Monday, April 6, 2015
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 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
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.
Monday, March 9, 2015
Thursday, March 5, 2015
The Wall Street Journal reports that China is restricting US pig imports - which can be thought of as an import quota.
Wednesday, March 4, 2015
Japanese consumer and producers (surprising enough) are becoming skeptical of the government tariff policies used to protect Japanese farmers. Using the supply and demand model, we know that consumers are worse off and society overall is worse off, but notice in the article linked above that these policies "drove away enterprising farmers."
Tuesday, March 3, 2015
The Wall Street Journal reports that both the US (on plywood) and Chinese (solar panel inputs) government have imposed tariffs. As we see in Principles of Microeconomics, tariffs are welfare reducing as the gains to those receiving the tariffs are less than the losses to society.