Chapter 3

Article Link: http://www.economist.com/agenda/displaystory.cfm?story_id=11660270

Summary

The article I've chosen talks about the price change of electricity in South Africa. The government changes the price so that people will gain more benefits from the electricity. Since the price went up to 27.5%, the electricity could also cause more inflation. Food prices are currently rising faster than prices as a whole. Food is not the only factor though, because energy prices are also another cause of rising inflation to South Africa. With rising prices continuing to push the inflation, South Africa cannot continue to supply the cheapest power in the world and the new price change could make the demand go lower but it would become more reliable.

Connection

This article connects to the chapter because it talks about how the government changed the price ceiling for electricity. This price could become more of a problem for businesses or on households to make more savings. With this new price change the government set, it contributes to the inflation from other things as well such as the price of food. If the price ceiling was lowered, the public could be more happy because then the electricity could be more affordable, but the quality of the service the electricity companies give would be lower because they gain less profit.

Reflection

Electricity is one of those things that everyone needs. It is a good that is inelastic because the public can't find another place to find this electricity unless they make it themselves. To help prevent more inflation the government could issue some private companies that give electricity to those who maybe pay more. The people who pay more for their electricity could get better electricity that does not have as many blackouts that happen. By allowing privatization of electricity then they could keep the price of electricity for the public lower price ceiling so that inflation won't be caused. Many of the people don't mind the price ceiling going up because they feel that the benefit of having better electricity service is worth the extra cost.