Ch 5

Chapter five began to introduce more mathematical methods, but still kept a huge focus on conceptual and graphical understanding.

                We were introduced to elasticity, which is the measure of the change of quantity demanded or quantity supplied to one of its determinants, and applied to demand is referred to price elasticity of demand; applied to supply is referred to price elasticity . So the price of elasticity of demand measures how much the quantity demanded responds to changes in the price, and price of elasticity of supply measures how much the quantity supplied responds to changes in the price. If the elasticity is less than one, the quantity demanded/supplied moves proportionately less than the price (inelastic), when it is one, the quantity demanded/supplied moves perfectly with the price, just about at equilibrium, and when it is greater than one, the quantity demanded/supplied moves proportionately more than the price (elasticity). Using a time horizon , supplied/demand tend to be more elastic in long runs than in short ones, where people can gradually pick something up or stop buying it, and where sellers can change their productions, close shops, or even more sellers come into the scene.

                Total revenue is the total amount paid for a good, measured by the price of good multiplied by the total amount of the good sold. For the inelastic, it falls as price rises, and for the elastic demand curve, it falls as the price rises. 

Article Review #1

The article on its own was very confusing, and while I made notes and looked up many of the words or people mentioned to try to get a better understanding, it was still difficult to make all the connections. The author was discussing how Keynesian economics doesn't really work and really only benefits those on Wall Street, rather than actually taking into account the households and how they borrow money. From my understanding, this concept is actually causing inflation, and a bubble in the economy, and tries to show positive interest rates actually "help" the economy. While the U.S. prints more money, that money doesn't seem to be going into households, but back into the stocks, where business growth is actually slowed. 

I did not fully understand Stockman's idea of tightening and his graphs, but it is evident that he does not believe that the Fed has tightened enough, in contrast to what Keynesian economics tried to show. I did not understand his connection to household debt, saying it how gone flat and even decreased. Does the Fed's balance sheet show an increase in money, in which case, is that not good, even if it doesn't directly affect the household borrowing and spending? Or is that the problem, in which the Federal balance sheet changes but household spending and borrowing doesn't? Wouldn't we want household debt to decrease? So do low interest rates benefit households and high interest rates benefit Wall Street? Overall, the idea of an inflation bubble does seem as something to worry about. 

Ch 4

Chapter four goes into markets and the correlations of supply and demand. A market, some more organized than others, run usually on competition, supply, and demand. Demand often false into the realm of price, so the higher the price of a good, the lower the demand, and vise versa (law of demand). Demand can then be split into two categories: individual and market. Individual demand being exactly what it sounds like, the demand and willingness of an individual to pay for a good, and the market demand simple adds up the individual demands. A shift in demand can take place due to income, prices, taste, expectations, and the number of buyers in question. Demand can also be altered due to government and policy interventions, which can increase of decrease demands of goods, even if it is not the good in question. Supply works in a similar fashion, as prices rise, the supply rises as well, but when it drops, you can expect a decline in supply. The individual supply makes up the market supply, though the market supply shows the total quantity supplied at any price. Similar to the demand, supply can change because of input prices, technological advances, expectations, and the number of sellers in the market. Supply and demand is then needed at an equilibrium where the demand meets the supply exactly, and the seller and buyer can both be satisfied. It is up to the market to reach the equilibrium through a “trial and error” method in which prices rise and fall for goods to try to find that equilibrium so that there is no surplus or shortage of goods.

Chapter 3

Chapter three addresses principles one, two, and five: people face trade-offs, the cost of something is what you give up to get it, and trade can make everyone better off. Even if two people are able to produce the same products, it may still be beneficial for both to trade their products. Person A would specialize in Product 2, and Person B would specialize in Product 1; this especially works when Person A is more efficient in producing Product 2 and Person B is more efficient in producing Product 1.This is not always the case and Person A may be more efficient in producing both Product 1 and Product 2, but trade would still benefit both due to their opportunity cost and comparative advantage. In this case, both people would find themselves leaning towards producing more of one product and trading their excess production for the other person’s excess production, finding they both have more of each than if they were self sufficient.

This same concept is then applied to two people specializing in one area, or even countries trading and benefiting from it.