Principles of Microeconomics: October 2015

Friday, October 30, 2015

How do higher incomes affect the price of houses?

Apple Pay : One Reason for High Home Prices
by: Laura Kusisto
Oct 26, 2015
Click here to view the full article on WSJ.com

TOPICS: Supply and Demand

SUMMARY: Apple workers live in pricier homes than other residents in the San Francisco Bay Area, and home values are rising much faster in neighborhoods where Apple workers live, according to a Zillow analysis. The gap between homes that Apple employees live in and overall prices in those areas, according to Zillow, has widened since the release of the first iPhone in 2007. The iPhone has helped boost Apple's stock price and, in tandem, employee compensation.

CLASSROOM APPLICATION: Students can evaluate the effect of increasing wages by a particular large employer or industry on home prices in a geographic area. In turn, students can learn that increasing home prices may cause rents to increase as well.

QUESTIONS:
1. (Introductory) What is the effect of the increasing wages of tech workers on real estate prices?

2. (Advanced) How is the effect of increasing wages of tech worker on real estate prices affected by zoning regulations and readily available land?

3. (Advanced) What is the effect of an influx of tech workers into a region on the willingness of current residents to sell their homes?

Thursday, October 22, 2015

Why is limited government good?

“'Think of your least favorite presidential candidate,' the Cato Institute’s Michael Cannon recently pointed out on Twitter. 'Now imagine s/he wins. Doesn’t limiting government power seem like a good idea?' It sure does—especially when you think of the Biffs in our midst" (http://www.realclearpolitics.com/articles/2015/10/22/the_biff_tannen_presidency_128499.html).

Does morality warrant $15 as the minimum wage:

http://www.huffingtonpost.com/robert-reich/the-morality-of-a-15-mini_b_8332580.html?ncid=edlinkushpmg00000090

Are employees who pay less that $15 immoral?
Are voters who elect politicians who oppose increasing the minimum wage to $15 immoral?
Are politicians who vote against increases in the minimum wage immoral?

Who decides what is moral and on what basis?

Could someone disagree with Reich and mount a credible case that paying someone less than $15 is or may be, in fact, moral?

Hillary Clinton on the ills of market concentration

http://qz.com/529303/hillary-clinton-being-pro-business-doesnt-mean-hanging-consumers-out-to-dry/

Wednesday, October 21, 2015

Do caps on interest rates charged for payday loans help people who borrow at the payday stores?

http://libertystreeteconomics.newyorkfed.org/2015/10/reframing-the-debate-about-payday-lending.html#.Vied_NWrTct

Friday, October 16, 2015

Costs, Profits, Entry and Exit in the California dairy industry

Conditions Sour for California's Dairy Farmers

by: Ilan Brat
Oct 09, 2015
Click here to view the full article on WSJ.com

TOPICS: Production

SUMMARY: California dairy farmers are retrenching amid falling prices and drought in the largest milk-producing state, a shift that could further reshape the U.S. industry by enabling farmers in other states to expand.

CLASSROOM APPLICATION: The article offers a case for students to evaluate about the relationship between costs of production and entry and exit decisions. In California, where due to water shortages costs of producing milk are now high, farmers are exiting the industry, and in the upper-Midwest, where water is plentiful, farmers are increasing production.

QUESTIONS:
1. (Advanced) Why were California's dairy farms in the past cheaper to run? Why in the past decade have costs been increasing?

2. (Introductory) Why did U.S. dairy exports fall in the first seven months of this year?

3. (Advanced) Why is the California dairy market contracting while the upper-Midwest dairy is expanding?

Reviewed By: James Dearden, Lehigh

Friday, October 9, 2015

Adam Smith and the Invisible Hand

"every individual necessarily labours to render the annual revenue of the society as great as he can. He
generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it.
By preferring the support of domestic to that of foreign industry, he intends only his own security; and by
directing that industry in such a manner as its produce may be of the greatest value, he intends only his
own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was
no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his
own interest, he frequently promotes that of the society more effectually than when he really intends to
promote it. I have never known much good done by those who affected to trade for the public good.

"But man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from
their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and shew
them that it is for their own advantage to do for him what he requires of them. Whoever offers to another a bargain
of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the
meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those
good offices which we stand in need of. It is not from the benevolence of the butcher the brewer, or the baker that
we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but
to their self-love, and never talk to them of our own necessities, but of their advantages. Nobody but a beggar
chooses to depend chiefly upon the benevolence of his fellow-citizens."

Property Rights in Communist China

This podcast describes property rights in Communist China and how a change in property rights affected economic activity. For a similar account taken from Puritan New England, visit this video.

Friedman on Greed

This video is an exchange between Milton Friedman and Phil Donahue. Friedman states that free enterprise is the only proven method of increasing standards of living and that all societies "run on greed". For evidence that politicians are greedy, read this article.

Friday, April 5, 2013

Why US Farmers are not planting rice

This summary of an article from the WSJ describes the reasons that rice production in the US is decreasing. It would be a good introduction for opportunity cost, supply and demand, and incentives.

Tuesday, February 26, 2013

What was the role of government in R&D for fracking?

This article argues that the government's role in supporting the research and development that led to the technology for fracking is less than President Obama claimed. The discussion illustrates that the profit motive can and does lead private firms to invest in research and development of new technologies, even when the results are uncertain and unknown. The debate about whether the profit motive alone is sufficient is an ongoing.