Economics Problems From a Broader Perspective, We

¶ … economics problems from a broader perspective, we need to apply macroeconomic principles. These principles help in understanding collective problems that various industry or countries are encountering and the role government can play in this connection. The paper studies current economic problems in the Transportation sector and explains how levels of supply and demand affect the demand curve.

MACROECONOMICS AND TRANSPORTATION SECTOR

Macroeconomics deals with economy on a larger scale and studies the principles of economics as they pertain to the whole industry and not just one firm. This helps in understanding national economic problems of inflation, unemployment, slow GDP growth, lower productivity etc. Therefore it is important to apply macroeconomics principles when we want to study and understand the problems being encountered by any economic system. For example in these days of slow growth, we notice that United States economic problems can be better understood in the light of macroeconomics than microeconomics. This is because we are currently encountering economic obstacles in almost all industries and their problems are collectively hurting the entire economy of our country. Let us focus on the transportation industry for example and we would notice that since the tragic events of September 11, the revenues for this industry have plummeted significantly. This is because travelling rate has witnessed considerable reeducation, as air transport is no longer considered safe. It is very important to bear in mind that it is not only aviation industry, which is suffering because of September 11 attacks, but also the transport industry in general is weathering stunned growth. The impact of this is being felt by air cargo service industry, which plays a dominant role in the businesses of major courier and shipping companies such as FedEx, UPS and DHL. In the last few months, we have noticed a sudden decline in the revenues of FedEx and UPS as both suffered from decreased consumer confidence. Consumers are no longer willing to blindly place their trust in any company and its shipping system and this is leading to improved security measures in every major shipping and courier firm. FedEx and UPS are both working hard to install sophisticated security equipment to screen all security packages and send an email to the recipient prior to delivery to inform them about the package and its exact delivery date. This helps in reducing fear, which is associated with opening unsolicited packages. Despite all these security measures both FedEx and UPS maintain that business has fallen considerably after the terrorists attacks last year and even during the holiday season, American chose to spend less on gifts which resulted in decreased revenues.

We must not forget that economics is all about choices people make everyday and deals with their behavior about selecting the best service or products when alternatives are available. The modern definition claims economics is, "The scientific study of the choices made by individuals and societies in regard to the alternative uses of scarce resources which are employed to satisfy wants." (See Ref 1) This definition indicates that economics is solely and intricately connected with satisfaction of wants, which in turn calls for an organized system of supply and demand. 'Demand curve' indicates the level of consumer demand for a particular service or product within a given period of time. When both supply and demand are proportionate to each other, it means that most firms are moving along the curve. But a shift in this curve occurs when supply is not proportionate to level of demand. For example when supply exceeds demand, we notice demand curve moving downwards and vice versa. To maintain a positive demand curve, firms are required to create demand for their service or product. They can do so either by discouraging competition or by improving their internal operating system. In the case of FedEx and UOPS, we noticed that they tried to create more demand by adopting more sophisticated security measures. But they also tried to manipulate external forces when they joined forces against foreign competition. This is where government comes into the scene. Macroeconomists feel economic conditions can be improved with federal actions, which revolve around fiscal measures (Fox, 1999). They also maintain that in order to make the demand curve move upwards, any industry must introduce collective measures. We noticed that in the past few months, FedEx and UPS both tried to improve their business by introducing extra security measures along with a united fight against German shipping service DHL. FedEx and UPS, both leaders in the cargo business in the United States maintained that in order to increase their revenues in the post September 11 world, they were required to make some changes in the screening system. But that was not all. They both joined forces against DHL's operations in the United States in their bid to crush foreign competition. UPS filed petition against DHL in which it asked Department of Transportation to investigate legality of DHL's American operations. According to U.S. law, American nationals must own carriers operating in the United States or they should have 75% stake in the company. This shows that government can often play a dominant role in improving economics conditions on a macroeconomic scale. For example of government refuses to allow DHL to continue its operations in the United States through its own carrier, this would give all shipping companies and many U.S. carriers a significant push upwards.