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Chapter 22 Reflection

1. What concepts or theories did you find most interesting and/or useful? Is there an area where you changed your thinking?

I really enjoyed this class! I think my favorite chapter was actually the first one. I was the most intrigued and struck by the story of Marco Polo. I’d also been watching a TV series based on his life and to hear about it from an economic perspective and to see how far we've come to become a global economy was very exciting.

Asymmetric Information and Adverse Selection is a topic that many of you find interesting (and me also).

2. How do you manage the affects of asymmetric information when you are shopping?

I am the biggest nerd when it comes to grocery shopping. I check all the labels, make sure I’m buying the healthiest version of the product, and also look for more sustainably made products or companies. Buying local is a huge guideline for me, and it can sometimes break the bank but I feel like it’s important.

Chapter 21 Reflection

1. What did you find most confusing?

Again, with graphs, I always feel a little overwhelmed but I think I have a grasp on indifference curves. It seems to be a very interesting topic. I think the Khan Academy video helped a lot to explain as well.

2. What do you think about the concept of indifference curves in the context of budget constraints?

In my book, it calls budget constraints a budget line. It makes sense to me and I realized I have used this system of thinking when at the grocery store on a budget. Sometimes I do decide on higher priced items because of their value in my opinion.

3. Does the concept of indifference curves add to your understanding of demand curves? The existence of prices and income clearly leads to budget constraints.

Absolutely. This helps explain more of a personal level of what goes on.

4. Do you think about trade-offs for large purchases (ie a car payment versus rent/mortgage)?

I think that’s also dependent on need and price as well. If it came down to which is more necessary and which would satisfy the consumers need more with regard to the price, then yes there could be a potential trade-off.

5. How about small purchases? Does timing matter (probably you aren't purchasing both a car and a house at the same time)?

Things can go on sale or they can have promotions, so yes sometimes timing can matter if you can buy something at a lower price.

6. How does the concept of indifference curves inform your thinking about purchases?

It makes me think about the fact that there are other options that may be more efficient and equally satisfying so not every decision is set in stone - keep an open mind.

Chapter 20 Reflection

Poverty and inequality can have a very negative effect on our society. This chapter speaks on how inequality is measured by income ranges. Unfortunately, it is a general measurement that doesn’t take a lot of factors into play, like permanent income for example.

There are three main political philosophies when it comes to how income should be distributed. Liberalism, utilitarianism, and libertarianism are the most prominent views. Some tactics for redistribution are the minimum wage (and increasing the minimum wage) and negative tax, which means that the rich are taxed while the poor receive subsidies. These could be tested to prove whether or not they will be successful to help keep a healthy economy.

Chapter 19 Reflection

1. “In the United States, the Great Depression of the 1930′s caused federal, state, and local governments to enact poverty programs and unemployment assistance.”

Wow! I guess I’ve just never really thought about the when because, in my realm, they’ve always existed. It’s hard for me to wrap my head around our country not having these helping hands. Can they be abused? Of course, but I think it’s worth it to truly help those in need. Arresting children/youths for stealing food to survive - it sounds like we made the right decision. We can’t rely so heavily on charities. Sometimes we need something more permanent and reliable for people in such terrible financial situations.

2. “An interesting discovery was that whites and African Americans have very similar income dynamics. Over that period 40 percent of white, African Americans, and Hispanics increased their incomes by at least 5 percent, while about one-third of each group saw their incomes fall by more than 5 percent.” I thought this was very interesting. To be able to find similarities between different races that are otherwise fairly different. The income disparity seems to be fairly large but they do respond similarly to the same rises and falls.

3. “Economists explain this puzzle by noting that completion of schooling signals to employers that you are likely to possess traits that they are looking for. These traits are tenacity, discipline, endurance, all of which make you more valuable and productive.” I think is very valuable information. I hear it all the time - “you just need the piece of paper.” While you’re in school, of course you are bettering yourself and gaining knowledge and insight that may be very useful in the future but it really shows that you can stick with something. I think people get lost in spending countless dollars trying to go to a “good” school when they don’t realize it’s not too important unless you’re going to an ivy league school. Employers just want to know that you can do it typically and focus more on your personal strengths (in my opinion).

Chapter 18 Reflection

1. What is the difference between a factor market and a product market?

Okay answer: More competition.

Good answer: Factor markets are much more competitive. In product markets, firms are going up against other sellers but, in factor markets, firms compete for the same factor resources. Certain firms may compete for the same pool of labor, capital, and land.

2. What does an upward sloping labor supply curve mean?

Okay answer: More people want to work.

Good answer: Workers are responding to an incentive like increased wages and decide to work more instead of leisure hours.

3. What is a derived demand?

Okay answer: A demand for a factor.

Good answer: A demand for a factor that is determined by the firm’s decision to supply a good in another market.

Chapter 17 Reflection

1. I think that the cost of production of service is much lower than the consumer pays. There is, in that sense, a producer surplus. Because all of the cell phone companies set their prices around each other, I think they could be an oligopoly. They also make it very difficult (pretty much impossible) for entry of smaller firms into the market. I also think that our cell phone providers have been very tactical as of late. Sprint is offering the “cut your bill in half” promotion, where you bring your cell phone bill to them and they will literally cut the price in half. T-Mobile is trying to gain grounds by offering an “un-carrier” service where you don’t have a contract and they will pay your contract cancellation fees. It seems like it’s almost moving closer to a monopoly. There is an obvious struggle that is shown through their marketing efforts. On the other hand, if the cell phone service providers are able to compete and stay in the market, it could be very beneficial for the consumer because they are seeing better prices and services offered.

2. A decision box is a table that helps people understand the different choices and possible outcomes of a decision. The decision box consists of two subjects, firms, or people that have two different options to choose from. Their choice and the other’s choice decide the outcome. There are four specific outcomes that can result. This can be a great decision-making tool and also helps in visualizing all possible outcomes.

3. I found this chapter to be very helpful in discussing oligopolies. My memory was a little fuzzy on all the details. The examples definitely helped.

Chapter 16 Reflection

1. Marketing and advertising efforts can have a huge impact on monopolistic and oligopolistic markets. Because there are so many sellers, distinction and brand awareness are key. One firm can have a nearly identical product but because of the idea of the brand, it can make or break a consumer’s decision.

2. The story regarding the 50 cent coupons towards the end of the chapter caught my eye. I think it’s so true. It’s similar for websites like Groupon as well. Someone didn’t plan on going to Mexico, they found no real reason to travel there until they found an all-inclusive resort package for a great deal. There are so many different travel markets and destination spots that it can sometimes be hard to “shine through” and grab people’s attention.

Chapter 15 Reflection

1. I’ve never heard of a monopoly described as a firm being able to successful raise the price above MC. After reading about MC in the previous chapter, it’s interesting to think of it from that perspective.

2. Patents can allow for monopolies. In the previous reflection, I spoke of Monsanto. The agro firm has put patents on GMO seeds making it illegal to use their seeds without paying them directly for their “creation.” Monsanto is putting a lot of farmers out of business or taking them to court because of such patents. Some farmers are seeing contamination of their crops just by having seeds float over to their crops and they are completely clueless to the situation. Also, we are seeing less and less GMO seeds because they are more expensive and harder to get a hold of. I think it is not only potentially harmful and the results are unpredictable, but I also think it’s unethical. Many producers are being thrown out of an industry for trying to grow crops without GMO seeds and it’s nearly impossible.

Chapter 14 Reflections

1. A perfectly competitive firm maximizes revenues when P=MC because the firm wants to produce a quantity of output that equals marginal cost. MC is also more than MR.

2. In this type, you want MR to equal P because that is maximizing profits and is being more efficient.

3. The book mentions agriculture but I do wonder, with all the buzz about Monsanto, if this is still the case. It is difficult for any firm to remain perfectly competitive. Omitting the fact that Monsanto controls a lot of types of seeds and can drive other farmers out of business, the general basis of agriculture remains within the lines of perfect competition. This means there is so much competition from other farmers that the market price is taken as given.

Chapter 13 Reflection

1. At first, the marginal cost of an addition unit exceeds the marginal value and reduces profits. After continuation, the profit-maximization fule states that marginal revenue equals marginal cost so it meets an equilibrium and (obviously stated by the name of the rule) maximizes profits from there. I found a good example online which related this topic to cooking pancakes. If you want to make one pancake and have the necessary ingredients to make only one pancake but you spend around 20 minutes to only produce one pancake, it seems ludicrous. That’s a lot of effort for only a small yield. As you increase the production of pancakes, the marginal cost starts to make a little more sense until you’ve hit a “sweet spot.” It’s important to pay attention because it makes production more efficient, whether it be a firm or a person’s daily life.

Chapter 12 Reflection

I agree with the progressive tax system to a point. It can be unfair to the wealthy but it makes sense for those who are bringing in less income. Do I think it’s fair? Not really. But it does make sense economically. To be honest, as someone who would like to one day own a business and (hopefully) be well-off, I’d obviously prefer the flat income tax system because I think the decision is completely subjective. From a social standpoint, I would vote for the progressive income tax system because it is better for our society to be happier as a whole. It would decrease disparity.

Chapter 11 Reflection

A great and very beneficial example of a public good is the fire department. Especially in southern Colorado and California, we will see fire danger increase this summer. It’s such a vital service and is paid for with our tax money. There is no social cost involved, only social benefit. I think that this is the most efficient way to provide the service. This chapter didn’t necessarily make me think of public goods any differently.

Chapter 10 Reflection

A common externality that many people contribute to is carbon emissions from cars. While vehicles are such a positive addition to our society, they are a factor in causing global warming. I think that this negative externality is too large to use the Coase Theorem. Changing the way we use transportation would be a huge decision and would be extremely hard to internalize. There are tax benefits for having more “green” vehicles but that isn’t a huge incentive. People are set in their ways and, unless we make electric cars extremely attractive to the market, I don’t foresee any changes being made - at least in the next decade. I think regulations could help but there are so many hands in the market that government regulations would be impossible. In a previous economics class we watched “The Death of the Electric Car” and how major car companies were starting to move towards electric cars and then, with one fail swoop, they recalled all of them mysteriously. Many speculate that it was due to pressure from the government and/or people affiliated with oil. I think it will have to be an effort from consumers, producers, the government, and alternative fuel producers. Foreign oil and oil refineries in the US are making too much money and would never be willing to give that up.

#foreignoil oilmoney cleanenergy

Chapter 9 Reflection

I enjoy buying local. I even try to buy products made within the state of Colorado. It boosts the local economy and helps create more jobs. This chapter didn’t really surprise me because I’ve taken several economics classes that spoke on this topic. I think it can help countries that are less equipped or don’t have a comparative advantage to receive similar goods. Maybe they are in a drought and cannot produce some of the foods vital for survival. In this situation, I think that international trade can be very beneficial. It also breeds dependency. When one country is so profitable growing a certain crop and can sell it at a low price, it takes out a lot of the competition and a once sufficient area now relies on another country because it is more efficient. It does increase variety which many can agree is a positive influence on our daily lives but there can be a lot of politics that comes into play. One example of international trading gone wrong is foreign oil. We have had many issues with our dependency on foreign oil and people risk their lives daily to try to fulfill our need for this good. I find that very interesting. While we have scientists and companies creating ways to remove oil from the picture and move forward with clean energy, there are oil refineries and other companies that are so vast it’s almost impossible to do. I believe it is a good that we will not stop buying, regardless of environmental impact and political tension, until it is gone.

I see what the worry is in the article about the decline of manufacturing. I referenced a similar topic in a previous reflection regarding Apple and the fact that it is designed in LA but assembled in China. Our workforce and just space in general is too small to take on such a daunting task. Do I think it’s an issue? Definitely. I also think that China is in overdrive and is ruining their environment in the process. From a personal standpoint, I am happy our country is not overloaded with factories and industrial districts that are polluting our air, land, and water. From an economic standpoint, we are missing out on a huge piece of the pie.

I suppose that the ban on exporting natural gas makes sense. We have a product that is unaffected by the global market price-wise that helps us become less dependent on oil and we are sitting on a gold mine of it. The process of extracting through fracking is something I disagree with but I would prefer to keep the product within our national borders if we are going to frack.

Chapter 8 Reflections

Personally, I haven’t had any issues with taxes. Whenever I make a purchase, I am fully aware of the taxes and, if I want something taxes don’t matter. I know that, for some of my friends that live in the city in New York, cigarettes are very heavily taxed and that makes them think twice about buying a pack. I think it does create a deadweight loss but it is beneficial because it discourages an unhealthy habit and is ultimately positive. It definitely leads to a loss in consumer surplus. Unfortunately the market isn’t extremely affected because you’re dealing with a highly addictive substance. Some people will give up other products in order to pay for their habit but I’d like to think that it turns away some that are less addicted or users that would already like to quit smoking.

Chapter 7 Reflection

1. According to economists, efficiency is the allocation of resources that maximizes the total surplus in the market. It creates the highest level of economic benefit and is, therefore, economically efficient.

2. Consumer and producer surpluses are vital. An equilibrium is set when the consumer is paying less than they would be willing to pay and the purchase is incentivized. On the other hand, the producer is getting a surplus by selling their product for more than they ideally need to sell it for based on the cost to produce the product. It should come right in the middle to create a market equilibrium.

3. Absolutely. Efficiency is key and when there is market efficiency, it is easier to reach an equilibrium. While it does create randomness, it is natural.

Chapter 6 Reflection

1. This crisis in Venezuela references the price elasticity of supply. Because producers are halting supply, they can drive up price and also inconvenience both the rich and poor.

2. I still can’t believe they tried to overcharge survivors during such a crisis. I think that, if price controls had been implemented, the supply would have gone down. It’s extremely unfair but is a harsh reality with capitalism.

3. This article talks about how increasing the minimum wage helps attract more potential applicants but it doesn’t necessarily mean there are more jobs. In fact, the number of jobs available will go down because employers see labor as being more expensive.

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