Wednesday, February 25, 2015

Per Unit Tax on Sugary Drinks in Berkley

At the end of 2014, voters in Berkley CA approved a one penny an ounce tax on sugary drinks in the city of Berkley.  This is an example of a per unit tax as discussed in Prin. of Microeconomics.

Friday, February 20, 2015

Willingness To Pay For Luxury Goods

The Wall Street Journal reports that as the price of luxury goods have been rising, wealthy consumers have been less willing to pay for those goods, which is the law of demand.  We also can infer that consumer surplus is also falling since some consumers are dropping out the market completely.

Friday, February 13, 2015

Pharmaceutical Drug Pricing in China

China has recently dropped their government policy of using price caps (i.e. price ceilings in Prin. of Micro) for low priced pharmaceutical drugs due to shortages of those drugs (as predicted using supply and demand for a binding price ceiling), and has replaced this with requiring firms to set prices based on production costs.  As we see in Prin. of Microeconomics, setting prices based on production costs can also give incentives for firms not to produce since firms will not be able to cover their fixed costs of production.

Thursday, February 5, 2015

Palladium Prices

In 2013, tension between Russia and the West increased over the Ukraine, and traders were concerned about the ability of Russia to supply palladium.  Thus this expectation that supplies would decrease (before they actually decreased) lead to an increase in the price of palladium, which is an unfortunate example of a negative supply price expectation that I talk about in Prin. of Microeconomics.

Wednesday, February 4, 2015

Consumer Preferences and Changes in Quantity Supplied

The New York Times reports that increased in consumer preference for more humanely raised hogs, some hog farmers are increasing the amount of hogs raised to meet this increase in demand.  This would be what the demand and supply model would conclude.  Note that the change in consumer preferences for humanely raised hogs is shifting the demand for pork out to the right and that suppliers are increasing the quantity supplied as a result of the higher prices for this type of product.

Tuesday, February 3, 2015

Changes in Agricultural Products and Supply

A few years ago the Wall Street Journal reported that farmers were switching from growing cotton to growing corn or soybeans since the price of cotton was falling.  This is exactly what the supply relationship tells us.  If the producer has more than one output, as the price of one of those goods falls (cotton), the producer switches to produce another good (corn or soybeans).  In terms of supply, as the price of cotton falls the QUANTITY supplied of cotton decreases, and the supply of either corn or soybeans shift to the right.

Monday, February 2, 2015

Change in Demand and a Change in Quantity Supplied

The demand for hummus (which uses chickpeas) is increasing, leading hummus producers to find new suppliers for chickpeas as reported in The Wall Street Journal.  Notice that from the demand and supply model, the demand for chickpeas is shifting out to the right resulting in an increase in the quantity supplied of chickpeas.