Economic Concepts in the World (Reaction Paper Sample)
Econ 201 Foundations of Microeconomics Practical Assignment
Objective: The purpose of this project is to (1) encourage you to see economics at work all around you in your daily life, and (2) sharpen your analytical skills in applying economic theory to real-world events.
Task: Read The Gulf News, The National, popular newspapers and magazines from other countries like The Economist, listen to the radio, watch TV, scan the internet and look for news events where you can see the principles and concepts we study in class playing out in business. Collect these articles or news events, and for each one explain how it is possible to see economic forces at work in the story. I am NOT looking for academic articles that explain economics. I am looking for articles that do not even mention economics, but that you can recognize the economics in the article because of what you have learned in the course. These articles must be published after the first day of the current semester. You may not use articles that we have discussed in class or that are listed on Blackboard.
Grading: Each student is required to explain a certain number of concepts to be considered for a grade. After reaching the minimum number of concepts, the project will be graded for content, grammar and spelling, neat and professional presentation. The final version of your project is due 23 April. It must be submitted through SafeAssign in Blackboard. Late papers will NOT be accepted.
You do not have a “number of articles” requirement; you have a “number of concepts explained” requirement. There is a list of possible concepts below. VERY IMPORTANT: To be considered for an A grade, each student must explain 5 concepts.
List of concepts that you can find articles to explain:
1) Principle 1: People face tradeoffs
2) Principle 2: Opportunity Cost: The cost of something is what you give up to get it
3) Principle 3: Rational people think at the margin
4) Principle 4: People respond to incentives
5) Principle 5: Trade (or Specialization) can make everyone better off 6) Principle 6: Markets are usually a good way to organize economic activity
7) Principle 7: Governments can sometimes improve market outcomes 8) The production possibilities frontier
9) Absolute advantage
10) Comparative advantage
11) Demand curve: a change in the price of the good itself
12) Demand curve: a change in income: normal good
13) Demand curve: a change in income: inferior good
14) Demand curve: a change in the prices of related goods: substitutes 15) Demand curve: a change in the price of related goods: complements 16) Demand curve: a change in the number of buyers
17) Demand curve: a change in tastes and preferences
18) Demand curve: a change in buyers’ expectations
19) Supply curve: a change in the price of the good itself
20) Supply curve: a change in input prices
21) Supply curve: a change in technology
22) Supply curve: a change in sellers’ expectations
23) Supply curve: a change in the number of sellers
24) A market equilibrium
25) A market surplus
26) A market shortage
27) The price elasticity of demand
28) The price elasticity of supply
29) The income elasticity of demand
30) The cross-price elasticity of demand
31) A price ceiling
32) A price floor
33) A tax on buyers and/or sellers
34) Consumer surplus
35) Producer surplus
36) The benevolent social planner and total surplus
37) Efficiency—allocating resources to maximize total surplus 38) Equality—allocating resources uniformly
39) Market failure
40) An externality (either positive or negative) and the attempt to resolve it
41) Chapter 13 Table 3: Two of the many types of costs
42) Profit maximization in a competitive firm
43) Sunk cost
45) Price discrimination
Economic Concepts in the World
Course Code: Course title
Economic Concepts in the World
Demand and supply interact and provide market dynamics relative to the consumers' requirements and demands. However, there are instances where demand is driven by external aspects other than consumer needs, such as price or market domination. This paper seeks to review the expression of specific economic concepts in the real world, providing insight into each, and exemplifying their effects. This paper focuses on five economic concepts, price elasticity of demand, price elasticity of supply, monopoly, oligopoly, and price discrimination. The effects of these concepts are felt on consumer capability, product supply, invention, competition, and the consumer demand.
Price elasticity of demand refers to the measure in response to price changes on the demand of a commodity or a service. Generally, demand explains the willingness to purchase by consumers. This willingness is often associated with and relative to the cost of a product or service. This concept is usually positive for Veblen and Giffen goods (Tucker, 2013). According to Rapier (2020), the oil industry and the automobile industry have a complementary relationship with regard to price elasticity. While this relationship is often positive, the global pandemic has resulted in reduced use of vehicles due to movement restrictions, and with it reduced oil demands. This reduction in demand, estimated at 3.8 million barrels daily, has resulted in a 30% drop in crude oil prices, and a slowed supply of the product (Rapier, 2020). This relationship is evident for complementary goods where the rise in demand for one results increased demand and vice versa.
On the other hand, price elasticity of supply defines the response of supply of a commodity or service relative to changes in its price. As a rule of thumb, when demand and price rise, producers and suppliers react with increased supply. Nicas, (2020) provides an example of price elasticity of demand for personal protective clothing essential during the COVID-19 pandemic. According to the article, global demand for face masks that are needed as a preventive measure against the disease, led to an acute shortage that resulted in increased prices. This rise in price not only motivated producer to meet the insatiable global demand but also resulted in the entry of new players. However, not all the dealers and suppliers were intent on standard quality, with unscrupulous dealers subverting this necessity. Regardless, the demand of this new necessity remains on a steady rise, common for essential inelastic products and services that meet a basic need. For these services and products, changes in price have relatively little or no effect on demand but may cause increased supply (Tucker, 2013).
With regard to supply and demand, monopolies present the concept of a market structure where a single producer or seller boasts a unique product. This unique nature shields the producer from competition, ensuring they enjoy total market control. Such producers set prices as they see fit and also exclude or impede the entry of competitors (Tucker, 2013). Such market structures result in buyouts for smaller players and complete control of new inventions in the sphere (Shubber, 2020). According to Shubber (2020), some of these buyouts may be indiscriminate of the competitive capability of the smaller companies and result in slowing the rate of technological development. Sitaraman, (2020) presents the open need to contain this control, but Big Tech argue that their dominance as an answer for Chinese advancements and political donations.
Besides, monopolies, market dominance can be exerted under oligopolies. One such structure would be the automobile industry, with GMC, Ford, Chrysler, Toyota, BMW, VW, and Honda having a robust market control globally and locally in the USA. According to Dow (2020), this control is visible through the use of car dealerships as a point of sale as well as barriers to electric vehicle technology. The article presents Tesla’s pioneering direct sales strategy and vehicle propulsion system and the marketing challenges they faced. Tesla’s threat to the status quo was met by decade’s long requirements for them to use dealerships, whose sales personnel had little to no understanding of their technology. However, Tesla was able to get a win in Colorado and has its sights set on more states, all the while engineering methods to meet client deliveries. This predominance and ability to infringe on Tesla by established vehicle companies is representative of oligopoly (Dow, 2020).
Finally, the concept is the pink tax presents a viable example of price discrimination. Applicable generally to women, the pink tax refers to the practice of suppliers charging women higher prices for similar products and services. According Hoffman (2020) and Morton, (2020) girls' toys cost 13% more than boys' toys, while female shirts cost 15% more than men's shirts. In addition, women got charged $3-4 more than men when accessing dry cleaning services. Besides these scenarios, these authors present the exploitation of women by vehicle repair shops that prey on their lack of information on the services
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