Chapter Reflection (5)

Chapter Five: Elasticity and its application (Level of difficulty 2 ½)

Elasticity refers to how sensitive quantity demanded is to a change in price. Considering that the relationship between price and demand is the following, if the price goes up then the demand for that good goes down. Inelastic demand shows that although the price may rise there is only a small quantity of the demand that decreases. The same way that if the prices may lower, there is only a little bit of increase in the quantity demanded. This may occur because there aren’t many substitutes to that certain good; the good is a basic necessity, or |% of change in quantity/ %change in price| with a coefficient that is less than one.  Demand curves for inelasticity are steeper than the demand curves for elasticity. Elasticity on the other hand must contain a coefficient that is greater than one. When the coefficient is exactly one, then that is considered to be ‘unit elastic demand’. Perfect inelastic means that the found change percentages equal zero, shown by a vertical curve in demand. Perfectly elastic represent that the found change percentages equal infinity, and are determined by a horizontal curve in demand. The changes in total revenue because of the change in price determined due to whether a good is inelastic or elastic is total revenue. The price times the quantity. Inelastic relationships mean that if the price rises so does total revenue, price drops then total revenue does as well. Elastic relationships on the other hand show that if a price rises then the total revenue goes down, and if the price drops then the total revenue rises. Cross price elasticity of demand measures how the quantity of demanded of one good responds to a change in demand for the other. While the elasticity supply measures how much the quantity supplied results in the change of price. 

The market forces of supply and demand

Chapter 4 (Level of difficulty 2)

Chapter four is based on the market and how supply and demand contribute to the relationship between the quantity demanded and the quantity supplied. If the price of a good increases then the demand for that certain good decrease, and vise-versa. This allows the demand curve and the demand schedule to move along with a constant relationship. There are two types of goods, a normal good and an inferior good. If there is an increase in income then there is an increase in demand that’s considered a normal good. If there is an increase in income, but a decrease in demand that’s considered to be an inferior good. Prices of related goods are placed into two groups, substitutes occur when the price of a good rises thus the demand for the other rises, complements happen when there is an increase in the price of one good, but a decrease in the demand for the other. Supply involves itself with the quantity supplied, which is what a seller is willing or able to sell. If the quantity of a good rises then the price of that good rises as well. Supply schedule and supply curve determine the relationship that the law of supply creates. There is always a difference in individual supply and demand compared to market supply and demand. Not only are there more individuals involved, there are more factors that determine different outputs. Equilibrium is the MOST important thing in supply and demand markets, since eventually the prices and the quantities will come to a point intersection known to be balanced. Excess supply happens when there is more supply than demand. Excess demand is when there is more demand, and less supply. The chapter was overall very easy to understand, various examples were illustrated to show shifts in the graphs and the collected data. 

KEYNESIAN CHORUS CACKLING?

THE TRUE STRUGGLE IS LISTENING TO THE KEYNESIAN CHORUS CACKLING.

In all honesty, there was no surprise to the information that was read in the article, ‘Why The Keynesian Chorus Is Cackling Like Chicken Little’. Federal government in general keeps too much away from the public, leaving the people with ignorance. The shocking news is that the author of the article, David Stockman is a former director of the office of management and budget, he’s giving us crucial information that will allows us to know how ‘dirty’ the Feds actually are.

To begin with there are big-wealthy people who are willing to manipulate the interest rates for borrowing money, or as Stockman states “tightening” the rates, and to top this whole thing off the Federals are willing to comply for an easy output. That’s not the worst part; imagine eighty months of ‘free money’, not being enough to satisfy these ‘big’ guys. It’s obnoxious because we, as the public, have to suffer the consequences caused by inflation when we can hardly get by living in the standards that we are living in now. Why don’t they use that type of money for college acceptances? Oh right, students are not worth it, instead they should kill themselves in order to pay a debt that they will most likely have for their whole lives. Great, just great.

Not only is this truly ridiculous, it’s pathetic. You have inflation occurring due to undermined interest rates that may hit zero, as the dollar shortens out and the equity markets fail and fall. Numbers have been extremely manipulated in a way that there is an appearance of growth and gains based on an idea, but not on real life. These are not the only things affecting the market; the business system has slowed so much! Something that should not be occurring, instead productivity and businesses should be increasing for benefit.

The dumb gamblers have created a trash based economic index that always warns the Fed not to increase the interest rates due to their own selfish opinions. TAA-DAA, the market worth drops and the credit spreads widen out, interesting…

 It’s stupid, if people actually think our money is being processed in an intelligent manner, because this article comes to show how horrible our economy is and has been for such a long time. The only real question is: How much longer before the markets crash and the money blows out and leaves us with depression and insanity?

Oops, it seems we’re already pretty crazy. . .

Chapter Three: Interdependence and the gains from trade

        
Chapter Three: Level of Difficulty 1
  Trade is a possible outlet to efficiency. Items can be produced in a way that not only benefit those who are producing, it may also benefit those who are consuming. There are advantages to the trading markets. The comparative advantage determines a specialization in products. The comparative advantage is  where there is a small amount of input but a large amount of output, all brought about when dealing with who has a lower opportunity cost per product. In all cases trade is to benefit production and consumption to have an overall greater prosperity. Trade will forever be all about the comparative advantage. Countries will always want to receive more for less. Throughout the chapter there are prices in which trade must lie itself within, but what would happen if the producers/consumers get ripped off? Has this happened before? When trading, what is the real cost when it comes to transportation? Do some products lack efficiency after the taxes? If trade increases consumption, does it increase employment as well, or are there some exceptions to this due to the 'efficient' way in which products are produced? I understand that the chapter was based on the basics, but overall the complications seem to be more interesting. The big bang idea is that trade is great, and the invisible hand helps plenty when it comes to own interests and prices. Production possibilities frontiers help make an outline of what goods should be imported and exported.