Chapter 18: The Markets for the Factors of Production

This chapter talks about factors of production. It talks about capital which is the the economy’s stock of equipment and structures. Examples of this are profit, rent, and interest. The amount of money paid to landowners, workers, etc., depend on the supply and demand of those professions. The factors of production are the inputs used to produce the goods and services. Labor, land, and capital are the three most important factors of production. The demand for a factor of production is a derived demand. Derived demand is the demand for demand for a factor of production is derived from its decision to supply a good in another market. For example, the demand for gas station attendants is inseparably linked to the supply of gasoline. First, one has to analyze factor demand by considering how a competitive,profit maximizing firm decides how much of any factor to buy. The chapter talks about the production function which is the relationship between the quantity of inputs used to make a good and the quantity of output of that good.It also talks about marginal product of labor which is the increase in the amount of output from an additional unit of labor. Diminishing marginal product is the property whereby the marginal product of an input declines as the quantity of input increases. The value of the marginal product is the marginal product of an input times the price of the output. A competitive, profit maximizing firm hires workers up to the point where the value of the marginal product of labor equals the wage. Another important concept is that any event that changes the spply or demand for labor must change the equilibrium wage and the value of the marginal product by the same amount because these must always be equal. The purchase price of land or capital is the price a person pays to own that factor of production indefinitely. Rental price is the price a person pays to use that factor

Chapter 17: Oligopoly

This chapter talks about oligopolies. An oligopoly is a market that has a few sellers. It is different from monopolies because they have one seller. In a monopolistic competition, there are many firms with different products. Finally, in perfect competition there are many firms with identical products. This chapter talks about the concentration ratio which is the percentage of total output in the market supplied by the largest firms. It is usually over fifty percent and includes about four firms. The chapter also talks about collusion which is an agreement among firms in a market about the quantities to produce or the prices to charge. Sometimes, collusions form cartels,which are groups of firms that act in unison. Antirust acts have been set in order to limit the cartels from forming because of the impact that they may have on society. The Nash equilibrium is a situation in which economic participants interacting with one another each choose their best strategy given the strategies given the strategies that all the others have chosen. We also learn about the game theory which is the study of how people behave in strategic situations. In general, when firms in an oligopoly choose on their own how much to produce to maximize profit, they tend to produce a quantity greater than the level produced by monopoly and less than produced by competition.

Chapter 16

Chapter 16 talks about a different economic system from those in a perfectly competitive market or a monopoly. It focuses on monopolistic competitive markets such as an oligopoly. Some characteristics of a monopolisticly competitive market is that it has many firms and free entry. This chapter also talks about two ways in which conopolistically competitive markets are different from competitive markets. One reason is that in a monopolistic competitive market, there is an excess capacity. That means that it operates on the downward sloping part of the ATC curve. Another reason it is different is that each of the firms charges a price that is above the marginal cost of the item. Because the price is set above the marginal cost in a monopolistic competitive market, there are deadweight losses as a result. Another problem is that there can be too many or very few firms which are inefficiencies that are hard to correct by the government. The chapter also talks about how brand names are a problem because firms use them to manipulate consumers and to reduce the competition. Some believe that using brand names to compete gives firms incentives to improve the quality of their products and to lower their prices as much as possible. 

Article 5 Review

This article is achieving success, instead of pursuing economics. Scott Adams, who wrote Dilbert, wrote about how to achieve success by learning from your own mistakes. The difference between the advice Scott gives and the advice others give is to not be guided by your goals. His way of portraying people that are guided by the goals they set themselves, is in a way that shows they set themselves for failure. He talks about how a person is in that state of failure until they have achieved their goals. Of course, when those success is achieved, the satisfaction is immense.  Scott Adams argues that once a person achieves their goals in life, they either lose their motivation or create a new goal in order to enter the failing state before success is achieved again. Scott Adams has an interesting viewpoint against pursuing interests that one is interested or passionate about. The main idea in the article appears to be that once a persons business achieves success, then that person can become passionate about it. Otherwise, one doesn't need passion to start any business.  

Chapter 15: Monopolies

This chapter focuses on monopolies by comparing monopolies to firms in a competitive market. The chapter defines a monopoly as a firm that is the sole seller of a product without any close substitutions. One difference is that a firm in a competitive market is a price taker whereas a monopoly is a price maker. In general, the price charged by monopolies is higher than the marginal cost. But, there goal is the same to that of a firm in a competitive market, to maximize profit. The force of the invisible hand guides competitive market firms whereas monopolies work in their self interest so often, those interests aren't the interest of society. There are three important barriers that may be the cause as to why other firms don't enter the market for monopolies. One reason is that key resources are owned by one firm. The second reason given is that the government sometimes gives a single firm exclusive rights to a product, such as a drug. The third reason given is that the costs of production make a single producer more efficient than a large number of producers. A kind of monopoly that arises because a single firm can supply the good or service to an entire market at a smaller cost than could two or more, is called a natural monopoly. When looking and the demand curves of a competitive market firm and a monopoly, their demand curves are very different. For a competitive market, the demand curve is perfectly elastic whereas for a monopoly, the demand curve is sloping downwards.  When looking at the general graph of a monopoly, in general the price is greater than the marginal revenue and total cost. Therefore, the point of maximum profit is still where the marginal cost and marginal revenue intersect.

Chapter 14: Firms in Competitive Markets

This chapter talks about how the competitive market is affected. It talks about how firms can't change the prices of goods in a competitive market because it would not be convenient to them. It also talks about how in order to maximize profit, firms must find where the marginal cost equals the marginal revenue. It mentions how the effects of single buyers are negligible. Total revenue is proportional to the total output. The chapter talks again about how a competitive market has many buyers and sellers, and the goods that are offered by various sellers are largely the same. Therefore, firms are price takers, not price makers. A shutdown refers to a short-run decision not to produce anything during a specific period of time due to current market conditions. On the other hand, an exit refers to the long-run decision to to leave the market. When shutting down temporarily, the fixed costs still have to be paid by firms. The fixed cost of land is said to be sunk cost when referring to the fixed cost of of a short-run shut down during a season of a firm. In contrast, if a producer decides to shut down completely, they have the opportunity to sell the land. When a firm shuts down, they obviously lose all revenue. The firm shuts down if the revenue that it would get from producing is less than its variable cost in production.

Chapter 13: The Costs of Production

This chapter mainly focuses on how producers decide whether or not producing an item is convenient.  It talks about how an accountant and an economist view profit differently. For example, an accountant only counts the explicit costs whereas an economist considers both the explicit and implicit costs in order to decide whether or not profit is worth investing. The chapter defines total revenue as the amount a firm receives for the sale of an output. The total cost is the market value of the inputs a firm uses in production. The profit is the total revenue minus the total cost. An economic profit is the total revenue minus total cost, including both explicit and implicit costs. Accounting profit is total revenue minus total explicit cost. A production function is the relationship between quantity of inputs used to make a good and the quantity of output of that good. Marginal products are the increase in output that arises from an additional unit of input. The diminishing marginal product is the property whereby the marginal product of an input declines as the quantity of an input increases. The chapter talks about fixed costs which are the costs that do not vary with the quantity of output produced. An example of this would be rent. Variable costs are the costs that do vary with the quantity of output produced. An example would be the water and gas bills which vary depending on how much of the supply is being used.

Article #4

The article begins by talking about how the focus has shifted from the economic well-being of monopolies to the crises that emerging economies may be facing. According to the author, the slowing down of China has affected many other countries. The author claims that another reason why the newly emerging economies of some countries are failing, is because of hidden debts. These debts are said to not appear on paper and just show up periodically, therefore going undetected. An example of this was the crisis in Mexico in 1994-1995 when the world learned that Mexico's private banks had taken a significant amount of currency risk through off-balance-sheet borrowing. Another example in the text is when banks in Thailand hadn't noticed that they were nearly empty. It also touches about the fact that China has been lending other countries a lot of money and how that can lead to another crisis.

I liked this article best because it is easier to understand. It is clear and to the point which helps the reader follow. Also, the writer doesn't seem to exaggerate and take one specific side/ argument.

Chapter 11: Public Goods and Common Resources

The chapter talks about excludability which is the property of a good whereby a person can be prevented from using it. It also talks about rivalry in consumption which is the property of a good whereby one person's use diminishes other people's uses. It talks about the importance whether or not people can be prevented from using a good. Private goods are goods that are both excludable and rival in consumption. Most private goods are controlled by monopolies. Public goods are goods that are neither excludable nor rival in consumption. Common resources are goods that are rival in consumption but not excludable. Free riders are people who receive the benefit of a good but avoids paying for it. This chapter also talks about the cost-benefit analysis. A study that compares the costs and benefits to society of providing a public good. The tragedy of commons is a parable that illustrates why common resources get used more than is desirable from the standpoint of society as a whole.

Chapter 10: Externalities

This chapter talks about externalities, which are the uncompensated impact of a person's actions on the well being of a bystander. Producers use the intersection between supply and demand to determine the optimal amount of a good from the standpoint of society as a whole. The use of a tax is called internalizing the externality. Internalizing an externality means that there is an altering of incentives so that people take account of the external effects of their actions. In essence, people are paying for the cost of the damage created in order for their product to be produced. Although some activities impose costs on third parties, others yield benefits and are called positive externalities. The optimal quantity is found is found where the social value curve and supply curve intersect.  This externality encourages the development of and dissemination of technological advancements, leading to higher productivity and wages for everyone. An important positive externality is called a technological spillover which is the impact of one firm's research and production efforts on other firms' access to technological advance. The chapter also talks about the Coase Theorem which is the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own. The chapter also talks about transaction costs which is the costs that parties incur in the process of agreeing and following through in a bargain. A corrective tax is a tax designed to induce private decision makers to take account of the social costs tht arise from a negative externality.

Article 3

 Due to all the free money in the market as ZIRP and other policies Stockman holds to be dumb is brought up again in the article. He disagrees with Ben Bernanke who created ZIRP and other Keynesian policies. Stockman consistently quotes Bernanke throughout the article, while counterattacking the facts Bernanke states. The global economy has been messed up due to the central banks who are trying to prevent another financial bubble from popping. He also makes pointed remarks at commentators on the current state of the economy. He addresses how the policies set by the Feds have made little to no impact on the job market. Also, the Feds either have a really misleading number of job growth or they have a bad accountant. He analyzes how the economic state in relation to the US’s and points out how the differences in their improvement and ours does not lie in the arguments stated by Bernanke. For example, Germany has a balanced budget and a slightly better real GDP than the US, but Bernanke criticizes their government for rejecting the Keynesian playbook. On the other hand, Bernanke praises Britain for their “solid recovery, in large part because the Bank of England pursued monetary policies similar to the Red’s in both timing and relative magnitude” even though their real estate prices are up by 50%.What really annoys me is how all he uses all the acronyms. After looking them up, two results end up occurring. I get more confused by the definition of the term or I cannot find the correct phrase for the acronym like BM economics. This writing was a bit difficult to follow because it appears that it was not read over after having been written with many grammar and spelling errors. It is interesting to see how the government continues to botch up numbers and statistics to make the public feel safe when we are headed towards an economic bubble burst. 

Chapter 8: The Costs of Taxation

This chapter talks about how taxes help to raise revenue. Taxes raise prices for buyers and lowers the amount of money that sellers receive. The amount of tax collected by the government stays the same no matter whether it is levied on the producer or the consumer. When a tax is put on the buyers, the demand curves shifts down and when it is imposed on the producer, it shifts the supply curve. The chapter also talks about deadweight loss which is the fall in total surplus that results form a market distortion, such as a tax. The price elasticities of the supply and demand curves help measure the deadweight loss. In general, when one of the curves are relatively elastic, the deadweight loss of a tax is large. On the other hand, when one of the curves is relatively inelastic, the deadweight loss of a tax is small. Deadweight loss comes to be because a tax induces buyers and sellers to change their behavior. The chapter also talks about how labor is taxed, such as Social Security tax and Medicare tax.

Article 2

This article talks about how the economy had been falling and it doesn't seem to be heading towards recovery. The article talks about the current conditions of China's economy that is very unbalanced and falling rapidly into debt. The author talks about China's overproduction of steel and how it has caused a huge decrease in prices. China has also been increasing their production of commercial malls and retail centers which is not a good move due to its citizens having no money. The author says that such an event is creating deflation in China. He also talks about how the United States' heavy investment in Brazilian goods is becoming an issue because shipment from Brazil has decreased 20% and is still going down. This article is an analysis of the global economy and a strong expression of concern due to ensuing deflation as the world economy transitions from a bull market to a bear market. The prices of commodities have been steadily falling for about three years or so, yet it is only now that the falling markets significance and effects are taking shape. China, which had been considered a ‘great hope’, is now becoming subject to rampant deflation. The steel industry is over developed and has seen large price reductions in recent years. 

Chapter 7: Consumers, Producers and the Efficiency of Markets

The chapter talks about welfare economics which is the study of how the allocation of resources affects economic well-being.  It talks about the willingness to pay for a good, or the maximum price that they a buyer is willing to pay for a good. Each consumer can receive a consumer surplus when the amount the consumer is paid is greater than the amount actually paid. It kind of reminds me of when someone buys something that they really wanted, for a way cheaper price since it was on sale. So, I think of it as how much I saved from the original price. To calculate the total consumer surplus, one can find the are of the region under the price and above the supply. Each person may have a different set price that they are willing to pay for a good which is what makes it tricky to decide whether or not the equilibrium price is fair.
The chapter also talks about the producer surplus which is the amount that a seller is paid minus the sellers cost for providing the good or service. I like to think of the surplus as the amount that the producer is profiting from the good or service. The consumer surplus is related to the demand curve whereas the producer surplus is related to the supply curve. Together, by adding the consumer surplus and the producer surplus, one gets the total surplus. Another way to calculate is by taking the value to the buyers and subtracting the cost to the sellers from it. A price of a good can either be efficient or work in equity. In order for it to be efficient, the allocation of the resource should maximize the surplus. In order for there to be equity, there should be fairness in the distribution among all the members in society.

Chapter 6: Supply, Demand and Government Policies

This chapter talks about price ceiling, which are the legal maximum price a good can be sold at, and price floor which is the legal minimum price a good can be sold at. It talks about how a price ceiling or price floor can affect a good by either having surpluses or shortages. Changes in the legal price of a good can either be non-binding or binding. When the government imposes binding prices ceiling in a competitive market, shortages arise and sellers need to ration the scarce sources. When this happens, discrimination tends to occur and the market becomes unfair. The chapter also talks about how the change in the minimum wage affects both firms and laborers. It talks about how the government tends to make laws that help improve the life quality of the poor but in reality, their policies tend to affect the middle class as well. Raising the minimum wage which seems to be a solution, tends to increase total revenue of the workers but leaves a lot of people unemployed in order to be able to pay those workers their now higher salaries. A tax incidence is the manner in which the burden of a tax is shared among the participants in a market, or in simpler terms, the distribution of a tax. For example, the government may choose to tax the firms or the laborers in order to raise revenue. In such cases, if only one of the two is taxed, they end up affecting the opposite curve in the same way. Even if they do share the tax by splitting it, one ends up loosing more than the other and usually, it is the laborer who ends up paying more than the firm.

Chapter 5: Elasticity and its Application

This chapter deals with how to calculate the change in supply or demand. It talks about finding the average change in demand and the average change in price. Then, it talks about how to use the midpoint method in order to get the most accurate measurement of elasticity. It describes the difference between elastic and inelastic relationships and how they are predictable based on a graph. The chapter talks about how the availability of close substitutes, necessities vs. luxuries, definition of the market and the time horizon affect the elasticity of a good. Using the midpoint method, one gets the same answer regardless of the direction of change. The chapter also talks about how curves can be classified by their elasticity. For example, they are elastic when it is greater than one. It is inelastic when it is less than one. When it is equal to one, it is called the unit elasticity. It is also closely related to the slope of a curve. The chapter also deals with how the total revenue is calculated. It is calculated by multiplying the price of a good by the quantity sold.

Current Events Article 1 "Dreams are what keep us humans going, striving to achieve greatness"

The article is written by a person who is against the Keynesian idea of having zero interest. The author gives data to support his claim. He talks about how the government should create economic bubbles to prevent situations like the one today. It also talks about how the government should work to increase the interest rate to spur investment instead of putting government money into firms and Wall Street. The graphs provided in the article prove the current tightening of treasuries and bonds and that the interest rate has flat-lined drastically compared to that of 25 years ago.The negative real interest rate is -1.52% compare to 30 years ago when it was +2.13%. It mentions how free money is actually tight money which is a product of a tiny circle of Wall Street people. The article also talks about how equity markets fall during blow-outs, which the author blames on the Goldman gamblers who have constructed a junk economics index. It also mentions how the trends in borrowing and spending show a complex absence of credit-fueled stimulus.

Econ Chapter 4

The chapter talks about the relationship between supply and demand. It talk about how there is always competition to sell a good, otherwise a monopoly is established with all the power over one specific good. It talks about how the demand curve shows the relationship between one good and the quantity demanded. Also, the chapter deals with how the demand of a good depends on many factors such as the income of people, how much of the good there is, the price of the good and so on.

The chapter explains how the buyers determine the demand for a product and the sellers determine the supply of it. It talks about how there is a competitive market where there are more than one group of firms that produce and sell a certain good. Also, it talks about monopolies and how sometimes, there is only one provider for a specific good who usually makes a lot of profit out of it due to its scarcity. The chapter uses the example of ice cream and shows a graph that correlates a demand schedule showing the relationship between the price of a good and the quantity that is demanded.

Two examples of goods are a normal good and an inferior good. Basically, a normal good is a good that one buys when one has a lot of money. An inferior good is a good that one resorts to when ones income is lower. It also deals with the relationship between complements and supplements of goods.

Principles of Economy Chapter 3: Interdependence and the Gains from Trade

This chapter dealt with the importance of trade. It also mentioned the different types of situations in which trade would and would not be convenient. Graphs can be made to describe the production possibilities. For example, one might want to know how many potatoes can be produced per hour if one focuses on only growing potatoes, vs. how many potatoes one can grow while also growing corn. The chapter talks about the importance of specialization and trade in order for the economy to work smoothly. One term in the chapter was absolute advantage which deals with he ability to produce a good using fewer inputs than another producer. Opportunity cost has to do with what has to be given up in order to obtain an item. Then, comparative advantage deals with the ability to produce a good at a lower opportunity cost than another producer. The chapter talks about how in some cases, international trade is most convenient for both the country that exports and the one that imports.  In conclusion, comparative advantage shows how trade can make everyone better off. Living in an interdependent economy is much better if one knows where and when to trade.