Post 15

Leading indicators are things that change before the economy does. For example:

1.     Average weekly hours of manufacturing

2.     Average weekly initial claims for unemployment insurance

3.     Stock prices

Lagging indicators are the opposite of leading indicators; they change after the economy does. For example:

1.     Unemployment

2.     The value of outstanding commercial and industrial loans

3.     The change in labor cost per unit of labor output

Coincident indicators occur directly with the economy. For example:

1.     Income

2.     GDP

3.     Manufacturing and trade sales

Leading, lagging, and coincident indicators are all indicators of economic change. There are many examples of each indicator, but I have picked what I think are the top three.

Post 14

After Mr. Campbell showed us the "My Humps" video and the "Business Cycle Rap" video, I better understood the business cycle, which really isn't a cycle at all. Rather, the business cycle is it consists of recurring fluctuations in economic activity consisting of recession and recovery and growth and decline. Both of the videos were accurate and informative in describing the business cycle. The “My Humps” video was very entertaining and informative. The creators of the video included many definitions and an accurate description of what the business cycles really is. The Qwiki video, however was the most helpful because I could really understand what they were explaining. The attached website was also very helpful to my understanding the business cycle.
 The Business Cycle

Post 13

What I learned from taking three online quizzes.

1.       National income accounting provides information about a nation's economic activities.

2.       To actually compute GDP, economists use the output-expenditure model. The model adds the output produced by the four sectors of the product market.

3.       Personal consumption expenditures include durable goods, nondurable goods, and services.

4.       Economists divide gross investment into two subcategories: fixed investment and inventory investment.

5.       Government transfer payments are not included when calculating government purchases. Transfer payments include Social Security payments and various types of government aid.

6.       To measure changes in prices over time, economists use price indexes.

7.       Barter transactions, housework, and do-it-yourself home repairs are examples of nonmarket activities. Transactions that do not involve money and are not recorded are nonmarket activities.

8.       To calculate national income, economists subtract subsidies and indirect taxes from net national product.

9.       The business cycle is divided into four stages.

10.   The contraction phase is a period of business slowdown.

11.   Many economists agree that the level of business investment, availability of money and credit, expectations about future economic activity, and external factors affect the business cycle.

12.   Coincident indicators change as the economy moves from one phase of the business cycle to another.

13.   Lagging indicators help economists predict the duration of economic upturns or downturns.

14.   Economic indicators are collected by the U.S. Department of Commerce.

15.   Capital deepening is an increase in the amount of capital goods available per worker.

Post 12

Mr. Campbell asked us to write a letter to the editor explaining why GDP is a faulty indicator.

Dear Editor,

“Gross domestic product, the leading economic measurement, is outdated and misleading.” CNN agrees with my opinion that the USA should adopt a new economic gauge. GDP is the sum of products and services bought and sold, with no distinctions between transactions that add to well-being, and those that diminish it. Instead of separating costs from benefits, and productive activities from destructive ones, the GDP assumes that every monetary transaction adds to well-being. This is why the GDP is a faulty indicator of the economy. The USA should consider using a method that takes depreciation into account, like NNP or NDP.

Sincerely,

Tara

Post 11

Formula for calculating GDP.

Step One: Calculate consumer spending

Step Two: Calculate investments

Step Three: Calculate government purchases

Step Four: Calculate net exports by subtracting imports from exports.

Step Five: Add them all together

M= C + I + G + NX (Where M equals both GDP and the national income, C equals consumer spending, I equals investments, G equals government purchases, and NX equals net exports.)

RULES:

1)     Must be made in your country

2)     Must be a final good or service

3)     Must be produced within country’s border

Post 10

After reading a section from my bood on macroeconomics, Mr. Campbell asked us to respond with our thoughts.

Macroeconomics is the study of the entire economy in terms of the total amount of goods and services produced, total income earned, the level of employment of productive resources, and the general behavior of prices. So when we learn about macroeconomics, we will learn about economics on a large scale. The study of our country’s economy interests me, so as I look forward to that as we begin to study macroeconomics. I hope to learn about 1) Why the economy has bad times and good times, 2) how much influence the government has over the economy, and 3) what makes inflation occur.

Post 9

Arthur C Clarke once said, “Any sufficiently advanced technology is indistinguishable from magic.” Clarke’s opinion on technology is echoed around the world as humans delve further into the information age. Technology is beautiful; it saves lives, allows scientists to explore outer space, helps explain the world, allows for easier communication, helps the environment humans have so carelessly neglected, and makes information more accessible.  From the Mesopotamian invention of the wheel to the modern inventions of computers, to inventions that save lives like vaccines, to environmentally sound inventions like hybrid cars, humans have always been innovators, and this innovation has given the world the gift of technology.

Malcolm Gladwell

Malcolm Gladwell spoke at a conference in 2006 about differentiation of products. He spoke of a man, Howard Moskowitz, who asserted the notion that food companies need not find the “perfect Pepsi” but the “perfect Pepsis.” Moskowitz meant that the companies should not search for the perfect Pepsi that will satisfy everyone a little bit; instead, companies should create a range of products to satisfy a larger amount of customers. Not only would a larger amount of people be pleased, they would be more pleased with a Pepsi catered to them, instead of a Pepsi catered to the entire population. However, no one believed Moskowitz’s ideas until finally Prego hired him. This man revolutionized the spaghetti sauce industry. Before him, there was only one type of spaghetti sauce. After being hired by Prego, then Ragu, these spaghetti sauce companies decided to go for variety. Currently Ragu has 36 varieties of spaghetti sauce.

            Mr. Campbell asked us to relate this video to what we’re learning in economics. Companies other than spaghetti sauce in this same way in order to try to win consumers. Companies selling basically the same product try to distinguish themselves from other producers. Companies use a tool called product differentiation to make their product more appealing. When Prego wanted to distinguish themselves from Ragu, they hired Moskowitz to make their product more appealing to the customers. Furthermore, if the two products have very similar prices, consumers have to decide based solely on the product, which is why companies use product differentiation.

            The monopolistic competition market requires that companies compete over characteristics other than price. In a monopolistic competition, producers have very similar products, just as in the spaghetti sauce industry. Companies must, therefore, compete over something other than price. Producers may make their product seem better, easier to use, more environmentally friendly, etc. Product differentiation allows the consumer to better make a decision between similar products. This method of product differentiation is very important in the monopolistic competition market.

Antitrust Legislation

Mr. Campbell asked us to create a game involving certain Antitrust laws to help us learn them. Tara's Antitrust Legislation Flash Cards

Types of Monopolies

Mr. Campbell asked us to give a real or make believe example of each type of monopoly.

Natural Monopoly- Distribution of water/gas.

Gov't Monopoly- When the US was being created, mail was a government run company.

Technological Monopoly- Microsoft Windows

Geographical Monopoly- One train station in a small town.

OPEC Cartel

OPEC is a global organization dedicated to stability in and shared control of the petroleum markets. OPEC stands for Organization of the Petroleum Exporting Countries and is a well-known cartel in modern society. Twelve countries are members of OPEC. In order to be a member, the country must be a big exporter of petroleum. These countries work together to keep competition out of the oil industry in order to keep the prices high. Everyone who pays for gas would benefit from this cartel being broken up because with the countries no longer working together to keep the price high, they would be forced to compete for buyers, which would drive the price for oil down as the countries try to undercut each other.

Eight Things I Learned

What I learned from taking 3 quizzes:

1.      In perfect competition, the many buyers and sellers must act independently. Otherwise, a group of buyers or sellers acting together could influence prices.

2.      Under perfect competition, sellers offer identical products; this way buyers make purchasing decisions primarily on price.

3.      If there are any barriers to entry in a market, sellers cannot compete easily and fully. Barriers to entry are factors that make it difficult for sellers to enter or exit a market.

4.      The main goal of product differentiation and nonprice competition is to increase profits. If a seller can increase demand for its product, the market price may increase, resulting in greater profits.

5.      Oligopoly is the most common noncompetitive market in the United States. An oligopoly is a market structure in which a few large sellers control most of the production of a good or service

6.      Interdependent Pricing- being responsive to or dependent on the pricing actions of competitors

7.      Under price leadership one of the largest sellers takes the lead by setting a price.

8.      A cartel is a group of companies openly organized to set prices. Cartels are illegal in the US.

Five Things I Purchased

Ok so the first thing I bought on black Friday was (1) gas; the thing teens hate paying for and what I spend all my money on. Anyway, I think gas would be in the oligopoly category. There aren’t many companies in the gas industry. The entry into the market is not very east compared to other industries, so I believe gas stations would be in the oligopoly category. The next items I bought were (2) clothes. Unlike gas, clothes are in the monopolistic competition category. There are so many companies in the clothes industry because people like variety, and people have different styles. For example, I bought clothes at Gap (everything was ½ off on black Friday), H&M, Urban Outfitters, American Eagle, Abercrombie and Fitch, Hollister, and Express I didn’t even visit all the sores in the mall. Next, I bought (3) Uggs! I have wanted a new pair for a long time and even though they weren’t on sale (they never go on sale) I bought them. They’re so cute and I didn’t have any mini Uggs before this. Anyway, Uggs are in the monopolistic competition because there are tons of companies that sell boots. Just to name a few there’s Bear Paw, Old Friend, Emu, and a bunch of stores like Old Navy, Famous Footwear, and DSW sell the boots with a very similar design. However, Uggs many people are loyal to the Ugg brand because they have high quality and long-lasting shoes. Ugg almost has a monopoly on the classic short style of sheepskin fur boots. If one were to walk through the halls of my school you see Uggs everywhere you look, and hardly any of the other brands mentioned above. After the mall, my sister and I met my mom at a car dealership to buy a (4) new car for my dad for Christmas. Car dealers would be an example of an oligopoly. There are few dealerships and it is not easy to gain entry into the market, which is why they would be an oligopoly. Finally after a long day of shopping, we stopped at a drink cart and I bought a (5) Pepsi. Pepsi is a monopolistic competition because if I thought the price was too high, I could have easily purchased a Coke, Sprite, Gatorade, or any other drink. Entry into the drink market is pretty easy, the companies do a fair amount of advertising, and there are many companies in the business.

Intro

This one's for you Mr. Campbell. Haha, anyway my name is Tara and everything I would write in this intro is already in my "about me" on my blog.

Visual comparing four market structures.