7/18/14

Economics for kids children's book

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Is an economics children's book a good idea?

Hello,


My name is Jeff Felardo and I'm an economics professor at Eckerd College. 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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7/17/14

Calculating consumer surplus with all you can eat

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This post goes over the example problem of calculating consumer surplus from different scenarios. The scenario sets up by giving you a table depicting a demand curve and then asks you to calculate consumer surplus with different prices. Finally, an all you can eat scenario is introduced where you pay a flat fee to enter the transaction but the marginal cost of each additional unit is effectively zero. Check this past post for a review of calculating consumer surplus.

A restaurant sells hot wings. A consumers demand for hotwings can be shown as:
Number of hot wing servings and the willingness to pay for hotwings (each serving)

1 $10
2 $8
3 $6
4 $4
5 $2
6 $0

a. If the price of an additional serving of hotwings is $6, how many servings will be purchased? How much consumer surplus does will you receive?
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7/14/14

Which FreeEconHelp.com video do you like best?

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Of the following videos, which do you like the best for advertising freeeconhelp.com? Leave your thoughts in the comments or fill out the poll at the bottom of the screen. You can leave a link to your own video in the comments and I will add them to the list!


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7/11/14

Strictly convex vs. convex and well-behaved preferences in economics

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This post is going to be a bit more technical than average and will probably be aimed towards the upper division microeconomics or perhaps even the graduate level students. When we go a letter more in depth studying consumer theory we learned about well-behaved preferences and the associated shapes that the indifference curves take on. Below you can see a graph with three different indifference curves where 2 are straight lines and one is bowed in. The curve that is bowed in is strictly convex, and all three of them are convex.

Lines A, B, and C all represent indifference curves, while points D and E represent points where the indifference curves touch or intersect (for discussions sake, point D is the point of tangency between lines C and A).

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Do used car sales count in GDP?

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Consider the following scenario:

You decide to purchase a used car (or a house, or anything used for that matter) from a used car dealer. The car's price is $2,500 (and for some reason you do not negotiate, always negotiate!). Out of that $2,500, $800 of it is considered profit for the dealer (meaning that he paid $1,700 for the car). How would this trade enter into Gross Domestic Product (GDP)?

Possible answers given include:

1) All of it: in this scenario the entire $2,500 would be included in GDP

2) The profit or "value added" (note that value added is in quotes because the actual value added is debatable): or the $800 because of an increase in consumption.

3) The value of the car - profit: or $1,700 (I can't think of a logical reason why this could be right)

-or-
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7/10/14

Perfectly elastic supply, an example

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This post is going to go over the economics of perfectly elastic supply and how to find equilibrium price and quantity as well as consumer surplus when we are given a perfectly elastic supply curve. First, if supply is perfectly price elastic, then it means that any change in price will cause an infinite amount of change in quantity. This is a little unrealistic, however, imagine that you are selling pictures you created. If it costs you $5 (in printing costs and time) to produce one picture, you would be willing to sell as many as you could for $5, however you would NOT be willing to sell any for less than this price. Additionally, if people offered you more than $5, you would be willing to sell an infinite amount (time permitting). This means that you are perfectly price elastic at the $5 mark, and any change in price will cause you to produce nothing or infinity depending on the direction of the price change. This results in a horizontal supply curve.

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7/7/14

What happens when the price of a substitute good changes?

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This post goes over a scenario where both the demand and supply curves will shift. Sometimes when both curves shift, we are left with an ambiguous (unknown) change in either quantity or price. Let’s look at the following example:

Imagine that there is an increase in popularity of a specialty type of Soy. Suppliers currently focus on GMO (genetically modified) Soy, but there is a growing premium on Organic Soy that is driving grower interest. Because of this, growers have announced that there will be higher prices for the Organic Soy crop. The organization indicated it'll be calling on growers to increase the area planted to the variety later this year.

With markets in Canada, the UK, South East Asia, South Korea and now Russia, the growers hope the industry can triple production for Organic Soy in the next three years.

Using the above scenario...

1. The demand and supply model needs to explain the change happening in the market for Organic Soy and explain the equilibrium achieving process on prices and output of growers’ response. Is there a shortage and a surplus why?
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