Heather's Homework

Efficiency is the allocation of resources in a way that maximizes the total surplus for everyone in society. It results in consumers feeling like they saved money, and producers feeling like they made a profit that is worth their while. Both consumer surplus and producer surplus can be measured with a demand curve. The surplus is the difference between the price they are willing to pay/ provide and the price they are able to purchase/sell. It basically measures how much the deal benefits them. These surpluses are an important factor in determining market equilibrium because it results in the resources being allocated to the members who value it most, as measured by price. Like my dad used to say, "It's only worth as much as someone is willing to pay". Market efficiency should not always be the goal of policy setters. For example, it would be unwise to try to maximize the black market for slave labor because that does not contribute to a society with equality. However,...

The first article about Venezuela illustrates how a price ceiling limits potential profits, which changes incentives for producers, resulting in a decrease in supply. Not only that, but consumers are more likely to hoard because the item is forced to sell at a price below equilibrium. The combined effect is that a shortage occurs because the supply is less than the demand. The market cannot correct itself unless the government lifts its policies. The letter to the editor put it well, saying " By preventing prices from telling the truth about underlying conditions of supply and demand, such controls spread economic lies."  This in turn causes people to behave in ways that do not align with reality and could potentially cause the problems to become worse. The last article references hyperinflation, which is the phenomenon that occurs when the supply of paper currency is rapidly increased. As the supply increases, the currency loses its value, and it takes more to buy t...

Because of the convenience of using Uber, I would expect consumers to prefer it over traditional taxis. Even if they didn't have a strong preference, there would be an increase in the availability of transportation. So the supply of transportation shifts to the right. When demand for taxis decreases, the demand curve shifts to the left. This creates a surplus, so prices fall towards the equilibrium. When I worked a snow-cone and hot dog booth one summer for a weekend festival, during the last hour of the last day we would offer buy-two-get-one-free deals. Prices decreased when demand decreased. Because the product on hand could not be saved for future sales, it was better to capture a smaller profit margin than no sale at all.  AirBnB increases the supply of rooms to rent beyond just the typical hotels, which  shifts the supply  curve to the right. I expect that because it is such a popular metro ,  prices may stay stable because  consumers will demand ...

1. There several issues in the buy local argument. One issue is that even if the finished product was made down the street, many factors of production likely came from elsewhere, so it is not 100% locally made. Another issue is that if we did rely on only local producers, the markets would shrink and there would be less variety because it would take people longer to do things. Trying to shop 100% local means that you lose the benefits of specialization that come with global trade. 2. I will buy local when it gives me added value...for example, more convenience, a more creative or unique product, or better sustainability practices. 3. A strength of buying local that is not mentioned in the video is that transportation costs are lower because products do not have to travel as far. In turn, this has a smaller impact on the environment. Plus, it is easier to know what actually goes into the product since you could probably meet the person who is in charge of making it. 4. In o...

1. The use of a very simplified model of the economy such as the production possibilities frontier helps explain the essence of a concept. For this particular model, it shows the combinations of outputs that an economy could choose to produce with its limited resources. It helped me see the trade off in opportunity cost. For example, make two toasters or one microwave. At a certain 2. I've often heard people saying that the minimum wage should be raised, or that there should be rent controls. These are both normative statements because they talk about actions that should be taken, rather than describe things as they actually are. It is important to make a distinction because one is objective and one is subjective. While everyone has a personal perspective and ideals, most normative statements have unintended consequences.

1. Because incentives influence people's behavior, I can see how legislator's actions influence society in a way beyond just making something legal or illegal. For example, tax credits can influence whether people pursue continued education or having more children. 2. Based on the concepts in this chapter, I'd like to know more about the ways those in power interfere with the economy. Recent examples such as tariffs, the Fed adjusting rates, and the intense fluctuations in the stock market are of concern to me.

What concepts or theories did you find most interesting and/or useful?  Is there an area where you changed your thinking? And on the content in this chapter - Asymmetric Information and Adverse Selection is a topic that many of you find interesting (and me also).  Here's a video on how it effects the used car market:  https://www.youtube.com/watch?v=sXPXpJ5vMnU  (Links to an external site.) Links to an external site. How do you manage the affects of asymmetric information when you are shopping? The ideas of asymmetric information and signaling were interesting to me. How people respond can reveal what is actually the case, as with choosing health and car insurance policies. I especially related to the example of gift giving...it reminded me of a conversation I just had with my boyfriend in which I said that it doesn't really matter what the monetary value of the gift is (or even fulfilling any particular wish list) because what I'm really paying attenti...