Econ 120 – Principles of Micro-Economics

ECON *120: Principles of Microeconomics Spring 2010 I. FOUNDATIONS OF ECONOMICS A. Scarcity, Production Possibilities, Efficiency and Exchange Section I. A Learning Objectives: †¢ Define or explain a number of basic economic terms and concepts. †¢ Explain, illustrate, and apply marginal analysis. †¢ Explain, illustrate, and apply the production possibilities model. †¢ Explain, illustrate, and apply the law of comparative advantage. 1. â€Å"Life is Economics† Q: Is this statement true or false? Why? 2. Economic Goals and Priorities of Society, or, â€Å"What does society want out of its economy? †¢ †¢ †¢ †¢ †¢ Economic growth/rising living standards Low unemployment/high employment Low inflation/stable prices Economic equity Economic efficiency Remark: On the individual decision-making level, the incentives that motivate economic activity and choices are utility maximization for consumers, profit maximization for producers/firms, a nd social welfare maximization for government units. 3. Economics Defined a) Economic Scarcity DEF: Economic scarcity exists when human needs and wants exceed an economy's ability to satisfy them given available resources and current technology.DEF: The four basic economic resources are labor, capital (a capital good is a produced good that is used as an input in the production of other goods and is not available for current consumption), land (energy, natural resources, raw materials and other â€Å"gifts of nature†) and entrepreneurial ability (the ability to recognize and exploit economic opportunities, develop and produce new goods/services and organize economic resources). Technology refers to the ability (based upon a body of knowledge or set of skills) to transform resources into goods and services. 1DEF: An economic good (bad) is something that increases (decreases) an individual’s â€Å"utility†, the economic term for well-being, happiness, satisfaction or welfare. Examples: Economic goods: kringle, DVDs and shoes. Economic bads: garbage and pollution. CLAIM: Economics is based on two axioms (self-evident truths): (i) society's material wants and needs are unlimited or insatiable; (ii) economic resources and current technology are limited. Remark: Physical scarcity alone does not cause economic scarcity. Economic goods are both physically and economically scarce.Economic bads, such as pollution, toxic wastes and garbage, are physically scarce but they are not economically scarce. CLAIM: Economic scarcity implies that (i) people must compete for scarce goods and resources, (ii) goods and resources must be rationed by some rationing device or mechanism, (iii) choices must be made and when choices are made, other opportunities and alternatives must be sacrificed. 2 Remark: Economic scarcity is most easily seen when a person has to give up or sacrifice something (in the form of money or time) in order to obtain more of something else. Price is a clear indicator or signal of economic scarcity. Remark: People and society in general are confronted with the following problem: The Economizing Problem: Attain the greatest or maximum fulfillment of a person's or society's unlimited wants (the goal of production) given limited resources and technology (the means of production). Question: How does one make the â€Å"best† or â€Å"optimal† choice? DEF: Economics is the study of economic scarcity and how individuals and society allocate their limited resources and technology to try to satisfy their unlimited needs, wants and desires; i. . , economics is the study of how best to solve the Economizing Problem. b) Opportunity Cost Claim: To solve the â€Å"Economizing Problem,† the decision-maker must make choices or decisions and so must know the value or cost of alternatives. DEF: The opportunity cost of a choice or decision is the value of the next best alternative that is forgone or sacrificed when th e choice or decision is made. What is the opportunity cost of (or sacrifices required by) the following? taking Econ *120 or working an additional 10 hrs/week †¢ buying 100 shares of Microsoft stock or conducting wars in Iraq and Afghanistan †¢ developing the oil fields in Alaska’s ANWR or operating a coal fired power plants Remarks: (i) Opportunity cost focuses on tradeoffs and so opportunity cost is measured in terms of sacrificed alternatives and not necessarily in terms of money. (ii) Opportunity cost is subjective and typically varies from person to person. (iii) The opportunity cost of an activity usually increases as more of the activity is pursued.Example: Suppose your employer wants to increase your work hours in increments of 2-hour blocks of time. What is the opportunity cost of each additional block of time and how does the opportunity cost of each additional block of time change? List alternatives. 1st 2-hr block of work, give up _____? 2nd 2-hr block o f work, give up _____? 3rd 2-hr block of work, give up _____? 4th 2-hr block of work, give up _____? 5th 2-hr block of work, give up _____? or, 1st hour of studying: give up _____? or, 2nd hour of studying: give up _____? r, 3rd hour of studying: give up _____? or, 4th hour of studying: give up _____? or, 5th hour of studying: give up _____? 3 (iv) Differences in opportunity cost provide the basis for mutually beneficial exchange. Example: Suppose that Max, a plumber, and Wanda, an electrician, each had 5 days of vacation time and each wanted to add a bedroom and bathroom onto their houses. Max can plumb a bathroom in 1 day and wire a bedroom in 4 days; Wanda can wire a bedroom in 1 day and plumb a bathroom in 4 days.In terms of opportunity cost: OCM1 wired bedroom = 4 plumbed bathrooms; OCM1 plumbed bathroom = 1/4 wired bedroom. OCW1 wired bedroom = 1/4 plumbed bathroom; OCW1 plumbed bathroom = 4 wired bedrooms. In five days, both Max and Wanda each could complete their house addit ions. How should they spend their time? Can Max and Wanda benefit from an exchange of some sort? Because of the differences in opportunity costs, Max should plumb both additions and Wanda should wire both additions and then each would have the desired additions to their houses plus three â€Å"extra† days. Trading† or exchanging 1 plumbed bathroom (one unit or day of plumbing) for in return for 1 wired bedroom (one unit or day of wiring) would be mutually beneficial. Example: Suppose Wilma has 20 cookies and 5 apples and Fred has 25 cookies and 10 apples. Wilma prefers apples over cookies and Fred prefers cookies over apples. Will Wilma and Fred eat the cookies and apples that they initially possess or will they exchange/trade? Explain. 4. EconomicMethodology a) Model/Theory Building The process: (i) Observe economic phenomena; (ii) Identify important variables; (iii) State assumptions that clarify, simplify and focus the relevant economic issues and questions being inv estigated; (iv) State the hypothesis or propositions; (v) Evaluate the validity of the propositions by proving the proposition logically and by testing the propositions against â€Å"reality† or â€Å"real-world† evidence; and, (vi) Accept the theory/model or reject it and reformulate the theory/model or construct a new theory/model. ) Marginal Analysis and Efficiency â€Å"DEF†: Marginal means incremental or additional and refers to a small change in an economic variable resulting from a unit change in some other economic variable; e. g. the marginal utility of a good X, the marginal cost of a good Y, the marginal product of labor. Remark: Marginal analysis evaluates and compares the marginal benefit and the marginal cost of a decision or choice and provides the solution to the â€Å"Economizing Problem. † 4 DEF: The marginal benefit, MB, of an economic variable Q is the change in the total benefit, ?TB, resulting from a unit change in Q); the marginal c ost, MC, of an economic variable Q is the change the change in the total cost, ? TC, resulting from a unit change in Q); that is, MB = ? TB/? Q, and, MC = ? TC/? Q. CLAIM: A rational economic decision-maker will increase a economic variable Q as long as the marginal benefit of that change in Q exceeds the marginal cost of that change; that is, if MB > (( MC at the quantity Q1 (or, MB < MC at the quantity Q2), then the quantity Q1 (Q2) is inefficient.Example: Suppose that you buy a used car for $500 but after you gain possession of the car you discover that repairs are needed to make it go and stop. The MB from driving the car is $1,000, MB = $1,000; the MC of fixing it up is $700, MC = $700. Do you spend an additional $700 to fix up and keep the car? Yes! Because, the MB of having and driving the car = $1,000 > $700 = the MC of having and driving the car, repair the car. The net benefit of repairing the car is $300 > 0. The $500 spent to buy the car is a sunk cost, a cost that has b een incurred in the past and cannot be changed and or ecovered. Thus, a sunk cost does not enter into the decision/choice to repair the car. Example: A pizza place next to a residence hall on a university campus operates from 11 am to 9 pm and sells 400 pizzas for $10 each during its business hours. After observing a large number of students carrying-in pizza boxes during the later part of the evening, a part-time pizza worker and economics student has suggested that the firm stay open later into the night. The student estimated the total benefits and total costs for different closing times (hours of operation) and created the table below.Should the pizza place stay open later? If so, how late? What should be its closing time? That is, what is the efficient or optimal closing time? 5 Closing Time 9 pm 10 pm 11 pm 12 am 1 am 2 am Total Benefit, TB $4,000 $4,500 $4,900 $5,200 $5,400 $5,500 Marginal Benefit, MB – Total Cost, TC $1,000 $1,100 $1,250 $1,500 $1,900 $2,500 Marginal Cost, MC – Answer: For the hour ending at 12 am, MB = $300 > $250 = MC and so the pizza place should still be open at 12 am. For the hour ending at 1 am, MB = $200 < $400 = MC and so it doesn’t â€Å"pay† to be open until 1am.Thus, the firm should close somewhere between 12 am and 1 am. Formally, the efficient o r optimal closing time is somewhere between 12 am (midnight) and 1 am, at which point MB = MC. Graphically: c) Microeconomics vs. Macroeconomics DEF: Microeconomics is the study of (i) economic decision-making by the individual consumer, firm or governmental unit, (ii) the allocation of resources and the determination of prices and output in specific markets and industries, (iii) the distribution of income in society, and, (iv) market structures. DEF: Macroeconomics is the study of conomic â€Å"aggregates† or â€Å"totals† such as Gross Domestic Product (GDP), national income, national employment/unemployment, economic growth, the price le vel/inflation, interest rates, the money supply, total consumption, total investment, govt. spending, total spending, industrial capacity, and trade/budget deficits. Remark: Microeconomics focuses on the decision-making of the individual economic agent (a person, firm, or governmental unit) and the â€Å"small† individual parts of the economy. Macroeconomics focuses on the whole economy and the sum of its individual parts. 6 d) Positive vs.Normative Economics Positive economics is descriptive and predictive and investigates â€Å"what was, what is and what will be† and is value free (does not depend on one's value system or religious beliefs). Normative economics is prescriptive and investigates â€Å"what should be†; it evaluates the desirability of economic decisions and policies using value judgements and depends upon one’s moral code or religious beliefs. e) Fallacy of Composition Claim: What is true for a single economic agent (individual consumer or producer) is NOT necessarily true for the economy as a whole.Examples: the balanced budget amendment; 15% wage increase for one person vs. everyone. f) Assumptions in Economics Remark: Assumptions simplify and distill the real world into its basic component parts in order to obtain a better understanding of the basic structure of an economy and its parts and the fundamental relationships; â€Å"separates the wheat from the chaff. † Assumption: ceteris paribus or â€Å"all other things held constant† or â€Å"nothing else changes. † g) Causation vs.Correlation â€Å"DEF†: Correlation (or association) occurs when two variables are related in some systematical and dependable way; the variables change together but a change in one variable does NOT necessarily cause a change in the other. Causation occurs when a change in one variable causes a change in the other. Remark: Economic analysis focuses on causation, not correlation. The ceteris paribus assumption simplifies the analysis and enables one to determine and understand the causal relationships between variables Remark: Unintended effects generally complicate economic analysis.For example, installing and using seatbelts and airbags are intended to reduce traffic deaths and injuries. But, despite the presence of these safety devices, the number of traffic accidents and deaths and the severity of traffic accident injuries initially increased instead. Why? The greater protection offered by these devises in auto crashes actually encouraged greater highway speeds and reckless and risky driving, all of which tend to increase the number of accidents and traffic deaths and injuries.Seatbelts and airbags do not cause more traffic deaths and injuries, but these variables are correlated or related in a systematic way. h) Teakettle and Table Problem 7 5. The Production Possibilities Frontier (Curve) Model a) Definitions and Properties of the PPF Model DEF: The Production Possibilities Frontier , PPF (or Curve, PPC) shows the different combinations of goods and services that an economy can produce given the efficient use of available fixed resources and current technology. Example: Consider the Guns – Butter PPF below.If the economy is operating at point C and producing 370 units of guns, then the maximum quantity of butter that the economy can produce using its technology and available resources efficiently and fully is 200 units. Alternatively, if the economy is producing 400 units of butter, the maximum quantity of guns it can produce is 200 units. Remark: Construct your own PPF; can you work 20 hours per week and achieve a 3. 67 (A–) gpa? Alternatively, construct the PPF for the U. S. for health care and cell phones or for food and energy (should we grow corn and sugar to eat or to make biofuels? . Remark: The PPF model can be used to illustrate three basic concepts: (i) the opportunity cost of a good; (ii) the law of increasing opportunity cost in the ca se of a concave outward PPF; and (iii) economic efficiency (productive efficiency, full employment and allocative efficiency). DEF: Productive (technical) efficiency is achieved when given quantities of goods are produced in the least costly way, or equivalently, when employed resources produce the maximum possible output of goods and services. Full employment is achieved when all available resources are employed. Remark.Productive efficiency and full employment are achieved at output combinations that lie on the PPF. Inefficiency occurs at output combinations that lie inside the PPF (resources or technology are either not being fully or efficiently used). Unattainable output combinations lie outside the PPF. 8 DEF: Allocative efficiency is achieved when the economy is producing the combination of goods most desired by society. Remark: Which point on the PPF that is â€Å"best† depends upon society’s preferences and thereby becomes a normative issue. In the PPF below, is point C â€Å"better† than point D or is D â€Å"better† than C?Democrats and Republicans have different perspectives on which combination of butter and guns is â€Å"best. † Claim. Moving from one efficient output allocation (point on the PPF) to another requires a transfer of resources from the production of one good to another. Consequently, when more guns are produced, less of butter can be produced; the opportunity cost of an increase in the production of guns is the resulting decrease in the production of butter. Furthermore, the |slope| of the PPF at a point shows the opportunity cost of one additional unit of good X as measured in terms of the other good Y.That is, the |slope| indicates how much of good Y must be sacrificed in order to obtain one additional unit of good X. Graphically: (see above graph) Points A, B, C, D, E and F represent three different combinations of guns and butter that the economy can produce when using all of its resources in a technologically efficient manner. When all resources and technology are used to produce butter, 500 units of butter can be produced but zero units of guns can be produced (pt. F). At any point on the PPF, the economy must sacrifice some guns to obtain more butter.Point G is inefficient because more of either or both goods can be produced; in this case, the opportunity cost of either good is zero. b) Constant Opportunity Costs and the Linear PPF Model DEF: A resource is specialized if it is not completely adaptable to alternative uses or cannot easily be substituted for another resource in the production of some good. Claim: If resources used in the production of goods X and Y are non-specialized or perfectly substitutable, then the opportunity costs are constant and the PPF is linear.That is, if the opportunity cost of a good X (as measured in terms of another good Y) is constant, then the same quantity of Y must be sacrificed for each additional unit of X, regardless of the quanti ty of X produced, and so the PPF is linear (a downward sloping straight line). Example: Assume that a farmer has 80 acres of land (of uniform fertility) and given quantities of other economic resources (labor, capital and entrepreneurial ability) with which to produce either corn or soybeans. On each acre of land, the farmer can produce either 100 bu. f corn or 50 bu. of soybeans. The opportunity cost of one bu. of soybeans is 2 bu. of corn and the opportunity cost of one bu. of corn is 1/2 bu. of soybeans. The farmer changes the combination of corn and soybeans produced by changing the number of acres planted in corn or soybeans. Non-specialized Resources – Linear PPF Production Possibility Schedule Possible Output Combinations A B C D E 0 2000 4000 6000 8000 4000 3000 2000 1000 0 Corn: Soybeans: 9 Note: At pt. A, all acres are in soybeans. At pt. B, 20 acres are in corn and 60 acres are in soybeans.At pt. C, 40 acres are in corn and 40 acres are in soybeans. At pt. D, 60 ac res are in corn and 20 acres are in soybeans. At by E, all acres are in corn. Remark: The opportunity cost of 4000 bu. of soybeans is 8000 bu. of corn; the opportunity cost of 8000 bu. of corn is 4000 bu. of soybeans. The opportunity cost of 2000 of corn is 1000 bu. of soybeans whereas the opportunity cost of 3000 bu. of soybeans is 6000 bu. of corn. Remark: At any point on the PPF, the opportunity cost of one additional bu of corn is 1/2 bu. of soybeans = |slope| of the PPF; i. . , OCcorn = ? bu. of soybeans per bu. of corn. Likewise, the opportunity cost of one additional bu of soybeans is 2 bu of corn = 1/|slope| of the PPF; i. e. , OCsoybeans = 2 bu. of corn per bu of soybeans = 1/(1/2) bu of corm per bu. of soybeans. Note that ? soybeans/? corn = |slope| of PPF can be written as (i) ? soybeans = |slope| ? ?corn, or, (ii) ? corn = ? soybeans/|slope|. Thus, if ? corn = 1, then ? soybeans = |slope| of PPF ? ?corn = ? ? 1 bu = ? bu, or, OCcorn = ? bu of soybeans. Likewise, if ? soy beans = 1 bu. , then ? corn = ? oybeans/|slope| = 1 bu. /(? ) = 2 bu. , or , OCsoybeans = 2 bu of corn. b) Increasing Opportunity Costs and the Concave-outward PPF Model The Law of Increasing Opportunity Cost: When resources are specialized, increased production of a good X comes at increased opportunity cost. That is, as the production of a good X increases, the quantity of a good Y that must be sacrificed for each additional unit of good X increases. Claim: The Law of Increasing Opportunity Costs and specialized resources are represented by a concave outward PPF.A movement down along a concave outward PPF implies that the opportunity cost of X is increasing. Remark: Most economic resources are specialized in the production of some good and so PPFs are most often drawn bowed outward. 10 Specialized Resources – Concave Outward PPF Production Possibility Schedule Possible Output Combinations A B C D E Good X (butter) 0 100 200 300 400 Good Y (guns)400 400 395 370 315 200 F 500 0 Examples: Given pt. B, the opportunity cost of 100 additional units of good X (butter) is 25 units of good Y (guns). At pt. C = (200X,370Y), suppose the |slope| of the PPF at C is OCX = ? 0. 5, then the opportunity cost of one additional unit of X (butter) is 0. 5 units of good Y(guns); alternatively, the opportunity cost of one additional Y is 2X. I. e. , at pt C, OCX = ? Y and OCY = 2X. At pt. D = (300X,315Y), suppose the |slope| of the PPF at D is 0. 8. The opportunity cost of one additional unit of X is 0. 8 units of good Y and the OC of one additional Y is 1/0. 8 = 1. 25 units of X. Formally, recall that ? Y/? X = |slope| of PPF. So, at pt D, |slope| = ? Y/? X = 0. 8, which can be rewritten as either (i) ? Y = 0. 8 ? ?X, or, (ii) ? X = ? Y/0. 8. So, at pt. D, if ?X = 1 (good X increases by 1 unit from 300 to 301 units of X), then good Y must be decreased by approximately 0. 8 units. That is, given ? X = 1 unit, it follows that ? Y = |slope| ? ?X = 0. 8 ? ?X = 0. 8 ? 1 unit, or OCX = 0. 8 units of Y. Likewise, at pt. D, if ? Y = 1 (good Y increases by 1 unit from 315 to 316 units of Y), then good X must be decreased by approximately ? X = 1/(0. 8) = 5/4 units. That is, given ? Y = 1 unit, it follows that ? X =? Y/0. 8 = 1 unit/0. 8 = 1 unit/(4/5) = 5/4 units = 1. 25 units, or OCy = 1. 25 units of X. Similarly, if at pt. E the |slope| = 1. , then OCX = 1. 5 Y = 3/2 Y and OCY = 2/3 X = 0. 67 X. 11 d) Shifts of the PPF Claim: Shifts of the PPF are caused by †¢ changes in the quantities available resources: L^ or K^ ? PPF shifts from PPF1 to PPF2. †¢ changes in technology: TechX^ ? PPF shifts from PPF2 to PPF3. †¢ changes in capital good vs. current consumption good choices Examples: Remark: An economic recession, a decrease in national real output for six or more months, is represented by a movement to a point inside the PPF and not an inward shift of the PPF, because in a recession not all resources (e. g. labor and capital) are fully or ef ficiently employed. 6. Choices and the PPF a) Choices Claim: Any society must decide: (i) What, how much and when to produce. (ii) How to produce (production technology) and distribute goods (allocation mechanism). (iii) For whom to produce, how to divide the economic pie. b) An Illustration: Present Choices, Future Possibilities and the PPF Model Claim: A choice of fewer capital goods and more current consumption goods implies smaller future increases (outward shifts) of the PPF, less capital accumulation, slower economic growth and smaller increases in living standards.In other words: â€Å"Party now, pay later. Pay now, party much more later. † 12 Graphically: Choose wisely! 7. Opportunity Cost, Comparative Advantage and Exchange (See Arnold, pp. 457-62). DEF: A(n) nation, firm or individual has a comparative advantage (CA) in the production of a good X if it can produce good X at a lower opportunity cost than can any other nation, firm or individual. A(n) nation, firm or individual has an absolute advantage in the production of a good X if it can produce more of good X with a given amount of resources than can any other nation, firm or individual.CLAIM: Every country has a CA is the production of at least one good. CLAIM: If nations, firms or individuals specialize in the production of the good in which they have a comparative advantage and engage in free, unrestricted trade (exchange), then total production will increase and exchange/trade can result in mutual gain for every nation, firm or individual. Remark: Specialization based on comparative advantage and free trade implies that a nation can consume outside its economy's PPF and that â€Å"self-sufficiency breeds inefficiency. An Example of Comparative Advantage and Mutual Gain Given: Wilma and Fred, computers and pizza, 100 units of labor, and linear PPFs. †¢ Wilma can produce either 50 comps or 1000 pizzas ? 1 comp â€Å"? â€Å" 20 pizzas ? OCWcomp = 20 pizzas and OCWpizza = 1/20 com p †¢ Fred can produce either 20 computers or 900 pizzas ? 1 comp â€Å"? â€Å" 45 pizzas ? OCFcomp = 45 pizzas and OCFpizza = 1/45 comp 13 Hence, Wilma has a CA in computers because OCWcomp = 20 pizzas < 45 pizzas = OCFcomp, and, Fred has a CA in pizza because OCFpizza = 1/45 comp < 1/20 comp = OCWpizza. Remark.Even though Wilma has an absolute advantage in the production of both pizza and computers, Fred still has a comparative advantage in the production of one of the goods. (i) â€Å"Autarky†: Initial no trade production and consumption: Labor Allocation Wilma 50% on comps 50% on pizza Fred: 50% on comps 50% on pizza Totals Production 25 comps 500 pizzas 10 comps 450 pizzas 35 comps 950 pizza Consumption 25 comps 500 pizzas 10 comps 450 pizzas 35 comps 950 pizza (ii) Mutual Gain from specialization and free trade. Fred and Wilma each specialization in the production of the good in which they hold a comparative advantage.Labor Allocation Wilma 80% on comps 20% on pi zza Fred: 0% on comps 100% on pizza Totals Production 40 comps 200 pizzas 0 comps 900 pizzas 40 comps 1100 pizza #1 Trade –15 comps +425 pizzas +15 comps –425 pizzas #1 Cons Allocation 25 comps 625 pizzas 15 comps 475 pizzas #2 Trade –12 comps +360 pizzas +12 comps –360 pizzas #2 Cons. Allocation 28 comps 560 pizzas 12 comps 540 pizzas Remark. Note that â€Å"all-or-nothing† specialization for both Wilma and Fred is not required to establish the result. This is true in general as well.Remark: The mutually agreeable terms of trade, or mutually beneficial price, for one good X as measured in terms of the other good Y is established between the opportunity costs of good X of each individual/country. That is, OCWcpu = 20 pizzas < terms of trade (tot) < 45 pizzas = OCFcpu, or, OCWpizza = 1/20 computer > 1/(tot) > 1/45 computers = OCFpizza. 14 In the above example, Wilma trades away 12 computers in exchange/return for 360 pizzas and so the terms of trade , tot, are 1 computer for 30 pizzas; i. e. , the tot or â€Å"price† of 1 computer = 30 pizzas.Hence, total (world) production and consumption are both greater under specialization and free trade than under autarky. Mutual gain results because Fred and Wilma each consume more of both goods. That is, specialization and free trade leads to an allocation that is Pareto superior to autarky. DEF: An allocation A is Pareto superior to an allocation B if no person is worse off at allocation A than at allocation B and at least one person is better off at allocation A than at allocation B. An allocation C is Pareto efficient (Pareto optimal) there does not exist an allocation D that is Pareto superior to allocation C.That is, allocation C is Pareto optimal if it is impossible to find another allocation D that makes one person better off without making someone else worse off. [The concept of Pareto efficiency is attributed to Vilfredo Pareto, a late 19th – early 20th century Ita lian economist. ] Graphically: The â€Å"specialization and free trade† consumption bundle (EW, EF) = ((560 pizza, 28 comps), (540 pizza, 12 comps)) is Pareto superior to the â€Å"autarky† consumption bundle ((500 pizza, 50 comps), (450 pizza, 10 comps)) because, compared to autarky, at least one person is better off and no one is worse off (in this case, both Fred and Wilma are better off). 5 ECON *120: Principles of Microeconomics I. FOUNDATIONS OF ECONOMICS B. Demand Section I. B Learning Objectives: †¢ Explain and differentiate the quantity demanded of a good and the demand for a good †¢ Explain, illustrate, and apply the law of demand and the demand curve †¢ Explain and illustrate the effects of changes in the determinants of demand (a. k. a. , non-own price factors or demand â€Å"shifters†) †¢ Explain and illustrate the effects of taxes and subsidies on demand 1. Definitions â€Å"DEF†: Demand represents the behavior f the cons umer and the relationships between the quantities of a good an individual consumes and other factors such as the good's price, the consumer's income, the consumer's tastes and preferences, the prices of goods related in consumption (substitutes and complements), expectations, government policies (taxes and subsidies), and the number of consumers. DEF: The quantity demanded of a good X, QXd, is the specific quantity of good X that a consumer is willing and able to purchase at a particular price.DEF: The demand curve, DX, shows the maximum quantity demanded of good X, QXd, by a consumer at each possible price in a series of prices for good X, ceteris paribus; alternatively, it shows the maximum price that a consumer is willing and able to pay for each possible quantity demanded of good X, QXd, in a series of quantities for good X, ceteris paribus. Remark: Demand is represented by the entire demand curve. The quantity demanded is represented by a single point on the demand curve a particular price and quantity pair. 2.The Law of Demand The Law of Demand: the quantity demanded of a good X, QXd, varies inversely with the price of good X, PX, ceteris paribus; i. e. , PX^(v) ? QXdv(^) and so the demand curve is downward sloping. 16 A brief explanation of the notation: The expression â€Å"PX^(v) ? QXdv(^)† is a form of symbolic shorthand, which will appear frequently in the lecture notes. The items outside the parentheses are associated with each other and the items within parentheses are associated with each other. Thus, the above expression can be separated and re-written as two separate expressions: â€Å"PX^ ?QXdv†, and, â€Å"PXv ? QXd^†. The expression â€Å"PX^ ? QXdv† reads: â€Å"an increase in the price of good X, PX, causes a decrease in the quantity demanded of good X, QXd. † Similarly, the expression â€Å"PXv? QXd^† reads: â€Å"a decrease in the price of good X, PX, causes an increase in the quantity de manded of good X, QXd†. Thus, the initial expression â€Å"PX^(v) ? QXdv(^)† states that an increase in the price of good X, PX, implies or causes a decrease in the quantity demanded of good X, QXd, and a decrease in the price of good X, PX, implies or causes an increase in the quantity demanded of good X, QXd.CLAIM: The Law of Demand is based on (i) substitution and income effects and (ii) the Law of Diminishing Marginal Utility. Intuitively: The income effect is the change in the quantity demanded of a good X, QXd, caused by a change in the purchasing power of a consumer's income, a. k. a. real income, which results when the price of good X, PX, changes, i. e. , PX^(v) ? purchasing power v (^) ? QXdv(^) The substitution effect, SE, is the change in the quantity demanded of a good X, QXd, caused by a change in the relative price of X (and while holding real income constant).PX^(v) ? the consumer substitutes the relatively cheaper good Y (X) in ? QXdv(^) place of the re latively more expensive good X (Y) Assumption: A consumer's total utility or happiness can be measured in terms of â€Å"utils. † DEF: The marginal utility of a good X, MUX, is the increase in total utility, TU, (satisfaction, happiness) that a consumer derives from the consumption of an additional unit of good X, ceteris paribus: MUX = ? Total Utility/? QX = ? TUX/? QX.The Law of Diminishing Marginal Utility (LDMU) states that the marginal utility derived from the consumption of a good X decreases (increases) as the quantity of good X consumed increases (decreases), ceteris paribus, i. e. , MUXv(^) as QX^(v) Remark: The LDMU implies that as the quantity consumed of a good increases, the price a consumer is willing to pay for those additional quantities decreases: QX^(v) ? MUXv(^) ? the price the consumer is willing to pay v(^).In the D2L â€Å"Interactive Graphs† section, click on the link â€Å"Demand Schedule & Curve† to see the interactive graph â€Å"An Ex ample of a Demand Schedule and Demand Curve. † 17 3. Determinants of Demand (Non-own Price Factors or â€Å"Demand Shifters†) Remark: An increase in demand means that at any given price, consumers are willing and able to buy a larger quantity of the good, or, alternatively, that at any given quantity, consumers are willing and able to pay a higher price per unit.A decrease in demand means that at any given price, consumers are willing and able to buy a smaller quantity of the good, or, alternatively, that at any given quantity, consumers are willing and able to pay a lower price per unit. Claim: Movements vs. Shifts. Changes in a good's â€Å"own† price, PX, cause changes in the quantity demanded of X, QXd, and movements along the good X demand curve, DX. Changes in the determinants of demand (a. k. a. the non-own price factors or â€Å"shifters† of demand) cause changes the demand for good X, DX, and shifts of the entire demand curve, DX.Example: A decrea se in the price of gas, Pgas causes an increase in the quantity demanded of gas, Qgasd, and a downward movement along the demand curve for gas because Pgas is the â€Å"own† price of gas. In contrast, the same change in Pgas causes an increase in the demand for SUVs and an outward or upward shift of the SUV demand curve because Pgas is a â€Å"non-own price† factor with respect to SUV demand. In the D2L â€Å"Interactive Graphs† section, click on the link â€Å"An Increase/Shift in Demand† to see the interactive graph â€Å"An Explanation of an Increase in Demand and a Shift of the Demand Curve. a) Tastes and preferences Tastes and preferences for good X ^(v) ? DX^(v), the demand curve shifts up/right (down/left). An â€Å"increase† in preferences implies that at any given price, say P1, the consumer is willing and able to buy a greater quantity, Q2d instead of Q1d. Or equivalently, at any given quantity, Q1d, the consumer is willing and able to p ay a higher price, P2 instead of P1. 18 Examples: †¢ summer vacation travel ? the demand for gasoline increases, DX shifts up/right †¢ tornado destruction in the Midwest ? he demand for lumber increases, DX shifts up/right †¢ mad cow disease ? demand for McDonald’s hamburgers decreases (DX shifts down/left) and demand for chicken sandwiches (good Y) increases (DY shifts up/right) †¢ medical studies change the demand for various goods (cigarettes, bran, mercury, etc. ) b) Consumer income: normal and inferior goods DEF: A good X is a(n) normal (inferior) good if an increase in the consumer's income I increases (decrease) the demand for good X, ceteris paribus; i. e. , Normal good: I ^(v) ? DX^(v) Inferior good: I ^(v) ?DXv(^) 19 Remark: Whether a good is normal or inferior depends upon an individual's preferences and tastes. Goods such as computers, new cars, eating out and jewelry are typically considered normal goods whereas goods such as pasta, potatoes, hotdogs, beer and the Bible. c) Prices of goods related in consumption: substitutes and complements DEF: Two goods, X and Y, are substitutes (complements) in consumption if an increase in the price of good Y, PY, increases (decreases) the demand for good X, DX, ceteris paribus; i. . , X and Y are substitutes: PY^(v) ? DX^(v). X and Y are complements: PY^(v) ? DXv(^). Examples: †¢ †¢ Complement goods: beer and pizza, gasoline and cars, staples and staplers, and computers and software, printers and printer cartridges, shoes and socks. Substitute goods: Pepsi and Coke, sub sandwiches and hamburgers, tea and coffee, ice cream and frozen yogurt, and staples and paperclips. Example: If jelly and peanut butter are complements in consumption, then Pjelly^(v) ? Qdjellyv(^) ? Dpeanut butterv(^).In this example, an increase in the price of jelly, Pjelly^, decreases the quantity demanded of jelly, Qdjellyv, which then (because consumers are buying less jelly) decreases the demand for peanut butter, Dpeanut butterv and shifts the demand curve for peanut butter down and to the left: when the intermediate step is removePjelly^ ? Dpbv . 20 Example: If coffee and tea are substitutes in consumption. Then Pcoffee^(v) ? Qdcoffeev(^) ? Dtea^(v). d) Expectations about future income, prices, and availability of goods. e) Government policies (taxes and subsidies).Remark: An excise tax (subsidy) on the consumption of a good shifts the â€Å"effective† demand curve vertically down (up) by the amount of the tax (subsidy). Graphically: An excise tax on consumption and the effective (after tax) demand curve. 21 Example: A $0. 50 excise tax shifts the â€Å"effective† demand curve down vertically by $0. 50 from the perspective of the producer because of the tax, the maximum price consumers are willing and able to pay producers (again, from the producers perspective) for Q0 = 100 units falls from $2. 25 to $1. 75. Consumers still pay the original $2. 25 but after the tax is imposed, producers receive $1. 5 and the rest goes to the government. Graphically: An excise subsidy on consumption and the effective (after subsidy) demand curve. Example: From the perspective of producers, an excise subsidy increases the maximum price consumers are willing and able to pay and so shifts the demand curve up vertically by $1. f) Number of consumers ^(v) ? DX^(v) Remark: Follows directly from the derivation of the market demand curve (next page). In the D2L â€Å"Interactive Graphs† section, click on the link â€Å"Examples of Changes in Demand† to see the interactive graph â€Å"Determinants of Demand and Shifting the Demand Curve. Please note the remark about the incorrect scripting of one of the cases of a demand change. 22 4. The Market Demand Curve Claim: The market demand curve is the horizontal summation of the individual demand curves of all consumers. Graphically: 23 ECON *120: Principles of Microeconomics I. FOUNDATIONS OF ECONOMICS C. Supply Section I. C Learning Objectives: †¢ Explain and differentiate the quantity supplied of a good and the supply for a good †¢ Explain, illustrate, and apply the law of supply and the supply curve †¢ Explain and illustrate the effects of changes in the determinants of supply (a. k. a. nonown price factors or supply â€Å"shifters†) †¢ Explain and illustrate the effects of taxes and subsidies on supply 1. Definitions â€Å"DEF†: Supply represents the behavior of the producer and the relationships between the quantities of a good a firm produces and other factors such as the good's price, technology, prices of inputs, prices of goods related in production, expectations, government policies (taxes and subsidies), the number of producers. DEF: The quantity supplied of a good X, Qs, is the specific quantity of good X that a producer is willing and able to produce and make available for sale at a specific price.DEF: The supply curve for a good X, SX, shows the maximum quantity supplied of good X by a producer at each possible price in a series of prices, ceteris paribus; alternatively, it shows the minimum price per unit that a producer must receive (or is willing to accept) for each possible quantity of a good X in a series of quantities, ceteris paribus. Remark: Supply is represented by the entire supply curve; the quantity supplied at a specific price is represented by a single point on the supply curve—a particular price and quantity pair. 2.The Law of Supply The Law of Supply: the quantity supplied of a good, Qs, varies positively with the good's price P, ceteris paribus; i. e. , P^(v) ? Qs^(v) and so the supply curve is upward sloping. 24 CLAIM: The Law of Supply and the upward sloping short run (SR) supply curve are based on the Law of Increasing Opportunity Costs. As the quantity supplied/produced increases, more inputs or resources must be used. Because inputs experience increasing opportunity cost, the opportun ity costs of additional inputs increase thereby increasing the per unit cost of producing additional output.Producers must receive a higher price in order to cover the higher costs of production. 3. Determinants of Supply (Non-own price factors or supply â€Å"shifters†) Remark: An increase in supply means that at any given price, producers are willing and able to produce a larger quantity of the good, or, alternatively, that at any given quantity, producers are willing and able to accept a lower price per unit. A decrease in supply demand means that at any given price, producers are willing and able to producer a smaller quantity of the good, or, alternatively, that at any given quantity, producers must receive a higher price per unit.Remark: Movements vs. Shifts. Changes in the good's own price cause changes in the quantity supplied of good X, QXs, and movements along the supply curve. Changes in the determinants of supply (the non-own price factors) cause changes in supply of good X, SX, and shifts of the entire supply curve, SX. a) Production technology: Tech ^(v) ? S^(v) 25 b) Input prices/resource costs: Input prices ^(v) ? Sv(^) Graphically: c) Prices of goods related in production: substitutes and joint products DEF: Two goods/products, X and Y, are substitutes in production if PY^(v) ? SXv(^).Two goods/products, X and Y, are joint products if PY^(v) ? SX^(v) X and Y are substitutes in production: PY^(v) ? QsY^(v) ? SXv(^). X and Y are joint products: PY^(v) ? QsY^(v) ? SX^(v). Example of Joint Products: Beef and Leather (Other examples: Donuts and donut holes, electricity and wall board/gypsum). Example of Substitutes in Production: Kringle and donuts. (Other examples: Jockey sweatshirts and T-shirts, SUVs and pickups, corn and soybeans. ) 26 d) Expectations with respect to. Inventories, future prices (of both inputs and output) and resource availability ) Government policies (taxes, subsidies and regulations) Remark: An excise tax (subsidy) on production shifts the â€Å"effective† supply curve vertically up (down) by the amount of the tax (subsidy). Graphically: An excise tax on production and the effective (after tax) supply curve. Graphically: An excise subsidy on production and the effective (after tax) supply curve. 27 f) Number of producers 4. The Market Supply Curve Claim: The market supply curve is the horizontal summation of the individual supply curves of all producers/firms. Graphically: 28 ECON *120: Principles of Microeconomics I. FOUNDATIONS OF ECONOMICS D.Market Equilibrium Section I. D Learning Objectives: †¢ Explain and illustrate a market equilibrium quantity and price †¢ Explain and illustrate market disequilibrium (shortage or surplus) †¢ Explain and illustrate the functions of market prices †¢ Explain and illustrate the effects of changes in the determinants of demand and supply on the market equilibrium quantity and price 1. Definitions DEF: A market equilibrium is a price P* and a quantity Q* such that at P* the quantity demanded equals the quantity supplied, Qd = Q* = Qs. DEF: A surplus exits at a price P1 if Qd ; Qs at P1. A shortage exits at the price P2 if Qd ; Qs at P2.Remark: Intuitively, a market equilibrium exists when market forces (demand and supply) are balanced and there is nothing that causes a change in the market price or quantity of a good. Illustrations: a marble at the bottom of a bowl. Remark: At a market equilibrium quantity and price, Q* and P*, the quantity demanded, Qd, equals the quantity supplied, Qs, equals Q* (Qd = Q* = Qs) at P*. At a market equilibrium, demand DOES NOT EQUAL supply; i. e. , it is NOT the case that D = S. To state that D = S means that the demand curve is identical to the supply curve, which clearly is an incorrect statement! 9 2. The Functions of Prices Claim: Prices play a critical role in competitive markets: (i) Prices are flexible and adjust to â€Å"clear† the market; prices ensure internal c onsistency by coordinating the production and consumption plans made independently by producers and consumers. DEF: The price adjustment mechanism: at a price P0, Qd ;( Q0* = Qs at P0* ? P^(v) as consumers bid up (down) prices ? Qdv along D1 from Q1 and Qs^ along S0 from Q0* (Qd^ along D1 from Q1 and Qsv along S0 from Q0*) until Qd = Q1* = Qs at P1*. Graphically: Dv and S constant ? P*v and Q*v. 30Examples: Be able to work through changes in preferences, income for normal goods (e. g. , cell phones and computers) and inferior goods (e. g. , hotdogs and pasta); prices of substitutes (e. g. , tea and coffee, Coke and Pepsi, staples and paperclips), prices of complements (beer and brats, staples and staplers, computers and floppy disks), etc. For the case of an increase in demand, see with the interactive graph â€Å"Demand Increase & Market Clearing,† which is available on the D2L ECON 120 website. b) S^(v) and D constant ? P*v(^) and Q*^(v). Remark: S^(v) from S0 to S1 ? surpl us (shortage) is created at the initial equilibrium price P0*, i. e. , Qd = Q0* ; Q1 = Qs at P0* ? Pv(^) as consumer bid down (up) price ? Qd^ along D0 from Q0* and Qsv along S1 from Q1 (Qdv along D0 from Q0* and Qs^ along S1 from Q1) until Qd = Q1* = Qs at P1*. Graphically: Sv and D constant ? P*^ and Q*v. For the case of an increase in supply, see with the interactive graph â€Å"Supply Increase & Market Clearing,† which is available on the D2L ECON 120 website. Examples: Be able to work through changes in technology, input prices or resource costs (e. g. , wages, pizza toppings, energy), prices of substitutes in production (e. . , kringle and donuts, corn and soy beans), prices of joint products (donuts and donut holes, hamburger beef and leather, electricity and bricks). c) Simultaneous changes in D and S Claim: When demand and supply change simultaneously, then the change in the equilibrium price and quantity demand upon the magnitudes of the change in demand and supply. Four cases exist: 31 (i) (ii) (iii) (iv) D^ and S^ ? Q*^ and the change in P* is indeterminate D^ and Sv ? P*^ and the change in Q* is indeterminate Dv and Sv ? Q*v and the change in P* is indeterminate Dv and S^ ? P*v and the change in Q* is indeterminateGraphically: Case (i) D^ and S^ ? Q*^, P* may increase, remain constant, or decrease (? P* ). Or, equivalently: Work through the remaining cases on your own! 32 ECON *120: Principles of Microeconomics I. FOUNDATIONS OF ECONOMICS Section I. E Learning Objectives: †¢ Explain and illustrate consumer surplus and producer surplus †¢ Explain and illustrate total benefit and total cost †¢ Explain and illustrate the efficiency of a competitive market equilibrium for a pure private good †¢ Explain and illustrate the effects of price controls, taxes and subsidies and the resulting deadweight losses E.Applications 1. Consumer and Producer Surplus Recall: The Marginal Benefit, MB (Marginal Cost, MC) of a good Q is the incr ease in total benefit, TB (cost, TC) resulting from a unit increase in Q; i. e. , MB = ? TB/? Q (MC = ? TC/? Q). Claim: Because the maximum price a consumer is willing and able to pay for an additional unit of a good is based upon the consumer’s MB from consuming that additional unit, the demand curve represents the marginal benefit derived from the consumption of the good.Likewise, because the minimum price a producer is willing and able to accept for an additional unit of a good is based upon the producer’s MC from producing that additional unit, the supply curve represents the marginal cost incurred from the production of the good. Thus, the demand (supply) curve can be used to measure a consumer's (producer’s) â€Å"economic welfare† at a given quantity. CS (PS) is used to measure the change in consumer (producer) welfare resulting from a change in the price and quantity and of a good consumed by consumers (produced by producers).DEF: Consumer Surplus , CS, is the difference between the price that a consumer is willing and able to pay and the price the consumer must actually pay in the market. 33 Remark: CS at a quantity Q1 is the difference between the total benefit of the consumer at Q1 (represented by the area under the demand curve between 0 and Q1 or the area of 0abQ1) and consumer total expenditures at Q1 (= P1? Q1 or the area of 0cbQ1). Thus, CS at Q1 represents the net benefits of consumers and is illustrated by the area between the demand curve and the market price line.DEF: Producer Surplus, PS, is the difference between the price that a producer is willing and able to accept and the price the producer actually receives for that good in the market. Remark: PS of a given quantity Q1 is the difference between the total revenue of the producer at Q1 ( = P1? Q1 or the area of 0cbQ1) and the total cost at Q1 (represented by the area under the supply curve between 0 and Q1 or the area of 0dbQ1). Thus, PS at Q1 represents the net benefits of producers at Q1 and is illustrated by the area between the supply curve and the market price line.Remark: For consumers, a price increase (decrease) lowers (raises) consumer surplus CS. The los (gain) of CS measures the decrease (increase) in consumer economic welfare. For prioducers, a price increase (decrease) raises (lowers) producers surplus PS. The gain (loss) of PS measures the increase decrease) in producer economic welfare. 34 Recall: The Total Benefit, TB (Total Cost, TC) at a given quantity Q1 is represented by the area under the MB (MC) curve between 0 and the quantity Q1. In the graph below, TB at Q1 = area abQ10 and TC at Q1 = area deQ10. Similarly, TB at Q2 = area acQ20 and TC at Q2 = area dfQ20.Remark: The change in TB caused by a change in Q is given by the area under the MB curve for that change in Q. For example, given an increase in Q from Q1 to Q2, the increase in TB = ? TB = area bcQ2Q1. Likewise, given an increase in Q from Q1 to Q2, the increas e in TC = ? TC = area efQ2Q1. Remark: At a given quantity, Q1, the economic gain to consumers and producers at the market equilibrium is represented by the Total Surplus or Net (Social) Benefit = net benefit of consumers + net benefit of producers = CS(Q1) + PS(Q1) = TB(Q1) – TC(Q1) = area abd in the graph below. 35 2.Market Equilibrium and Efficiency in the â€Å"Private Good† MB/MC Model DEF: A good is a pure private good if there are no external benefits or costs from the consumption or production of that good and so Dmkt = MB = ? iMBi and Smkt = MC = ? jMCj. DEF: In a market, the quantity Q* is efficient if the maximum price consumers are willing and able to pay per unit for Q*, which represents the marginal benefit to consumers or â€Å"consumers price† equals the minimum price producers are willing and able to accept per unit for Q*, which represents the marginal (opportunity) cost to producers or â€Å"producers price†.That is, the quantity Q* is ( socially or economically) efficient if MB = MC at Q*. Claim: (The First Fundamental Theorem of Welfare Economics) In a market for a pure private good, the market equilibrium quantity is efficient, provided that certain technical conditions are satisfied; i. e. , at the market equilibrium Q* and P*, P* = MB(Q*) = MC(Q*). Remark: In other words, net social benefit is maximized at Q*. In addition, if at a quantity Q0, MB ) MC, then Q0 is inefficient and a deadweight loss, DWL, (also know as a â€Å"welfare cost† or â€Å"loss in efficiency†) is imposed upon society.The DWL at Q1 (Q2) is represented below by the area bce (cgh). Remark: The quantity Q1 is inefficient because MB(Q1) > MC(Q1); similarly, the quantity Q2 is inefficient because MB(Q2) < MC(Q2). At Q1 (Q2), society can be made better off by producing one more (less) unit of Q. Increasing Q from Q1 to Q* increases social welfare by the amount DWL at Q1 = area bce = ? TB – ? TC = area beQ*Q1 – area e cQ*Q1. Alternatively, decreasing Q from Q2 to Q* increases welfare by DWL at Q2 = area cgh = ? TB – ? TC = area Q*chQ1 – area Q*cgQ1. 3.Price Controls DEF: A price ceiling is a maximum legal price that a producer/seller may charge for a good or service; a price ceiling, Pc, is effective only if it is below the market equilibrium price (Pc < P*mkt). A price floor is a minimum price, fixed and â€Å"supported† by the government, that a producer/seller can receive for a good or service; a price floor, Pf, is effective only if Pf > P*mkt. 36 Claim: At a price floor Pf, the quantity supplied in the market, Qsmkt, is inefficient and the good is â€Å"overproduced† (i. e. , Qsmkt > Q*mkt) because t Qsmkt, the maximum price consumers are willing and able to pay per unit for Qsmkt is less than the minimum price producers are willing and able to accept per unit for Qsmkt. That is, at Qsmkt, MB < MC and so Qsmkt is inefficient. Graphically: (iii) At a price ceiling, Pc, the quantity supplied in the market, Qsmkt, is inefficient and the good is â€Å"under-produced† (i. e. , Qsmkt < Q*mkt) because at Qsmkt, the maximum price consumers are willing and able to pay per unit for Qsmkt is greater than the minimum price producers are willing and able to accept per unit for Qsmkt.That is, MB > MC and so Qsmkt is inefficient. Graphically: 37 4. Taxes and Subsidies: Who Pays and Who Benefits? DEF: Consumers price vs. producers price. Claim: An excise tax (subsidy) drives a â€Å"wedge† between the consumers’ price and the producers’ price and imposes a deadweight loss (welfare cost or loss in efficiency) upon society because the losses in CS and PS exceed the tax revenues. Graphically: Excise tax on consumption. Remark: The after-tax equilibrium quantity, Qtax, is inefficient because MB > MC at Qtax, and so a deadweight loss is imposed upon society, represented by DWL(Qtax) = area abc.The tax revenue is not an economic loss f or society in general but does constitute a redistribution of economic welfare from consumers and producers of the good to society in general. The DWL is the difference between the sum of the loss in consumers surplus, area P*dab, and the loss of producers surplus, area eP*bc and the tax revenue generated by the excise tax, area edac, i. e. , DWL(Qtax) = ? CS + ? PS – Tax Revenue = area P*dab + area eP*bc – area edac = area abc Graphically: Excise tax on production. 38 ECON 120: Principles of Microeconomics Spring 2010 II. MICROECONOMIC MODELS AND DECISION-MAKING Section II. ALearning Objectives: †¢ Explain and calculate the price elasticity of demand †¢ Explain and illustrate elastic, inelastic, unit elastic, perfectly elastic, and perfectly inelastic demand and corresponding demand curves †¢ Explain the determinants of elasticity †¢ Explain and illustrate the effects on total revenue of producers or total expenditures of consumers of a change in p rice given elastic, unit elastic, and inelastic demand †¢ Explain and calculate other elasticities of demand (income and cross price elasticities) †¢ Explain and calculate the price elasticity of supply and its basic determinant †¢ Explain and illustrate how the elasticity of demand and supply affect consumers and producers prices given an excise tax on production A. Elasticity of Demand and Supply 1. Elasticity of Demand a) The Concept of Elasticity and Elastic/Inelastic Demand Curves DEF: The (own) price elasticity of demand, Ed, is a numerical measure of the sensitivity or responsiveness of the quantity demanded to changes in price, ceteris paribus, and is calculated as Ed = ? %? Qd/%? P?. Examples: Suppose that the quantity demanded of gas, Qgas, decreases by 10% when the price of gas, Pgas, increases by 20%. Then Ed = ? –10%/20%? = 0. 5.If the Qd of Mountain Dew decreases by 50% when the price of Mountain Dew increases by 20%, then Ed = ? –50%/20%? = 2. 5. Remark: %? Qd = – Ed? %? P. Example: If Ed = 2 and price increases by 8%, %? P = +8%, then %? Q = –2? (8%) = –16%. If Ed = 0. 4 and price decreases by 25%, %? P = –25%, then %? Q = –0. 4? (–25%) = +10%. Alternatively, if a firm wants to increase its sales by 30% and Ed = 1. 5, then it should decrease price by 20% because %? P = %? Q/ –Ed = 30%/ –1. 5 = –20%. DEF: Midpoint elasticity formula: Given two points on a demand curve, (Q1,P1) and (Q2,P2), the (own) price elasticity of demand at the midpoint between these two points is calculated by Ed = ? %? Qd/%? P? = ? (Q1 – Q2)/(Q1 + Q2)]/[(P1 – P2)/(P1 + P2)] ?. 39 Example: Let pt A = (Q1,P1) = (8,16); pt. B = (Q2,P2) = (12,14); pt. C = (Q3,P3) = (28,6); pt. D = (Q4,P4) = (32,4). The midpoint price elasticity of demand between pts A & B: Ed = ? [(8 – 12)/(8 + 12)]/[(16 – 14)/(16 + 14)]? = (4/20)/(2/30) = 3. pts B & C: Ed = ? [(12 – 28)/(12 + 28)]/[(14 – 6)/(14 + 6)]? = (16/40)/(8/20) = 1. pts C & D: Ed = ? [(28 – 32)/(28 + 32)]/[(6 – 4)/(6 + 4)]? = (4/60)/(2/10) = 1/3. Remark: A linear demand curve has a different elasticity coefficient, Ed, at each point on the demand curve, Ed ranges from Ed = 0 at the horizontal intercept to Ed = ? at the vertical intercept.DEF: Demand is said to be: elastic if Ed > 1 or ? %? Qd? > ? %? P? , unit elastic if Ed = 1 or ? %? Qd? = ? %? P? , inelastic if Ed < 1 or ? %? Qd? < ? %? P? , perfectly elastic if Ed = ? and perfectly inelastic if Ed = 0. Remarks: (i) Perfectly elastic demand is represented by a demand curve that is horizontal at the market price. A perfectly elastic demand curve implies that, at the market price, consumers will buy whatever quantity producers are willing and able to produce. (ii) Perfectly inelastic demand is represented by a demand curve that is vertical at the market quantity and implies that consumers will pay whatever price pro ducers want for the market quantity. iii) Elastic demand can be represented by a demand curve that is relatively flat, such as D3. The majority of the demand curve D3 that appears in the graph is the elastic portion of the demand curve because the midpoint of the demand curve, where Ed = 1, is near the â€Å"lower-end† of D3. 40 (iv) Likewise, inelastic demand can be represented by a demand curve that is relatively steep, such as D2. The majority of the demand curve D2 that appears is the inelastic portion of the demand curve because the midpoint of the demand curve, where Ed = 1, is near the â€Å"upper-end† of D2. b) Determinants of Elasticity Claim: The demand for good X is more elastic (inelastic) (i) the greater (fewer) the number of substitutes there are for good X.Remark: In general, Edcaterory < Edbrand. For example, because very few substitutes for gas exist but many substitutes for Mobil gas exist (such as BP, Citgo, Phillips, Shell, etc. ), Edgas < EdMobil g as. Likewise, Edsoda < EdMountain Dew. (ii) the more (less) an item absorbs as a share or portion of a consumer's budget, Example: Because student expenditures on tuition or rent as a percentage are much greater than their expenditures on toothpicks or salt as a percentage of their income, Edcollege ; Edsalt. (iii) the less of a necessity and the more of a luxury (the more of a necessity and the less of a luxury) good X is; for example, Edfood ; Eddiamond jewelry. iv) the longer (shorter) the time interval considered, which allows for changes in preferences or the emergence of more substitutes; i. e. Edshort run ; Edlong run. c) Elasticity and Total Expenditures (Total Revenue) Remarks: Total Revenue of producers = TR = P? Q = TE = Total Expenditures of consumers. Because TR = TE = P? Q, total revenue or total expenditures can be represented graphically by the area of a rectangle of width Q and height P. 41 Claim: Along the (i) elastic portion of the demand curve, Ed ; 1 or ? %? Qd? ; ? %? P? : Pv(^) ? TE^(v). (ii) unit elastic point of the demand curve, Ed = 1 or ? %? Qd? = ? %? P? : Pv(^) ? ?TE = 0. iii) inelastic portion of the demand curve, Ed ; 1 or ? %? Qd? ; ? %? P? : Pv(^) ? TEv(^). Remark: In the graphs below, consider a given change in price, ? P (= P1 – P2 = P3 – P4), and change in quantity demanded, ? Q (= Q1 – Q2 = Q3 – Q4). Along the elastic section of the demand curve (left graph), the decrease in price, ? P, from P1 to P2, and the increase in the quantity demanded, ? Q, from Q1 to Q2, increases total expenditures of consumers (or total revenue of producers); i. e. , TE1 = P1 ·Q1 ; P2 ·Q2 = TE2 because the increase in expenditures from a greater quantity is greater than the decrease in expenditures from a lower price.Alternatively, along the inelastic section of the demand curve (right graph), the same decrease in price, ? P (from P3 to P4), and increase in quantity demanded, ? Q (from Q3 to Q4), decreases total e xpenditures of consumers (or total revenue of producers); i. e. , TE3 = P3 ·Q3 ; P4 ·Q4 = TE4 because the increase in expenditures from a greater quantity is less than the decrease in expenditures from a lower price. 42 Claim: TR is at a maximum at the quantity at which Ed = 1. d) Other Elasticities of Demand (i) Income elasticity of demand, EI, is a numerical measure of the responsiveness or sensitivity of the quantity demanded to changes in income, ceteris paribus. If EI ;(( %? P), then supply is elastic, 1 ; Es ; ?. f production costs do NOT increases as output increases, then supply is perfectly elastic, Es = ?. †¢ 44 P perfectly inelastic : ES = 0 S1 S2 inelastic: 0 ; E S ; 1 S3 elastic: 1 ; E S ?P S4 perfectly elastic : E S = ? ?Q 2 ? Q 3 0 Q0 Q †¢ Given S2, a change in price of ? P yields a relatively small change in the quantity supplied (i. e. , %? P ; 0 ? %? Qs ; 0 but %? P ; %? Qs) and so 0 ; ES = %? Qs/%? P ; 1. For example, if supply is inelastic, then a 5 % increase in price results in a less than 5% (perhaps 3%) increase in Qs. Given S3, a change in price of ? P yields a relatively large change in the quantity supplied (i. e. , %? P ; 0 ? %? Qs ; 0 but %? P ; %? Qs) and so 1 ; ES = %? Qs/%? P.For example, if supply is elastic, then a 5% increase in price results in a more than 5% (perhaps 8%) increase in Qs. Given S4, a change in price of ? P yields an â€Å"infinite† response from producers. Producers are willing to produce and sell whatever quantity consumers are willing and able to buy at the market price (i. e. , %? P ; 0 ? %? Qs = ? and so ES = %? Qs/%? P = ? ). †¢ †¢ 3. Elasticity and Taxes Claim: Given an excise tax on either consumption or production, if the elasticity of demand is greater (less) than the elasticity of supply, then the portion of the tax paid by consumers is less (greater) than the portion of

Home Based Childcare Essay

Childminder must handle all information that she has on the child as confidential and should be shared only with the child’s parents and the child. It is essential to handle data about children and families in a confidential way, due to that they have a legal right to privacy. It is equally important that information should not be passed on without written approval of the parents or carer, because they have the right to give or deny their consent before the childminder may take certain action with respect to their child. For example the parents or carer approval is needed to discuss information about the children with professionals such us GP, health visitors or teachers. Therefore it is important also to get permission to share the child’s learning journey with other professionals. In second place confidentiality and data protection also means that all information about children and families should not discussed with a friend or other parents. Therefore there are only two sets of circumstances to share information: * Parents or cares gave the written approval for it. * It is essential to do so in the best of interest of the child, for example safeguarding or medical emergency. All information about children and families is sensitive. So that all documentation, reports, notes about the child should be kept in a safe place such, as in a filing cabinet, which can be locked, and not removed from the childminder’s home. Furthermore all information stored on computer must be password protected. In the same way photographs of the children can only be taken with the written consent of the parents and carers. Data protection Act exist to strike a balance between the rights of individuals to privacy and to use data for the purposes of the business. The purpose of data protection legislation is to make sure that the personal data is not processed without the knowledge of the individuals. The act of data protection introduced basic rules of registration for data users and right of access to that data for the individuals who are related to it. The childminders have data protection responsibilities. First of all they need to protect the children and their families and maintain sense of trust between parent and staff. Most important is that if they keep records of the children’s health, behaviour or development on the computer or takes digital photograph of the children, they â€Å"will be expected to register with the Information Commissioner’s Office (ICO)† (ncma.org.uk, 2013). The points that I may include in my confidentiality and Date protection policy are: Confidentiality Policy * All parents receive a copy of my policies and procedures, which detail how I run my setting. * My certificate of registration is displayed and available to all parents. * I am aware of my responsibilities under the Data Protection Act 1998 and the Freedom of Information Act 2000. * I maintain a record of parents’ and/or emergency contact details, the contact details of the child’s GP and appropriate signed consent forms. * If a child is identified as a child in need (section 17 of the Children Act 1989) I will, normally with the parent’s permission, give appropriate information to referring agencies. * I expect parents to inform me of any changes in the child’s home circumstances, care arrangements or any other change which may affect the child’s behaviour such as a new baby, parents’ separation, divorce, new partner or any bereavement. * All information shared will be kept confidential and will not be disclosed without the parents’ consent, except as required by law, for example, if there appears to be a child protection issue. Please see my Safeguarding Children policy. * I expect parents to keep private and confidential any sensitive information they may accidentally learn about my family, setting or the other children and families attending, unless it is a child protection issue. * Ofsted may require to my see records at any time. * Parents have the right to inspect all records about their child at any time. * All significant incidents are recorded in an incident book and will be shared and discussed with parents so that together we can work to resolve any issues. * As a registered provider I must notify Ofsted of any serious accidents, illnesses or injuries or the death of any child whilst in my care and any action I may have taken within 14 days of an incident occurring. * If I am in need of support or advice regarding a serious illness or incident involving a child in my care I may contact National Childminding Association who will log information regarding the incident with regard to their safeguarding policy. An NCMA designated officer will be assigned to my case and all the information given to them will be kept confidentially unless their appears to be a child protection issue which will be reported accordingly. * If an accident or incident involving a child in my care may result in an insurance claim I will contact my public liability insurance provider to discuss my case and be allocated a claim number. This may involve discussing details of the child in my care with a third party. * If I am using the National Childminding Association (NCMA) public liability insurance, the total life of the policy is 21 years and 4 months to enable the child to make a claim against the policy at a later date. Data Protection Policy * I am aware of my responsibilities under the Data Protection Act 1998 and the Freedom of Information Act 2000. * If I keep records relating to individual children on my computer I will ask for the parent’s permission. The information will be securely stored for example, in password-protected files, to prevent viewing of the information by others with access to the computer. Backup files will be stored on [insert method, for example, a memory stick, DVD or CD] which will be locked away when not being used. * All information on children, families and anyone working with me (if applicable) is kept securely and treated in confidence. Information will only be shared if the parents/carers/co-workers give their permission or there appears to be a child protection issue. All details will be kept confidential and records are kept secure. The details are easily accessible if any information is required for inspection by Ofsted. * All parents will be asked to complete permission forms for use of photos, please see Parent Permission form. Photos will be used for observations. I will be carrying my mobile phone with me when I am on outings to keep emergency contact details and to call for assistance and to contact parents if First Aid is required. My mobile does have a facility to take photo’s (this will done in accordance to parental permissions). * I am registered as a Data Controller with the ICO (Information Commissioner’s Office). Biography * http://www.ncma.org.uk/childminders/your_business/policies_and_procedures/data_protection.aspx * Riddall-Leech, Sheila (2010): Home-Based Childcare Student Book: Level 3 Unit CYPOP5 * The date protection Act 1998

Business Law Essay Example | Topics and Well Written Essays - 1000 words - 17

Business Law - Essay Example Lindsell, 1818). One of the major advantages provided by the postal rule to commercial contracts lies in the fact that the offeror cannot take undue advantage of delay or difficulty encountered in communication. This is especially true of situations where the offeree has no knowledge regarding the receipt of the acceptance by the offeror(Raymond 2006, p. 7). In accordance with this rule, whenever communication of acceptance of an offer is from a place that is not nearby or contiguous, then the acceptance is rendered binding from the moment that it is mailed or dispatched. This has a major bearing on the receipt rule; because, the acceptance of an offer becomes binding with dispatch of the acceptance by the offeree, and does not depend upon the receipt of the acceptance by the offeror (Raymond 2006, p. 5). The operation of the postal rule is unaffected by factors, such as the receipt of the acceptance by the offeror or the intimation of a revocation from the offeror, whilst the message regarding the acceptance of the offer has not been received. In effect, any risk attendant upon a failure to communicate clearly has to be borne by the offeror. This is one of the major outcomes of the postal rule. Subsequent to the decision in the Adams case, the postal rule has enjoyed wide support, as it has proved to be expedient for business transactions (Raymond 2006, p. 6). There is considerable support for the postal rule, because it is seen to apportion the risk involved in the transmission of acceptance on the offeror. Such allocation of risk is justified because; first, risk has to allocated to either of the parties, and it is difficult to make a choice; second, compelling the offeror to bear the risk is equitable, as the offeror originates the offer and consequently is in a better position to control transmission risk, although he preferred to abstain from exercising such

The Effects of Social Media in Todays Society Research Paper

The Effects of Social Media in Todays Society - Research Paper Example It has been observed that social networking sites like Facebook and Orkut leads to time wastage but its benefits cannot be completely ignored. This research paper aims to measure the positive and negative effects of social media on society. Social media is accessible to anyone who has a simple internet connection at home, office or anywhere to his or her entourage. It is reachable to people from all walks of life, from students to business professionals. Websites like MySpace and Bebo helps to connect friends and family by bringing them under a single platform. Similarly, social networking sites like eBay brings buyers and sellers to exchange commodities between them. In short, social media brings B2B (business to business), B2C (business to consumers) and C2C (consumers to consumers) to interact; share information or files and trade all under a single platform (Hendricks, 2012). Social media influences our life and daily routine in great many ways depending how we utilize these networking tools. Time is of essence and this is what it helps to save. People find it much easier to go online and read articles and electronic books rather than newspapers or books that are physical in nature. In this fast moving world, people have adopted to the technological development made especially in the last decade. There has been a huge decline in book readings as people have turned to social media to meet their reading needs. Social media is changing the social habit of people. Though eBooks saves time, they cause massive exertion and fatigue (Coupland, 2012, p. 103). People find it much easier to shop online than to physically go to shops and malls to make purchases. Social media is changing the way people shop nowadays. Products can be ordered with just a single click and can be delivered right at the doorsteps. Such facilities have made life very convenient for people. However there are major drawbacks of shopping online. People

BUSCOM wk1 Essay Example | Topics and Well Written Essays - 500 words

BUSCOM wk1 - Essay Example Workplaces are not the only places that such type of communication can occur. They can also occur in schools, at home with family or even with the most trusted of friends. What communication all comes down to is how it is being done at that particular moment. In the above chart, the sender of the message was ME, while the receiver of the message was the MANAGER. The channel that was used to send the message was verbal communication and it was done while the two were physically present at a given location; which in this case is the office. The misunderstanding that occurred was due to the fact that a firm employee, who happens to be ME, made the mistake of trying to reason with the MANAGER about how his current behavior might lead to the bankruptcy of the firm. This misunderstanding would have been avoided had I not confronted the MANAGER (Ellis, 2009).   From the result of the above conversation, it is safe to say that communication is a key process and a very important aspect in the everyday life of people. Without communication, then there would be the existence of a world where people know nothing about each other. From the above communication, I would say that the message did not get through in the same way that it should have. The main causes of misunderstanding when it comes to communication results from; the type of message that is being passed along: the sender depending on how they are doing the passing on of the message and thirdly the receiver, depending on how they take the message (Ellis,

The Perspective and Emergent Approaches to Strategic Management Essay

The Perspective and Emergent Approaches to Strategic Management - Essay Example Whenever an organization succeeds in terms of profitability and productivity, it is usually assumed to have effective strategies. But the effectiveness of the strategy for a prolonged time remains dubious. Strategies are developed by the management with the support of logical approach, analytical activities, and experiences. Present day management researchers added another agent to the above-mentioned ingredients of strategy making, i.e. the dynamic nature of the business environment which keeps on changing. The changing nature of business environment influences the effectiveness of the strategies and brings differences in its output (Murray, Poole & Jones, 2005, p.168). The present report is an attempt to analyze the different views of researchers on strategic planning and its associated factors. In a broader sense, the study discusses ‘Prescriptive and Emergent’ approaches to strategy formulation and their suitability in the present day business organizations. Irrespective of suggested views and arguments on the concept of strategic management, organizations as well as academicians have agreed on the core concept which describes the conversion of organizational resources into needs of unsatisfied customers keeping a profit which satisfies the long-term objectives of the stockholders. The debate among the researchers is regarding the methods, models, system, or processes which could be used to achieve the core objective of strategy. The approaches for strategic planning, irrespective of the methods, models, and processes used to execute the plan can be classified into four generalized approaches as General Electric/Ansoff /McKinsey approach, Management by objective approaches, Business policy approach, and Non-strategic approach.  

International Organizations Essay Example | Topics and Well Written Essays - 3000 words

International Organizations - Essay Example it consists of the national governments of these member states along with some form of supranational institution which has influence over the decisions being enacted. These member states abide by some form of governing constitution which enforces certain rules upon them, adherence to these rules is mandatory for being a part of the union, in order to maintain discipline and control. This constitutional framework of the union is established on the basis of some Treaties among all the member states. Once the union has been established, and the constitution been made, then remains the question of power and decision making. It is necessary for the members to agree upon the type of decision making under consideration, since it will serve as the basis for all decisions to follow. There are two most prominent forms of governance with regards to supranational bodies such as the EU, United Nation, and NAFTA etc.: Intergovernmental form of Decision Making: this form of decision making provides sovereignty to the member states, under this type the decisions are reached with consensus amongst the sovereign governments of the member states, and the supranational body exists to coordinate the successful execution of the unanimous decisions. Federal form of Decision Making: this is a type which gives the supranational body more individualistic power over the member states, since it calls for the submission of some rights by the member-states’ governments to the union, which makes decision which is binding upon the member nations. The intergovernmental form of decision making regards the union as an international body, which is separate from the governments of the member states, whereas the federal form of decision making regards the union as a federation, which comprises of various... This essay stresses that European Union is a an entity which has influenced the ways in which the European nations interact with each other, and how they collaborate in order to develop one single entity in face of the rest of the world. The success of the EU over 50 years of its life with regards to the spheres it covers is commendable; it started off as a mere economic cooperation union and extended to develop into a widely known multifaceted organization which covers political, social, developmental, environmental and international affairs on behalf of its member states. This paper makes a conclusion that the EU’s decision making process is an intricately woven net which has undergone a lot of amendments and alterations overtime. Initially it was created with the aspiration of being a single entity which would represent Europe through representation of sovereign and independent states, and be a purely intergovernmental institution, however with time and constraints it was discovered that this approach is highly inadequate, and in order to be a single entity which agrees ion unanimous decisions within a limited time frame, it is necessary that the member states give up some of their rights to a representatively elected European Parliament, within the Council of Ministers, who then decide upon different matters which would be binding upon the nation states. Along with this federal form of decision making by the union, the partially sovereign states also reserve the right to decide upon key policy issues for their independent nation.

Laws of Blasphemy and Human Rights Is there a modern connection Essay

Laws of Blasphemy and Human Rights Is there a modern connection - Essay Example At a point when legal developments have come to focus on the excitement created by renewed controversy, the social and cultural significance of the offence and the legal strategies have been questioned. In the course of this paper, I have attempted to examine the law of blasphemy in uncertainties surrounding the impact of secularization and cultural pluralism, which invest it with considerable symbolic consequence. This brings to the fore the recent revival of blasphemy laws through an assessment of the paradoxical nature of its effects, with particular emphasis on those difficulties that have been posed for liberalism as a political philosophy that tries to steer through an era of plurality and harmonious co - existence. In this way, the significance of blasphemy is related to the question of the status of religion in contemporary western societies in context of the appropriate response of the legal machinery of various countries, as well as the conflict that exists between the desire to rationalize the offence and the desire to equalize the protection it affords. Further, in recent times, there have been numerous accounts of the parameters of the law which has sparked a critical analysis of its relationship to laws dealing with the adjacent areas of sedition, obscenity, outrage to public decency and offences against public order. Therefore, dissension over the future of the blasphemy law arises at the intersection of a cluster of intractable debates which have rendered the topic as extremely sensitive and hard to judge. It is now imperative to chart a brief history and evolution of blasphemy to understand the journey of its evolution and how it has come about to be associated with Human Rights in the present day. Having originally been a part of canon law, in the 17th century the offence of blasphemy was declared a common law offence by the Court of King's Bench, punishable by the common law courts. From the 16th century to the mid-19th century, blasphemy against Christianity was held as an offence against common law, apart from being used a legal instrument to persecute atheists, Unitarians, and others. All contumelious reproaches of Jesus Christ, all profane scoffing at the Holy Scriptures, and exposing any part thereof to contempt or ridicule, and finally all blasphemies against God, including denying His being or providence, were punishable by the temporal courts with fine, imprisonment, and corporal punishment. In 1656, the Quaker James Naylor suffered flogging, branding and the piercing of his tongue by a red-hot poker. An act of Edward VI (repealed 1553 and revived 1558) set a punishment of imprisonment for reviling the sacrament of the Last Supper. Further, it was in the 1676 case of Rex v Taylor, when the Lord Chief Justice Sir Matthew Hale stated that "Such kinds of blasphemous words were not only an offence to God and religion, but a crime against the laws, State and Government, and therefore punishable in that Court.... Christianity is parcel of the laws of England and therefore to reproach the Christian religion is to speak in subversion of the law." (www.google.com) Those denying the Trinity were deprived of the benefit of the Act of Toleration by an act of 1688. Commonly called the Blasphemy Act, an act of 1697-1698, stated that if any person, educated in or having

Compare two Faulkner stories, A rose for Emily'' and '' Barn Burning Essay

Compare two Faulkner stories, A rose for Emily'' and '' Barn Burning '' in terms of the author's ideas and the - Essay Example The town’s people felt sorry for her after the death of her father. They were curious about her way of living and they kept a close watch on Emily. She again suffered a major blow when she got close to a newcomer in town known as Homer Borron who refused to marry her. But she found out her own way to deal with the situation and poisoned him and kept his body with her for thirty years. This was discovered in the end when she died and his body was found in her house. On the other hand Barn Burning is a story revolving around a troubled man known as Abner Snopes. Abner Snopes has always been involved in troubling other people as he is accused from the very beginning of the burning the barn of Mr Harris. Abner Snopes is presumably suffering from sort of problem because of which he cannot compromise with the circumstances of his life. He has two a son named Sartoris who has a role to play in informing the authorities about the actions of his father. After being accused Snopes is as ked to leave the city which he does in a timely manner. He joins the farm of Mr de Spain where he is again accused for ruining the rug of the owner. In the latter part of the story Snopes is again seen to be planning a fire on the barn of de Spain. His son Sartoris informs de Spain indirectly about the fire and runs away hearing gun shots in the end from the barn. The story â€Å"A Rose for Emily† presents Emily as a very stubborn lady who lives her life in her own way and finds her own ways to deal with situations. She constructs her own ways and methods to lead her life and does not care about the restrictions of society. This can be seen when Emily refuses to pay the taxes and the stubbornness she shows towards the pharmacist when she asks for arsenic without a prescription and does not abide by the rules. She also poisons Homer Barron when he refuses to marry her to keep him with her. This is against the norms of the society but she has her own way of living. Considering the other story of Barn Burning it can be seen that the character of Snopes is almost the same as that of Emily. It is seen that both characters face from some sort of difficulty in coping up with the matters of life. Emily has been left secluded all her life whereas Snopes even with a family cannot keep a control on his temper. Snopes also has a very bad temper as it can be witnessed from the story. He ends up revenging at different instances as shown by William Faulkner. He burns the barn of Mr Harris when he asked to pay a dollar for his hog entering into his premises and he attempts to burn the barn of Mr de Spain too when he accuses him of ruining the rug. This clearly shows that both the characters share certain characteristics which make them revenge. Both the characters are stubborn in their language and this can be witnessed in their actions respectively. It is because of this stubbornness that Emily ends up killing Homer Barron and Snopes hitting Sartoris. Isolation is a t heme which can be found in both the stories of William Faulkner. Sartoris is an example of a character in Barn Burning who has been living in isolation from other children of the town. Same is the case with Emily who has been living in isolation because she was never allowed to interact with the people living in the town. Both the characters underwent a change because of the isolation that they were living in. Sartoris acts in a different manner as he betrays the loyalty promised to his family whereas Emily cannot withstand

The past world expo economy influence and effect on property market in Essay

The past world expo economy influence and effect on property market in previous host cities and countries - Essay Example The first of such exhibition was held in the Crystal Palace in Hyde Park, London in 1851. It was named at that time as â€Å"the Great Exhibition of the Works of Industry of All Nations† and rightly so because this exhibition celebrated the coming of age of the Industrial Revolution in Europe. Thus the 1851 Great Exhibition was not only a trade fair but also a display of scientific, industrial and technological inventions. Queen Victoria’s consort, Prince Albert, possibly did not foresee that what he conceptualised would become today’s third grandest event after the FIFA World Cup and the Olympic Games, considering its impact on culture, on society and the nation’s economies. Today, the World Expo has come a long way. It is not only a trade fair and a showcase of new scientific and technological advances and inventions but it is also a means of promoting cultural correspondence and transfer and a way of finding solutions to issues that hound humanity. Moreover, it becomes a platform of presenting a strong national image before the whole world. In other words, it affords countries to advertise their assets and perceived advantages over other nations. The pavilions that each country construct have become competitive in terms of lavishness, splendor, magnificence and cost. There is a contest as to who builds the most stunning and most memorable pavilion. So many World Expo historians are of the opinion that the geodesic dome of the US pavilion in the 1967 expo in Montreal, Canada is the most memeorable and the glass and iron Crystal Palce of UK in the 1851 World’s Fair in London as the most imposing. In each world expo, all countries try to express s ome theme via its architectural design and the contents of its pavilion Thus each World Expo is characterised by glitter, glamour, visions and images (Maddox 2004, p. 79). The

United States foreign policy relations to international politics Essay Example for Free

United States foreign policy relations to international politics Essay A foreign policy is a policy that governs, or gives directives on how a state relates with other state and non-state actors on the international scene. It is usually broad in that it governs issues of military, economic as well as trade. In many countries including the United States the president is usually the chief negotiator of the foreign policy. The foreign relations of the United States are highly influential on the world stage. The officially stated goals of the foreign policy of the United States, as mentioned in the Foreign Policy Agenda of the U. S. Department of State, are to create a more secure, democratic, and prosperous world for the benefit of the American people and the international community. In addition, the United States House Committee on Foreign Affairs states as some of its jurisdictional goals: export controls, including nonproliferation of nuclear technology and nuclear hardware; measures to foster commercial intercourse with foreign nations and to safeguard American business abroad; International commodity agreements; international education; and protection of American citizens abroad and expatriation. . HISTORY OF AMERICAN FOREIGN POLICY America’s foreign policy has been changing since independence in 1776. There are times when it was inclined to isolationism, at other times selective engagement and others containment. The foreign policy is also widely associated with the military. In the case of the United States the president is the chief negotiator of the foreign policy through the ministry of foreign affairs headed by the secretary of state, who is the primary conductor of state-to-state diplomacy. In the united states the President is also Commander in Chief of the military, and as such has broad authority over the armed forces once they are deployed whether for domestic or for the purposes of the international community. Due to the fact that the president has veto powers within the country the executive has been able to implement foreign policy decisions at the expense of the legislature. Some of the recent examples of this are the governments’ decision to wage war in Afghanistan and Iraq. In this regard the executive has also widely kept the legislature in the dark concerning the CIA and us military operations overseas especially on the issue of their humanitarian records and treatment of terrorist suspects in CIA detention camps overseas. The United States is one of the two largest democracies in the world the other being India. As thus the United States government should have given the legislature the privilege of being a major partner in formulating the foreign policy. Instead the executive has gone ahead to even defy the doctrines of the United Nations to which it is a signatory. In so doing the public has been kept in the dark on issues that even though they don’t affect them directly they are still of an important nature. American foreign policy has been the subject of much debate and criticism both domestically and abroad. Charges of negative influence have been levied even in countries traditionally considered allies of the United States. This has been mainly so since the foreign policy is designed in a way that it is only good if and only if the recipient country is willing to play by U.S terms if not so then everything changes. CONCLUSION: The American foreign policy can be seen as an extension of the executive this is because many policy decisions even if they are discussed by the congress the executive implements them to its own terms. This has caused many negative criticisms from both domestically and internationally since even when an issue is approved by the congress the executive has had a tendency of over implementing the policies turning good intentions into a bad policy implementation. REFERENCE: US Dept of State Foreign Policy Agenda. Available at: http://usinfo. state. gov/pub/ejournalusa/foreignpolagenda. html Committee on Foreign Affairs: U. S. House of Representatives . available at: http://www. internationalrelations. house. gov James M. Scott (1998) After the End CL: Making U. S. Foreign Policy in the Post-cold War World, Duke University Press. Israel, Iran top negative list, Nick Childs, 6 March 2007. Available at: http://news. bbc. co. uk/2/hi/middle_east/6421597. stm

Home Schooling: Advantages and Disadvantages

Home Schooling: Advantages and Disadvantages Introduction Home schooling refers to the concept of giving the kids a formal education without sending them to schools and teaching them within the comfort of the home. It involves making a few adjustments and the teacher in home schooling, whether it is a parent or external help must be aware of all the advancements in the field of education to ensure that the children who are being home schooled get proper education to place them well in the society. Another consideration would be the adaptability of the children to the societal norms particularly when they are confined to the comfort of the home and peer interaction may be hindered. The various pros and cons are discussed in this report. Pros of home schooling While the concept of home schooling is relatively new as compared to the traditional context, there are many studies which prove that homes schooled children score higher in their SATs than their counterparts from public schools. In fact, the Ivy-league colleges have started opening up their doors to these home-schooled children as they realise their value. Home schooling provides children with a flexible schedule to learn and can be tailor-made to fit the learning pace of the child. Home schooling for children with special needs is beneficial as the child can learn in a comfortable and known environment and thus the focus shifts from the anxiety of social interaction to the process of learning in the younger stage of life when the child can absorb the most knowledge. However, home schooling is not just for kids with special needs. Other children can also benefit from it. Home schooling allows better control over the child’s time, thus freeing them up for cultivating other hobbies like music, dance, writing and sports. It allows the child to break free of the compulsion of assignments and allows for more experiential learning. The child can have access to the learning material through all areas of the home and thus experience freedom in gaining theoretical and practical knowledge. Many schools do not make children ready for the real world, they just follow a set textbook. However, with home schooling and with the technology bringing us vast amount of information on demand at the click of a button further facilitates this process. This freely available information and the vast array of online courses designed specially for the child allows to bring down the cost of education while simultaneously increasing the quality of education. Home schooling also affords for bringing in knowledge about religion, family history and the likes to the children which may not be offered as courses in many schools. Home schooling also caters to the parents’ wish to be able to supervise the child’s learning process more closely, understand the strengths and weaknesses of the child, and develop the child in their own specific way. Home schooling retains the natural curiosity of the child to the process of learning and gets rid of the compulsions laid down by schools.The child has freedom to choose what he likes and thus home schooling keeps the kids engaged. The control over the child’s schedule also allows the family to take travel trips together at most times of the year to complement the child’s learning about separate cultures and thus raises more tolerant and well-informed individuals. The main benefit about home schooling is the the one to one student teacher ratio ensures that the child has attention trained towards him all the time. This situation is not possible in public schools and the needs of the child often go ignored. Home schooling also protects the children from bullies, teenage peer pressure, unhealthy competition. It is also beneficial in the case of teenage girls who are prone to worry about fitting in with the rest of the people and following trends and fashion. This takes away their attention from the main element of learning. Home schooling also benefits the families which have to keep relocating very often due to work or otherwise. The kids may face problems with moving around very often and home schooling gives them a buffer against this. This brings in more stability to the learning process of the children. Home schooling also saves time for the children. With focused learning, the children can accomplish more in the same time while the school curriculum tends to go at a slower pace to accommodate all the children in the classroom. Also, not having to adhere to rigid timings of waking up and rushing to school is a positive. The children feel more at ease while not having to be burdened with unnecessary written work and can focus on developing their other interests. It is no surprise to know that children learn the most from the people they are surrounded with. A child may talk to his classmate in school and learn to be around people but they may pick up values which are not desirable to their parents, religion or culture. To prevent such a conflict the kids can be homeschooled. Social interaction for kids arranged through hobby classes will ensure their fast academic absorption and also satiate the need for social interaction. The kids who are homeschooled also generally interact with c hildren from a much wider age group, thus instilling maturity and new thought processes, whereas the schoolgoing kids usually interact with people from their same age group. This leads to a holistic development of children. Cons of home schooling: While home schooling has a many merits it also entails certain downsides. To start with, the home schooling model of learning means that the kids are home with their parents most of the times. This may cause the parent child relations to get strained as they are together most of the time. Also, parents may not find adequate time for teaching the child all that should be taught and the process of learning may develop gaps. The child then grows up with certain beliefs which may not be true or may be partially correct. Such a world view is damaging to the child’s psyche in the future. In many cases, when the parents are too rigid about the material they should use or the course they should follow, they may miss out on incorporating the recent trends in the field and hence limit the knowledge that the child gains from home schooling. Absence of a formal curriculum may also lead to unorganized learning. These formal curricula at schools are developed by professionals who are train ed in the field and understand the child needs and psychology on a wider scale. Ignorant parents will deprive their children of the benefit they may receive when trained with such material. Another matter of concern with home schooling may be that the child’s education may not receive the legal and societal acceptance it deserves. People tend to look at homeschooled children as lacking social skills and the kids may not get a recognition for their education while applying to college for further formal education. It may become difficult for the child to find acceptance in these cases, hurting their chances of succeeding. The homeschooled kids may also not benefit from healthy competition which inspires them to break their limits and achieve success to their maximum potential. Also, learning in schools gives them collective knowledge. The children learn from their peers and it shapes their ideas and personality. Home schooling entails being around the same set of people though the major part of their day and hence the skill of thinking from different perspectives may get minimised and opinions may become biased as the children tend to carry forward the beliefs of t heir parents and tutors. This can lead to a narrow mindset. Home schooling may also mean that children can miss out on sports events with their peers. Although they may still be a part of sporting activities, they miss out on a competitive sporting events where they get to forge strong bonds with their peers. These kids may also miss out on handling high pressure situations, surprise quizzes and other such events which leads to their emotional development. Not learning to properly interact in a group can result in behavioural and social issues. They might face problems following the laid down norms as they have been exposed to an environment wherein they are free to act as they want. They may have issues with sharing, may demand personal attention from people, and may become distant. Children may even dread participating in social events and would rather stay in the comfort of their home. Parental overinvestment in the child can cause them to fret over the child’s actions, decisions and behaviours and this type of helicopter parenting may lead to the the children not becoming fully independent. The parents have to be very cautious that their kids stay free to choose for themselves in this environment. Children going to schools share common experiences with their peers. School gives a chance for field trips, proms, shared projects which teach the child to trust others and understand their emotions. These common experiences become a way for children to form lifelong friendships. While it may be possible to share experiences with a sibling, knowing and interacting with people from the other cultures always benefits by broadening a child’s mindset. Experience from someone who was home schooled: Two cousins of mine were home schooled, not just through school but also through college. The involvement of parents was also very high along with a tutor employed to formally teach them the curriculum. When they grew up, they were imparted working knowledge by their father who is a businessman. This gave them practical knowledge in the field and also exposed them to interacting with business partners. The kids were also taken to participate in various treks and went camping with other kids their age. The home schooling provided them with undivided attention and excellent theoretical knowledge which was then supplemented with occupational skills in their free time. The legal issues of their education not being recognised were overcome with correspondence examinations and online courses. These certifications further gave them a chance for organized learning and got them the recognition for their knowledge. The absence of peer learning was never felt to be too huge as they interacted w ith the neighbourhood children. Today, they are both very well placed in the society and doing very well in their chosen areas. Home schooling also gave them freedom to pursue unconventional subjects and not be rigid about subjects they wanted to learn. This has broadened their horizons and the vast amount of knowledge they gained about diverse topics is colouring their decisions today, which turn out to be as sound as anyone who has had a formal education through the traditional channels. Conclusion: While home schooling has both pros and cons for children, it should be deliberated upon by parents whether they have the appropriate means and methods to give their children a comprehensive education at home or if the children need to go to school where they can be taught by a trained faculty. All the options available must be weighed in before jumping into any decision. Even if the children go to school, it is necessary for parents to take adequate interest in their learning and development to ensure that they are on the right path and are learning the right things in the right way. Refs: Lisa Rivero Mitchell Stevens http://school.familyeducation.com/home-schooling/parenting/29861.html