ECON312N
Principles of Economics
Week 1
Discussion
Trade Offs,
Opportunity Cost, and Factors of Production
Required Resources
Read/review the
following resources for this activity:
Textbook: Chapter 1, 3
Lesson
Minimum of 1 scholarly
source
Introduction
The basic economic
problem that every society faces is the fact that resources – often called the
factors of production – are not sufficient enough to satisfy everything a
society would like to have. Thomas Sowell, a renowned economist said, “The
first lesson of economics is scarcity: there is never enough of anything to
fully satisfy all those who want it.” (Sowell, 1993, p. 131). This statement
implies that to get one thing we like, we usually have to give up another thing
that we like.
Paul Samuelson, America’s
first Nobel Prize winner for economics, is credited with providing the first
clear explanation of the economic problem. He argued that in order to solve the
problem of scarcity, societies must answer three basic questions:
What to produce?
How to produce it?
For whom it should be
produced?
Firms produce goods
and services, but what they produce and the quantity produced are largely
determined by the needs and wants of consumers. Firms make decisions with
respect to how goods and services are produced. In making these decisions,
firms are faced with the decision on how to combine factors of production to
produce the goods and services. For example, one of the decisions firms are
frequently confronted with is the decision as to whether to use labor intensive
or capital intensive methods of production. Finally, decisions on who will
receive the goods or services produced will depend, to a large extent, on the
distribution of income in the economy. Individuals with the highest incomes,
for example, will have the ability to buy the most goods and services and,
therefore, may have many goods and services produced for them.
Making decisions with
respect to what, how, and for whom, requires that we trade–off one goal for
another. Trade-offs are all the options we give up when we make a choice from
competing alternatives. Opportunity cost, on the other hand, is the most valued
alternative foregone or the next best alternative to any choice we make. It is
important to note that the opportunity cost of a decision is the cost of the
choice made in addition to the value or cost of the next best alternative
foregone. Effective decision making requires a cost-benefit analysis –
comparing the additional costs of alternatives with the additional benefits –
of each of the alternatives we have to choose from.
Initial Post
Instruction
For the initial post,
address all of the following:
What important
trade-offs have you made recently? What was the opportunity cost associated
with the trade-off? To what extent did you integrate the concept of
cost-benefit analysis in the decision-making process to arrive at the most cost
effective and efficient choice? In other words, based on the information at
your disposal at the time of making the decision, what steps did you take to ensure
that you were making the absolute best decision? (Use actual examples from your
own experiences or construct hypothetical examples).
Assuming that you are
a business owner faced with questions of What to Produce? How to Produce? and
For Whom to Produce? what factors would you consider in answering these
questions? (Use actual examples from your own experiences or construct
hypothetical examples).
ECON312N
Principles of Economics
Week 2 Discussion
Demand, Supply, and
Market Equilibrium
Required Resources
Read/review the
following resources for this activity:
Textbook: Chapter 4, 5
Lesson
Minimum of 1 scholarly
source
Introduction
In a market-oriented
economy, a change in the price of a product is usually caused by changes in the
factors that affect the demand and/or the supply of the product and the price
elasticity of the demand for and the supply of the product.
Consider the market
for crude oil. As you know, changes in the price of crude oil affect just about
everything that is made, transported, eaten, and sold in the United States. For
example, a change in the price of crude oil is likely to affect the prices of
products like jet fuel, gasoline, diesel, home heating oil, just to name a few.
There is a strong correlation between the price of crude oil and the price of
gasoline. The Organization of Petroleum Exporting Countries (OPEC) is the
largest group of crude oil producing countries in the world. According to
Statistica (2018), the average annual OPEC crude oil price has risen steadily
from 2016 to 2018 as follows: $40.68 (2016), $52.51 (2017) and $67.33 (as of
July 24, 2018). With the significant improvement in the economies of the U.S
and other global economies and recent geopolitical events around the world, the
price of crude oil is likely to continue to rise in the foreseeable future.
Initial Post
Instructions
For the initial post,
address the following:
Considering the demand
and the supply sides of the crude oil market, provide a comprehensive analysis
of domestic and international factors that may be driving the increases in the
price of crude oil since 2016.
If the price of crude
oil continues to increase, how will the increases affect your buying behavior
in the short-term and in the long-term, considering that the demand for most of
the products derived from crude oil are typically inelastic?
Explain how changes in
the price of gasoline affect your buying behavior of related goods like cars,
the use of public transportation, vacations etc.?
Research shows that
the demand for gasoline is inelastic. Suppose the price of gasoline continues
to rise into the foreseeable future, as predicted. How would your purchases
change in the short-term and in the long-term? Explain.
Suppose you have
become very informed and convinced about the harmful effects of carbon
emissions on both the environment and on public health. Will this newly
acquired information change your demand for gasoline or the quantity of
gasoline demanded? Explain.
Will the increase in
the production of affordable electric cars change your demand or quantity
demanded of gasoline? Explain.
ECON312N
Principles of Economics
Week 3
Discussion
Concepts of Cost and
Prices Under Different Market Structures
Required Resources
Read/review the
following resources for this activity:
Textbook: Chapter 10,
11
Lesson
Minimum of 1 scholarly
source (other than the article noted in the instructions)
Initial Post
Instructions
For the initial post,
address the following:
List and briefly
explain the features of a Perfectly Competitive market structure. How do firms
in a Perfectly Competitive market determine price and profit-maximizing output
levels?
According to
Papanicolas, Woskie, and Jha (2018), the main drivers of the cost of healthcare
in the U.S are “labor and goods, including pharmaceuticals and devices, and
administrative costs” (Conclusions and Relevance). If you were the Chief
Financial Officer (CFO) of a large medical facility, what cost-cutting measures
would you propose to address the excessive cost of operating the facility while
maintaining quality of care?
Journal of American
Medical Association (JAMA): Special Communication: Question: Why is health care
spending in the United States so much greater than in other high-income
countries?
Findings: In 2016, the
United States spent nearly twice as much as 10 high-income countries on medical
care and performed less well on many population health outcomes. Contrary to
some explanations for high spending, social spending and health care
utilization in the United States did not differ substantially from other
high-income nations. Prices of labor and goods, including pharmaceuticals and
devices, and administrative costs appeared to be the main drivers of the
differences in spending.
Meaning: Efforts
targeting utilization alone are unlikely to reduce the growth in health care
spending in the United States; a more concerted effort to reduce prices and
administrative costs is likely needed.
ECON312N
Principles of Economics
Week 4
Discussion
DQ1 Market
Concentration of Firms and the Determination of Price and Output
Required Resources
Read/review the
following resources for this activity:
Textbook: Chapter 8,
12, 13
Lesson
Minimum of 1 scholarly
source
Introduction
Firms in the
healthcare industry do not seem to have features of a perfectly competitive
market structure and, therefore, must not be classified as such. Those firms
fall somewhere within the continuum from monopolistically competitive and
oligopoly markets to monopoly markets (specifically regional monopolies).
Initial Post
Instructions
For the initial post,
decide if you agree or disagree with the introductory statement.
If you agree with this
statement, provide at least two examples of firms in the healthcare industry
(pharmaceutical companies, medical centers, insurance companies etc.) and
identify the features the firms you selected have that make you believe that
they should be classified in one or several of the following market structures:
monopolistically competitive and oligopoly market structures; monopoly market
structures.
If you disagree with
the statement above, name at least two firms in the healthcare industry
(pharmaceutical companies, medical centers, insurance companies etc.) and
provide reasons why those firms you selected can be classified as perfectly
competitive firms.
Note: the two examples
must come from different industry groups – for example, both firms cannot be
insurance companies.
DQ2 Foreign Exchange
and the Balance of Trade
Introduction
The value of the U.S.
dollar relative to the value of other major currencies has always been an issue
of contention among foreign exchange experts and policymakers. There is a
school of thought that strongly believes that keeping the value of the U.S.
dollar high relative to other major currencies would be beneficial for the U.S.
economy. On the other hand, there are those who feel that such a policy could
be detrimental to the U.S. economy.
Initial Post
Instructions
For the initial post,
explain where you stand on the issue and provide reasons to support your
position.
If you agree with
keeping the value of the U.S. dollar high relative to other major currencies,
identify one or more reasons that you find convincing about the line of
argument presented by those opposed to a relatively high value for the dollar.
What proposals would you make to allay the concerns of those opposed to it?
If you disagree with
keeping the value of the U.S. dollar high relative to other major currencies,
identify one or more reasons that you find compelling about the line of
argument of proponents of a relatively high value for the dollar. What
proposals would you make to ease the concerns of proponents of raising the
value of the dollar?
ECON312N
Principles of Economics
Week 5
Discussion
Unemployment and
Skills Mismatch
Required Resources
Read/review the
following resources for this activity:
Textbook: Chapter 14,
15
Lesson
Introduction
In the last few years,
there has been a debate about the main causes of the high rates of unemployment
during the Great Recession (2008-2009). One line of argument is that there is a
misalignment between the skill-sets required by employers and the skill-sets of
job seekers, which continues to keep millions of Americans out of the job
market. In an article published in MIT Technical Review Business Report,
Majcher (2014) reported that “employers have 300,000 unfilled manufacturing
jobs” which she attributes to the lack of the required skills needed in the manufacturing
sector (para. 1).
Since 2010, there has
been a steady decrease in the unemployment rate. In fact, in its April 2018
Hiring and Unemployment report, the Labor Department presented the unemployment
rate as 3.9%. Despite this low rate of unemployment, there is still a significantly
large number of people who cannot find jobs. In a research conducted by
LiveCareer, it was reported that “companies claim they cannot find workers with
the right skill sets, while workers complain that their existing skills are
becoming obsolete due to technological change and automation of various job
functions. Less skilled workers simply are not fit for many jobs in the digital
age.” (LiveCareer, 2018, para. 1). The lack of well-trained and skilled
workers, some worry, may have adverse consequences on the performance of the
U.S economy as the economy grows and the productivity of labor becomes
increasingly crucial in sustaining the growth. As pointed out in their 2017
report, the Business Roundtable – an association of chief executive officers of
America’s leading companies – surveyed its members and reported that “as
America continues to recover from the worst economic recession since 1930, our
economic growth is hindered because the skills of today’s workers have not kept
up with requirements of current and future jobs” (p. 1). This state of affairs,
the report argues, is caused by the fact that “the working-age population is
growing at half the rate of the past century; labor force participation is
holding steadily below that of the past three decades and baby boomers are
retiring in record numbers” (p. 1). The report went on to state that “no amount
of automation or technological innovation can overcome these headwinds if our
nation does not take action to ensure that our labor force holds the skills
needed for today’s jobs and for the future" (p. 1).
Initial Post
Instructions
For the initial post,
address the following:
What educational and
job training policy proposals would you like to see implemented to help resolve
the apparent skills-mismatch in the U.S labor market?
ECON312N
Principles of Economics
Week 6
Discussion
Inflation in the Costs
of Education and Healthcare
Required Resources
Read/review the
following resources for this activity:
Textbook: Chapter 16
Lesson
Link (website): Bureau
of Labor Statistics (Links to an external site.)
Introduction
The Consumer Price
Index (CPI) is a measure of the average monthly change in the price for goods
and services paid by urban consumers between any two time periods. There are
three steps in calculating the CPI. First, the Cost of the CPI market basket is
calculated at base year prices. Second, the cost of the CPI market basket is
calculated at current period prices. Finally, the CPI is calculated for the
base period and the current period. The CPI is used to calculate changes in the
cost of living and changes in the value of money. To measure these changes, we
calculate the inflation rate, which is the percentage change in the price level
from one year to the other. Due to the volatility in the prices of certain
goods and services, the CPI basket (that includes all items that Americans
spend most of their incomes on) might not be a reliable measure of inflationary
and deflationary periods. To get a more accurate measure of CPI, therefore,
food and energy items are removed from the basket to get Core CPI (Consumer
Price Index for All Urban Consumers: All Items Less Food & Energy
[CPILFESL]). This measure of the cost of living is often used as a benchmark
for changes in the cost of other goods and services.
Two key components of
CPI are the costs of Education and Healthcare. These two variables constitute
what is known in Economics as Human Capital, which is a key determinant in the
productivity of labor, and hence, essential for economic growth and development.
In the last few decades, the value of these variables has risen faster than the
value of the general level of prices (CPI), which they are subsets of. According to David Wiczer (2017), “the price
of medical care has grown at an average annual rate of 5.3% while the entire
basket (headline CPI) has grown at an average annual rate of 3.5%.” He goes on
to state that “In the past 20 years, in the regime of stable inflation,
headline CPI has grown at an average annual rate of 2.2%, whereas the price level
of medical care has grown at an average annual rate of 3.6% - about 70% faster”
(para. 1).
As shown in Figure 1,
the increases in the costs associated with Healthcare and Education have
consistently exceeded the overall cost of living during the period of
observation (2000-2018). There are many consequences for the high cost of
Healthcare and Education, not least of which are skipping expensive but
necessary medical procedures, discouragement from pursuing career enhancing
educational requirements, or resorting to educational loans with the potential
for life-long financial consequences.
Graph showing the
changes in medical care, education, and all items minus food and energy
Figure 1: Increases in
the Overall Cost of Living (CPI) Vs. Increases in the Costs of Healthcare and
Education.
Initial Post
Instructions
For the initial post,
address the following:
In your opinion, what
are the implications of the high cost of Healthcare and Education on the Human
Capital needs of the U.S economy?
What policies would
you recommend to rein in these costs, or at least to slow down their rate of
increase?
ECON312N
Principles of Economics
Week 7
Discussion
The Federal Deficit
and National Debt
Required Resources
Read/review the
following resources for this activity:
Textbook: Chapter 18,
20
Lesson
Introduction
The federal debt is
symptomatic of the nation’s persistent Budget Deficits as the National Debt is
the accumulation of Budget Deficits. Deficits grew steadily during the Great
Recession when there was a significant shortfall in government revenue, which
required that the government pursue an expansionary Fiscal Policy to stimulate
the economy. The recession is now over, but the Trump administration, at least
for the first two years, pursued deficit spending. In a contribution to Forbes
magazine, Chuck Jones (2018) points out that the U.S. Federal deficit was $587
billion in Obama’s last year in office, and it grew to $666 billion in the
first year of Trump’s presidency. The Trump Administration’s Tax Reform plan
and the two-year bipartisan budget, which passed in February 2018, are
estimated, by many accounts, to cause the Federal Deficit to exceed 1 trillion
dollars by 2020 (Jones, 2018). The implication of this growing deficit is a
further increase in the National Debt.
From 1965 to through
2018, there has been a persistent increase in the Federal Debt. This trend
became more pronounced during (and in the aftermath of) the recession of
2008-2009. As shown on Figure 1, in September of 2017, for example, the
National Debt rose to 20.24 trillion U.S. dollars. This disturbing increase in
the Federal Debt is likely to increase the per capita debt burden for each
American citizen. According to Statistica (2018), if the debt owed in 2016 were
distributed to every American citizen, the amount owed per capita would be
60,470 U.S. dollars.
Graph showing the
total public debt increasing from 1970 to 2017 to 20.24 trillion U.S. dollars.
Figure 1: Federal
Debt: Total Public Debt
As the U.S. Federal
Debt increased over the years, so did the Federal Debt as a percentage of GDP.
From 1965 to 2018, there has been a general increase in the Federal Debt as a
percentage of GDP. Remarkably, this increase was very pronounced during (and in
the aftermath) of the recession of 2008-2009, after a brief decline from 1995
to 2002. As shown on Figure 2, in the fourth quarter of 2017, the Debt to GDP
ratio was 104%. The ratio compares what the U.S. owes to what it produces, and
it serves as an indication of the U.S.’s ability to pay its debt. This number
can also be interpreted as the number of years it would take for the U.S to pay
back its debt if the nation’s GDP is used entirely to pay back its debt
(Statistica, 2018).
Graph showing the
total public debt as a percent of the gross domestic product. The Debt to GDP
ratio was 104% in the fourth quarter of 2017.
Figure 2: Federal
Debt: Total Public Debt as a Percent of GDP
Deficit hawks in
Congress and conservative activists who railed against President Barack Obama's
spending plans called the GOP debt explosion "dangerous"
“immoral" and "a betrayal." American Conservative Union chairman
Matt Schlapp warned the Republican-controlled Congress not to underestimate the
impact of responsible spending for voters. In fact, President Trump, whose aides
participated in the negotiations and the crafting of the Budget, had a little
bit of buyer’s remorse when the Budget was presented to him. In a morning
tweet, he threatened to veto the Budget, but later signed it. The Washington
Post (2018) summed it up this way “Just hours after threatening a veto,
President Trump said Friday afternoon that he had signed a ‘ridiculous’ $1.3
trillion spending bill passed by Congress early Friday, averting a Government
Shutdown” (para. 1).
The spending situation
has become so alarming that there are renewed calls - from both sides of the
political aisle - for a Balanced Budget Amendment to the constitution based on
the premise that unless restrained by constitutional rules, legislators will
run budget deficits and spend excessively, especially if this would help their
reelection efforts. Another basis of this argument is that politicians do not
like to levy taxes on constituents, but like to spend on projects favored by
their constituents or big political donors. This situation, they argue, creates
an incentive structure that makes budget deficits almost inevitable.
Initial Post
Instructions
For the initial post,
address the following:
Do you agree that the
constitution should be amended to include a Balanced Budget requirement? Why or
why not?
If you agree with a
constitutional amendment, can you identify one reason why some people may be
opposed to it? What proposals would you make to allay the concerns of those
people?
If you disagree with a
constitutional amendment, can you identify a line of argument - made by the
proponents of the constitutional amendment - that you find compelling? What do
you find persuasive about that line of argument?
ECON312N
Principles of Economics
Week 8
Discussion
Fiscal Policy
Simulation Exercise
Resources
Read/review the
following resources for this activity:
Textbook: all chapters
Lesson (This lesson
provides an overview of The Fiscal Ship. Make sure to review before beginning
this activity.)
Link (website): The
Fiscal Ship (Links to an external site.)
Introduction
Data analysis is an
indispensable part of the study of Economics, and plays a significant role in
the formulation of economic theory and policy. The Fiscal Ship game will be
based on simulating Fiscal Policies to set the U.S budget on a sustainable
path. This exercise also reinforces concepts taught in the course.
It is imperative that
you read the Instructions provided to help you successfully play this game.
Once you have familiarized yourself with the features of the simulation tool,
click on the link for The Fiscal Ship to launch the game. Select New Game.
Then, conduct your desired policy simulations.
Initial Post
Instructions
Answer all of the
following questions after you attempt to meet your target goal. If you have the desire and the time, you can
play the game more than once in order to meet your target goal.
Specify where in the
spectrum of political ideology you would consider yourself to be? Centrist,
Progressive or Conservative.
State the Governing
Goals you chose and provide reasons why you chose those goals.
Specify which of your
policy choices had the largest impact on your fiscal target, and which barely
moved the line. Were you surprised by the magnitude of any policy choices?
State whether or not
the game made you reevaluate your initial governing goals?
Propose ways that you
think the federal government should set the budget on a sustainable course in
the next 25 years?
Remember to attach a
screenshot of your budget solutions to your discussion post.
