Introducing myself in MICRO economics

[randpaul2016]

Its just an easy assignment for class its through the forums for my class. I dont want to mention Ron Paul, maybe incorporate the FED? Just a few sentences...Hello my name is _____ blah blah blah

Someone wrote about health care, another on supply and demand, and one said an important issue if so individuals to be able to provide for their households.

Help me sound smart guys

Say a few words about who you are and what you think is the most important issue in microeconomics today (and how it affects you) and respond to at least one other student!
Microeconomic Issues: Supply and Demand, taxation, consumer choice, monopoly, concentration (for instance in the banking industry), role of government (everywhere from consumer finance to environmental regulation), international trade.

[Danan]

Its just an easy assignment for class its through the forums for my class. I dont want to mention Ron Paul, maybe incorporate the FED? Just a few sentences...Hello my name is _____ blah blah blah

Someone wrote about health care, another on supply and demand, and one said an important issue if so individuals to be able to provide for their households.

Help me sound smart guys

Say a few words about who you are and what you think is the most important issue in microeconomics today (and how it affects you) and respond to at least one other student!
Microeconomic Issues: Supply and Demand, taxation, consumer choice, monopoly, concentration (for instance in the banking industry), role of government (everywhere from consumer finance to environmental regulation), international trade.

The Fed is really more a macroeconomic topic (I mean you could talk about it's microfoundations but I guess that's a little bit too deep).

The most important foundation of microeconomics is how the rational self-interest of all actors in an economy, through the channels of supply and demand, generate an equilibrium, a market clearing price with a market clearing quantity. You won't be able to improve on that by using force. You could explain why price controls are a bad thing, because setting the price lower than the equilibrium will discourage suppliers to sell that good, while giving costumers an additional incentive to buy - thus creating a shortage. If you want to shock your teacher praise "price gouging", like Ron Paul (http://www.youtube.com/watch?feature...6pLMmrs#t=107s, http://www.examiner.com/article/ron-...-gas-shortages)

They probably want you to talk about how in a free market monopolies and oligopolies are going to cause inefficiencies. That's obviously nonsense and in practice almost all monopolies are creatures of government.

In environmental issues they probably want you to explain negative externalities. For instance a paper manufacturer who pollutes a river and downstream is a fisherman. So he is imposing a cost the fisherman but doesn't have to pay for it himself and has thus no incentive not to pollute. According to what I suspect your teacher to believe that should be resolved by governmental regulation. Be sure to mention that the best solution for those cases would be to asign property rights of the river. If the paper manufacturer owns the right to pollute the fisherman has to offer him money to stop polluting until he can make a living fishing again. If the fisherman owns the river, he can make the polluter stop unless he is willing to pay compensation per unit of pollutant. In the end they once again reach a "socially optimal" level of pollution. (That's "Coase theorem" if you want to sound smart.)

In regards to international trade you should mention how every two countries always benefit from free trade with eachother by increasing specialization, because every country has its own "comperative advantage" (http://en.wikipedia.org/wiki/Comparative_advantage).

[VoluntaryAmerican]

This would probably get a better response in the economics section.

[randpaul2016]

In regards to international trade you should mention how every two countries always benefit from free trade with eachother by increasing specialization, because every country has its own "comperative advantage" (http://en.wikipedia.org/wiki/Comparative_advantage).

whoa say this again because he says benefits>(or equal)costs=yes. and in international trade I think he said 1 always loses.

[randpaul2016]

As far as an issue that we face today that should be addressed, is having universal coverage health insurance for individuals in our society. This has been one of the key issues surrouding healthcare reform in the United States.

oh man should I respond to this girl that posted this?

[Kregisen]

whoa say this again because he says benefits>(or equal)costs=yes. and in international trade I think he said 1 always loses.

You must have misunderstood your professor. International trade is always good - if one side was losing they wouldn't trade. It increases wealth because both sides value eachother's goods more than their own.

If I give you $5 for a sandwich, I am better off because I value the sandwich more than $5, and you as the sandwich shop is better off because you value $5 more than your sandwich. The same is true for all voluntary trade, regardless of whether or not it is international trade.

In terms of international trade, there will be winners and losers within each country. For example, if until today the US never allowed any imports of foreign cards, then suddenly allowed imports of foreign cars, America as a whole will become MUCH better off, but many people in the auto industry would lose their jobs because we had an artificially too large of an auto industry to begin with (too much ineffiency).

I could type about this topic for a few hours, and we have had countless threads on these forums on this topic with myself and some other people who have educated themselves on this topic, vs some members on these forums who have not educated themselves on free trade and think tariffs and government restrictions allow for more prosperity - despite what all of the evidence and logic suggest. But in order for there to be above average IQ people in this world, there have to be below average IQ people in this world....and there is no IQ test in order to register on these forums. I digress...

[Danan]

whoa say this again because he says benefits>(or equal)costs=yes. and in international trade I think he said 1 always loses.

Say people in the United States are able to create 10 computers per hour and 20 pounds of food per hour. People in Malaysia can produce 2 computers per hour and 10 pounds of food per hour. Let's further assume that there are 1,000 maximum work hours in the US and 100 in Malaysia.

So on the first glance, it seems like Malaysia wouldn't benefit at all, having no advantage in either industry, right? Well, wrong! They may not have a absolute advantage, but they do have a comparative advantage. That is the productivity-ratio between two industries within the same country. To produce 10 pounds of food Malaysia has to give up two computers, while the US would have to give up 5 computers for the same amount of food. This also tells us the local prices without free trade. In the US one computer costs two pounds of food, while in Malaysia one computer costs five pounds of food.

Let's say Malaysia used its 100 hours to produce 100 computers (2*50) and 500 pounds of food (10*50), while the US produced 5,000 computers (10*500) and 10,000 pounds of food (20*500) before free trade was able. Now policy changes, goods can freely be traded between the US and Malaysia. How are Malaysians going to react to this? Well, they know that if they produce food, they get 10 pounds per hour which they can trade locally against 2 computers and vice versa. However if they produce food and sell it to Americans they can get 5 computers for 10 pounds of food. That tells us that the best strategy for Malaysians is to only produce food and export everything they don't personally need to Americans. Lets say they continue to keep 500 pounds of food for themselves but now instead of producing 100 computers, they produce an additional 500 pounds of food and sell it to America for a total of 250 computers.

If the US wants to keep the same number of computers to themselves they would have to take 25 hours out of food production to offset the 250 (25*10) exported computers. That would cost the US exactly 500 pounds of food (25*20). So in this scenario they wouldn't gain or lose from free trade (which is not representative for all cases).

How did total output change? Before we had 5,100 total computers (5,000+100) and 10,500 pounds of food (10,000+500). Now total output is 5,250 computers (5,000+250) and the same amount of food, 10,500 (9,500+1,000).

So free trade increased total output, although worktime or production methods didn't change at all. And this is always the case.

[KingNothing]

The Fed is really more a macroeconomic topic (I mean you could talk about it's microfoundations but I guess that's a little bit too deep).

The most important foundation of microeconomics is how the rational self-interest of all actors in an economy, through the channels of supply and demand, generate an equilibrium, a market clearing price with a market clearing quantity. You won't be able to improve on that by using force. You could explain why price controls are a bad thing, because setting the price lower than the equilibrium will discourage suppliers to sell that good, while giving costumers an additional incentive to buy - thus creating a shortage. If you want to shock your teacher praise "price gouging", like Ron Paul (http://www.youtube.com/watch?feature...6pLMmrs#t=107s, http://www.examiner.com/article/ron-...-gas-shortages)

They probably want you to talk about how in a free market monopolies and oligopolies are going to cause inefficiencies. That's obviously nonsense and in practice almost all monopolies are creatures of government.

In environmental issues they probably want you to explain negative externalities. For instance a paper manufacturer who pollutes a river and downstream is a fisherman. So he is imposing a cost the fisherman but doesn't have to pay for it himself and has thus no incentive not to pollute. According to what I suspect your teacher to believe that should be resolved by governmental regulation. Be sure to mention that the best solution for those cases would be to asign property rights of the river. If the paper manufacturer owns the right to pollute the fisherman has to offer him money to stop polluting until he can make a living fishing again. If the fisherman owns the river, he can make the polluter stop unless he is willing to pay compensation per unit of pollutant. In the end they once again reach a "socially optimal" level of pollution. (That's "Coase theorem" if you want to sound smart.)

In regards to international trade you should mention how every two countries always benefit from free trade with eachother by increasing specialization, because every country has its own "comperative advantage" (http://en.wikipedia.org/wiki/Comparative_advantage).

This is a great post -- Danan kept it to topics you'll discuss in microeconomics.

[Aurave]

randpaul 2016 around wheres do you go to school?

[rpwi]

In regards to international trade you should mention how every two countries always benefit from free trade with eachother by increasing specialization, because every country has its own "comperative advantage" .

This is not necessarily true. Take two islands. Island A is grossly over-populated and resources are scarce, while labor plentiful. Island B has a stable amount of resources and a sable population.

If trade opens up, then island B will "import" the over-population issues from island A. Yes, labor will become cheaper, but for those that don't own productive resources, the increase resource cost will more than overshadow the cheaper cost of labor.

Another example...imagine if you had two grazing pens of deer...one was over-crowded and one was roomy. If you merged the pens, this would help the overcrowded pen, but would hurt the less crowded one.

As for the initial questions being more macro then micro oriented, I totally agree.

As for suggestions for the OP, game theory is a real micro topic and a lot of fun. My choice would be to talk about how in many game theory scenarios, the individuals will not interact which other, but create a group dynamic and relate with that. Basically how collusion/democracy can solve games theory or at least apply stability in which non is assumed possible.

The flaws in supply and demand are fun. Supply and demand assumes infinite supply...yet things like land can not be increased so totally destroy supply and demand. Market externalities, imperfect information, privileges (patents/occupational licensing) also create zero-sum scenarios that contradict supply and demand. Negative externalities are fun too.

Economies of scale is a fascinating subject IMO that if fully explored and explained could win the Nobel Prize in Economics IMO. This is because the increment of association can only be split upon zero-sum mechanics, so in such cases supply and demand doesn't work as it should. Obtaining the share of the increment of association falls to bargaining (micro-economics never talks about bargaining but it should). The key with bargaining is your ability to threaten to withdraw yourself your group from the larger group (strikes, firing workers, cutting off a supplier/customer). It can be a big game of chicken really...and unions/mergers help increase your bargaining power.

If you really want to be cheeky, talk about the inherent contradiction of supply and demand. Equilibrium price is determine by trade, yet trade needs price to determine the equilibrium. Micro is mostly about supply and demand, so even though the contradiction is true and S&P is flawed...this might get you intro trouble. I can go into more detail if you are interested.

FRB might be applicable in your example and it would be always fun to teach a economics teacher of how this really works.

Taking indirect jabs at Keynesian without naming it would be a suggestion. Talk about a government program to make mud pies to create jobs and explain how stupid that would be. Or explain how smashing windows creates a lot of jobs (window repairmen, people who receive money from the repairmen, etc...). Then talk about how we need to destroy things and how hurricanes are so wonderful. Then end this by saying this is how our politicians and media think and it is all wrong.

Lastly, a subject about what determines job placement in careers that are consistently overpaid (like government jobs). If effort/skill isn't determining compensation and hiring...what is? (most likely politics and pseudo-structures/rules created to benefit one class of job seekers over another)

Hope you have fun with the course Micro can be a great subject, but unfortunately most teachers aren't that great and just make you do non-stop supply&demand graphs and "math problems". This is not real micro-economics. Concepts are more important than calculating supply and demand equations that have no baring on reality and nobody does in real life.