Unit 2 Online Quizzes

If you didn't catch the email or comment post, you can continue the online quizzes through 2/26. The 2/19 was set when we had the test on 2/20 - since that is pushed back, so is the due date for the online quizzes.

So...2/26. :)

KM

Why?

Can anyone explain why these sold for $1300?


http://cgi.ebay.com/2-The-Police-Tickets-Madison-Square-Garden-MSG-NY-8-3_W0QQitemZ220082588838QQihZ012QQcategoryZ16122QQrdZ1QQcmdZViewItem

:)

Elasticity

Here is some info on elasticity:

http://www.reffonomics.com/elasticity1.html (animated gif file)

http://apecon.us/tanstaafl_files/ (38 minute video file, a lecture from another teacher)

http://en.wikipedia.org/wiki/Price_elasticity_of_demand

http://hspm.sph.sc.edu/COURSES/ECON/Elast/Elast.html (interactive tutorial)

http://economics.about.com/cs/micfrohelp/a/priceelasticity.htm


Some questions for thought:

1. When would you want to own a business that sells price-elastic products? Why?


2. The rent for apartments in New York City has been rising sharply. Demand for apartments in New York City has also been rising sharply. This is hard to explain, because the law of demand says that higher prices should lead to lower quantity demanded. Do you agree or disagree? (and, as always, explain)

3. Taxicab fares in most cities are regulated. Several years ago, cab drivers in Boston obtained permission to raise their fares 10%, and they anticipated that revenues would increase by about 10% as a result. They were disappointed, however. When the commissioner granted the 10% increase, revenues increased by only about 5%. What can you infer about the elasticity of demand for taxicab drivers? What were cab drivers assuming about the elasticity of demand? (You may not be able to answer this one without looking up other ways to determine elasticity in your book) :)

Supply & Demand Together -

Some links: (no gifs this time)

http://en.wikipedia.org/wiki/Supply_and_demand (ALWAYS remember that wikis can be easily changed by anyone and read carefully!)


http://www.netmba.com/econ/micro/supply-demand/


http://www.investopedia.com/university/economics/economics3.asp

http://hspm.sph.sc.edu/COURSES/ECON/SD/SD.html (interactive)

Very worthy of discussion, from Ellen:

>alright i have a question.. i was discussing this with a fellow classmate earlier and i was just >wondering if its possible to live without having economics involved. we were saying even if you >live out in the woods in a secluded area in a cardboard box you can't get away from economics >(assuming you aren't starving yourself) because if you go looking for berries or something, well >there is still supply and demand involved.. so is it possible?

Hmmm....

S & D info

Hey there -

Just some questions to get you thinking about S & D, and some links to more animated gif files.


1) Some people will pay a higher price for brand-name goods. For example, some people buy Rolls Royces and Rolex watches to impress others. Does knowingly paying higher prices for certain items just to be a “snob” violate the law of demand?

2) Predict what will be the direction of change for either supply or demand (and in what market) in the following situations:
a. Several new companies enter the home computer industry.
b. Consumers suddenly decide that large cars are unfashionable.
c. The US Surgeon General issues a report that tomatoes prevent colds.
d. Frost threatens to damage the coffee crop, and consumers expect the price to rise sharply in the future.
e. The price of tea falls. What is the effect on the coffee market?
f. The price of sugar rises. What is the effect on the coffee market?
g. Tobacco lobbyists convince Congress to remove the tax paid by sellers on each carton of cigarettes.
h. A new type of robot is invented that will pick peaches.
i. Nintendo anticipates that the future price of games will fall much lower than the current price.

3) When Exxon moved away from its location at the northeast corner of Wright and Green Streets, Shell, operating on the southwest corner of Wright and Green, promptly raised its prices. Is this coincidence? Explain.

4) Why are we relatively insensitive to price changes affecting low-priced goods such as bubble gum?



http://www.reffonomics.com/determinatesofsupply.html (determinants of supply)

http://www.reffonomics.com/supplydemandindifferent.html (shifting curves)



Have a nice weekend - sorry I freaked some of you out about the application questions - no worries, we'll talk about them next week. Enjoy your relatively homework-free (from me) weekend! :)



Ohh - almost forgot - if you feel I missed comments for the blog grading, zip me an email. I have a system now, and it's going to work great, but it was a little confusing setting it up, so I may have missed some people on accident. Remember - your comments should be meaningful and amazing! ha!

KM

Ha! Links!

Hey there -

On the sidebar, I posted links to everyone's blog (at least, everyone that's made a blog up). Your weekly posts/queries can go on anyone's blog. If you comment on an old post (meaning not the current week), please let me know by email or a note in the basket so that I can credit you with your comment. Remember, just saying "cool" isnt' enough - analysis is much better for your brain.

I'm almost done with the grading for the first 2 blog weeks - I think I have a system now. :) Updated grades will be posted by Monday at the latest - but more than likely tomorrow for you guys.

I'll also post some supply links and some discussion questions before I leave tomorrow.


KM

Interesting blogs!

There are some great posts out there from your peers (as I plow through the grading!). If you have time, you should go take a look at what some people have said!

Remember - if you leave comments on OLD posts, let me know so you can get credit for your comments. I'll read through current weeks, but I won't go back to old posts unless you leave a note in the basket or email me.

Economics of Sports

Just in case some of you are interested. :) There's a growing field in Econ now, dealing with the Econ of Sports. I took a seminar in it a few years ago - very interesting.

Before you read any of this (if you're interested) - which sport pays the highest: football, baseball, basketball, or hockey?

An article to think about:

http://www.econlib.org/LIBRARY/Columns/y2004/Sandersonsports.html


And a blog:
http://www.thesportseconomist.com/

And, if you really feel like reading college-level material, a professional article:
http://www.vanderbilt.edu/Econ/faculty/Vrooman/general.pdf


No, it's not really what we're on, although as it was pointed out, some of it is supply & demand. It's an interesting topic, though. Salaries are paid for a reason. :)

Monday Night -

News 3 out of Madison says we have a 2 hour delay tomorrow. More than likely, this means that 1st & 2nd hour won't meet - at least, that's what's happened in the past with late starts.

I can give 15-20 minutes in class to finalize info on your Food Court stuff. After that, we can have it due later in the week, but I can't give any more time. We need to get started on S & D, especially after losing today.

Super Bowl - interesting ideas on the commercials! I liked the slapping one, myself.

What about players? Why do football players (or any professional sports person, for that matter) get paid so much? and no, it has very little to do with supply & demand.

Hope y'all stayed warm - at least our car started. The truck decided it would rather be elsewhere and stayed in non-starting dream land. :)

Economics of the Super Bowl...

We're still really early in the semester, so there's not a lot of economic theory that we've talked about, but anyone want to give it a try?

I can start - why do businesses pay $3 million+ for a 30-second commercial that is never shown again other than during the Super Bowl?


~**~**~**~**~**~**~**~**~

So...will we have school tomorrow? It's supposed to be mighty cold...

Intro to Supply & Demand

Here's some links to help you get started on S & D:

http://www.reffonomics.com/demand1.html (demand - animated gif)

http://apecon.us/currentwork/substitutionincome.gif (substitution & income effect - animated gif)

http://www.reffonomics.com/determinatesofdemand.html (determinants of demand - animated gif)

http://www.reffonomics.com/determinatesofsupply.html (determinants of supply - animated gif)


Food court simulation - due Friday unless you need until Monday. It's up to the sub, really. You need to do the math-y stuff, and determine as a group which 5 restaurants you'd chose, and why.

Enjoy your weekend! :)

KM

Unit One Test

Test average = 73%

High score = 92%
Low score = 48%

Median score = 73% (weird, that it's the same as the average, hey?)

I am pleased. I know that many of you aren't, and that's cool. This was NOT a test that you should have left thinking, "Oh, I aced that one. How much easier could she have made it?"

Retests will be available after next Monday. There is one person that has to test, and you will receive the scan sheet (with answers) and your test booklet on Friday. You'll have the weekend to look it over, and we'll talk about it on Monday. After that, you may retest to your heart's desire; I will take the highest score you get.

There are two on the scan sheet that were graded incorrectly; I put the wrong answers on the key (that's why doing the analysis of seeing which questions were most wrong helps so much - if 18/20 get it wrong, then it's the question, not the test-taker...). Those are corrected on your scan sheet if you got the extra points. Also, there were two questions with answers that were ambiguous; although I thought they were clear, after seeing results and what people put, they were written badly. Those were taken out of the count.

I'll show you scores tomorrow. :)

Have a nice night - good job!

KM

Okay, I lied...

one more.

Here are some links that might help you. The guy who wrote these has taught AP econ for many years and put these together for his students. If they help, terrific. If not, ignore. :)
They are animated gifs, so you have to have the ability to view those.

http://www.reffonomics.com/opportunitycost.html

http://www.reffonomics.com/pp1.html (PPC's - animated)

http://www.reffonomics.com/economicsystems.html (economic systems)

http://www.reffonomics.com/terms.html (terms)

Okay - now I'm really going home.

KM

Food for thought...

Some answers to your questions...or maybe just more questions to your questions to lead you in the right direction to find your own answers...or questions to your questions to make you questions my question to make you think about your answers...

Hmm. I think I just confused myself.

Anywho -

Questions on ppc’s that you asked (sorry, I didn't write down who asked what questions):


i have a question: in class, a point outside the production possibilities curve was inefficient because it was an over use of resources, but according to the chapter, hte point is infeasible because it cannot be reached with the scarce anount of resources available. i'm wondering, which is it? or can it be either?

Me: (Because purple is cool...)

A point outside can be reached for short periods of time. For example - a person can work 80 hour workweeks if they are uber-workers, but most people couldn't handle that for short periods of time. As pointed out, it's an example to show an opposite to under-utilization of resouces. You can also reach that with trade.


Question, the production curve, can you really over utilize the resources? Would you not have the curve along the maximum amount of usage to show maximum production? Or is this another curve?

Me: If you are doing aggresive strip-mining, you are overusing resources. Or...cutting down rainforests (or any forest) without replanting. Or forcing overtime. Or...anything that makes it so that you are being inefficient as you use the resources. It can be a judgment call - what might seem like overuse to you might not seem like it to others. If it were on the national exam, they would make it very clear that they considered it inefficient.

Another curve would be finding and/or using new resources. Drilling in the Alaskan wildlife refuge, technology advances, discovering how to access the oil reserves in the Gulf of Mexico, a large population explosion - all will move the curve out. The opposite - a large population destruction (war, famine, holocaust), a government that forbids the use of resources or technology - would move the curve in.

dan,in response to your first question, i don't really think the point beyond the curve is actually realistic. Any country wouldn't have enough resources to exceed effeciency, or the points along the curve. Perphaps economists put this point on the graph as a contrast to the underutilzation of resources (which is possible)

Me: Right - but it IS fully accessible with trade. You can easily consume beyond your PPC with trade with someone else who specializes in production.

I am also posting to get my little address out there as well. But while I am here I would like to make a question. I understand that civil war can cause capital and consumer goods production to decrease, but I always thought that war was supposed to be good for the economy. Sure, there are going to be less people making things, but there is also going to be a higher demand for products, especially machinery. So couldn't a civil war also increase the production? Or is that only a war between nations?

Me: Interesting! A war is good for the economy in the sense that it sets people to work on government goods even if consumer goods are rationed or not necessary. So, it increases GDP (what's being produced), increases employment rates, and usually helps level off inflation (this is all macro stuff, so we won't be getting into it too much). What' s really important to remember here is that this is assuming (a) that we are talking about a relatively stable government, (b) this almost never happens in the case of a dictator, and (c) this is almost always in the case of a market or mixed (socialist) economy.

If you think to the US civil war, it causes a problem. Want a history lesson? Mr. Schwedrsky will tell you that I'm a Civil War buff and a Southern sympathizer, to boot. :) The South was much less developed economically at the time of the Civil War, and this caused problems. All heavy machinery was in the North. So - I would say that the Northern economy flourished while the Southern economy plodded along. (Not to mention that there was no stable currency, no recorded GDP, etc....) Anyway - in general, (my opinion, nothing to back this up but knowledge of economic theory...I dont' feel like researching it right now...) - because civil war today encompasses total war - as in, it hits all sectors of a country, economic, social, political - I think that it would not help an economy. Most modern warfare involves guerrilla tactics, so they have to be supplied somewhere - most guerrilla armies are supplied from non-domestic sources. Because terrorist attacks and bombings are usually done on economic centers, that would hurt it more.

So - a long answer to your short question. A civil war could increase production, but I dont' think that's a hard and fast rule. How's that for being indecisive?

Other questions you had:

My second question is about market intervention. How does effiency and equity contribute to market intervention?

Me: Efficiency is the idea of using all resources to their best and full capacity. Equity answers the question - is that fair?

So, if we use all of our resources to "make people better off", and in Congress' opinion that means that they will make sure that the government guarantees a minimum living wage of $20,000 a year, that might be efficient. Is it fair? What incentive does that give to work? If you knew that no matter what you did, the government would guarantee that you received a wage equal to up to $20,0000...well, lots of people would stop working. That was the problem with welfare. There was no incentive to get off of it. Now, in WI, there is - W-2 (Wisconsin Works) sets it up so you can only stay on welfare for x number of months before you have to show that you are looking for/training for a job.

Market intervention - the government will often look at efficiency (mostly the right-leaning), while at the same time trying to determine equity (mostly the left-leaning). But - in determining equity...should every one be equal? Should you make the same as a high school student that I make as a person with a masters' degree? Should I make the same as a doctor, or as Tiger Woods, or even as Scotty Nguyen, the great Texas Hold 'em player? :)

In a market economy, we must look at equity because markets are not fair. They don't favor one person over another, but they do allow for equality in the sense that we all have the same options. I can buy or not buy. I can spend or save. I can go to Vegas in April or I can use that money to pay off some bills. There are incentives to do different things. Is it fair that I'm going to Vegas when some of you can't even get money to go to Madison? I don't know. Is it efficient? I'm not sure. But - we all have that chance with a market economy.

Did that make any sense?

And finally, one last question:

So, Mrs. McDaniel... What is the most sucessful type of economy?

Me: I'm going to be difficult here and say...it depends on what you determine as "success". If success is that government stays out of your lives, then market would be your answer. If success is making the most money possible, regardless of others, then market would be your answer. If success is being able to go to college for free, mixed/socialism would be your answer. If you are concerned with equity (all being equal), then command is your answer.

I'm difficult, I know. Success is a relative term. I think history has proven that there cannot be a command economy that works efficiently. There are people in Russia who would love to see communism return, because at least under communism, they had food. They had a job. They didn't have to worry about where basic necessities were coming from. The movement from command to market economies is brutal.

I think markets have proven to work. I also see great value in mixed/socialist economies, but that is very unlikely to shift here in the US - even though the idea of free college and healthcare might appeal to some, the taking of such a huge percent of our incomes is VERY unpopular. People complain over the government taking 30%...imagine if they took 70% - or 80%. Yikes!

I've talked enough. I'm going home. :)

This is an example of how your personal blogs should look...

(this is not an example of what your responses should be...)
(I'll write more later today about your questions on PPC's, etc)

Blog example:

http://money.cnn.com/magazines/moneymag/moneymag_archive/2007/02/01/8398768/index.htm

Is it time for a new, New Deal?

Author Pat Regnier talks about the New Economy (the “Anxiety Economy”) and how, although we may have more toys & gadgets than ever, we as a society are still having a problem paying our bills, saving for retirement & the kids’ college tuition, and are living paycheck to paycheck. He suggests that the new Democratic Congress should install programs to help people out, similar to FDR’s “New Deal” to get out of the Depression.

Personally, I think this guy is a nutcase. The economy is in much superior condition to anything we saw in the 1930’s. People need education, not handouts. This ties to discussions on the class blog dealing with the question of opportunity cost and competition (from the Naked Economics book). A few people wrote in asking if we were better off than our parents, and what that has to do with competition. Perhaps competition has helped to cause some of the problems listed in the article – how many credit cards does one person need, even if they are offering free stuff or special rates? How many iPods does a person need, or TV’s, or…anything? Does competition encourage us to spend our money rather than save, which can cause the decrease in the US savings rate? (Did you know that some economists say that the US now has the lowest savings rate in the world? As a percentage of disposable income, we now save about –2%. Yes, that’s a minus. In comparison, Japan has a savings rate of about 18%, and China’s is over 30%. What’s up with that?)

PPC's

There is a more detailed explanation on increasing/decreasing/constant OC in regards to PPC's in the last post. A question was posted there.

I made a boo-boo - you need 2 posts per week. Yes, they can be questions. No problem. It's a basis for discussion. Feel free to answer someone's question if no one has yet.

Avoid "yeah" answers - giving info that isn't there yet is much better. Or expanding in general.

Fun, fun! Test on Tuesday -

KM

Naked Economics Study Guide

Here are the major areas of Naked Economics to take a look at. This is not a shortcut around reading the entire book - it is meant to help you concentrate on important points. The points that are mentioned are things that you should feel comfortable wtih - have a passing knowledge of them ("Oh, yeah, I remember that...it was ____"). There are some study questions at the end in blue to help you, also. This is all for your assistance in understanding the book; none of it will be collected and graded.

If anyone wants to borrow my book (with notes/highlighting, etc) throughout a school day or overnight, come on by and let me know!

We will be discussing the book the first few days of class as a precursor to Unit 1. There will be a quiz on the critical content as well as information from the book on your Unit 1 Test.

Enjoy! :)

~*~*~*~*~*~*~*~*~*~*~*~*~*~*~

Forward

Economic way of thinking - pxiii

Chapter 1 - The Power of Markets

Market Allocation - p3
Invisible Hand of the Economy - p4
Utility - p6+
Opportunity Cost - p9
Demand/Externalities - p10
Cost/Benefit Analysis - p11
Profit Motive - p11
Human Capital - p12+
Barriers to Entry - p14
Market price, pricing decisions & price discrimination - p15+
Lessons of markets - p18+
Globalization - p20+

Chapter 2 - Incentives Matter

Incentive - p23
Command vs. private property - p24
Free Rider problem - p24+
Incentives in Economic Systems - p27
Law of Unintended Consequences & Disincentives - p29+
Behavioral Economics - p34
Game theory & Prisoner's Dilemma - p34+
Externalities - p35
Trade & Quotas - p37
Taxation & Laffer curve - p38+
Deadweight Loss - p40
Tax Systems - p41

Chapter 3 - Government and the Economy

Externalities - p43+
Government solutions to externalities - p48+
Government makes market economies possible - p51+
Property Rights - p54
Public Goods & Free Riders - p57+
Redistribution - p59
Equity vs. Efficiency - p60

Chapter 4 - Government and the Economy II

Government inefficiency - p63
Gov't allocation vs. private allocation - p67
Effects of regulation - p69+
Economic Thinking - p72
Deadweight loss - p74
Taxes as regulation/Effects of taxation - p74+
Laffer Curve - p76
Effect of minimum wage - p77+

Chapter 5 - Economics of Information

Adverse Selection - p82+
Economics of Discrimination - p83+
Assymetry of Information - p84+
Screening mechanism - p89
Equality of information - p90+
Branding - p91
Perfect Competition - p92
Monopolistic Competition/Oligopoly - p92
Signaling - p93+

Chapter 6 - Productivity & Human Capital

Fantasy Spending - p98
Income Inequality - p99
Human Capital - p99+
Scarcity - p100
Human capital and job creation - p102+
Displacement - p104+
Productivity - p107
Standard of Living - p108
Rule of 72 - p109
Income Inequality - p111+
Zero sum game - p115

Chapter 7 - Financial Markets

Purposes of financial market - p118
Rules for investing - p119
Basis of financial instruments - p120+
Efficient Market theory - p129
Investment guidelines - p132+
Diversification - p134

Chapter 8 - The Power of Organized Interests

Incentives for interest groups - p138
Consumer/Producer Surplus & Taxes - p142
Price Ceilings and Floors - p142
Laissez faire economics - p143
Trade - p144+

Chapter 9 - Keeping Score

**Is not micro, will not be part of this course**

Chapter 10 - The Federal Reserve

**Is not micro, will not be part of this course**

Chapter 11 - Trade and Globalization

Benefits of trade - p187+
Globalization - p189
Economic interdependence - p189+
Absolute & Comparative Advantage - p190+
Losers from trade - p191
Protectionism - p193
Trade raises real income - p195
Tariffs - p195
Cultural Homogenization - p199
Externalities from trade - p200
Sweatshops - p201
Comp Adv of poor countries - p201

Chapter 12 - Development Economics

Wealth & Poverty of nations - p206+
What makes one country wealthy whan another isn't? - p208+
Property Rights - p209




Study Questions: (Feel free to answer here if you'd like some feedback from me and/or peers) :)

1) How has competition affected your life and in what ways? (p37) Are you better or worse off than your parents?

2) Name 5 underground economies created as a result of taxes. (p37)

3) "We know that people seek to make themselves better off, however they may define that. Our best hope for improving the human condition is to understand why we act the way twe do and then plan accordingly. Programs, organizations and systems work better when they get the incentives right." (p42). To predict outcomes in economics, we need to understand human behavior. What are some other "laws" of human behavior (like self-interest) that might help us understand the workings of the economy better?

4) On p56, the author describes government's institutions that "form the tracks on which capitalism runs". Find 5 of these institutions and describe their role in facilitating capitalist rules.

5) What are some other examples of information assymetry? (p85)

6) In a competitive market, there should be no profits. T/F and why?

7) What human capital do you possess?

8) Does our free-market economy make poverty inevitable?



Good luck! Have fun! :)

A New School Year...New AP Students!

Welcome!

If you made it here, it means that you got the letter informing you of the book you need to read before coming to class in January. Believe it or not, this is not meant to torture you - it's meant to give us more time on the much more difficult material we need to cover before the exam in May. Lots of people from last year said that they would have LOVED the chance to read a book in order to have more time to concentrate on the hard stuff.

Okay, maybe they wouldn't have loved it. But they said they would have appreciated the increase in time.

This blog is set up for my AP Econ students to chat and respond to problem sets that I post. You can also respond to each other. I am considering setting it up so you all have posting privileges - I think it might make it easier to repond to everyone else. Then again...well, I'm just not sure. We'll see how things go.

The links over on the side might be helpful as we go through the semester, and your posts here will be part of your grade in class.

As for the book - I have added some links to info on the book. As of today, I still have at least 7 books available for checkout. You may keep them until January, just be careful with them, and you can't write in them. The book is "Naked Economics" by Charles Wheelan, and you can skip the two chapters on macro stuff (off the top of my head, I'm not sure which ones these are, check the letter). :)

I'll post the study guide and maybe even some problem questions within a few weeks. You may also, as you go through the book this semester, borrow my copy for a day (and night) and see what I have highlighted as important and any notes I've put in there - that might help you.

The most important part is getting the information, not my "tricking" you into reading parts of the book that aren't necessarily important. We will discuss/quiz the first days of class in January - but you do need to have the reading done before then. It would be virtually impossible to read it the first day of classes.

Enjoy! It's actually a very well-written lay book that is pretty easy to read...especially for an econ book. :)

Feel free to post comments - questions - concerns. Come on by if you have questions, or email me through the school email (I'd post it here, but I hate spam...darn web crawlers...)

KM

August already!

Well, you will all be heading off very soon - if you haven't already. I need to update this for this year's students, so old posts will be deleted/privatized very soon.

Thanks for a great semester - good luck!