Up in Rankings

The University of Hawaii’s College of Business Administration’s (UHCBA) undergraduate program has move up in rankings. This year the U.S. News and World Report ranked the program 13th in the nation, compared to 17th place last year. UHCBA tied with Indiana University-Bloomington. The UHCBA graduate program also went up by one place in the rankings for International Business to 21st place, tying UHCBA with Dartmouth College and George Washington University. The article acts like a free advertisement for the UHCBA as it encourages more students to consider the college based on its rankings.Since the UHCBA is higher in rankings, it will attract more students to want to go to school there. Going up in rankings can be measured as a non-price determinant, because it is an increase in measured quality. According to the Law of Demand, a change in any non-price determinant will cause a shift in demand. In this case there will be an increase in demand. With an increase in demand there will be more students applying to UHCBA. This will cause a shortage of classes available, and will require the price to increase until the point of equilibrium.The problem with this is that the UHCBA, and most other school systems in the U.S., are not in a free market system. Schools cannot adjust the tuition price based upon supply and demand; it is dictated by the state. Therefore, the way to compensate for this increase in demand is to make it harder to get into the school by raising the admission standards. Raising the standard will actually cause a decrease in demand, back to its original equilibrium point. Thus, eliminating the shortage of available classes. There is actually another way to eliminate the shortage of classes; the UHCBA could simply obtain more resources, for example more classrooms and professors.up-in-rankings.doc

Oahu to get 6 new Taco Del Mar Eateries by Spring

A new chain of restaurants that serves tacos is opening up here in Hawaii, the firm called Taco Del Mar is opening a total of nineteen restaurants. This year two other firms have also came into the market here in Hawaii they are Wahoo’s and Moe’s. All of these firms are in the so-called “Fresh-Mexican” (Mexi-Fresh) market, which is a sophisticated new market for Mexican food that excludes Taco Bell. Each firm offers similar products but tries to differentiate its self, for instance Maui Tacos uses Hawaiian ingredients and Hawaiian sounding names. Taco Del Mar differentiates itself by serving in a style similar to Subway whereas the other firm’s cook their food in a kitchen. This will have many implications on the Mexi-fresh Industry.All of these factors will affect the Mexi-Freh market in Hawaii in two ways because of one reason, the number of firms in the market with a close substitute product. One factor that will be affected will be the elasticity of demand of the entire market, making the entire market more sensitive to change in price. Before the new restaurants came into the “Mexi-Fresh” market, Maui Tacos was the only firm in the market making it a monopoly, which has a relatively inelastic demand curve. According to the Law of Elasticity of Demand the more elastic a product is the more sensitive it is to a change in price, which means that if you change the price a little then there will be a greater affect on demand, and the demand curve will become more horizontal or elastic. According to the news article all three of the new firms coming into the market provide close substitutes to Maui Tacos product, which will in turn greatly increase the elasticity of demand. There is also another factor that will affect price and it is supply. As the number of firms in the industry increases the supply for “Mexi-Fresh” products will also increase. This will cause the market price to decrease and the quantity demanded to increase. Since the elasticity of demand has increased so much, it will be difficult for individual firms to raise the price of their product because it will cause the quantity demanded to decrease greatly.Since Taco Del Mar’s main goal is to maximize profit, they will try to decrease the elasticity for their individual demand curve. Once they open up they will try to distinguish their self from the other firm’s in the industry, Taco Del Mar will do this by advertising. They will also distinguish them selves by marketing the style that they serve. Since Taco Del Mar prepares their products right behind the counter, in fort of the customer, they will have a relatively inelastic demand curve allowing Taco Del Mar to become a price setter to a certain extent. Other firm’s will have to advertise in order to convince potential customers that their product is different or superior to Taco Del Mar and the firm that has been in Hawaii all along, Maui Tacos.tacos-elasticity.doc

Smoking Ban is Law of the Land

Hawaii recently passed a new law concerning smoking, the law makes it illegal to smoke in many public places including all, restaurants, bars, airports, and partially enclosed facilities that are open to the public. This new has made many smokers upset claiming that it takes away their right’s but nonsmokers are happy to have a law protect their right to breathe clean air. Inorder to look at this issue in a rational way one must look at the economics of smoking and of the new law.Hawaii has the 11th highest tax rate per pack of cigarettes at 1.40 per pack (Taxfoundation.org). These regulations are designed to protect nonsmokers from the negative side effects of second hand smoke, but the tax doesn’t make that many people quit smoking. According to the book Curbing the Epidemic by the World Bank “researchers have found that a price rise of 10 percent for a pack of cigarettes decreases demand by about 4 percent (an elasticity of -0.4)” this proves that the elasticity of demand for smoking cigarettes is relatively inelastic. So the Government must step in and enforce regulations against smoking.The new law will make it much more inconvenient for smokers to smoke in public places, the increase in inconvenience is measured as an increase in price, so it will decrease the quantity demanded for cigarettes. Figure-1 illustrates the shift in supply and reduction in quantity demanded, which shows the increased inconvenience. The new law was created inorder to reduce the amount of places that people can smoke thus reducing the supply of places to smoke. The demand for cigarettes is relatively inelastic because nicotine is an addictive substance and there are no close substitutes. According to the World Bank Smoking regulations reduce “tobacco consumption by between 4 and 10 percent, according to various estimates” this is a much greater affect than changing the price of cigarettes. According to Figure-2 the marginal cost to society will be reduced by this new law, it will shift from E-1 to E-2, which will be an increase in cleanliness. This new law will affect the polluters (smokers) by reducing pollution causing activities.Since nicotine is such an addictive substance it will be hard for smokers to quit, therefore the government will have to step in again and offer more nicotine replacement therapy programs such as “Smoking Cessation”. This will make it much easier for them to quit smoking because it will provide needed support for smokers. Another long-term implication that this law will have is that it will prevent more people from starting smoking in the first place because fewer children will be exposed to cigarettes and less non-smokers at bars will be around smoking, which is a time when some people would be more likely to take a chance and try something they wouldn’t normally do since they would be inebriated. Although many smokers complain about the new law, it will greatly benefit society in the future by protecting our children.Sources:”The Tax Foundation – Tax Data for Hawaii.” Tax Data Hawaii. 11 OCT 2006.Tax Foundation. Accessed 6 Dec 2006 .United States of America. The World Bank.Curbing the Epidemic:Governmnets and the Economics of Tobacco Control.Washington, DC: GPO, 1999.tobacco-paper.doc

The U.S. Within the World Economy

The U.S. Within the World Economy

What, How, and for Whom to Produce?  What to Produce?

•We live in a world of scarcity and tradeoffs. 

•If more of a particular item is produced, then less of something else will be produced during the same period, with a given set of resources.

•In the U.S. economy, for the most part, it is the interaction of the demand for and the supply of different goods and services that determines what and how much will be produced.

•This interaction is carried out via the price system.

The Price System      

•With a price system, when goods get scarcer, their prices go up. 

•When they get less scarce, their prices go down.

•If the highest price that consumers are willing to pay is less than the lowest cost at which a good or service can be produced, output will be zero.

How Should We Produce Our Goods and Services?

•The price system indicates to producers what to produce.

•Because of competition and the desire to make the highest profits possible, producers must use the least-cost combination of inputs.

For Whom Will Output Be Produced—Who Gets What?

•After goods and services are produced, there has to be a determination of who gets what.  For instance, who gets to buy all of those millions of new cars produced by General Motors and Ford? 

•The answers to questions like this are determined by the distribution of money income.

Determination of Money Income

•The money income is determined mainly by the value of your labor services to the outside world.

•It is given by how well you are able to sell your labor

•It also depends on how well you have invested in the stock market, housing, and the like.

Distribution of Goods

•In the U.S. economic system, the distribution of finished products to consumers is based on different consumers’ ability and willingness to pay the market prices for goods and services. 

•There is no central governing body that decides which consumers will get which goods.

Resources

•The U.S. economy produces millions upon millions of goods and services.

•Those goods and services that we produce each year require resources.

•We call such resources factors of production, which are the resources or inputs required for final production of goods and services.

Resource Classification

1.Land—As an economic term, land refers to all natural resources present without human intervention.

2.Labor—Labor is often called the human resource.  It includes the services of anyone who works to produce goods and services.

3.Capital—refers to the manufactured goods used to make other goods and services.

Sometimes economists like to distinguish between physical capital (factories and equipment) and human capital—defined as the accumulated education and training of workers. 4.Entrepreneurship—refers to the ability of individuals to start new businesses, to introduce new products and processes, and to improve management techniques. 

• Entrepreneurship involves initiative and willingness to take risks in order to reap profits.

Productivity

•Productivity is often measured as output per unit of labor.

•If the labor input required to produce a unit of output falls, we say that productivity has increased.

•Typically, productivity increases because of the increased use of capital, both physical and human.

The U.S. Economy in Perspective

•The economies of most European countries have been around for much longer than the one in the United States. 

•In fact, the U.S. was an undeveloped country, by world standards, until the latter part of the 1800s. Since then, it has grown to be a world powerhouse.

•Average living standards—measured by income per person or consumption per person—have increased many times just in the last century.

•Population grew from a few million during the time the Constitution was ratified to close to 300 million today.

The U.S. Economy by Itself

•While there may be 50 states, we typically look at the U.S. economy as one entity. 

•A good reason why this is appropriate is that there is unrestricted trade among the states—the Constitution prohibits almost all barriers to interstate trade. 

The U.S. Labor Force

•Currently almost 145 million U.S. residents are part of the labor force, defined as the number of those over 16 who are either working or actively looking for work. 

•A hundred years ago, the labor force measured a mere 40 million.

•Given that the average percentage of the labor force without a job has stayed about the same over time, this means that the U.S. economy is capable of creating millions of jobs every year.

•Today, the U.S. labor force is well schooled, well trained, and mobile. One in five families move each year, usually for work-related reasons.

The Number and Quality of Goods that We Produce and Consume

•For much of the early years of this country, we were an agrarian society.  Over 90 percent of the population was engaged in farminguntil mid 1800s.

•Our incomes were low, and the products that we consumed were precious few and far between.

•Today, the average U.S. resident can choose among dozens of car brands (not all manufactured in the U.S), dozens of brands and types of refrigerators, and millions of books.

•We are a consumer-oriented society.

The Information Age

•Perhaps one of the most startling changes in the U.S. economy has occurred in the area of information and communication.

•One of the reasons that we are such a “wired” society is because the cost of computing power has fallen so significantly.

The Switch to a Service Economy

•When this nation started, almost everybody worked in agriculture.

•Gradually, we became a more manufacturing-oriented economy.

•Today, less than 2 percent of the labor force is involved in agriculture, and about 17 percent is involved in manufacturing and mining.  

•The rest of the labor force is involved in services—over 80 percent! Services include the obvious—healthcare, accounting, architecture, legal research, plumbing,electrical repair, and education.

•Services also include banking and finance, accounting, travel and vacation consulting, retailing, insurance, real estate, and providing restaurant meals.

The U.S.’s Place in the World Economy

•With 4.5 percent of the world population, the U.S. generates about 25 percent of total world industrial output.

•The U.S. economy has a total national income of over $11 trillion, compared to $30 trillion for the world economy.

The U.S. Is Closely Intertwined With All Other Countries

•We live in a global economy.

•The information and communication revolution has caused the U.S. to be in closer contact with all other countries.

•With the benefits of increasing global integration also come some costs. 

•The more our businesses are dependent on manufacturing in other countries, the more they are susceptible to crises caused by interruptions in their normal global supply routes.

The U.S. Economy Is Huge and Growing

•The U.S. economy is one of the most vibrant, resilient, and flexible economies in the world.

•On average, U.S. residents have experienced increases in their standards of living over most of this country’s relatively short history.

Gross Domestic Product—GDP

•The most frequently used statistic of economic performance is gross domestic product (GDP).

•GDP is the current value of all final goods and services produced in our nation each year. It is usually expressed in trillions of dollars per year. 

Per Capita GDP

•To get a better idea of what has been happening to the average person’s standard of living, we typically have to divide GDP by population to come up with per capita GDP.

•However, per capita GDP does not tell us anything about the distribution of income, it just tells us its average level. 

Inflation and Real GDP

•Inflation is defined as a sustained rise in the average of all prices.

•When you adjust GDP for inflation, you obtain real GDP.The term real refers to the physical or actual quantities of goods and services produced.

Per Capita Real GDP 

•To compare living standards over time, we need to correct GDP for both inflation and population growth.

•The result is called per capita real GDP.

Basics of Economics

Chapter 1 introduction to economics

Economics
• Economics is a social science that studies how people allocate their limited resources to try to satisfy their unlimited wants.
• Economics is the study of how people make choices.

Needs vs. Wants
• The term need applies to the bare minimum physical necessities that allow you to survive: bare minimum of basic food, shelter, and clothing.
• Wants include those desires that you are able and also unable to pay for.
• They are unlimited.

Scarcity
• Scarcity exists because nature does not provide us with all of the resources required to satisfy our unlimited wants.
• For many people, the scarcest resource they face is time.

Goods and “Bads”
• Goods are defined as those items that give us satisfaction when we consume them. Examples include a sandwich, a cup of coffee, a warm sweater, etc.
• “Bads” are the byproducts of production and consumption that we would prefer to do without. They include pollution of any type, such as smog.
Scarcity and Decision Making
• Scarcity forces us to make choices.
• When we decide to do anything, we are implicitly deciding against doing something else. In other words, we are giving up an opportunity.

Opportunity Cost
• The opportunity cost of every economic decision we make is the value of the next-best alternative .
• It is the value of the alternative that
we had to forgo, or do without, for
the decision or choice we made.

Scarcity and Trade-offs
• Scarcity forces us to make choices.
• When we change our mind, and choose a different alternative, we face a trade-off.
• Trade-off is the sacrifice of one good or service to purchase or produce another good or service.

Resources
• Resources are things (goods or services) used to produce other goods and services to satisfy people’s wants.

Production Possibilities
• Most businesses can use their resources and technology to produce different goods or services.
• When businesses produce more
of one good or service, they must produce less of another.
• The PPC is a graphical representation of the maximum combination of two goods or services that can be produced, given a fixed amount of resources and technology.

Efficiency vs. Inefficiency
• Combinations along the PPC mean that the economy is producing its maximum output with given technology and resources.
• Those combinations represent productive efficiency.
• Any point below the PPC represents an inefficient point or output combination, where some resources are being wasted.

Economic Growth and the PPC
• Economic growth is defined as an increase in output produced by a nation, and can be graphically depicted as an increase in the production possibilities of a nation.

Rational Self-interest
• A key assumption used by economists when formulating economic theories or models is
rational self-interest.
• It is often misinterpreted as fostering selfishness to pursue just one’s monetary wealth.
• This assumption also refers to individuals pursuing goals relating to prestige, friendship, love, power, helping others, creating works of art, and many other matters that make them and those around them better-off.

Disclaimer

I am going to publish information about all of the classes that I am taking. I may publish some of the class work that I turn in. You cannot reuse the information contained in the article without proper citation, otherwise you will violate plagiarism laws. These articles are not for the purposes of cheating or any other illegitimate use. The purpose of this is too share ideas and views with other people. I hope that you enjoy this blog.