none if they go up to five bucks apiece.*
A good or service is said to be “elastic” if this variance is very strong- for instance, when the cost of a car goes down the company might sell more cars. In that case (indeed, in most cases) cars are said to be “elastic”. An example of an “inelastic” product is one that people just need regardless of price. Necessities like bread and toothpaste are examples of inelastic products.
Image Credit: Salvatore Vuono / FreeDigitalPhotos.net
*All lies. I will buy as many of those heavenly confections as will fit in my sadly INelastic pants pockets no matter the cost. They are the greatest things ever. I live for them and through them. All praise be to Cadbury.
What is Organic?
Certainly not that box of Cadbury eggs I put down yesterday, am I right? Heh. I kid, I kid. The actual definition of “organic” is
Big business. Very lucrative.
I guess I’m feeling ornery tonight. This is all true, though- organic food is a $26.8 billion industry in the U.S., and it’s been growing at about 20% annually for the past 15 years according to this Times Leader article. Through the dot-com bust and the recent recession, “organic” has remained a hot label that keeps people spending. But what exactly is “organic”?
The precise definition of “organic” in the U.S. is maintained by the Department of Agriculture. According to their website,
Organic production is a system that is managed in accordance with the Organic Foods Production Act (OFPA) of 1990…
The referenced OFPA is a living document that was most recently amended in 2005. It is a fantastic and relatively easy-to-read guideline containing many worthwhile definitions and statutes. You can find the PDF version here.
So, loosely, “organic” is whatever the government says it is. Farmers, manufacturers, and handlers must partner with the Department of Agriculture to obtain organic certification in order to reap the competitive advantages of the organic label. After clicking around on the National Organic Program’s website a little bit, I found a cool document that more or less lays out their requirements in raw, specific terms. You can find the outline here- click around for yourself. It gets really juicy around section 205.203.
A little light reading to start off your week!
What is “curated”?
“Curator” is not a new word. I’ve heard it used in relation to museums and art galleries all my life. According to merriam-webster.com, a “curator” is:
one who has the care and superintendence of something
However, I’ve seen the word “curate” pop up in two new contexts in the past month or so. The first time was in a recent CNNMoney.com article that I commented on in a post last month. It referred to U.S. Best Buys as taking a “curated” approach to retail: Best Buy looks at all the electronics products available and chooses certain products and brands to put on their shelves. That is “curating” a retail space. Think about how different chains carry different brands and how you can NEVER find New York Vanilla ice cream at Wal-Mart, only Target and DANG IT TARGET CLOSED HALF AN HOUR AGO.
…okay, I’m calm. Anyhow, I saw the term “curated” in a subtly different context today: a geekosystem.com articleabout the upcoming Nintendo handheld, the 3DS. Apparently Nintendo will host a “curated content” short-form video service for the 3DS. This means that Nintendo will make active decisions about what to offer on the service and when. Movie trailers, game trailers, interviews, advertisements… all of it will be intentionally selected to further Nintendo’s goals while appealing to their target audience.
“Curating” content and retail offerings is part of a trend towards businesses consciously maximizing every resource. Has this “curating” existed forever? Of course! TV networks, newspapers, a sales catalogues have always “curated” their content. But by boiling it down to a buzzword we can put new emphasis on this facet of business. Now where’s my New York Vanilla ice cream?
Baltic Dry Index
I’m a big index fan. I enjoy tracking numbers up and down from day to day and week to week. Not month to month, though. Who has the attention span for THAT? Kidding.
The newest index I discovered is the Baltic Dry Index, or BDI. The BDI measures the demand for room on cargo ships that transport dry bulk materials. A lower index means that fewer bulk materials are being shipped, which can be inferred to mean that less production is occurring around the world. A higher index means that ships are filling up due to more materials being shipped.
According to this old slate.com article, the BDI is an excellent leading indicator of market health because it measures transport of the first indicators of economic growth- raw materials. In an age where everyone wants to know what will happen ten moves before it happens, leading indicators are extremely valuable.
Nowwwwww the bad news: According to this easy-to-read chart on bloomberg.com, the BDI has been on a clear downward trajectory since October. I will dig deep and venture one guess as to why this does NOT mean that the economy is headed down down down: perhaps countries are sourcing more from their own materials reserves as oil prices rise? Eh? Who likes my idea?
Logistics!
Logistics is a hot topic in business management circles right now. Thanks to UPS it even has a theme song.
According to my BFF businessdictionary.com, logistics is
Planning, execution, and control of the procurement, movement, and stationing of personnel, material, and other resources to achieve the objectives of a campaign, plan, project, or strategy.
Logistics is an important topic because it directly impacts the timeliness, quality, and overall efficiency of any process. It has been at the forefront of factory design for many years, but now many industries are investing in logistics as a way to increase their bottom line.
The Long Position
I was reading an article about gold values (they topped $1400/ounce today) and I saw a reference to investors increasing their “long positions” on gold. Huh? What is a long position? The answer (according to freedictionary.com) is extremely simple. The long position is:
The ownership of a security or derivative, or the state of having bought one or the other.
That’s it. Someone has the “long position” on a stock (or other security) if they own shares of that stock. So basically, the “long position” is ownership. You can contrast that with the “short position”, but I’m late for a movie* so you’ll have to piece that together on your own.
Image Credit: anankkml / FreeDigitalPhotos.net
*False
360-Degree Feedback
Employee assessment is a delicate, high-stakes science. In some work environments(call centers, factories, production) defined metrics can provide a snapshot of employee performance over a period of time. However, in most cases the numbers alone do not tell the story. 360-degree feedback has become more popular in recent decades for assessing employees. According to businessdictionary.com, “360-degree feedback” is
Performance-appraisal data collected from ‘all around’ an employee- his or her peers, subordinates, supervisors, and sometimes, from internal and external customers.
So this provides a comprehensive portrait of an employee, which is great. Of course, there are drawbacks- this assessment method is obviously vulnerable to politics and social games. Metrics are still invaluable whenever possible. That actually reminds me of a book I read a few months back: Super Crunchers. The author posited that numbers (more than human intuition) hold the key to predicting and analyzing performance of everything from stocks to employees to educational systems and sports teams. But now we’re wandering far from the original topic.
In closing: 360-degree feedback provides a comprehensive human view of an employee. It can be vulnerable to politics and scheming, and should be used in conjunction with metrics wherever possible.
Now you know!
What is a “Bourse”?
While perusing Marketwatch this morning, I saw a headline about how strong Nestle profits are “supporting the European bourses”? Huh? I’ve never heard of a “bourse”. Is it a business? Is it a mass of consumers? Is it a special cricket move?
The Free Dictionary provides several definitions of “bourse”. The common thread is that a bourse is a
…common name for a securities exchange located in Europe.
So there we go. According to the Federation of European Securities Exchanges, some of these “bourses” include the Athens Exchange, the Luxemborg Stock Exchange, the Deutsche Borse, and the NYSE Euronext. The free Dictionary goes on to say that the word “bourse” originates from the French word for “purse”. Indeed, the national stock market of France is the “Paris Bourse”. So now you know!
Bill of Lading
A bill of lading (B/L) is a specialized form of receipt used in the shipping industry. As businessdictionary.com puts it, a bill of lading is a
Document issued by a carrier, or its agent, to the shipper as a contract of carriage of goods. It is also a receipt for cargo accepted for transportation, and must be presented for taking delivery at the destination.
Businessdictionary.com goes on to list several key elements of a bill of lading, which include shipper and carrier names, shipping dates, and all manner of details about the cargo being shipped. It is important to note that the term “bill of lading” hinges on the seldom-used word “lading”. As part of a special two-for-one episode of the Daily Biz, businessdictionary.com defines “lading” as
1. Placement of cargo in its transporting vessel.
or
2. Cargo carried in a transportation vessel.
So lading is either a noun (the cargo being carried) or, more commonly, a verb (the act of placing cargo in a vessel for transport). The more you know!
Consumer Price Index
The Consumer Price Index (or “CPI”) is a popular method of measuring inflation or (less commonly) deflation. According to my beloved investopedia.com, it works like this:
The Bureau of Labor Statistics selects a “basket” (grouping) of goods and services frequently used by average people. This can include things like food items, housing transportation costs, apparel, tuition, and medical care costs. The items are taken on a weighted average to produce a number which is then tracked for upward or downward movement.
When I first heard of the CPI I thought it was a cost-of-living indicator. Not so! It is actually a tool for measuring inflation and deflation. Increases in the CPI provide insight into inflation rates. Likewise, decreases in the CPI indicate deflation. Those decreases are rare, though we recently saw one in the total annual CPI from 2008 - 2009. Check out this table for a month-by-month breakdown of the CPI over the past ten years.
