Curves, yes curves. That was one of my biggest take always from this class. It might seem silly that my biggest take away was that of curves. Learning more about supply and demand curves has really showed me how the economy can shift them. The shift in these curves taught me how there are so many variables that come into play in the economy that shift the curves.

Public goods and natural monopoly are the two things that first came to my mind of topics where my thought really changed. I thought I truly knew what those two things were, but after learning more about them I had a better understanding and could see what did and did not qualify something to be considered one.

I manage the affects of asymmetric information when shopping a few different ways. If it something I have great knowledge in myself, I approach it different then areas where I lack knowledge. When buying cars or snowmobiles, I go into it acting like I know very little about them. I then ask very average questions and see how the seller replies. Then I will get under them or in the engine bay and do my own screening. Based of the sellers answers to my original questions, I can usually see how honest they were being with me when they thought I new nothing about mechanics. This has saved me in the past from buying bad vehicles and also come out very good. Personally, if it is an electronic device and I don’t know much about it, I will ask my questions and then have someone who knows a lot about the item look it over for me. If the seller is not willing for me to have someone look it over for me, then I know there is usually something wrong with it.

Is there a time with the indifferent curve, that a consumer won’t be equally happy? I find it hard to believe that the consumer will always be happy with “x” amount of one item and “x” amount of the other. I could be very wrong, but was wondering if there are any times when this is the case?

I think that the indifferent curve is a great way to view your options when you have a budget constraint. The curve shows at what points the person will be satisfied with two items, and how many of each item they will receive. The marginal rate of substitution also shows how many of one item someone is willing to give up to have “x” number of another item.Indifferent curves go to show more how the demand curve works. With the indifferent curve, if someone demands more of an item the indifferent curve will show how they will then receive less of another item. Having learned more about indifferent curves, I can look more at my own life and see how I give up one item for another. I am constantly facing trade-offs. I just sold my snowmobile and trailer, to use that money to start my business back up. My trade-off was not being able to snowmobile anymore so that I had cash flow to buy more equipment for my company. The indifferent curve will always be in the back of my head when I make purchases now. I will always think, what am I giving up having less of by making this purchase? Even a small purchase such as, buying a pack of red bulls at the grocery store. If I were to not buy the red bulls, maybe I would treat myself to a coffee out one morning.

I think as humans it is hard for us to visualize how a bunch of small purchases could add up to that large purchase. Also, many people do not have the delayed gratification to wait to save the money for the large purchase. People like the buy then and now, instead of waiting.  

Chapter 20 focuses on income inequality and poverty. The chapter is then broken down into three main topics; The measurement of inequality, the political philosophy of redistributing income and Policies to reduce poverty. Economist use a table that contains quintiles. That is dividing the population into 5 quintiles, each with the same number of people in each quintile. Each quintile then shows the percent of total income that it brought in. In 2014, the bottom quintile received 3.6% of all income in America for that year. The lack of reduced poverty is contributed to the increase of inequality. The political philosophy of redistributing income is divided into three main categories: Utilitarianism, Liberalism and Libertarianism. Utilitarianism is when the logic of individual decision making to questions concerning morality and public safety is applied. Liberalism is when government chooses policies that are considered just. Libertarianism is the philosophy that government should punish crimes and enforce voluntary agreements but not redistribute income. There are many policies to help the poor. Some of the most well known policies are minimum wage laws, welfare, negative income taxes and in-kind transfers. While these policies are aimed to help, they have many side affects. Very high effective marginal tax rates tend to discourage the poor from escaping poverty.

Chapter 19

1. When reading about human capital, I started to think more in depth. With employers generally willing to pay more for someone who is highly educated, rather than someone not educated, I know understand better why certain employers will pay for someone to go further with their degree. My brother worked at an engineering company of trucks, they would pay for him to get a masters, because the cost of them paying for it will be beneficial to the company because he will be more knowledgeable.
2. Hard work usually always pays off. When reading this section about effort, I thought of myself. I started a job at a golf course as a greens keeper the first year. I put all my effort into that position and had a natural ability of working with machinery. The next year I was an irrigation technician, making more than people that had been there 6 years.
3. The signaling theory of education caught my attention. While I agree that people view people with a higher standard if they have a four-year degree, I don’t think it is always right. I know many friends from high school who got a 4-year degree, but didn’t learn anything in those 4 years. I know people from high school who didn’t go to college and will be more successful in life than those who did just to do it.

Question: What causes the labor-demand curve to shift?

Good Answer: A shift in the labor-demand curve can be caused by the output price, technological change, and a few other factors. The output price is changed when the value of the marginal product changes. The marginal product value is calculated by multiplying the marginal product times a firms output price. When the output price changes, there is a shift in the curve. New technology usually increases the marginal product of labor, which in turn shifts the demand. Other factors could be one such as, a factory relying on an item that they don’t produce, to produce their product. If the product they rely on is in a shortage the curve could also shift.

Okay Answer: Output price and technological change could shift the labor-demand curve.

Question: What causes the labor-supply curve to shift?

Good Answer: Change in tastes, change in alternative opportunities and immigration can all shift the labor-supply curve. A change in taste or attitudes towards work can shift the labor-supply curve. Think if it became the norm that almost every highs schooner’s had a job and went to work right after school everyday of the week. The supply of labor would increase and the curve would shift. Alternative opportunities can also shift the curve. If there was a Qdoba and Chipotle side by side, and Qdoba raised there starting wage $4 higher than Chipotle’s, the supply of laborers at Qdoba would rise and drop at Chipotle. Thus, causing the curve to shift. Immigration can also play a huge role in the supply of labor. When more and more people from Mexico started migrating to America, the supply of labor dropped off in Mexico and rose in America, causing the curve to shift.

Okay Answer: Change in tastes, change in alternative opportunities and immigration.

Question: What are the three most important factors of production?

Good Answer: Land, labor and capital are the three most important factors of production. Land is the physical space. Labor is the time someone gives up for a benefit. Capital is the assets, such as machinery or computers in a factory.

Okay Answer: Land, labor and capital.

1. Pretend for a moment that this is Twitter and you only have 140 characters to respond in — write a tweet defining and/or describing oligopoly.

Oligopoly is a market structure in which only a few sellers offer similar or identical products

2. Can you think of a market that was an oligopolistic market, but has changed and is now either leaning monopoly or Monopolistic competition?  Were regulatory agencies involved? (Good or bad.)

I think that Kellogg Cereal is leaning towards a monopoly. There are still many brands of cereal on the shelves today, but Kellogg is leading the market for cereal.

1. Muse a little about the role of advertising in industries classified as monopolistic competition or even oligopoly. Can advertising make markets either more or less competitive?  How?

I believe that advertising makes markets more competitive. In todays world, companies are all about advertising. Think of how much companies are willing to pay to have a commercial during the super bowl. People today are all about social media, and always on their phones. Companies know this and take advantage of it. I might google something and then 5 minutes later I have an add for that item on my Facebook. Advertising makes the markets more competitive because they are always comparing themselves to a competitor. Think of a cell phone carrier, they will have commercials that show where they have service and list two other companies that don’t have service in that area. This drives those other companies to improve their business to then compete with the company that just made them look bad. To me, advertising in todays market is a never ending battle for who and why they are the best.

• What was the most interesting thing you learned in this chapter?  Why was it interesting to you?

I thought it was interesting how economist view “brand names” compared to generic. It is said that people tend to by brand name items because they know of the quality they are receiving before even buying. I also think it has to do with their marketing techniques for the item. Big brand name companies spend more on advertising, therefor they usually have someone famous in their ad. Think of Icy Hot, they have Shaq, a very famous basketball player in the advertisements. People see this and think, “well if Shaq uses it for his pain it must work well”. This gives Icy Hot the upper hand. While the generic version is probably a lot cheaper and works just as well. I personally try to buy generic brand items to save money, unless I know there is a big difference in the quality.

After reading this chapter, my views on what I thought might be a natural monopoly changed. For example, the US Postal Service, I thought of as a natural monopoly. It is actually a legal monopoly. It is legally protected by the government, therefor has the upper hand on the prices they charge. For example, they sell stamps, if they increase the price of stamps, you will more than likely have to pay the increased priced stamp.

Water companies are a example of a regulated monopoly. They choose to give these companies the monopoly so that there weren’t multiple companies trying to run the pipes in a town to supply water to everyone. They also did this because they can put a price cap on it and people aren’t charged a outrageous amount for their water. That is where the government regulated part comes into play. I think if multiple water companies were competing in one town, the price would go up to a certain point and then level out.

They maximize revenues when p=mc, because when mc=mr they are making their greatest profit. They decide on a level of output for when mc=mr.

P=MR in this market type because the price is set in the market and firms are price takers. Given that its revenue is proportional to the output, if they increased their price they would loose money because the demand would be lower and if they reduced their price they would cheat themselves out of money they could make.

I think of the market for eggs when looking back on this chapter. While maybe every egg is a little different from the next, a egg is an egg. Those in this market selling eggs, have very little control on the price they can sell their eggs at, as the market decides the price. With so many companies in the market of selling eggs, if one raises their price, the consumer will buy another brand and still pay the market price.

Marginal cost are known to fall and then rise, creating a U-shape on a graph. At the beginning of production, not all inputs are being utilized correctly. One more units are added to production, the inputs are then utilized more efficiently. You then reach a point where limited resources are being used up and and your cost starts to rise. When your cost starts rising you begin to see less of a return.

Marginal cost are very helpful to firms, when they are deciding to increase or decrease production. Firms should produce until the point that marginal cost equals marginal revenue. When those two equal each other, they are maximizing their profit. If a firms marginal revenue is greater than the marginal cost, they should produce more units. If the firms marginal cost is greater than the marginal revenue, they should produce fewer units.

A personal example for me is with my landscape company that I am starting back up. I’m currently in the market for a new dump trailer. While I could save money by getting a smaller trailer that does not require me to have a cdl, I have opted to get a bigger trailer and get my cdl. I will pay more up front for a bigger trailer and to get my cdl, but in the long run I will be able to take bigger jobs and haul around loaders and heavier equipment. The opportunity cost for me is the higher priced trailer up front and giving up that money to eventually make more money by getting bigger jobs.