Is GM trying to restrict entry?

http://www.bloomberg.com/news/articles/2016-02-24/tesla-battles-general-motors-over-right-to-sell-cars-in-indiana

Here are some resoures on the web that may help students learn about gains from trade.

1. Watch the Economic Detective on comparative advantage and trade (2:31).
2. Watch this video describing the hockey stick of economic prosperity (4:54)
3. Watch Khan on comparative advantage and trade (8:55)
4. Optional: Visit this post to see 4 videos and 2 articles that present different opinions of whether free trade is good or bad. One article distinguishes between free trade and fair trade.

Economic Systems

Optional material:

1. Capitalism v. Communism from 1funkyteacher. It is a good account of some differences between the market system and the command system.
2. this slidecast for an extended discussion of the basic economic systems.

Does the gender of the seller affect the price buyers are willing to pay?

The article says, "Yes": https://www.theguardian.com/science/2016/feb/19/ebay-study-shows-online-shoppers-are-subconsciously-sexist.

Questions.

1. Does the evidence indicate that buyers are irrational? If not, what other explanations exist?
2. How could a savvy buyer take advantage of these differences in price?

Will the latest attempt to collude in the oil market succeed?

Saudi Arabia, Russia, Qatar, Venezuela Agree to Freeze Oil Output
by: Summer Said and Benoit Faucon
Feb 17, 2016
Click here to view the full article on WSJ.com

TOPICS: Cartels, Oil Markets

SUMMARY: Saudi Arabia and Russia, the world's two largest crude-oil exporters, said Tuesday they would halt production increases as long as other major producers followed suit, but prices fell anyway as investors looked for more concrete action to reduce the global glut of petroleum.

CLASSROOM APPLICATION: Students can evaluate the recent commitment and strategy by Saudi Arabia, Russia, Qatar, Kuwait, and Venezuela to cap oil production. The commitment is contingent on other OPEC members, notably Iran and Iraq, following suit. Involved in the evaluation is the reasons that Iran and Iraq have for increasing oil production.

QUESTIONS: 
1. (Introductory) Why are Saudi and Arabia and Russia pushing OPEC members to halt increases in oil production?

2. (Advanced) Why have Iran and Iraq recently increased oil production? Are the two countries likely to halt increasing oil production?

3. (Advanced) What is Saudi Arabia's traditional role in OPEC? What was Saudi Arabia's rationale for abandoning this role in the recent past?

4. (Introductory) Why did the U.S. producers in the past year cut back on oil production?

Reviewed By: James Dearden, Lehigh University

More evidence that firms operate when average total cost > price > average variable cost and shut down when price < average variable cost

More Cuts Loom as Oil Nears $25
by: Erin Ailworth and Bradley Olson
Feb 12, 2016
Click here to view the full article on WSJ.com

TOPICS: Oil Markets, Production

SUMMARY: As crude prices slide toward $25 a barrel, many oil companies have little choice but to start making the steep cost cuts they have avoided up until now, jettisoning every well that can't break even or isn't needed to keep the lights on.

CLASSROOM APPLICATION: In the context of this oil case, students can evaluate two economic principles: the shut-down point and a firm's optimal level of employment. Students can evaluate the reason why oil producers are operating despite losses and the reason why the producers are laying off workers.

QUESTIONS: 
1. (Introductory) U.S. and Canadian producers are losing at least $350 million a day at current prices, according to an AlixPartners analysis. Should all producers that are losing money be shutting down operations? Characterize the oil price at which a producer should shut down.

2. (Advanced) Why are oil companies laying off workers? Use the wage rate and the concept of the marginal revenue product of labor for a given type of job in answering the question.

3. (Advanced) John England, vice chairman of energy for Deloitte LLP, is advising energy clients trying to stave off bankruptcy to go ahead and make the steep cost cuts they would have to if forced to declare. How does the potential prospect of bankruptcy affect a firm's decision to make steep cuts in costs?

Reviewed By: James Dearden, Lehigh University

Resources on the web for incentives

1. Watch this humorous clip to see Captain Ron use incentives to induce good effort.
2. Watch this humorous clip from Office Space to see how incentives, or the lack of them, affects behavior.
3. Watch this clip from the Stand Up Economist @ 3:15. It mocks the principle that people respond to incentives?

A review of a book critical of the ACA

http://www.realclearmarkets.com/articles/2016/02/16/book_review_sally_pipes_the_way_out_of_obamacare_102007.html

The article says that the attempt to use price controls to limit the increase in cost has failed.

The article is a good introduction to a discussion of whether markets or command and control is the best way to organize economic activity.

Answers from a student to review questions in Chapter 4 of Mankiw

These are the review questions a student answered in chapter four. Add a comment if you see any errors. 

Problems and Applications

1) Cold snap hits florida
a. Price rises because supply of oranges decreases and shifts to the left 
Weather turns warm in new england
b. Price of hotel rooms plummets because demands decreases and shifts to the left 
War breaks out in the middle east and gas rises and used caddys fall
c. Price of gasoline rises because supply is decreased so it shifts to the left and used caddys fall because the demand is decreased and shifts to the left because the supply of gasoline decreased.
3)Minivans and the effects
d. More children means the demand for mini vans increases and shift to the right
e. Steel prices rises so supply is decreased 
f. Engineers develop new automated machinery that increases the supply of mini vans shifts to the right
g. Price of sports utility vehicles rises 
4) Compliments
• dvds and tv screens our compliments 
• dvds and movie tickets our subs
• tv screens and movie tickets our subs
b. as the technological advance reduces the cost of manufacturing TV screens the supply would increase because you can create more tv screens at the same cost as before.
5) It created more supply of computer chps which brought the price down on computer chips and computer chips compliment computers so therefore the price of computers went down as well. 
6)
a. increases supply
b. increased demand
c. increased demand of exercised attire
d. supply increases
10) Supply decreased because something affected price. 

Gasoline for $1 a gallon?

Gas at $1 a Possibility for Parts of the U.S. 
by: Alison Sider
Feb 09, 2016
Click here to view the full article on WSJ.com
Click here to view the video on WSJ.com 

TOPICS: Oil Markets, Supply and Demand

SUMMARY: Gasoline could return to $1 a gallon for the first time since the 1990s amid the continuing decline in crude-oil prices, a growing fuel glut and seasonal refining shifts.

CLASSROOM APPLICATION: Students can evaluate the causes of low gasoline prices, the effect of falling gasoline prices on the quantity of gasoline demanded, and the reasons why gasoline prices vary across the states.

QUESTIONS: 
1. (Advanced) What factors are causing gasoline prices to fall? Include OPEC, refinery capacity, and the performance of the Chinese economy in the explanation.

2. (Advanced) How do state taxes, distance to refineries, and state environmental regulations affect local gasoline prices? Why is Texas a good candidate for ultracheap gasoline?

3. (Introductory) What is the effect of the price of gasoline on the equilibrium quantity of gasoline demanded? Does a decrease in the price of gasoline cause a shift in the demand for gasoline?

Reviewed By: James Dearden, Lehigh University

What creates demand?

This article reports that what is the consumer's head determines how much he or she is willing to pay for the item, not necessarily its intrinsic characteristics.

http://qz.com/614214/what-the-diamond-industry-is-really-selling/

Supply and demand in action in the market for califlower

http://managerialecon.blogspot.com/2016/02/a-cauliflower-bubble.html

A good article on the reasons to support and to oppose free trade

http://www.bloombergview.com/articles/2016-01-26/free-trade-with-china-wasn-t-such-a-great-idea

Good video on why standards of living grow rapidly in some countries and slowly in others

http://mruniversity.us10.list-manage2.com/track/click?u=04a951a4045e64f9ee2a762fd&id=e3632f20ad&e=8886654bda

Optional material for L12b

1. This blog has examples of low rents paid for some apartments in NYC.
2. This paper reports vacancy rates for apartments in NYC.
3. This paper reports that the vacancy rates for apartments in NYC is lower than the national average.

More optional material for L09

1. This story from Planet Money illustrates supply and demand at work. It shows how the price of a ride on Uber increases during a snowstorm.
2. Read the article linked from this post: Pig market.  It discusses the effects of a virus that is killing young pigs and lower grain prices on the price of pork.
3. This article reports that the price of tickets to the Super Bowl is falling. The forecast today, 1 week out, is for temperatures between 35 and 30 with a 20% chance of precipitation. Perhaps that forecast makes watching the game (and the commercials) in the comfort of your home on your new big TV look better and better.
4. This article in the WSJ reports that propane prices rose as temperatures fell. It is a good introduction to supply and demand. It links higher prices to higher demand, mentions possible shortages, and has at least one example of a reduction in the quantity demanded.
5. This video shows how changes in demand affect the price of Hula Hoops.

Optional material for L09

1. Foodie on Equilibrium. It is a clear exposition of demand, supply, and equilibrium.
2. 1funkyteacher on demand and supply, and equilibrium. It uses auction for cows in an excellent illustrations of demand, supply, and equilibrium.
3. 1funkyteacher on changes in equilibrium. It discusses the market for natural gas and shows that price increases as supply decreases and demand increases. It also discusses why “rigging” the market may be difficult and how suppliers did so in the 2000s.
4. The Economic Detective’s video on supply and demand. This is a clear exposition of demand, supply, and equilibrium.
5. This story from from Planet Money illustrates what happens when prices do not adjust to shortages. It describes the backlog (backlog=shortage) of packages at UPS and FedEx during the Christmas season. “Surge” pricing could have eliminated the backlog; the backlog occurred because the quantity demanded exceeded the quantity supplied.
6. In this essay, Gary Becker and Julio Elias estimate that the shortage of kidneys would disappear if the price increased to something between $15K and $30K. About 4,000 people a year in the US die while waiting for a kidney transplant and another 1,200 are removed from the waiting list because they become too sick for a successful transplant. See also Becker,  Gary S. and Julio Jorge Elías (2007), “Introducing Incentives in the Market for Live and Cadaveric Organ Donations,” The Journal of Economic Perspectives, Vol. 21, No. 3 (Summer, 2007), pp. 3-24.

Optional material for Choice

1. Watch this clip.  (The instructor predicts that you will laugh.) Is the monkey that rejects cucumber rational?
2. Watch this clip. It shows a consumer considering whether to pay a higher price to buy American. The marginal benefit is obtaining a US-made product instead of one made in India. The marginal cost is $212. It is a good example of making a decision by comparing the benefit and cost.
3. Watch the 60-second lesson beginning @ 5:30 to learn about Rational Choice Theory
4. Watch this humorous clip from Jerry McGuire. What motivates the football player?
5. Watch this clip from the Stand Up Economist @ 2:35. It mocks the principle that people are rational.

Optional material for L03

1. Watch the first 60-second lesson: The Invisible Hand
2. Watch Kahn on Adam Smith @ 0:00-4:30.
3. Watch this clip from Home Town Story @ 37:00. A businessman states that he is interested in profit. He goes on to discuss that customers also seek profit (economists call this second profit consumers surplus) and that the mutually attainment of profit leads to good results.
4. Read this post to learn read how consumers are responding as the price of natural gas falls. Did they need the government to tell them to convert? Why or why not?
5. Watch this clip. It shows that no one knows how to make a pencil and explains why the market is miraculous and government control is inefficient.
6. This story describes aggregating what many people know, each of whom may know much about some things and little about other things, leads to better decisions than trying to have one person or group know everything.
7. Watch Friedman talk about how markets lead to cooperation and harmony to produce a  pencil.

Optional material for L04

1. Read this article (2 pp.) that summarizes recent evidence on the percentage of people in a country that have paid a bribe, a form of corruption.
2. This video describes corruption in Russia associated with the Sochi Olympics. It illustrates one reason why the Heritage Foundation rates the level of economic freedom in Russia as "Mostly Unfree."
3. This chart reports statistics on the ease of starting a business in countries. Ease of starting a business is one indicator that the economy relies heavily on markets.
4. Watch this video for a short account on Puritans in New England. It has great quotes from Governor Bradford about the problems with the communal system.