Unit 3a: Exercise 3-3 - Effects of Change to Demand

There can be many causes for demand to change such as a change in a person's preferences, an increase or decrease in the income of consumers, expectations of the future and the price of related products.

I am definitely guilty of adjusting my demand for products based on upcoming raises (expectations of the future). When I know I'm going to have more money in the bank I will be more willing and able to buy items that I wouldn't normally purchase. For example, I might buy a $100 bottle of champagne to celebrate my raise, when usually I would opt for the $10 bottle of Baby Duck.

I was watching Conan the other night and he had an author on his show to promote his new book. As I was watching it I remember thinking "I bet the sales of this guy's book go through the roof because of this show". I even put it on my birthday wish list! The graph below depicts an increase in demand because of a change in preference (the viewers of the show, realizing they suddenly longed for this book). We are of course pretending that your local bookstore can increase the price of books and the quantity supplied quite easily.

Unit 3a: Exercise 3-2 - Market Equilibrium

Unit 2: Exercise 2-2 - Games about the Economy and Marketplace

The game I selected to play was Diner City. It was pretty non-complex, however, it definitely took me awhile to determine a good balance between providing fast service and purchasing products that would increase revenue and restaurant capacity.

Playing the game made me aware of my buying behavior resulting from product pricing. I was conservative in purchasing items that would benefit my business because I wanted to retain a large bank account, however, I learned that I could make wise purchase decisions and weigh my options while still keeping sufficient funds in the bank to pay my bills. When money became scarce I would cut back on purchasing products, but I would increase the speed and cleanliness of my store to attract customers (less costly) and once my bank account grew enough I would then invest in the products that would greatly increase my revenue and capacity.

If I were to give tips to other players I would suggest that they invest quickly in in the lower priced products to increase revenue and restaurant capacity, while maintaining a fast service. Always ensure there are enough funds in the bank to pay for cleaning, and skip a round or two of purchasing new products for the store if funds are low.

And... while I didn't find it entirely necessary to purchase a security system in the beginning, after the third time getting robbed I decided to invest.

Good luck! It was fun.

Unit 1: Exercise 1-2 - Possibility Curve

Figure 1.1 and 1.2 in Chapter 1 in the textbook represent the production possibility curve, which is a graphical representation of the combinations of maximum output that can be produced, in this case cars and wheat.

Three assumptions behind the production possibilities curve are: full employment, the use of the best technology, and production efficiency.

Figure 1.3 represents the effect that technology has on the production possibilities curve, most commonly an increase in production of one or more goods, and Figure 1.4 shows different growth rates for two economies based on their choice to emphasize the production of capital goods or consumer goods.

The production possibility curves demonstrate that creating more of one product can significantly reduce the production of another and subsequently create scarcity.  When more of one item is produced, you are sacrificing the potential of another and therefore generating an opportunity cost to generate more of one product. Society will choose to produce more of the product in greater demand and must bear the cost and sacrifice associated with its production.

A significant choice that I have to make based on scarcity of income is to be a conscious consumer when it comes to buying no name brand items at the grocery store instead of the brand name items that I have used growing up in a middle-class household. Working in contrast to this would be my scarcity of time, which means that I am buying more often for convenience than for price, i.e. when I'm eating on the run I will pick up something at 7/11 instead of a grocery store which has lower priced groceries.

The opportunity cost of going back to school as opposed to not going to school at all is lower than if I had not gone back. In going back to school I will eventually make a higher income and that decision will be worth more, thus have a lower opportunity cost.