Posts Tagged ‘ Economics ’

Elasticity

There are some goods and services that see very little change in quantity demanded with an increase in price. On the other hand, there are those that see the complete opposite. How responsive consumers are to changes in price is called elasticity. This is measured by dividing the percent change in price in to the percent change in quantity demanded.

 

We’ve already discussed how to visually interpret price and the demand curve on a graph: Price ascending vertically on the y-axis and quantity demanded ascending horizontally to the right on the x-axis.

 

If an increase in price creates a small decrease in how much the product is demanded, we call that inelastic demand. It is inelastic because the demand curve stretches only slightly to the left. For example, quantity demanded for a meal priced at $10 is 60, but decreases just to 55 when the price goes up to $15. Accordingly, if an increase in price creates a significant decrease in quantity demanded, the demand is said to be elastic – demand going from 60 to 30 as the price increases by $5.

 

So how is elasticity influenced? Products that are considered a necessity are often harder to substitute, so when prices rise there will be a smaller change in quantity demanded (i.e. highway tolls, gas, milk). But when a product is deemed a luxury, the opposite occurs (i.e. expensive candies, vehicles, brand names). A product that has many substitutes will also see a more elastic demand curve as price increases because consumers have other options, and vice versa.

 

Contrary to what the greater population wants to believe, bad management can make for a bad economy. From your knowledge of elasticity, you can understand the detrimental effects of increasing the price of a good that is highly elastic. If you produce cigarettes and raise your prices, it is very unlikely that your business will take a hit. However, if you make pencils and hike the price, don’t be surprised if consumers partake of the many other substitutes available.

 

Career Outlook: People who like to delve into consumer behavior in this regard usually do well with careers as a pricing analyst or revenue analyst.

  

Contributor: Simone Devereueawax

2010
11/08
CATEGORY
Economics
Liberal Arts and Sciences
TAGS










6 comments

Education: Vision

A Riddle: What is always all around you, comes in great abundance, it seems plentiful; but, you never have enough, there is always more coming; but once you use it or let it go you can not get it back, and finally, though we know better, we continuously waste it- GIVE UP?  Yes, you guessed it TIME!

 

 Hello again from Willard Draper of WDJED Enterprises, Inc. Can you believe it is October already?  For those of you that have been busy on your understanding of KNOWING ONE’S SELF, the last month was a blur.  For those who were not so engaged in some productive pursuits, you probably felt September would never end.  I fall in the former of the groups; I can’t believe another month has been burned off of 2010!  As usual Time is relentlessly moving on, with or without us.   

A note about my blogs, theories can be divided in to Stage or Phase approaches.  With Stage theories, they must be completed before you can move to the next level.  With Phase theories, you can transition to another level even if you have not completely satisfied all the elements of the Phase. For my Blogs, the subjects we discuss are not in Stage order; however they are in a progression. There will be some moving back and forth among subject matter; however we will deal with the subjects that are linear (A-Z).  Though it will be important you get to know yourself  (A), in the interest in time, I will move each month into new territories in the same or different subjects. Overall; we, will progress through future topics and move all the way to your final goal, success, graduation, career or business, etc. (Z).  In the mean time I hope you have begun to master the things mentioned last month like, disregarding foolish things, moving beyond fear, being positive, being focused and being true to yourself.

 

If these things have begun to happen for you; probably you have started to develop a VISION for yourself and your future. Vision is that mental image, plan, image, revelation, idea or Dream you have yourself or your future.  Great ideas come from the initial vision.  Visionaries including Moses, Mohammad, Julius Caesar, Cleopatra, Jesus, Washington, Abe Lincoln, Fredrick Douglass, W.E.B. Dubois, CJ Walker, Henry Ford, The Mandelas, The Clintons, King, Malcolm X. all had meaningful visions.  The M.L. King’s, “I Have a Dream” speech was a presentation about a great vision for America.  Many, who pursued greatness, literally see themselves in positions of enterprise, graduation, success and leadership.  If you can SEE it, you can BE it!

 

Most business books have a number of volumes on the topic of VISION.  I personally like the treatment of this topic by a University of Chicago professor, Dr. Mihaly Csikszentmihalyi.  He simply states we all have talents and all life has challenges.  When your skills are stronger than your challenges you move toward your vision.  If your challenges out strip your skills or perceived skills, you sink toward apathy.  Having strong sense of self; including focus, low fear, confidence, spirit and a positive outlook you can become a visionary.  These are the people who do not just talk the talk; they also walk the walk.  Can you name some in your house, family, government, church, club, school etc? Make a list and see if they know themselves and have vision.  Let me know. 

 

In summary:

 

  • Move  beyond Fear
  • Be Positive
  • What future do you see to be better, successful and inspires and creates greatness
  • Have Focus with enthusiasm
  • Know that when directed, your vision motivates behavior and shapes the future
  • The picture in your mind becomes reality in time

See you in November with your VISION!

 

Contributor: Willard Draper

2010
10/08
CATEGORY
Education
TAGS









6 comments

Take the Candy from the Strangers

Why is that we are taught not to take candy from strangers, but every October 31st it’s completely acceptable and highly encouraged? The same parents who warn their children of the dangers of taking things offered by people they don’t know are the same who escort them to do the very thing…repeatedly.

 

The American economy, at both the macro and micro levels, thrive off of our traditions and holidays. No matter if there are talks of a recession or high unemployment rates, the economy is guaranteed to see some type of stimulation around certain times of the year. This is one of the best ways to explain how markets work and the significance of demand.

 

Markets are how consumers and producers of goods and services engage with one another – hence the term “the marketplace”. Being in a particular market (the buyer) translates to producers (the sellers) that they have a demand for something and are willing and able to make purchases at various price levels. For instance, one could be in the fresh fruit market, home phone service, automobile, etc. Demand is different from desire. Unless you are willing to pay the market price for a good, you are not in the market for it.

 

In economics, factors influence consumer demand such as:

·         Price of the product

·         Price of similar products

·         Income of consumers

·         Expectations of future changes in price

·         Tastes/Preferences

·         Number of consumers in the particular market

 

A demand curve is a visual representation of the price of a good and how much of the good consumers want (quantity demanded). Price is shown ascending on the y-axis and quantity demanded is shown on the x-axis ascending to the right. The curve that shows the relationship for the demand for the good will almost always be downward sloping because of the negative/inverse relationship between price and quantity demanded. Simply put: As the price of a demanded good or service goes down, consumption increases and vice versa.

 

Although this may hold true for everyday consumers and goods such as pizza, events such as Halloween change both consumer and producer behavior. Consumers are more willing to pay the higher price for the bag of candy, the costume, and the decorations leading up to the event. Because of this high demand, we see more seasonal jobs created and manufacturers and other industries experience a boost in business and revenue. As a result, producers and the economy are better off as a result of the widespread increase in demand. We see peaks and valleys because after the event, consumer tastes and preferences change.

 

Contrary to what you may have been told as a child, America needs you and everyone else to continue taking candy from strangers and are relying on you to pass this tradition down to your kids and so on. Events and holidays are economy boosters because consumers demand greater quantities of goods and services than they normally do during these times.

 

Contributor: D. Simone Devereueawax

 

2010
10/01
CATEGORY
Economics
General
TAGS









122 comments

Everyday Economics

Whether you are a student, employee, parent, business owner, or superstar, we are all human and face an overlooked concept: insatiability.  Contrary to what many believe, nothing is (and never will be) enough for us in our endeavors in life because we will always want more. Accordingly, scarcity occurs because wants are unlimited while the resources of this land are limited and people, businesses, and countries find themselves having to make choices that are in their best interest.

This is such a big deal that there exists an entire field of study for it. Economics is the study of how choices are made under scarcity and facing these insatiable wants. Economics is divided into two levels: macroeconomics and microeconomics. Macro deals with the overall performance of the economy. Such topics covered under this sector include the money supply, inflation rates, unemployment, currency rates, economic policies, interest rates, and the federal budget.

Micro is concerned with the choices of consumers and businesses, and their impact on certain markets. Those who focus on this branch of economics cover price changes of particular goods, bans on immigration affecting the U.S. produce market, seatbelts leading to more deaths, how a company can maximize profits, and the like.

While a person like me gets excited about economics, there are others who may not understand how it relates to them and how exposure to its principles can help them in their everyday lives and better interpret what goes on in the world around them. The goal of this blog is not only to provide insight into the field by showing its relevance, but to also make it interesting so that keen economic intuition may be developed for optimal decision-making on a variety of levels.

Every decision we make in this life comes with a cost that is more than likely not monetary. When one choice is made, another is forgone. This forfeited cost is known as the opportunity cost. Studying as opposed to hanging out with friends and going to class instead of working to earn a paycheck are some opportunity costs involved in going to college to obtain a degree. However, people are willing to pay that price because they feel such a decision will benefit them greater in the long run.

As we travel along this economic voyage, it is imperative to understand that there is more to economics than the happenings at the Federal Reserve and recessions. Economics helps us understand how to get the most value from limited resources as we all face scarcity and unlimited wants.  

 Contributor: D. Simone Devereueawax

2010
09/03
CATEGORY
Economics
General
Liberal Arts and Sciences
TAGS










150 comments