November 15 2023 11/15/23

I would like to wake up in El Paso, Texas, where many of my good friends reside. It’d be nice to be able to hang out with them for a whole day. It would be cool to just walk around and goof off with each other. Walking around different stores and such can be really fun because of the people we are and what we do when we’re together. We also play a lot of games together. It’s partially because I’m in California and they’re in Texas but it’s mostly because it’s fun. Being able to buy proper hardware and games for my friends and me would be nice, so we can all play together without old computers and hard drives getting in the way. There isn’t a schedule for any of this because we should just do things based on what we feeal like. If we wanna play games, we should. If we wanna walk around, maybe shop a little, we should. The most fun I could ever have is hanging out with my friends.

  • Adventure
    - Walking around is an adventurous activity to do. We never really go places with a specific plan in mind, it’s usually “Let’s eat here” and we walk around to random places nearby.

  • Fairness
    - Buying games and hardware for all of my friends is fair among my friend group. Not neglecting anyone and making sure to include everyone is very important.

  • Friendship
    - It’s pretty obvious where friendship plays in this. I love my friends, and I’d prefer nothing but to hang out with them.

  • Fun
    - I value fun things. Having fun is awesome. Video games are awesome because they’re super fun. Friends make them even better because they’re funny.

November 16 2023 11/16/23

Workings of a company

Capital - tools/equipment (money to buy) (financial capital)
Entrepreneur - person who has the ideas and tells what to do. owns business
Labor - the work for parts of a business. designer, people who put together the product (literally)
Land - natural resources, raw materials, property/land

3 basic economic questions

What to produce?
How to produce?
For whom to produce?

November 28 2023 11/28/23

Utility - usefulness
Scarcity

Things I could have done over the weekend:

  • Homework 6
  • Practice driving 3
  • Get my drivers permit 1
  • Code 5
  • Apply to EPCC 4
  • Hangout with friends 2

Calculate oportunity cost
15 hats
4 hats
1 video
2 videos

Constant opportunity cost - A straight line. y=7-x
increasing opportunity cost - kinda like a quarter-circle

Law of increasing opportunity cost
when all resources are being used, an increase in the production of one good will lead to greater forgone production of another good

November 29 2023 11/29/23

Economic System: An organized way of providing for the wants and needs of a society’s people

3 main types:
Traditional: Almost all economic activities are based on ritual, habit, or custom (social behaviors frequently as well)(Don’t really see it on a larger scale)
Command: Central authority (government) makes the most economic decisions (Associated with socialist or communist)
Market: People and firms make the most economic decisions for own best interests (Could be more democratic, authoritarian)

November 30 2023 11/30/23

Economic Freedom- make your own choices
Economic Efficiency- preserve scarce resources
Economic Equity- equal treatment and access
Economic Security- safety nets matter
Full Employment- job availability
Price Stability- prevent inflation
Economic Growth- do better with each generation

December 4 2023 12/4/23

Market Economy

Markets work best:

  1. Competition - best quality, lowest price
  2. Resources free to move to where they’re needed
  3. Firms are free to produce the best way they know
Pure competition Monopolistic Competition Oligopoly Pure Monopoly

Perfect (pure) competition

*very rare structure

  • large number of buyers and sellers of identical products (example: agricultural industry) Characteristics:
  • No control over price
  • Large number of small firms
  • identical products (perfect substitutes)
  • easy to enter and exit the market
Pure competition Monopolistic Competition Oligopoly Pure Monopoly

Law of One Piece

In an efficient market, all identical goods must have only one price.
Result: Each firm is a price taker and has no control over the price.

Traffic Analogy
When there is heavy traffic, why do all lanes seem to go the same speed?
Cars leave slower lanes and enter faster lanes.

Monopolistic Competition

Firms sell differentiated products that are adequate substitutes
*More common market structure
examples: fast food chains, clothing companies

Characteristics:

  • limited control over price
  • large number of firms
  • differentiated products
  • few barriers to entry and exit
  • non-price competition
Pure competition Monopolistic Competition Oligopoly Pure Monopoly

Non-price Competition

  • Differentiating one’s product from others
  • More profitable than lowering prices
  • Used in monopolistic competition and oligopolies
  • Examples:
    • Packaging
    • Features
    • Brand name
    • Advertising
    • Why? to convince consumers to pay higher prices

Oligopoly

  • Small number of sellers dominate product market
    *Structure found in certain markets, such as soft drinks, automobiles, cereal, cell phones

Characteristics:

  • Price makers - control over price
    • collusion - firms secretly setting prices
  • Few larger firms
  • Identical or differentiated products
  • High barriers to entry
  • Non-price competition

Monopoly

True or false?

  1. All monopolies make a profit - false
  2. Monopolies are usually efficient - false
  3. All monopolies are bad for the economy - false
  4. All monopolies are illegal - false
  5. Monopolies charge the highest price possible - false
  6. The government never prevents monopolies from forming - false

*Govt gets involved when we move towards this market structure

  • One seller of a product with no close substitutes
  • Government regulates to protect consumers from high prices, shortages, poor quality
    examples: utilities, Microsoft, Standard Oil

Characteristics:

  • “Price maker” - total control of price
  • Single firm controls the market
  • Unique product with no close substitutes
  • New firms cannot enter market
Pure competition Monopolistic Competition Oligopoly Pure Monopoly

Types of Monopolies

Pure Monopoly - banned by the govt

  • one seller of a unique economic product with no close substitutes
    examples: rare…U.S. Steel, Alcoa (aluminum)

Natural monopoly

  • Costs minimized by having a single firm produce
  • Efficiency justifies this type of monopoly
    example: electric companies, cable TV

Geographic Monopoly

  • Firm has no competition in its immediate area
  • Minimal population justifies this type of monopoly
    example: rural gas station and grocery stores

Technological Monopoly

  • Firm or individual creates something new
  • Patents and copyrights provide incentives for inventors and artists to create
  • Encouraging innovation justifies this monopoly
    example: pharmaceutical drugs, songs, books, toys

Government Monopoly

  • Owned and operated by the government
    example: U.S. Postal Service, state liquor stores, SD Trolley

January 8 2024 1/8/24

Supply & Demand work together

How do they communicate? PRICE!
Prices have the following advantages in a market economy:

  • neutral
  • flexible
  • no cost to administer
  • easily understood

market equilibrium.png

January 19 2024 1/19/2024

Categories of Labor

  • Unskilled Labor
    • Janitors, ditch diggers, dishwashers
  • Semi-Skilled Labor
    • Cashiers, Truck Drivers, Typists
  • Skilled labor (“Blue collar”)
    • Carpenters, Electricians, Plumbers
  • Professional Labor
    • Doctors, Lawyers, Business Executives, Teachers

Two Methods of Determining Wages

  1. Labor Negotiations
    • Unions negotiate contracts with employers to determine wages (usually higher than what the market would otherwise set). When they can’t agree, they will use the various methods of conflict resolution (arbitration, mediation, etc.)
  2. Supply & Demand -Jobs that require specialized, unique skills will have higher wages than those that can be done by a large number of people (doctors vs waiters)

How do Unions Increase Wages

  1. Convince Consumers to buy only Union Products
    EX: Advertising the quality of union/domestic products

  2. Lobby government officials to increase demand
    EX: Teacher’s Union petitions governor to increase spending

Union Activities

  • Strike: refusal to work until certain demands are met
  • Picket: Parade outside with signs that display the dispute
  • Boycott: a mass refusal to buy products from targeted employers or companies

January 25 2024 1/25/2024

The Unemployment rate

The percent of people in the labor force who want a job but are not working

Unemployment rate = (# unemployed)/(# in labor force)

Who is in the labor force

  • Above 16 years old
  • Able and willing to work
  • Not institutionalized
  • Not in military, in school full time, or retired

3 Typed of Unemployment

  1. Frictional Unemployment
    • Temporarily unemployed” or being between jobs
    • individuals are qualified workers with transferable skills but they aren’t working
    • Examples: High school or college graduates looking for jobs, individuals that were fired or are looking for a better job - Seasonal Unemployment
    • This is a specific type of frictional unemployment which is due to the time of year and nature of the job
    • These jobs will come back
    • Examples: Professional Santa Clause Impersonators, Construction workers in Michigan, Me!!!
  2. Structural Unemployment
    • Changes in the structure of the labor force make some skills obsolete
    • Workers DO NOT have transferable skills and these jobs will never come back
    • Workers must learn new skills to get a job
    • The permanent loss of these jobs is called “creative desruction”
    • Examples: VCR repairmen, Carriage makers - Technological Unemployment
    • Type of structural enemployment where automation and machinery replace workers causing unemployment
    • Examples: Auto assemblers fired as robots take over production, Producers of Capital Goods (tractors) fire assemblers
  3. Cyclical Unemployment
    • Unemployment that results from economic downturns (recessions)
    • As demand for goods and services falls, demand for labor falls and workers are fired
    • Examples: Steel workers laid off during recessions, Resaurant owners fire waiters after months of poor sales due to recession

The Natural Rate and Full Employment

Two of the three types of unemployment are unavoidable:

  • Frictional unemployment
  • Structural unemployment
    Together they make up the natural rate of unemployment (NRU)
    We are at full employment if we have only the natural rate of unemployment
    This is the normal amount of unemployment that we SHOULD have
    The number of job seekers equals the number of job vacancies

January 30 2024 1/30/24

Market failures

  • inadequate competition
  • resource immobility
  • inadequate information
  • public goods
  • externalities

Four Conditions of a Competitive Free Enterprise Economy

  1. Adequate competition exists in all markets
  2. Buyers and sellers are reasonably well-informed about conditions and opportunities in markets
  3. Resources must be free to move from one industry to another
  4. Prices must reasonably reflect the costs of priduction (including reqards/profucts for entrepreneurs)
    If any of these conditions are signidicantly altered, market failure occurs

Market Failure #1: Inadequate Competition

Inadequate Competition can lead to…

  1. Resources are not allocated efficiently (wasteful spenfing, extravagant purchases because the producers CAN)
  2. Higher prices and reduced output (monopolues take advantage)
  3. Businesses ingluencing politics (requesting waivers from encironmental laws, funding political campaigns)

Market Failure #2: Inadequate Information

Consumers, producers, and the government must have adequate ingormation about the market confitions so that resources can be allocated efficiently
Examples:

  • Wage differences in different industries
  • interest on investments
    if information/knowledge is important to know but difficult to find, this results in a market failure.

Market Failure #3: Resource Immobility

Difficult to avoid- factors of production tend to stay within the same industry
Examples:

  • Labor wants to avoid moving, stay close to family/friends
  • Manufacturing plants tend to be difficult to switch to new industry

Market Failure #4: Public Goods

The market is generally successful in satisfying individual wants/needs, it tends to fail to satisfy collective wants/needs- thus the government has to step in and provide for them
Examples:

  • Public pools
  • libraries
  • police
  • fire protection

To be considered a true public good, it must meet two criteria:

  1. Non exclusion
    • Evveryone can use the good
    • Cannot exclude benefits of the good for those who will not pay (ex: National Defense)
  2. Shared consumption (nonrivalry)
    • One person’s consumption of a good does not reduce the usefulness to others (ex: State Beaches)

Market Failure #5: Externalities

The free market fails to include external costs and/or benefits
No government involvement would lead to too much of some goods, too little of others
Ex: e-bikes

Free market assumes cost of e-bikes is paid by those who purchase the good
Cities recognize external costs (accidents, safety hazards) and create policies to limit usage

Febraury 2 2024 2/2/2024

What can taxes impact

  • Factors of production: taxes on businesses increase the cost of production, shifting supply curve left & raising prices… consumers buy less, causing FoP to shift to other industries.
  • Consumer behavior: high taes can raise revenue and reduce consumption of socially undesirable products (alcohol, marijuana, tobacco, etc.) sin tax
  • Productivity and growth: high taxes can discourage people from earning more/loss of incentive if they don’t keep the $$ (millionair/billionaire example)

Who pays the tax?

Depends on the elasticity of the demand for the product

  • Elastic demand for a product: the producer is more likely to cover the tax burden (consumers will decrease purchasing if the price rises)
  • Inelastic demand for a product: the producer may cover some tax increases, but is more likely to pass those costs in the form of higher prices to the consumer (people will continue buying the good despite the price increase.)

How to ensure taxes are effective

3 Criteria:

  • Equity: those paying the tax must feel that it is fair (fewer exceptions/tax loopholes).
  • Simplicity: tax laws are easy to understand
  • Efficiency: reletively easy to administer and successful at generating revenue (income tax taken out of paychecks)

Two Principles of Taxation

  • Benefit Principle: if you benefit from the goods/service paid for by the tax revenue, you should contribute to the cost in a proportionate manner (gas tax)
    • Limitations:
      1. Greatist benefits go to those who can least afford to pay (food stamps, low income housing)
      2. Benefits are hard to measure
  • Ability to pay principle: if you have more $$, you should contribute more regardless of how much you benefit (income tax)
    • Two factors:
      1. Can’t always measure benefits of govt spending
      2. High income earners suffer less then paying taxes than those with lower incomes

Types of Taxes

  • Proportional tax: Everyone pays the same % regardless of income
  • Progressive tax: % you pay increases as your pay increases
  • Regressive tax: % you pay decreases as your pay increases

Febraury 5 2024 2/5/2024

What is Macroeconomics?

Macroeconomics is the study of the large economy as a whole. It is the study of the big picture.

  • Instead of analyzing one consumer, we analyze everyone
  • Instead of one business we study all businesses

Why study the whole economy?

  • The field of macroeconomics was born during the Great Depression
  • Government didn’t understand how to fix a depressed economy with 25% unemployment.
  • Macro was created to:
    1. Measure the health of the whole economy
    2. Guide government policies to fix problems

For all countries there are three major economic goals:

  1. Promote Economic Growth
  2. Limit Unemployment
  3. Keep Prices Stable (Limit Inflation)

February 7 2024 2/7/2024

What does GDP tell us?

Just like calculating your own income, GDP measures how well the U.S. is doing financially

How do you use GDP?

  1. Compare to the previous years (Is there growth?)
  2. Compare policy changes (Did a new policy work?)
  3. Compare to other countries (Are we better off?)

Calculating GDP

Two way of calculating GDP:

  1. Expenditures Approach - Add up all the spending on final goods and services produced in a single year
  2. Income Approach - Add up all the income that resulted from selling all final goods and services produced in a given year
    Both ways generate the same amount since every dollar spent is a dollar of income

Real vs. Nominal GDP

Nominal GDP is GDP measured in current prices. It does not account for inflation from year to year.
Real GDP is GDP expressed in constant, or unchanging, dollars

Real GDP adjusts for inflation Real GDP is the best measure for economic growth

Does GDP accurately measure standard of living?

Standard of living (or quality of life) can be measured, in part, by how well the economy is doing…
But it needs to be adjusted to reflect the size of the nation’s population.

Real GDP per capita (per person)

  • Real GDP per capita is real GDP divided by the total population. It identifies on average how many products each person makes Real GDP per capita is the best measure of a nation’s standard of living

What is Economic Growth?

  1. An increase in real GDP over time
  2. An increase in real GDP per capita over time (usually used to determine standard of living)

Why is economic growth the goal of every society?

  • Provides better goods and services
  • Increasing wages and standard of living
  • Allows more leisure time
  • Economy can better meet wants

The Business Cycle

Why does the economy fluctuate?

  • Retailer and Producers send misleading information about consumer demand
  • Advances in tech, productivity, or resources.
  • Outside influences (wars, supply shocks, panic) Who cares?
  • Macro economics measures these fluctuations and guides policies to keep the economy stable
  • the government has the responsibility to:
    • Promote long-term growth
    • Prevent unemployment (resulting from a bust)
    • Prevent inflation (resulting from a boom)

How does the Government Stabalize the Economy?

The government has two different tool boxes it can use:

  1. Fiscal Policy - Actions by Congress and President to stabilize the economy
  2. Monetary Policy - Actions by the Federal Reserve Bank to stabilize the economy

Contractionary Fiscal Policy (The BRAKE)

Laws that reduce inflation, decrease GDP (Close a Inflationary Gap)

  • Decrease Government Spending
  • Tax Increases
  • Combinations of the Two

Expansionary Fiscal Policy (The GAS)

Laws that reduce unemployment and increase GDP (Close a Recessionary Gap)

  • Increase Government Spending
  • Decrease Taxes on consumers
  • Combinations of the Two