6/19/15

Learning Economics Video Game

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Please try this new game and leave comments below!

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6/4/15

Price discriminating monopoly, solving for profit maximization

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This post goes over the math required to solve for the profit maximizing price and quantity of a price discriminating monopoly operating in two markets. Consider the following problem:


A cable company sells subscriptions in San Francisco and Boston. The demand function for each of the two groups, which are separate and do not have the ability to re-sell to members of the other community, are Psf = 480 - 4Qsf and Pb = 400 -2 Qb. The cost of providing the cable service for the firm is TC = 500 + 4Q, where Q = Qsf + Qb. If the company can price discriminate between the two markets, what are the profit maximizing prices and quantities for the San Francisco and Boston markets?

To solve this problem, we need to review the steps for finding the profit maximizing price and quantity for a monopoly. We find that we need to find the price and quantity where marginal revenue (MR) is equal to marginal cost (MC).

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Is a higher savings rate good or bad for long run growth?

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This post goes over a simple discussion (based on principles concepts) of the act of saving and its affect on an economy's long run growth. The short answer is that yes, higher savings rates are good for long run growth. However, there are a few caveats. If we begin with the simple assumption that:

Y = C + I + G

We find the first argument against saving because it lowers C (consumption) which reduces Y (Gross Domestic Product). We hear this argument on the news often, because of the assumption that our economy is driven by consumer spending. However, if we add another assumption:

I = S

This supposes that I (investment) in the economy is going to be equal to S (savings), so the reduction in consumer spending is going to be 100% offset by the increase in investment spending with no impact on GDP.

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Solving for equilibrium with Qs and Qd

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This post goes over an example of solving for equilibrium price and quantity using the method detailed in the prior equilibrium solving method post. In this example we are given a Qs equation as shown:

Qs= -7909.88 + 79.0988P

Note that this gives us a positive sloping supply curve and that price has to be at least 100 in order for the supplier to produce anything at all (we can figure this out by dividing the intercept 7909.88 by the coefficient on the price 79.0988).

The next step is exploring the demand equation. In this example we are given a demand function as follows:

Qd= 38650 - 40P

Here we have a downward sloping demand curve and the quantity demanded at a price of 0 will be 38650. Once the price reaches 966.25 we will see a quantity demanded of 0 (found by dividing 38650 by 40).

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2/7/15

Examples of Deforestation on Google Earth

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There are lots of examples of deforestation occurring around the world and the purpose of this post is to provide some visual examples, using Google Earth, of deforestation occurring in different countries. A lot of deforestation is happening because of timber production, the harvesting of trees to use their wood for inputs in the production of goods such as furniture and houses. Wood is also used as a heating source for cooking or climate control. Forest conversion can also happen because those in charge think that alternate land uses will provide higher profits, or benefits for society (depending on who controls the forest).

The following examples look at deforestation occurring in five different controls with a brief hypothesis as to the motivation of the conversion. You can view larger versions of any of the images by clicking on them.

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12/11/14

Economics for kids publishes its first book!

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The book is finally available on Amazon. Thanks to everyone for their support during this process. Right now the physical version of the book is available for $6.99 and the kindle version is available for $1.99.

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7/18/14

Economics for kids children's book

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We are now live on Kickstarter! Click below for more information!
Kickstarter Project for Economics for Kids
Economics for Kids Kickstarter Project

Some friends and I have written a children's picture book about the ideas of tradeoffs and opportunity costs. We are in the process of having illustrations done and it is quite an expensive process. In order to offset some of these costs to keep the price of the book low, we are considering running a kickstarter campaign in order to raise the funds.

The book is about Johnny (named after John Maynard Keynes a famous economist), and the book would focus on many decisions he makes. His thought process during these decisions are explored in the book. Please see the cover draft below, and some sample passages from the children's picture book.

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