Chapter 5

Chapter five was relatively difficult but very doable. It was once again slightly more difficult than the last chapter but probably easier than the next one and I assume the pattern will continue. Chapter five was a progression meaning that it built on the material learned from chapter four and it brought math into the equation which I've been excited about for a while now. The main topics discussed were the elasticity of demand and supply curve as well as the different kinds of curves that exist. Elasticity generally means how flexible something is and that applies to economics. In economics it is how much either of the curves shift or react when there is some kind of change. If there is a lot of change, it is known as elastic and when there is barely any change it is considered inelastic. The effect of the changes in price was exemplified through necessities and luxuries by the book. The book also showed how to calculate the elasticity of a curve with percent changes and that wasn't difficult to understand. This makes me wonder how the elasticity factor of a graph that we learned about in pre-calculus last year comes into this. Availability, time, and income are also three major factors that effect the elasticity and they generally determine the value. All in all, it wasn't a difficult chapter but starts getting into the nitty gritty bits of econ.

Article Review

The article was a big jump from the simplicity of the first four chapters we've read from the book but after a few days of thinking it over and rereading and researching, I've found that the general gist of the article was as follows, Keynesian economics is a failure. They have led to nothing positive in the long-run and are only stalling an inevitable crash of a bubble they have created themselves. Essentially, wall street has been taking free money from the government for the past 80 months. This has lead to a creation of a bubble around wall street, which like the internet bubble and the housing bubble, will eventually crash. Large corporations have also been loaned money from the government at a very low interest rate and this money was supposed to be loaned out to the general public in hopes of helping to alleviate some of the financial struggles they may face and and in turn promoting spending overall. However these corporations have actually been keeping the money by charging really high interest rates themselves. The author argues that these economies are nothing but bad news and it is the low interest rates that are causing most of the issues and the buildup that will lead to a crash. The author is also very against government interference in most cases. He believes that the government hasn't positively affected wall street and that most policies and actions, like inflation by printing more money, have only perpetuated the bubble once more.

Chapter 4

Supply and Demand were the two main topics of the chapter. There is a direct correlation between them, they have an inverse relationship. Supply is controlled by the seller and demand is controlled by the buyer and there is rarely a single entity that has the power to drastically change either one if there is healthy competition. When there is one entity, it's known as a market failure and the government usually steps in. Whenever there is a change in demand or supply at EVERY price, not just a single price or a few, then it's known as a curve shift. This is an important distinction since in order to change the demand or supply at every point it must be a drastic change, whether that comes as a result of a public shift in opinion or government influence. The main example used was ice cream in a small town. In any given town there will be a number of ice cream shops and people that buy ice cream from those shops. Price is the main motivator when people decide whether or not they want to buy something and the quantity that they want to buy and the equilibrium, or where the supply and demand curve meet, is where the price is located. It is at the equilibrium that the buyer's value of a product and a seller's cost meet. That is why price is so important and such a valuable indicator of natural economics and trade and why government interference tends to hinder trade rather than help it.

Journal 1

    Chapter 3 wasn't really difficult to understand. I liked it since the next few chapters will probably be harder. The chapter focused on the different aspects of a trade and what both sides can bring to the table. The main analogy used was that of a farmer and a rancher. Both of these people produced meat and corn but at different rates. By having each of them produce only one of these and not both and trade with each other, everyone was able to have more than what they were originally supposed to have. The chapter explains that this is because of their comparative advantage, or who essentially has less opportunity cost, or all of the other possible options when making a choice, when producing one product or making a choice, and much less their absolute advantage, or who was able to produce more of both every product. By specializing, the farmer and the rancher were able to consume more than what they would have if they tried to manage both farming and herding on their own. This analogy was meant to represent any market in Capitalism. By having everyone within a market or even an economy specialize and do what they are best at and then trade with each other, everyone is able to receive a bigger portion of the bigger overall pie, all thanks to the different opportunity costs of people. This chapter illustrates this point very well and in an easy to understand way.