Chapter 6

Chapter 6 talks about how the government controls price and taxes through their policies. These can sometimes have unintended outcomes. A price ceiling is the maximum, by law, on the price of a good. A price floor is the minimum, by law, on the price of a good. A binding price ceiling causes a shortage and the sellers must disperse small amounts of the good to a large number of buyers. A binding price floor causes a surplus. Taxes discourage market activity in that when a good is taxed, the quantity sold is smaller in the new equilibrium. Buyers and sellers both bear the burden of taxes. However, the tax burden is heavier on the side that is less elastic. When a good is taxed, the side with fewer alternative choices has to bear the burden of the tax. An unintended outcome is that the distribution of tax burden is not equal, fifty-fifty, like the policy makers initially wanted. This chapter showed how the laws of supply and demand along with the government laws interacted with each other. Their effects are still greatly debated among policymakers today. I thought this chapter was pretty understandable but I still have a few questions. I would like more of an explanation of the difference between how taxes on sellers affect market outcomes versus how taxes on buyers affect market outcomes. Other than that, I feel this chapter had useful graphs and examples to explain the topics, like how the minimum wage affects teenage labor.

Article Review 9/26

Ben Hunt's article describes how crisis actors are people hired from the government to go on TV and pretend to be victims in a staged event, such as a fake terrorist attack, to influence other people to support government action. Hunt warns readers that such lies inevitably influence our opinions. Since humans have self-awareness, we can resist these lies using our own knowledge. We do not have to immediately believe in the propaganda delivered by governments. My favorite quote/passage that describes Hunt's theory best is the Hermann Goring interview by Gustave Gilbert (1947) describing "poor slobs in the farm". This passage states that people are so willing to go fight for their country because the country makes the people feel endangered by the enemy and sparks a sense of patriotism in them. This clearly showed me how propaganda by the government controlled its people and influenced their opinions. Without using self-awareness, people could be controlled by the government and its lies. The crisis actors are the people that don't use their self-awareness and let the government control them and their decisions. They act AS their leader's words are the absolute truth, meanwhile people usually act AS IF their leader's words are true. We must prevent ourselves from going from AS IF to AS, from not using our self-awareness. I thought this article was interesting to read. I thought it was cleaver to use quoted evidence, from places like movies, to support the views stated in this article. That made the article easier to understand. 

Chapter 5

Chapter 5 discusses how buyers and sellers react to changes in economic variables, which is the concept of elasticity. The price elasticity of demand is calculated by the percent change in quantity demanded divided by the percent change in price. If the elasticity is less than one, the demand is known as inelastic. If the elasticity is greater than one, the demand is known as elastic. The determinants of price elasticity of demand include the availability of close substitutes, necessities vs. luxuries, time horizon, and markets (narrowly vs. broadly defined).  The cross-price elasticity of demand measures how the quantity demanded of one item reacts to the price of another item. Total revenue is the amount paid for a good and equals the quantity sold multiplied by the price. In inelastic demand curves, total revenue rises as the price rises, which shows a positive relationship. In elastic demand curves, total revenues falls as the price rises, which shows a negative relationship. The price elasticity of supply is calculated by the percent change in quantity supplied divided by the percent change in price. The equations for price elasticity of demand and price elasticity of supply are extremely similar. The determinants of the price elasticity of supply include the flexibility of sellers and the time horizon. When the elasticity is equal to zero, the supply is perfectly inelastic and is shown on the graph as a vertical line. When the elasticity is infinite, the supply is perfectly elastic and is a horizontal line. 

Chapter 4

The relationship between supply and demand is the basis of Chapter 4. In a competitive market, there are so many buyers and sellers that each of them has no impact on the market price. The law of demand shows that as prices of a good falls, the quantity of a good rises. Basically, if the prices for apples falls, people will buy and demand more apples. This is seen as a negative relation, and the demand curve is shown in a downward curve. In contrast, the law of supply states that as the prices of a good rises, the quantity of a good rises. Therefore, when the price of apples rise, then the amount of apples produced rises. This is seen as a positive relation, and the supply curve shifts upward. The intersection of the supply and demand curves is known as equilibrium, which means that there is a balance in the price and quantity of a product. The area above equilibrium on the graph means there is a surplus in items made than are demanded. The area below equilibrium on the graph means there is a shortage, which means that items desired are greater than the number available. I felt this chapter was understandable due to relatable examples that helped explain these concepts. I also felt the labeled graphs were helpful explaining the supply and demand curve relationships. I think the hardest part was learning about the shifts in the supply/demand curves and how the graphs then changed.