Good Term Paper On Economics Micro
“Government waste is the opinion that the government does not spend money in an acceptable manner” (“Government Waste”). Not all collected taxes are used to fund important for people programs, critical infrastructure like roads, schools, bridges etc. Sometimes the objects of government financing are not chosen wisely. Here is the list of the most outrageous spending projects:
$856,000 to train three mountain lions to run on a treadmill in order to measure the energy consumption of the cats’ hunting techniques. (Nitti)
$473,000 to house 100 chimpanzees in a room with 100 typewriters for the entire year to determine whether, if given enough time, they could recreate the complete works of Tucker Max. (Nitti)
$331,000 to study whether the concept of “hanger” was real by testing whether hungry spouses were more likely to stab a voodoo doll representing their significant other. (Nitti)
$1 billion to destroy $16 billion in unneeded purchases of military-grade ammunition. (Nitti)
$371,000 to study if mothers loved their dogs as much as their own kids by studying the way their brains responded to pictures of both. (Nitti)
$500 million to provide a subsidy for millionaire for purchases of beachfront property. (Giokaris)
It’s impossible not to agree that that a good education is crucial to performing most jobs in today’s high-tech economy. And for sure the standards of education today differ from those we had 40 or 50 years ago. But life itself dictates these changes. Nowadays it’s very important not just possess such basic skills as reading, writing and arithmetic but to develop “so called ‘21st Century skills’ - how to problem-solve, how to think critically . . . how to enhance people’s independent thinking” (Williams).
The aim of educational reform is to change the approach to getting knowledge: learn fewer but deeper, with greater detail; develop critical thinking not only in philosophy and literature, but in every subject, and be able to support logically and with clear evidence their points of view. To be a success in contemporary world people have to learn how to competently carry on a conversation - “come to a discussion prepared, listen respectfully to others, take turns speaking, build on each other’s conversations, ask clarifying questions” (Murray). And for sure modern time requires modern technologies: the internet, online tools, high-tech devices, software are not only helpful tools but a must for use by a qualified worker. So, all these changes in educational system are carried out for good and are designed to meet the spirit of time.
That is why I can’t agree that the changed educational standards are the main reason for declining quality of labor. Among other important factors are the lack of motivation, failure in keeping workers satisfied, “which can be the result of pleasant work conditions, room for advancement and trust among colleagues” (Fagnani). Use of the latest technologies, free access to statistical, reference and other information and ability to extract the vital from the large variety of available sources, deep knowledge of the professional area, well-coordinated team work help increase the productivity and quality of labor.
According to Investopedia “Substitute is a product or service that satisfies the need of a consumer that another product or service fulfills” (“Substitute”). In other words, if the customer has already bought one good then there is no more need to consume another of the substitute goods. The perfect example of the substitute goods are Coke and Pepsi. If the price of Coke rises it will lead to an increase in demand of Pepsi. Even though the price of Pepsi does not change, it is relatively cheaper due to the higher price of Cola. And vice versa . . . Thus, for substitute goods there is a direct link between the price of one of them and demand for the other.
If the goods or services meet the needs of customer only in combination with each other they are called complementary (“Complementary good”). Such goods provide greater satisfaction if we buy them together. Sometimes either both such goods should be purchased or neither of them. For example, ski and binding packages. Demand for ski generates demand for the ski bindings. Lower price for ski leads to an increase in demand for the bindings also whether or not its price also falls, and vice versa, if ski prices increase, people will buy fewer bindings. Thus, there is an inverse proportionality between the price of one of the complementary goods and demand for the other of them. Another example of complementary goods is jet ink printer and ink cartridge. The more ink printers we buy the more ink cartridges we will use. Suppose the price of printers goes down. Then according to the law of demand more printers will be purchased, in other words the demand for printers will increase. Since printers and cartridges are complementary goods the demand for cartridges will increase too even if the price of cartridge will remain the same. On the other hand if the printer price increases it will lead to a decrease in quantity demand for printers and consequently to a decrease in demand for cartridges.
“Law of diminishing marginal utility is a law of economics stating that as a person increases consumption of a product - while keeping consumption of other products constant - there is a decline in the marginal utility that person derives from consuming each additional unit of that product”(“Law of Diminishing Marginal Utility”). It means, that consumed consistently parts of any goods have diminishing utility for the consumer. A maximum overall utility is achieved at the point where the marginal utility reaches zero. This means that the need of the customer is fully satisfied and the continued consumption may start to cause displeasure.
For example, if you are thirsty and you drink the first glass of water then in terms of the marginal utility you have already received the maximum possible pleasure. You drink the second glass of water - total utility grows for you because you still quench your thirst, but the marginal utility falls, because your thirst is actually already not as strong as before). When you find that you do not want to drink anymore, and if you continue to drink, then each next glass of water will most likely make you feel uncomfortable, because you are already completely sated with water, then at this point you reach the maximum total utility and the marginal utility of glasses of water is for you zero at this point. (Managedstudy.com)
This law is often applied in practice at pricing: if each successive unit has less and less marginal utility, the consumer will buy additional units of the good only if their prices will be decreasing. According to this law, manufacturers must reduce the price in order to encourage consumers to increase purchases of this product.
It is significant to note that this law is not universal, since in some cases the marginal utility of the following units of the good at first increases, reaches a maximum and then begins to decrease. The similar relationship exists for small portions of divisible goods.
Wikipedia explains economies of scale as “the cost advantages that enterprises obtain due to size, output, or scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output” (“Economies of Scale”). Sometimes increasing scale influences operational efficiency too which leads to lower variable cost as well. The simplest example of scaling is bulk buying. Supermarkets buy food in bulk and get lower average costs. The marginal cost of transporting is relatively the same for both 10,000 cartons of milk and 100: you still need to pay only one driver, the fuel costs will be similar even if you may need a bigger van. So the average cost of transporting 10,000 units will be significantly less than in case with 100 units as the marginal cost will be evenly spread to a larger number of units. That is how the supermarkets benefit from economies of scale.
Diseconomies of scale – it is the concept opposite of economies of scale. It refers to a situation when a firm expands beyond its optimum scale and experiences an increase in long run average costs when output is increased instead of their continued decreasing. This can happen for several reasons: poor communication, problems with control in a large firm, the increased shipping costs due to distance or weight. For example, for a large plant with the increasing output costs of transporting the good to distant markets can increase too much to offset any economies of scale: the more the firm produces, the more it needs to ship to distant locations.
A variety of strategies can be used to minimize diseconomies of scale, such as restructuring or closing some operations, decentralizing production markets, careful market segmentation, flattening management structure, investing in technology to improve communication (InvestingAnswers.com).
I think I would better repair my old car than to buy a new car requiring an auto loan. Maintenance, which includes regularly scheduled work when your car reaches a certain mileage as well as wear-and-tear items - such as tires, brakes and windshield wipers - are costs all car owners incur, regardless of the age of the car. These costs don't disappear with a new car (we suppose I don’t buy a model with a free car maintenance plan, as maintenance is free only for a limited time and such cars are too expensive for me). Even with an inexpensive car and an auto loan at a great interest rate, I am looking at a minimum of about $2,400 annually on car payments alone. It's unlikely my older car will cost me $2,400 in repairs. Apparently, I will more likely be paying for repairs.
Fixed and Variable Costs
The structure of fixed and variable costs (Blake) is shown above (see table 1). Thus, the difference is in maintenance costs and costs of repairs which I’ll pay for my old car instead of significantly higher payments on loan for a new car (“Car Costs”).
“In economic theory, perfect competition (sometimes called pure competition) describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product” (Perfect Competition”).
In the market of perfect competition none of the firms can affect the price at which the products are sold. Therefore the law of demand, even though it expresses objectivedependence between price and quantity of goods, in general, has no practical significance for a perfect competitor. Such firms are always forced to sell their products at the price prevailing in the market as the result of the interaction of all buyers and sellers, that is, at the price of market equilibrium (“Equilibrium”). In the long run the perfect competitor always breaks even. Suppose firms are making a profit in the short run. Economic profits will attract new producers in the industry, new firms would be attracted to the industry, thus industry supply will raise and the equilibrium price will go down just far enough so that it would be equal to every firm’s break-even point. In the same way, if firms are losing money, just enough firms will leave the industry, reducing industry supply and raising equilibrium price so that it reaches the break-even point (Pettinger).
The example of the wheat market illustrates the mechanism of functioning of the market of perfect competition. If the price of wheat increases as a result of increased demand, the farmer will react to this by expansion of his crops next year. For the same reason other farmers will sow wheat on larger areas, as well as those who have been in that business before. As a result, the supply of wheat in the market will increase, which could lead to a drop in the market price. If this happens, all the manufacturers, and even those who have not expanded the area under wheat, will have problems with its selling at a lower price.
But in fact a market of perfect competition is hypothetical as in reality the situation, in which all conditions for its operation are present at the same time, doesn’t exist.
“The Taft-Hartley Act, officially known as the Labor-Management Relations Act, is a federal labor law that regulates the actions of labor unions” (“Taft-Hartley Act”). The law covered almost all aspects of labor relations and trade union activity from the anti-corruption regulation in trade unions to the ability to introduce the state of emergency in the country in connection with a major strike.
Huge discontent of trade unions was due to the fact that the law intensified government interference in labor relations and seriously strengthened state regulation of the trade union movement in the United States.
Taft-Hartley Act had numerous benefits for employers, gave new rights to businesses and placed restrictions on labor unions, which called it a “slave labor act”. Act stated that advanced warning should precede all strikes (Shmoop Editorial Team), allowed “the federal government to call off a strike, or an employer's lockout for that matter, during an eighty-day "cooling-off period" if the national interest was endangered” (Shmoop Editorial Team). Secondary boycotts and sympathy strikes were banned as well as close shop policies, certain legal terms for carrying out a strike were set by that act, unofficial strikes were outlawed (Shmoop Editorial Team). Courts were given the right to decide on the termination of strikes. In fact, Taft-Hartley Act put trade unions under state control, introducing obligatory annual reports for the Ministry of Labor on financial and organizational issues (Reese).
Unions were outraged by the statements of the law restricted political activities of the labor unions. One of such limitations included the prohibition for unions to finance election campaigns.
All those key provisions of the Taft-Hartley Act, including withdrawn later requirement for union leaders and activists to declare under oath membership in the Communist Party, persuaded union leaders that the law was anti-labor.
Financial dictionaries define usury laws as protecting consumers regulations, which govern excessively high rates that can be charged on a loan, by setting caps on the maximum amount of interest, that can be applied (“Usury Laws”).
Majority of the U.S. states keep to usury laws today, though the maximum limit is fixed in each state. The debate, whether usury laws should be changed or maintained, still continue.
Usury ceilings are introduced for a variety of reasons: in order to prevent excessive profits, lower interest rates and inflation, stimulate housing and growth, subsidize certain consumer groups and protect the unwary and uninformed (“An Analysis of the Impact of Usury Ceilings”). However, it’s difficult to avoid perverse effects in each case which may defeat these goals. In particular these effects can be uncontrolled, as necessary administrative remedies, rationing, or adjustable ceilings are not defined by law.
Most economists criticize usury laws, supporting the opinion, that such limitations as well as any other form of government restrictions in free market have exclusively negative results. In particular, the restriction on the size of interest generates deficiency of credit resources, and the prohibition of certain transactions leads to the black market and the rise in price of the forbidden. The common judgment of leading economists is that the most effective policy would be to avoid the usury ceilings altogether.
Not the most obvious measures can be the most effective. Thus, the usury ceiling does not provide adequate protection against predatory lending. The increase of transparency and formalization of financial transactions would be more logical means, as well as control if the duties of creditors and support those who took excessive loans (assistance in developing a business plan on settlement of claims and improving bankruptcy mechanism for individuals). However, the provision of these measures may require considerable administrative resources.
As early as 1982, the USA was the world’s largest creditor nation with investment surplus. In benign conditions for borrowings from abroad additional foreign resources were attracted and directed toward more investment (Cline). But later the country experienced rising merchandise deficit and billions of dollars were transferred outside the country to pay for imported goods such as automobiles, color televisions, stereo systems. Then, that money became reinvested in the U.S. in everything from governments bonds to Los Angeles real estate. Borrowed foreign capital went largely to finance US government and private consumption “rather than been put into investments that would boost American productivity” (Crutsinger). There was a sharp deterioration in the net foreign asset position going forward, as even net capital income swings into large deficit. U.S. international liabilities significantly exceeded American investments abroad. “The difference between foreign investments in this country and American holdings overseas represents huge debt burden the country is carrying” (Crutsinger), which means that “foreigners now own more in U.S. assets than Americans own abroad” (Crutsinger).
Almost thirty years of trade have made the United States the world’s largest debtor highly dependent on China and other foreign investors instead of being the world’s banker. Actually America borrows money from many foreign countries in order to finance its ongoing trade deficit. Recently “foreign equity markets outperformed the U.S. stock market and the dollar steadily depreciated. These two factors reduced the annual deterioration in America’s investment position that otherwise would have been dictated by massive U.S. trade deficits during this period” (The Washington Times).
The USA is deeply in debt now and it affects its fiscal, trade and monetary policies.
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