For our second installment of the SAS Economists Podcast, Claire and So Yeon survey 55 students to discover what determines where they prefer to get their coffee fix in the Shanghai neighborhood of Gubei. They discover through their research that consumers base their decisions on a variety of reasons, and that price, while important, is not the only factor that determines which particular products consumers will purchase. Location, tastes, size of the market, and various other factors all play a role in consumer’s decisions between two alternatives in a competitive market like that for coffee in Gubei, a trendy neighborhood with no shortage of coffee outlets.
Click below to hear this excellent and enlightening investigation into consumer behavior and the determinants of demand for coffee in modern Shanghai!
Determinants of demand for Starbucks vs. The Coffee Bean[ 5:24 ]Download (5)
“The sugar producers say whatever its costs, the new farm bill is needed to save their industry.”
We’ve all heard the news about this amazing new fuel that just might save the world from the perils of global warming… ethanol, food fuel, alternative energy, replacement for oil, the panacea to all of America’s energy, climate, and geo-political woes! Corn farmers in America’s grain belt have benefited hugely of late due to large subsidies bundled with America’s latest farm bill.
The new version of this bill, being debated in Congress now, contains a proposal to prop up the country’s 12,000 sugar farmers by promising to buy any surplus sugar resulting from cheap sugar imports from Mexico (themselves the result of market liberalizations accompanying the North Atlantic Free Trade Agreement) at a profitable price. The sugar lobby insists that sugar should play a larger part in the production of ethanol, currently which is made mostly from corn.
To effect that policy, the government would buy excess sugar and sell it at a loss to ethanol producers. They ferment corn starch to ethanol, but adding a little sugar can speed the reaction…
Mr. Keenum suggested that the Agriculture Department would end up buying sugar for 22 cents a pound and selling it to ethanol producers for 4 to 7 cents a pound. “You can easily do the math and look at the loss potential,†he said.
Here’s an online special for my IB students. We’ve recently started our unit on International economics, and one of the first topics is free trade, protectionism, barriers to trade, and the arguments in support of and against such protection. Below are the graphs we discussed in our Smartboard lesson during today’s class.
If you click on each image it will take you to a full size version.
What to notice about the impact of a tariff: Domestic producers benefit at the expense of domestic consumers and foreign producers. The green triangles represent efficiency or welfare loss because that is consumer surplus that is forgone after the tariff. The yellow rectangle is not DWL because it is tariff revenue for the government.
Be sure to understand the indirect effects of such policies also. For example, any of the three forms of protection shown here will lead to a decrease in net exports for America’s trading partners, which means a decrease in Aggregate Demand and the possibility of higher unemployment, recession, lower income, thus less demand for American products abroad. So, not only does the tariff hurt American consumers through higher prices and lower quantity, but it could harm other American businesses whose products are no longer in demand from foreigners whose incomes have declined thanks to the American tariffs.
Note also the regressive nature of tariffs. Much like a VAT or an excise tax, tariffs place a greater burden on low income earners than high income earners, as a particular tax on imports represents a larger percentage of a poor person’s income. Continue Reading »
It is very exciting that three Economics professors from the US have received recognition from the Nobel Foundation and have been awarded the Nobel Economics prize. All three professors, including, 90 year old Emeritus Professor Leonid Hurwicz, have been working the since 1960′s investigating “how people’s knowledge and self-interest affect their behavior in the market or in social situations such as voting and labor negotiations.”
While some of these ideas will sound familiar to you now as an “experienced” AP Economics students, their “mechanism design theory” will be new to you. This theory builds on another theory that we will discuss later on this year, Game Theory. What I appreciate about the these three professors is that they have been dedicated to developing economic theories in order to understand real life situations. One professor has even applied his formula in such a way that he has written about how it can be used to rebuild the government in Iraq. Essentially, the three men studied how game theory can help determine the best, most efficient method for decision-making.
Essentially, the three men studied how game theory can help determine the best, most efficient method for decision-making.Continue Reading »
The writers at Free Exchange find the concept of comparative advantage to contain almost enchanting beauty and hope for a better world. Perhaps they romanticize it a bit much, but this is an interesting little piece, nonetheless:
The principle of comparative advantage is one of those ideas that can completely transform the way you see the world, once you really internalise it. That everyone, even those who are best at nothing, can benefit themselves and others through co-operation is a beautiful idea that points to the possibility of a benevolent world.
Introduction: So today on SAS Economists podcast we come to examine the economic practices of our beloved catering service, Eurest. For the last several years Eurest has held our stomachs and their breaths, as they poured out food for the school community’s enjoyment. But how much does the community really enjoy the services provided by Eurest?Too often complaints about the variety of food or taste and appeal are expressed by students and teachers when the name “Eurest” is mentioned.
Today, we will examine the alleged gap between price and quality for Eurest’s food. We’ll try to find out whether the prices charged for cafeteria food truly reflect the costs to Eurest, or whether it is monopoly power that result in the prices many students consider to be unreasonable. Does a lack of competition result in x-inefficiency on behalf of Eurest? If students had the benefit of greater variety and the freedom to eat off campus, how would Eurest match up against greater competition? What can the company do to achiever a higher level of customer satisfaction? These questions and more in the first EVER SAS Economists podcast!
To play, click on the viewer below and wait a couple of minutes for the video to load. It will play automatically once it has buffered.
The last two weeks I have been leading student trips outside of Shanghai, first to the Philippines where 16 juniors and seniors built a house for Habitat for Humanity, and just today I returned from Sichuan Province where 24 students road their bikes through the fields of the Chengdu Basin and along the foothills of the Himalaya for three days.
Along the way on our cycling adventure we visited the Panda breeding center, the 2300 year old Qin Dynasty irrigation project at Dujiangyan, and several ancient villages preserved into modern times. On our way to the airport this morning our bus found itself in the middle of a village street market that I swear looked like it could have been 50 years back in time. There was not a private automobile to be seen, only Chinese “Forever” and “Flying Pigeon” bicycles (based on the 1937 American Raleigh design). Half the villagers were wearing the “Mao” costumes of what I thought was a bygone era in China, but it turns out this communist fashion has simply become isolated in the poor countryside, which is where we spent most of this week! Continue Reading »
Meet Jasper. Jasper is a resident of Saint Dominic Village, a Habitat for Humanity community made up of 65 houses (eventually 92), one as of yet un-staffed community center, 200 children (the average family has about six kids), one playground with a few rusty swings and a teeter totter.
Among the 200 children in Saint Dominic Village, only a handful attend school regularly. Almost all of the younger children live on their own for most of their days, as their parents head to the city to find work. Teenagers in the village attend school sporadically, often choosing to hang out in the village smoking pot, or to find work in the city to supplement their family income.
A typical family in Saint Dominic village will earn between 3 and 6 dollars a day, but only when there is work to be found. Some of the common jobs here include “tricycle” driver (these are motorcycles with side cars used as taxis in this part of the Philippines), jeepney driver, charcoal salesman, seamstress, laundry service, handicrafts, and the odd factory job (although these are scarce in this area as there is very little capitalinvestment). Continue Reading »
This afternoon my wife and I returned to Shanghai after an amazing week in the Philippinese where we led 16 students on a Habitat for Humanity house building project on the island of Luzon (see map here). While this experience is still fresh in my mind, I wanted to share a few comments about how my thinking about Habitat for Humanity evolved over the last eight days.
A week ago right now, the 18 of us from SAS were bouncing scarily southward along Luzon’s main north-south highway, which is only a highway in the western sense for about 30 km outside of Manila, beyond which it turns to a two-lane, pot-holed, multi-use thoroughfare shared by buses, three-wheeled motorcycle taxis, lorries, a handful of personal automobiles and thousands of jeepneys. Three hours of nerve and bone rattling travel brought us to our lovely guest house near the southern Luzon city of Lucena, where we would spend five days building a house in a community on the outskirts of the city. Continue Reading »
Meet Jasper. Jasper is a resident of Saint Dominic Village, a Habitat for Humanity community made up of 65 houses (eventually 92), one as of yet un-staffed community center, 200 children (the average family has about six kids), one playground with a few rusty swings and a teeter totter.
