Wednesday, April 29, 2015

US Sugar Price Floor

The US has a binding price floor on sugar, resulting in sugar prices being higher than in world markets.  From the supply and demand market for sugar we know that a binding price floor will result in a surplus of sugar at the binding price floor.  Now let's think about the impact this has on US candy manufacturers.

As reported in the Wall Street Journal, US candy manufacturers are moving out of the US to avoid having to pay the higher US sugar prices and purchase sugar at the lower world prices.  This has resulted in a loss of jobs as the manufacturers are moving to where production costs are lower.

Monday, April 27, 2015

Nursing Home Labor Shortage

The Wall Street Journal reports that there is a shortage of nursing home workers.  Why - because the wage is below what workers are willing to work at.  How to solve this problem - raise the wage.

Monday, April 6, 2015

Prison Communication Monopoly

The New York Times reports that prices for cell phones, emails and wire money transfers are "sky-high" and the reason is a lack of competition.  In fact in some cases, the private firms that are providing these services are the prisoner's only options, meaning for that list of customers, they are monopolist's, and as I demonstrate in Prin. of Microeconomics, firms that are monopolists have a profit maximizing incentive to charge higher prices than firms in more competitive markets.

Thursday, April 2, 2015

Electricity Production

Electricity producers are changing from nuclear power to natural gas powered due to the decline in the price of natural gas.  Notice that as natural gas prices decrease so does the marginal cost of producing electricity.  When marginal cost's decline this can shift the supply of electricity to the right which results in a decrease in the electricity prices.  As electricity prices fall some electric producers are choosing to shut-down higher operating costs plants.

Tuesday, March 10, 2015

Regional Cap & Trade Analysis

In Prin. of Microeconomics I talk about negative externalities (costs to those outside the market transaction) and present some solutions such as Pigouvian taxes and cap & trade markets.  Here is a really good article on cap and trade for emissions and some critique on setting up the market for it to work as it is intended.