Chapter 18

Chapter 18 focuses on labor and land/capital, discussing many things. In a profit maximizing firm, the demand for labor depends on how the production function is for their firm, and the marginal product of labor to determine how many workers to hire. Firms will stop after it is no longer profitable to hire any more workers, trying to get the most revenue they can while still making a profit. Because of diminishing marginal product, firms will get to this point quicker than if it dealt with market conditions that would lead to them to produce less without it. And, due to this, the value of the marginal product curve ends up being the demand curve for the firm. While there's demand for labor, there is also supply for it, in terms of whether people are willing to give up leisure time to work, based on the amount of hours in the work week. Shifts in the graph would be based on external factors and effects, like an influx of new workers lowering wages, or a higher sale price for the product, increasing amount of workers. Land and capital are also used in determine how production is affected, as without certain equipment, firms would not be able to sell their product, depending on how big the land is and how much they can get off of it. This in combination with labor affect the main production line, in that there needs to be a balance between them to ensure they're at the profit maximizing point.

Chapter 17

Chapter 17's main focus was on monopolistc competitive markets, and how they differed from monopolies and perfectly competitive markets, along with how they were similar to said markets. The big difference between the perfectly competitive market and monopolistic competitive market would be how the graphs are, due to the fact that there is markup in one while the other is a price taker. The markup and downward sloping demand curve cause an inefficient amount of the product being made due to the firms creating deadweight loss of transactions not occuring. This can be offset by the government subsidizing the firms so that they produce at a loss but produce at the socially efficient scale; the problem with this is that there would be many firms that would need to be subsidized, along with the fact that the taxes created to subsidize would create more deadweight loss, and would lead to a very ineffective solution overall to the problem. Being able to be a price maker, these firms can enter the market when favorable conditions are met for what they want to produce more easily based on circumstances, but the effects of brands and advertising can effect whether entry is easy or not. Unlike perfectly competitive markets, these firms can advertise for more people to use their product, as they would want as many people to buy it instead of the "set" amount that would buy it. Debate over advertisements has been constant, due to it being such a powerful tool in the market and how they can affect consumer purchase without necessarily showing information about the actual product.

Chapter 16

Chapter 16 main focus was on oligopoly, a different type of firm that's not exactly in a perfectly competitive market or monopoly market, but instead something in between the two in an imperfect competition. A different approach has to be taken when dealing with these types of firms as they follow a different market structure than the norm, and whether the amount of firms is actually only a few or many. With only two firms, the oligopoly can be called a duopoly. These two firms can choose whether to cooperate or not, but if they do agree, there might be betrayal from one firm or both about producing more than they were supposed to to increase profit, as the firms have their own self interest that can affect how they act. Due to the self interest, it's hard for firms to actually reach the equilibrium price and instead reach the nash equilibrium, one that gives less profit overall to firms involved. This, along with anti trust acts, causes cartels to be very uncommon overall because of the disagreements caused by human nature.

Chapter 15

Chapter 15's main focus was on monopolies and how they affect the market/how their market affects society as a whole due to having strong market power in the business they are in. It discusses the different types of monopolies and how they each act in their own environments. They could be a monopoly due to the resources they have that allows them to have a lower input cost overall than other firms, are made based on the government's thinking of what is best for the public, and can be natural monopolies based on being able to produce at lower cost than other firms. They follow a downward sloping demand curve to make sure they have business, as while they may charge high prices for it, high enough prices would cause consumers to not buy the product/service. In this way, a monopoly is able to increase it's profit by a huge amount compared to a normal firm in a competitive market, as they are price makers, with the others being price takers. How they affect society depends on both the consumers' willingness to pay and whether what they're charging is reasonable. Along with this, price discrimination can also occur with monopolies, as they're able to lower prices below (or above) marginal cost to maximize profit due to the variety of consumers. In a competitive market, they wouldn't be able to do this as buyers would go elsewhere for their goods if price is higher than other firms, or the firm would be selling at a loss at a lower price.

Chapter 14

Chapter 14's focus was to expand more on how firms are affected in competitive markets, taking a more in-depth look at revenue and maximizing profit. Firms, depending on costs and profit, will decide to shut down production for however long is needed, or shut down permanently to not deal with the overpowering costs and no profit. However they go about it, the decision must be made based on short and long run effects. One of the main reasons to shut down would be because the average cost to make the good is more than the actual price of the good, in which selling at a loss would cost the firm much more than just paying fixed costs for the firm while it's shut down. This lets the firm decide whether to shut down permanently, or wait it out and see if the price of good rises (or it costs less to make it overall). Sunk costs are introduced, in which many ignore due to the fact that they're unavoidable when dealing with certain parts of production for a firm. The decision to enter or exit a market in the long run for the firm depends on, mainly, profit, total cost, total revenue, and quantity of the good. Because of how important they are, firms have to take all variables into account when dealing with this type of situation. For some, the short run might be awful but might pay off overall in the long run, with this risk involved on whether they should stay in the market or exit completely.

Chapter 13

Chapter 13's main focus was mainly on production and costs, with there being explicit and implicit costs with different variations of each type of cost. Total cost and the firm's cost are technically different, in that total takes into account the value of inputs used, while firm's cost takes into account all opportunity costs. There's also different types of profits, with there being economic and accounting profit that takes into account cost and explicit cost respectively. One of the main differences is that economic profit can be zero and the company will be doing well, as opportunity costs are taken into account, unlike accounting profit which is the one mostly everyone knows about. The product function and total cost curves show the relationships that are shared between quantity and revenue/cost, with the two graphs being inverses of each other in terms of how they look. The main idea shown is that, constantly increasing the quantity will have varying effects based on where in the graph the increase is at, as in the beginning increasing the quantity of a good will be very beneficial to a firm due to the revenue it would bring in and the low cost of it. But as the product function gets flatter over time, it becomes worse for the firm to constantly add the quantity of what they're adding as profit will decrease and total costs will keep increasing because of it.

Article Review 4

In this article, the author talks about the problems that emerging economies face at the moment, with the idea that they all have common symptoms and may be dealing with a hidden debt that is unknown to that country. China is, again, one of the main parties involved that is a huge factor when taking into account the situations of the emerging economies of many countries. Due to the way the hidden debt works, it will usually go undetected and cause extreme chaos in a way, or just be a small obstacle that doesn't affect the country too much. The crisis in Greece is a good example, in which their crisis only became apparant in 2010 because of the fact that their accounting ways caused people to think their debt was lower than it actually was. The problem with most emerging economies now, though, is the fact that many borrowed money from China in terms of U.S. dollars, along with the fact that their development banks aren't included in data, so it's hard to figure out just how much China influenced/impacted certain countries compared to others. And because of this, the article mentions that data should be handled carefully to determine the extent of China's influence in terms of loans, as their slowed down economic prowess can affect a variety of countries.

Chapter 11

The focus of the chapter was based mainly on the different types of goods that are part of a market, and how they affect policy makers' decisions, with the main focus on public goods and common resources as the chapter's title states. Many problems arise with common goods, as no actual revenue is made from them, but instead have benefits that cause people to decide on whether the benefit would be worth the cost of producing it. Because they are public, the problem of free-riders also comes up when dealing with something like a fireworks show, where some people can just not pay to see it. Then there's the gray area between public and private goods for some like lighthouses, where it was a private good early on but turned into a public good. Cost-benefit analysis is important, as rough estimations have to be made of the benefit when compared to the cost of it to see whether it's a good decision or not to produce or have. Common resources face a different type of problem, with private decision makers constantly overusing what is available, making it worse for other people that want to use it. With this in mind, government intervention aims to regulate it efficiently, so that no problems come about from the overuse of it, although sometimes it is very hard to enforce when you consider something like the ocean and how vast it is, with many people mostly looking out for themselves might not think twice about the negative effects they create.

Chapter 10

Chapter 10's focus was on GDP and how it's affected by many different things happening throughout the country of which it is being measured. It is a very big process that involves a large scale of every good and service (that is in the legal market) being sold and produced. It measures the net value of total spending and revenue the country produces, in which, ideally, the numbers would be the same, with number discrepencies being due to how it's calculated in two different ways, either from the spending or selling point of view. It is an intricate system that takes into account many things but sometimes excludes stuff to get the correct value of actual GDP, along with taking into account seasonal changes. For example, the used car market would not be taken into account for the car maker, as it has already been put out in the market and sold as is. The variety of households in a country and what they buy, how much they make, whether they have a company outsourced in a different country, all affdct GDP in different ways (or no way at all as outsourced companies raise GDP of the country they're located in instead of the country the person is in/from). Spending on imports/exports is also a way that GDP is affected.

Article Review 3

Stockman has written another article, with another prediction of the economy crashing after a certain point, with keynesian economists affecting the outcome of it greatly with the policies they helped to produce and enforce for the federal government. The main person talked about, Bernanke, is ridiculed throughout for his reasoning and the ideas that he helped implement, as the policies created a lot of change in the government's economy that cause it to be in it's little bubble that will eventually pop harshly. With reaching very low unemployment being the reasoning for his decisions, and taking credit for it by saying that under his policies it happened, Stockman argues that Bernanke really didn't do anything overall except cause excessive spending that's not needed, as shown by the amount spending has increased and the rate unemployment went down. With the amount of spending, unemployment should technically be nonexistant, but it only altered it by just a little bit that Stockman constantly argues against of it not adding up. Having increased spending by so much, along with having a 0 interest rate policy, the U.S. is in a bad spot, as such a low interest rate won't cause any revenue to actually be made. Bernanke's thinking of European governments also seems silly, as Stockman compared both the U.S.'s and Germany's GDP growth rate, in which both have different types of economies and policies, and showed Germany's was slightly higher, even after the U.S's massively increased spending to try to help out the economy.

Chapter 8

Chapter 8 focused on how taxes affect the market that they're imposed in by showing how revenue is made from them, along with the costs of that revenue that gets taken away from total surplus between consumers and producers. The loss in surplus, called deadweight loss, can be either big or small, depending on the elasticity of both supply and demand curves. But for most goods in a market, a tax will always result in deadweight loss based on how the market responds to it. Inelastic supply and demand curves cause the deadweight loss to be much less than if they were elastic. But the implementation of taxes can also cause other negative effects, based on opportunity cost, willingness to pay, and how large the tax is. With unfavorable conditions, a trade that might happen based on the situation before the tax won't if it isn't favorable to both parties involved. The tax would then cause not only a loss in surplus, but on the whole trade if it's too big, meaning no tax revenue is received and the market loses out because of it. As the tax increases, more deadweight loss is accrued, meaning it would be very inefficient for it to be implemented if it interferes too much with the market. Because of this. total tax revenue is increasing until it reaches a certain point, where the tax interferes too much that revenue would start going down as people don't want to take part in buying or selling the good or service being taxed.

Chapter 7

Chapter 7 had a lot of focus on both consumers and producers, introducing the new ideas of consumer surplus and producer surplus. With consumer surplus, people willing to buy a good at a certain price but are able to buy it for less causes a surplus for them, as they save on money that they were willing to spend. The lower the price and the higher they're willing to pay, the more surplus the consumer has. While consumer surplus is related to demand curves, producers are related to supply curves, and instead of maximum willingness to buy something, they instead use the lowest price to do a certain job based on how much they would get and are willing to get. For producers, a higher price means more surplus as they will get more money based on how much the job will pay them. This causes the two sides to clash in a way, to find the best possible place for both consumers and producers to be happy. The market, at it's best, will find a way to maximize total surplus for both sides, needing to find the most efficient allocation of resources to do so. And, in reality, it also has to have a focus on equity so that more people have a chance to get the good if they want to. With this in mind, the idea of centrally planned economies usually don't work because of the vast amounts of information to try to appeal to everyone, and should usually be left alone to find the equilibrium point.

Article Review 2

In this article, Stockman focuses on the issue of the global economy currently being in trouble based on current situations that have appeared in trading, mainly in Brazil. With the decrease in trading and various other things like shopping and job employment, Brazil is currently heading towards an economic slump that will greatly affect the world's economy. The way the U.S. is affected is the amount they export to brazil, decreasing by a lot due to the fact Brazil is reaching a recession. The other country talked about is China, in which their current situation has caused a great loss in terms of money. Stockman is, again, very aggressive in his writing, mocking wallstreet and how they portray China as a great hope for better change in the economy that will increase growth and revenue. His viewpoint comes from the idea that China's economy is spiraling out of control, and it's currently just trying to keep it in check or controlled to a minimum. With these two countries, Stockman believes that worse is yet to come due to the current trends with both countries, and how the global market will respond to them. And with China's increasing market output of things such as steel, deflation is rampant and compared to a freight train due to the amount of price reductions China has caused in the past three years. It's only a matter of time before more countries are either affected by these situations or they face similar situations, causing the global economy to be in trouble in the future.

Chapter 6

Chapter 6's focus on governement policies helped show how effective/ineffective they are, depending on the viewpoint. Two ideas taken into account, price ceilings and price floors, show how the market responds to such intrusive policies of the free market that would otherwise even out over time. With a price ceiling, it can either have no effect by being not binding, have a small/intended effect for the short run, or be disastrous due to being elastic as time goes on. The example given of there being only a certain amount of rooms being able to rent, while effective at first because of current inelasticity, it will cause huge shortages that affect consumers negatively by creating the need to bribe landlords to rent a room they shouldn't, causing it to slowly shift back to the equilibrium price in a way it shouldn't. Price floors can either have no effect, or cause surplus in the quantity of the good that cause sellers to not be able to sell everything they have. The other focus throughout the chapter is on taxes and how they affect consumers and market outcomes. If it's a tax on the good, demand curve shifts to the left due to the added price on it thats consumers would have to pay. But if the tax is levied onto the seller instead, the supply curve would shift that causes less quantity and a higher price, with the equilibrium point shifting based on how much the tax is.

Chapter 5

Chapter five introduced and focused on the idea of elasticity, in which it measures responsiveness to changes in the market. Along with supply and demand, it is very important in analyzing changes in the market to see what changes will occur in the good and how it'll be affected. Most common normal goods are elastic, in that something like a change in price would cause the market to respond based on elasticity. Luxuries are an extreme, where they are very elastic due to not being needed by most (although outliers could say it's needed for them), while doctors' visits are inelastic, in that even if it increases in price, not much change would occur. Elasticity is very important, in that supply and demand go with it to be able to understand how a market reacts. It expands on the basic idea of just simple factors affecting how much of a good is sold and demanded, and shows how those factors would actually affect the outcome of the changes with more factors. Some new things are perfectly inelastic supply and demand, with completely horizontal and vertical lines. An interesting example given is wheat, and what would happen if technology helped produce more. Due to the increase in supply and inelastic demand for wheat, the equilibrium point shifts to a lower price with slightly more quantity, and will overall have a negative effect on farmers due to loss of revenue. Elasticity can show how advances can affect people in the market negatively, even if it looks like it'll be more useful.

Article Review 1

The main argument introduced and argued throughout the article focused on, mainly, of how the interest rates that we have are currently creating an economic bubble that will likely pop in the near future and going against the idea that the government is tightening too much money, but instead actually needs to have tightened the amount of money it had a lot sooner. I wasn't too sure at first, but understanding now, the current negative interest rate of -1.52 means the government is basically giving away money, all while trusting that businesses/consumers will use that money for spending and good business decisions. Overall though, there is no actual monetary stimulus to make up for the fact that it lost a lot more money than in past years because of it, with business investment actually being lower in 2015 than 2000, even though the federal government issued out incredibly more money than before. The author was very aggressive in his stance, constantly getting angry at the Goldman index, in which it had data that "instructs" the central planners to not fix the distortions in the market, constantly causing the bubble to grow bigger. The problem, though, is that it's been constantly done so many times over the past 25 years, "fixing" the current problem with a short time solution. And, according to the author, due to the "nonsense" that Keynesian Economics supporters' impacts have had on the federal government's spending, the economy's collapse will be brutal and incredibly destructive.

Chapter 4

Chapter 4 focuses heavily on three subjects: Supply, demand, and how they affect the economy together. Both supply and demand have their own curves that each depend on different factors, but ultimately combine and meet to create the equilibrium point, where all the factors involved lead to both supply and demand being the same. The equilibrium point. while ideal, needs to actually be reached first. At any point in time, both supply and demand curves may shift through their own means, but the goal is to always try to shift back in a way to be as close as possible to the equilibrium point. Having more or less of a product than what the market demands causes surplus and shortages, creating problems for sellers who then try to find ways by highering or lowering prices, or other means for what the issue may be. Prices can affect both the supply and demand curve, as sellers may see an increase in price as more profitable, therefore getting more of the good in stock, while customers on the other hand may believe that such a high price means they may have to buy either substitutes if available, or inferior goods that are cheap and work well enough to not have to purchase the original good. Supply and demand is an intricate system that showcases how buyers and sellers will react to change in goods, and how resources will be used and allocated to cater to the ever changing market of a variety of goods, with all businesses, small and large, affected by how everyone responds to the ever changing market.

Chapter 3

The focus on this chapter centered on trading and the positive effects it can have to parties involved, explaining the ways that 2 different parties can be affected by it. The main example, the farmer and rancher, showed that even though the rancher was better than the farmer at producing both meat and potatoes than the farmer, they would both benefit from trading with each other rather than limiting themselves and trying to get both products on their own. Although very simple, this example showed how specializing in something that you're good at doing and trading is beneficial overall. There was doubt in the farmer as to how it can help him better, but charts/graphs helped show how trading can help him have more than what he can currently make with his current workload input. And, although one person can have absolute advantage than another in everything, the comparative advantages between them is different unless the opportunity cost between the two parties is the same. Absolute means one can be better overall in output done for what the two of them can make, even so though comparative means that one person can give up less than the other to make the same good. The differences between the two is showed more in later examples. In a scenario with Tiger Woods and his neighbor, participating in a commercial and hiring the neighbor to mow the lawn is better for him overall instead of wasting the time needed to do the commercial by mowing the lawn.