Archive for October, 2007

Oct 28 2007

Russia goes “Mugabe” on food prices as elections approach!

Published by under Price controls

Kremlin Secures Price Controls on Food Items Before Elections – New York Times

Okay, students. This article needs to introduction, no summary, no analysis, no passages quoted, I barely even glanced at the article myself! Read the headline… if you’re interested, read the article; but it should be nothing new to you at this point. It’s the same flawed economic thinking that led Zimbabweans to attempt to eat a poor giraffe, and the Chinese decision to freeze certain prices in the run up to the 17th meeting of the Chinese Communist Party Congress earlier this month.

What’s wrong with this sort of economic policy? Why do governments still attempt such policies, and why do people still fall for such tricks played by paranoid leaders obsessed with placating the masses through “generous” price controls? What do you expect will result from Russia’s price controls?

Hat tip to Greg Mankiw for the link.Mugabe, can't do economics good

Speaking of our old friend Robert Mugabe, the president of Zimbabwe has just announced he’s launching The Robert Mugabe Intelligence Academy. His stated purpose for opening this institute, which will train government officials from the greater Southern African region?

“The important role of defending our country cannot be left to mediocre officers incapable of comprehending and analytically evaluating the operational environment to ensure that the sovereignty of our state is not only preserved, but enhanced,” Mugabe said.

Before settling on the institutes’s official name, several options were tossed around, including the close runner up: “The Robert Mugabe Institute for People Who Can’t Do Economics Good and Want to Learn to Do Other Things Good Too.”

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23 responses so far

Oct 26 2007

SAS Economists Podcast #5 – What does the Caramel Frappuchino mean to Starbucks?

by Caleb Liao and Drew Venkatramen

Just how important is the caramel frappuchino to Starbucks? This podcast will explore the demand for a particular product from the ubiquitous coffee chain, a new branch of which has recently been opened across the street from Shanghai American School.

SAS students overwhelmingly favor the sweet, caramel goodness of the beloved Frappuchino, but how much would they really be willing to pay for already the steeply-priced beverage. At its market price of 32 kuai, customers seem to arrive in droves from the SAS campus; but could Starbucks do better by charging a higher price? What if they lowered the price, would it make a difference in their revenues? This podcast explores the market for the crowd’s favorite coffee beverage, the caramel frappuchino, and tries to learn something about demand, elasticity, and firm behavior in the process!

7 responses so far

Oct 25 2007

Harry Potter Economics…

Published by under Supply/Demand,Teaching

Environmental Economics: 6th Grade Econ Question of the Day

Tim Haab at Environmental Economics pulls the following question from his 6th grade daughter’s “economics” homework assignment:

Suppose that a new Harry Potter book comes out and yet again becomes a bestseller. Thousands of people want to read this book. Stores will order more copies of this book from the company that makes it. To fill orders, the company increases the SUPPLY of these books in the marketplace. The increased supply has been made in response to an increased DEMAND for the book.

  1. If the supply of a new product is low and the demand is high, what will happen to the price?
  2. If the supply of a product is high and the demand is low, what will happen to the price?

Here’s the answer the teacher wants the 6th graders to give:

    1. Price will increase in response to a shortage.
    2. Price will decrease in response to a surplus.

My question for you is: what’s wrong with this picture? Is professor Haab’s 6th grade daughter being taught good economics? Without following the link and reading Dr. Haab’s entry, see if you can figure out what’s wrong with this question!

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Oct 24 2007

SAS Economists Podcast #4: There can’t be too much of a good thing… can there?

by Helen Chu and Angel Liu

How do brownies relate to economics? First, most people can agree that brownies are, in general, a “good thing” because, well, they’re yummy. And because they are commonly perceived as a “good thing”, we have chosen them to be the subject in our exploration of the law of DIMINISHING MARGINAL UTILITY. How can such a “good thing” transform into something revolting in less than ten minutes? Take a look at the results below and listen to our podcast – you’ll see.

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7 responses so far

Oct 23 2007

The US dollar’s decline in value may cause more harm than good for the US economy

Asia Sentinel – A Falling Dollar Does Nobody Any Good

Many economists hail the decline in value of the US dollar as a boon to the American economy. It may sound counter-intuitive, but economic theory predicts that when a currency depreciates relative to other currencies, this could actually be good for the country’s economy? Why, you ask? Let’s consider an example:

In the last four months the value of a dollar in terms of euros has gone from 0.75 Euro cents to 0.69 Euro cents. For Europeans, that means that dollars are cheaper now than they were four months ago, therefore American goods are cheaper now than four months ago. Cheaper American products should mean more business for American companies as Europeans demand more of their stuff. Good for business, right? In the US, aggregate demand will shift out, unemployment should fall, and the price level should rise as more foreigners demand more American products. But what impact does the weaker dollar have on Americans? Continue Reading »

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