Unit One

A. Scarcity: the nature of economic systems

Scarcity is when people's desires and wants exceed the amount of resources available. It means
that we do not have the resources to fufill those desires and needs. An example of this was this
Christmas with the Wii situation. Every child in America desired a Japanese- made Wii, but there
were not enough to go around. People were buying them on Ebay for hundreds of dollars more
than they were worth and still not everyone got one. This is a scarce good. Not enough to go
around. Things that cause scarcity are the factors of production, along with insufficient
technology or limits in skilled workers. The production possibilities curve is determined by
scarce resources. The inefficient use of resources (less that full employment, waste of land) will
cause the economy to work below its production possibilities frontier. The graph to the right is an
example of a production possibilities curve between food and computers. If the PPF was inside
the curve, the economy would be making its scarce goods, or economic goods, even
scarcer.Goods that are not scarce, such as sand or salt water, are free goods. Due to the scarcity
of goods, it becomes necessary for society to choose how the scarce goods are allocated. An
example of this is diamonds. Because diamonds are scarce, we choose how much is distributed
to everyone. In a market economy, the way to achieve this is trade but other ways it is done by
centralized command, tradition, or community democracy.
1. Opportunity Costs
Scarcity causes trade-offs (since not everyone can have a good, they have to choose a different
good), and trade-offs result in opportunity costs. Opportunity cost is what must be given up when
you choose something. For example, if a student chooses to go back to school to earn his or her
master's degree, the cost of the tuition and fees is roughly 30,000 dollars (it's an expensive
school). One also has to consider the income he or she would have been making during that time
he or she went to school. If the student was making 60,000 dollars a year and went back to
school for two years, the opportunity cost would be 120,000 dollars.
2. Production Possibilities Curves
A production possibilities curve is a graph that shows the amount of to goods an economy can
produce with scarce resources. The curve shows the maximum amount of a good that economy
can produce for the amount of another good. It illustrates the possibilities for a firm or company
to produce for two goods. It also demonstrates the trade-off of choosing one good over another.
The graph to the right shows how much wine compared to grain an economy can effectively
produce. The more wine it can produce results in less grain that it can produce. The more grain it
can produce results in less wine is can produce.

B. Specialization, Trade, and Comparative Advantage

What is specialization? It allows a person, business, or nation to specialize in a certain activity
that they do best, instead of striving for self-sufficiency. What's so great about it? It allows for a
greater variety of goods and services to be available at a lower cost. It also allows for increased

output by giving people

the chance at becoming
better at what they do.
Trade helps people
exchange what they
have for what they want.
It also facilitates economic growth, because it allows for specialization. Specialization allows a
person to specialize in creating something that they are most efficient in making and then trading
the products they make for things that they have a higher opportunity cost in making. A person
has a comparative advantage when he or she has a lower opportunity cost in producing a good
or a service than another person. Opportunity cost is what one gives up, when choosing to do
one thing over the other. For example: you have two cupcakes in front of you. One is chocolate,
the other vanilla. When you choose the chocolate one, your opportunity cost is the vanilla
cupcake. When you choose the vanilla cupcake, your opportunity cost is the chocolate cupcake.
Specialization, comparative advantage, and opportunity cost, they are all some of the basic ideas
behind free trade and the World Trade Organization (WTO).
Here's a link that talks about the Heckscher-Ohlin Trade Theory, which basically discusses the
reasons why two countries should specialize and trade with one another.
http://nobelprize.org/educational_games/economics/trade/ohlin.html
1. Determining Comparative Advantage with input information
NOTE: input information refers to the resources ( i.e. time, money, etc) that are put into
performing a certain task, such as baking cupcakes.
Here is an example, since that is the best way to try and explain this.
Suppose you have two countries: the US and Japan. Now suppose you have two tasks: making
airplanes and cars.
Cars
Airplanes
US
6 hours
2 hours
Japan
3 hours
4 hours
US has the absolute advantage in making airplanes, because the US takes fewer hours to make
1 airplanes than Japan does. Japan has the absolute advantage in making cars, because Japan
takes fewer hours to make 1 car as opposed to the time taken by the US.
Now what is the opportunity cost of the US for making cars in terms of airplanes? For airplanes

in terms of cars?
opportunity cost for making cars : car hours / airplane hours
6/2 airplanes or 3 airplanes
opportunity cost for making airplanes: airplane hours / car hours
1/3 cars or .33 car
Now what is the opportunity cost of Japan for making cars in terms of airplanes? For airplanes in
terms of cars?
opportunity cost for making cars : car hours / airplane hours
3/4 airplanes or .75 airplanes
opportunity cost for making airplanes: airplane hours / car hours
4/3 cars or 1.33 cars
So . . . which country has the comparative advantage in cars? In airplanes?
Japan has the comparative advantage in making cars, because it has the lower opportunity cost.
The US has the comparative advantage in making airplanes, because it has the lower opportunity
cost. Therefore . . .
US should make airplanes, and Japan should make cars.
2. Determining Comparative Advantage with output information
NOTE: output information refers to how many of one product (i.e. cupcakes, cars, airplanes, etc)
a person can make with limited resources (i.e. hours, money, labor, etc)
Here is an example, since that is probably the best way to explain this.
US
Japan
Cars
6
3
Airplanes
2
4

This is how many cars and airplanes either country can make within an
alloted time of one hour. *

Now what is the opportunity cost of the US for making cars? For airplanes?
opportunity cost for making cars : # of airplanes / # of cars
2/6 airplane or 1/3 airplane
opportunity cost for making airplanes: # of cars / # of airplanes
6/2 cars or 3 cars
Now what is the opportunity cost of Japan for making cars? For airplanes?
opportunity cost for making cars : # of airplanes / # of cars
4/3 airplanes or 1.33 airplanes
opportunity cost for making airplanes: # of cars / # of airplanes
3/4 car or .75 car
US has the absolute advantage in making cars, because the US makes more cars than Japan
does. Japan has the absolute advantage in making airplanes, because Japan makes more airplanes
than the US.

So . . . which country has the comparative advantage in cars? In airplanes?

Japan has the comparative advantage in making airplanes, because it has the lower opportunity
cost. The US has the comparative advantage in making cars, because it has the lower opportunity
cost. Therefore . . .
US should make cars, and Japan should make airplanes.
If you still have some doubt over absolute advantage, comparative advantage, and some of the
other basic concepts, here are some videos. Hopefully they'll help clear out any remaining
doubts. :)
http://youtube.com/watch?v=aLe_LF622JI
http://youtube.com/watch?v=8UsOCSBt3fA
http://youtube.com/watch?v=9leliceP63c
http://youtube.com/watch?v=A6_v7okrO-s

C. Introduction to Demand
1. Relationship Between Price and Quantity Demanded
The term supply and demand refers to the relationship between the producers and the consumers
of a good. The demand aspect, which we will be discussing in this section, refers to what degree
the consumers demand that product and what price they will pay for it. This is shown by the
demand curve as seen on the right. The position of the demand curve, meaning its orientation to
the right or left, determines the price of that product. In this particular supply and demand model
the demand curve has shifted to the right indicating a increase in the demand for than product.
Because of this shift the demand curve now crosses the supply curve at a different place
indicating a new equilibrium point. The dotted lines on the graph show that this shift has caused
an increase in price and quantity. These two factors are represented by the x and y axes and
depending on the equilibrium point these factors can either increase or decrease. In this instance
they have both increased but they do not always act in the same way. For example if the supply
curve were to shift to the left indicating a decrease in the amount of product the producers are
willing to sell, the price would increase but the quantity would decrease. In summation the
supply and demand curves represent the amount consumers will pay for a product and the
amount producers will sell the product for. Where these two curves meet is the equilibrium point.
Based on where this equilibrium point is found and its position on the x and y axes the price and
quantity change. The more demand there is for a product the more money people will be willing
to pay for it and the higher price the producers can charge.
Here is a video that I found that might help if you are having trouble understanding the supply
and demand curves: http://www.youtube.com/watch?v=JWVG0FAfgmA
2. Determinants of Demand
There are certain factors that cause the demand to shift to either the right or the left. Thses
factors, which change the demand for a certain product, are known as the determinants of

demand. Some of the most common determinants of demand are:

1.) tastes or preferences of consumers

an increased taste in a product increases its demand

a decreased taste in a product decreases its demand

2.) number of consumers in the market

more consumers increases a products demand

fewer consumers decreases a products demand

3.) the money incomes of consumers

Superior goods or normal goods

As income increases, a superior good's demand increases

As income decreases, a superior good's demand decreases

Superior goods are most common good

Inferior Goods

As income increases, an inferior good's demand decreases

As income decreases, an inferior good's demand increases

4.) prices of related goods

Substitute Goods

As price of A increases, demand for B increases

As price of A decreases, demand for B decreases

Example: Nike's and Reeboks

Complementary Goods

As price of A increases, demand for B decreases

As price of B decreases, demand for A increases

Example: computers and computer games; gasoline and motor oil

Independent Goods

As price of good A changes, demand for good B does not change

5.) consumer expectations about the future prices and incomes

if consumers expect a price increase in near future, demand increases

if consumers expect a price decrease in the near future, demand decreases

3. Changes in Quantity Demanded vs. Changes in Demand

Before we can delve into this topic it is important to understand the difference between a
movement along the demand curve and a shift of the demand curve. A movement refers to a
movement along the demand curve and a shift means a translation of the entire curve to the left
or right depending on how demand has changed. On your left you can see a graph that shows a
movement along the demand curve, and on the right is a shift of the entire demand curve.

A change in quantity demanded is a movement along the curve while a change in demand means
a shift of the entire curve. A change in quantity demanded is usually caused by a change in the

price of the product. This price could be enforced by the government or by individual sellers.
This movement along the graph only occurs when the supply and demand relationship remains
consistent and the change is caused when a price change effects only quantity or vice versa. A
change in demand results in a shift of the curve right or left and is caused by a change in a
determinant (such as one stated above) other than price.
http://economics.about.com/

D. Supply

1. Relationship between supply and

quantity supplied.
Supply is defined as being "the quantity of a good
or resource that sellers/suppliers are willing and
able to offer to the market for sale under a given set of conditions over aspecific period of time."
A supply curve illustrates the law of supply which states that ceteris paribus, if a price of a
product rises, the quantity of that product supplied will increase. Likewise, if the price of a
product decreases, the quantity supplied will also decrease.
The Supply Curve
The supply curve (shown at left) shows the relationship between the price and quantity supplied.
Price is measured on the vertical axis and quantity supplied is displayed along the horizontal
axis. Due to the law of supply (see below), the supply curve generally slopes upward. A situation
in which the supply curve would not slope upward is the supply curve of labor. Under normal
circumstances, if a product has a higher price, more will be supplied. With the labor supply
curve, the more a company is willing to pay, the more hours a person will be willing to work.
However, as the hours get higher and higher, the person may begin to value their time more and
more and choose to forgo extra income in order to spend their time in leisure. This backward
bending supply curve is illustrated on the right.
The Law Of Supply
The law of supply states that if other things remain constant, if the price of a good rises, the
corresponding quantity supplied increases, and as the price falls the quantity supplied will
decrease. In order for a business to supply more of a product, they will have to charge more in
order to have the financial resources to produce more.

2.

Determinants of supply
The following factors cause supply to shift to the right or the left on a supply curve:
1) Prices of Resources:
As resource prices rise, typically supply will be reduced. It will cost more for the producer to
manufacture their product, and therefore they will require higher prices to be paid for their
product. As a result, the producer may choose to lower supply in order to drive prices up. For
example, let's say that Furby are made from plastic and a magical ingredient known as Furbz. If
the price of Furbz increases, it will cost the producer more money to create each individual
Furby. As a result, the producer will need to charge more for each Ferby in order to make up for
the increased price of Furbz. Thus, the supply of Ferbys on the market will decrease.
2) Technological Innovations:
Technological innovations usually lead to improved productivity, which means that the prices of
production can be decreased. A decrease in the cost of production will allow for supply to
increase. An example of this is that if you are manufacturing a Wii and new technology comes
along that allows you to make a Wii in half the time and for half the price, the supply of Wiis will
increase.
3) Number of Producers:
If there are more producers producing a product in a market, the supply will increase.
4) Taxes and Subsidies:
If the government is willing to provide tax breaks and subsidies, then the supply of a product will
increase. Likewise, if the government imposes new taxes on a product, the supply will most
likely decrease.
5) Price Expectations:
Producers may choose to change the supply of their products due to their expectations about
what prices will be in the future. Let's say an eggnog company distributes eggnog all year round.
The company comes to the realization that their consumers will most likely buy more eggnog
around the holidays, and therefore they would be able to charge more for their eggnog and still
receive business. The company would possible choose to hold on to some of their eggnog and
wait to sell it at a later date when they could make more money off of it thereby decreasing
supply now and increasing supply in the future.

3. Changes in quantity supplied vs. changes in supply

A change in price results in a change in quantity supplied. Therefore, this results in movement
along the supply curve, NOT a shift in the supply curve. This is illustrated below on the left.
A change in supply is caused by factors other than price. These factors will cause shifts of the
supply curve. This is illustrated below on the right. Changes in the determinants of supply lead to
shifts in the supply curve.

E. Introduction to Elasticity of Supply and Demand

1. Elasticity is the responsiveness in which the supply and demand curve will change. A
curve that has a high elasticity is susceptible to change. If the curve has a low elasticity, a
higher change in measure, such as price level, is needed in order to affect the curve.
There are many factors that can affect elasticity. Supply elasticity is affected by price
changes. Demand elasticity is affected by the availability of substitutes, amount of
income available to spend on the good, and time.
1.

elastic_s.gif

inelastic_s.gif
3. Supply elasticity- If there is a large change in price, as well as a large change in
supply, then the supply graph is considered to be elastic. A large change in price,
but small change in supply, the graph is then considered to be inelastic.
1. Elastic Supply Inelastic Supply
4. Demand elasticity- If there is little change in price level, but large change in
quantity, then the demand curve is considered to be elastic. An inelastic demand
curve would have a large change in price level, but little change in quantity.

1. Availability of substitutes- If a price rises in a product, then the demand

will decrease. As a result, consumers will more than likely buy another
product of similar fashion, but lower in price. This will then cause a
decrease in price level for the first product, and possibly increasing
demand for it again. However, not every product can be easily switched
over to. One example of an inelastic product is oil. There are very few
other options for energy resources other than oil. Consumers can not
change what they put in their gas tank over night, so as a result, countries
such as Saudi Arabia may charge what ever price they want on oil and the
consumers can do very little about it. Products that are necessities have
very little price changes as opposed to goods and services, which are
relatively elastic.
2. Amount of income available- This is another important factor when
determining the elasticity of supply and demand. A simple way to see this
is if the price of a product were to go up and a buyer's income were to stay
the same, then demand would go down. If a product were to increase
proportionately in price with the buyer's income, then demand should not
change. On the other hand, if the price of a product were to down, but the
buyer's income were to either stay the same or increase, then demand will
increase because the buyer's purchasing power has increased.
3. Time- Time is unlimited, yet so important because we have so little of it.
Any product can be affected by time. Take for example you only like
satellite TV (as opposed to cable), so you pay a monthly fee of $30 for
Direct TV. Unfortunately, the only other satellite service is Dish Network,
which is actually more expensive (say $50 for example). By paying for
Direct TV monthly, the demand for it become inelastic. However, say the
person can no longer pay for the service, then he or she will have to cancel
the service. As a result, the service of Direct TV becomes elastic over
time.
4.

elastic_d.gif

inelastic_d.gif
Elastic Demand Inelastic Demand,
user-14387

Supply and Demand Curve Video

jcleare Jan 2, 2008
I found this on youtube and at first just thought it was a funny video but it actually was a pretty
good tutorial about supply and demand curves
http://www.youtube.com/watch?v=JWVGOFAfgmA

jcleare Jan 2, 2008

Oops sorry I typed it in wrong its actually this:

http://www.youtube.com/watch?v=JWVG0FAfgmA

Heckscher-Ohlin Trade Theory

danielarudman Jan 1, 2008
This theory makes sense, of course. However, it is interesting to see how currency could almost
be meaningless in direct trading via specialization. The theory states that one stipulation of
specialization is that both countries must want what the other produces. I thought this was a good
way to think of how people traded before set currencies were developed. To be able to get what
someone else wants, you must have something he or she wants in return. Specialization works
the same way. Because of the Law of Demand, the value of any product produced can be
measured with regard to how much you are willing to pay for it. This being whether you are
paying in dollars, pesos, any other currency, or just another product that your nation specializes
in. Basically, bartering is still part of economics today through specialization except cost of input
matters in specialization while it had no meaning in the old days when there was no set currency.

Scarcity of Water
NatalieJordan Jan 1, 2008
http://finance.yahoo.com/expert/article/economist/59232
This article talks about how water resources could become the next oil. I'll respond seperately.

NatalieJordan Jan 1, 2008

I agree with Charles Wheelans theory that water could become the next oil. Wheelan uses the
example of a rice farmer who is operating in the desert. While I highly doubt that someone
would seriously cultivate rice in the desert, many agricultural endeavors take place in locations
where the natural resources of the area are not compatible with what is being grown. As a strong
environmentalist, I dont think that any development should take place that is not
environmentally sustainable. Golf courses in the desert are absurd wastes of resources. The
economist in me, though slightly smaller, agrees with Wheelan because of the concept of creative
destruction. If someone has to be subsidized to use a resource which is already being
uneconomically expended, why should this be allowed to continue? It only harms the
environment and the economy. (138 words)

peytonrocks Jan 2, 2008

Talking about the scarcity of water makes me think of the drought we are going through. It's the
second worst drought Georgia has ever experienced and many Georgian inhabitants try to place
the blame on the government. This in itself is seriously ridiculous because the only true solution
is rain and I'm not quite sure that my mom is a rainmaker. But anyway, someone emailed my
mom asking her to build a desalinization (spelled right?) plant and ship salt water here from the
ocean. My mom laughed out loud. One, it is an incredibly large waste of money, being one of the
most expensive sources of water, so if that came to be expect a dramatic increase in your taxes.
Two, you would have to do this forever. You can't just abandoned the plant once people are
dependent on it. Everyone is freaking out about the drought but when you look at the grander
picture, it'll fix itself. Hard times come but it'll rain again. The environment with steady itself like
it always does. I'm not saying we shouldn't conserve water because we should. The environment
is very important but there are bigger issues out there than the drought in the southeast region of
the United States. It's like we learned in Naked Economics. People worry so much about global
warming because they have nothing else to worry about.

BenKretschman Jan 2, 2008

First off, i must say that golf courses in the desert are wonderful. They provide a great source of
entertainment even if they are wasteful. Besides, golf courses in the desert have higher prices
than other golf courses because they have to cover the cost of watering the course. And since this
is a free country, anybody can purchase water and do whatever they want with it. Even if it is
morally or enviromentally wrong. Anyways, I don't think water will ever become scarce because
the enviroment will even itself out. A drought this year and flooding next year. It happens
everywhere. But, lets say that it doesn't rain in Georgia anymore and we have to convert to
desalinization plants. What will we do? Well, we simply just do what we are doing now with oil.
Deal with it. The higher price of water would not deter us from using it. Just like with oil. Prices
are up to 3 dollars a gallon and we still don't have any type of law that makes us look for a more
efficient way of doing things. Since we have no other options for powering our cars, we alter our
spending habitats to combat the higher prices of oil. The same would happen with water. We
have no better alternatives if our water runs out. We will just have to adjust our lifes to the higher
price of water just like we did with oil. On a person note, it is a very sad reality that the only
thing that will make us change our fuel consumption is the complete absence of oil. (270 words)

christinabins Jan 2, 2008

First of all, I have to address the environmental concern: I love the environment. Go treehuggers! Yay! But only to a certain extent: global warming is not the biggest issue in the world,
and some times you have to sacrifice certain aspects of the environment to, oh I don't know...
survive. It's just like what we read about in Naked Economics, we stress about pesticide use in
the USA because malaria doesn't threaten to kill us on a day to day basis. However, it would
behoove us (even in our own happy stable nation) to use potentially harmful substances to help
out Africa. Who knows what they could contribute to the world market if they were actually able
to reach a certain level of productivity? They certainly cannot reach such heights without a
healthy populace.
Ben says that the water will just level itself out in time. That's true; we have years of drought and
years of surplus. But the fact remains that each year the world's population grows. Aren't we up
to 7 billion now? Will nature's stabilizing effects be able to sustain such continuous growth? And
water is not like oil because there are alternatives to oil. Life requires water, can you think of any
other alternative?
I agree with Wheelan in that something needs to be done about the potential shortage. Grants
should be awarded to researchers to encourage investigation into desalination techniques. The
problem will not isolate itself to the Middle East. Water conservation should be one of our chief
concerns.
And finally, I'd like to point out this summer's battle between Georgia, Florida, and Alabama
over the water from Lake Lanier. Surely even greater battles over water would occur if the Great
Lakes were used to hydrate all of America.

christinabins Jan 2, 2008

295 words

Trade between Punjab and Pakistan

gvanchi Dec 31, 2007
article: http://in.news.yahoo.com/071230/203/6p0pk.html
Considering recent events, I thought this article was pretty relevant. Plus it also talks about what
happens when trade between two places stop.
It basically discusses how trade between Punjab ( a part of India) and Pakistan has been affected
since the assassination of Benazir Bhutto. Because of the turmoil going on in Pakistan at this
time due to the recent death of Benazir Bhutto, trade between the two places has almost
completely stopped, and transportation between the borders has been shut down. All in all this is
also affecting peace discussion between India and Pakistan, not just the economies of both
places. Punjabs export of cement and dry fruit to Pakistan are halted. Because of this both
Punjab and Pakistan have been adversely affected. This all goes with the idea of two countries
can benefit from and lose the benefits brought from it upon stopping trade.

jcleare Jan 2, 2008

I found this to be very interesting. This goes beyond comparative advantage and stuf we learned
in class and into the realm of foreign policy. When two countries stop trading with each other,
especially if they are economically dependent on one another, stop trading it clearly is a crisis.
Judging from the article it seems like these two nations depended a lot on each other for trade
and to lose your largest trading partner would be a serious financial hit. You would think that
over time these two nations developed a very strong trading system and as stated in the article
through trade and comparative advantage both nations were profiting tremendously. When this
amount of economic relations comes to a screeching hault one would wonder where each nation
would get the supplies that were once supplied by that nation. Obviously each nation had
resources that the other needed and vice versa. Pakistan, being the wealthier of the two nations
would like be able to bounce back but Punjab sounds like that will be in a serious economic
depression until that source of trade can be made up else where. It's a very interesting article. It
will be interesting to see how Punjab recovers after this economic hit.(207 words)

Shooting Ourselves in the Economy

gvanchi Dec 31, 2007

article:
http://finance.yahoo.com/expert/article/economist/55241;_ylt=AinQwmVGfgU4gT.JHLrc_tExt9
IF
So this article is basically one of those pro-free trade arguments, and considering my topic
(specialization, trade, and comparative advantage) I thought it to be pretty relevant. It starts off
talking about how there are sanctions on Gaza and Iran, and then goes on to talk about how
sanctions work. Basically sanctions hurt the economy by limiting what the sanctioned country
can export and prevent that country from taking part in the global economy. So it is equivalent
fencing off a country's market, which as you can tell is really bad for the economy of that nation.
The article also talks about how presidential candidates and many in the US believe that the US
should trade less with the rest of the world. It argues the against that opinion, saying that less
trade is the equivalent of "self-inflicted embargo" and the effects of such an action. So basically
it's arguing for free trade, pointing out the pros.

Kris90 Dec 31, 2007

Ah, we meet again Charles Wheelan. I propose a trade: your economics intelligence for some
clothes. There are certain topics in which I stand different from Mr. Wheelan but in this instance,
I highly agree that trade benefits the United States of America. Im not quite sure if the Gaza
analogy applies to us though. The United States is such a powerhouse country that I am sure if
one country tried to cut off trade with us, we would just get the goods from some other place.
I for one think its sad that trade is being used as a weapon. If your mom and dad found out you
smoke crack, they wouldnt take away your food and shelter (hopefully). Theyd send you to
rehab so you could become a better, drug-free person. Similarly, I think Israel should use force to
create a stable, non-violent government in the country of Gaza, much like what we are doing in
Iraq.
Along with trade forming jobs and putting more money in the pockets of the consumer, it also
builds friendly relations and allows a country to network. It definitely boosts the GDP of a
country as well. After all, gross domestic product does involve net exports. (206 words)

danielarudman Jan 1, 2008

Kris, I completely agree with you that Israel should use force to create a stable government and
environment for its citizens. Unfortunately, trading and allied partners continue to stand against
Israel in its fight to do so. Whenever force on the part of the Israelis is used, the rest of the world
criticizes and belittles them. Although Israel is an extraordinarily productive place considering its
awesome lack of natural resources, this tiny state tends to listen to the outside world as it
threatens to cut Israel off from trade and allied relationships. Trade is being used as blackmail
nowadays, something that many people do not know, nor could have predicted.

This is wrong on many levels. First, of course, it is not anyone elses business how Israel deals
with people who violently invade them. Ultimately, though, this could begin a trend of blackmail
or lose outside resources, goods, and services. More and more countries will be cautious of their
trading partners and the idea of specialization could eventually disappear. This would cause an
unproductive and hostile world that we do not ever want to live in.
On the other hand, I think it is important for nations, especially the United States to because
semi-independent. We should begin to manufacture goods inside our borders so that our GDP
and standard of living may grow and the price of our dollar will increase so that when we do
need to buy goods from other countries, we can do so. Prices of domestic goods will be high at
first, but because the dollar is worth very little in other currencies, we will export more goods,
and eventually the dollar will regain its strength and the price will decrease because it must then
compete with the global market for those goods or services. Once the dollar becomes balanced,
countries can choose to buy elsewhere, so we must be competitive and even the domestic price
will decrease.

AndrewC48 Jan 2, 2008

I agree completely with this article. The main point that Wheelan is advocating here, is that if
you want to bring harm to a country or enemy, then restrict trade. Therefore, by restricting
ourselves from trading we are harming ourselves. What is smart about doing this? Trading has
been going on since the time of the cavemen when he traded a an animal skin for a wheel. They
both were happy because neither of them could make the other's product as well. It's the same
principle today. Some people loose their jobs in the process but many more have jobs in the end
due to trade. As you can see this is precisely the fallacy behind Protectionist arguments here in
the United States. Restricting imports is just like shooting ourselves in the foot. We end up with
higher relative prices here in our homeland. Additionally, although some jobs are being saved
and protected we are in essence promoting inefficient processes that these jobs are based around
in the first place. If someone abroad can produce something cheaper and more efficiently then
we should promote buying this product and perhaps adopting the same practices here ourselves
to make our own economy more efficient.
Wheelan also provides an answer to those people who would say that we need to restrict trade in
order to force some countries to follow certain policies and/or to develop certain standards within
their own sovereignty. He states that this practice is O.K., even though it potentially hurts us as
well as greatly injuring the victims of said restrictions. He points out that this practice provides
an opportunity to enforce requirements when all other diplomatic processes fail. I completely
agree with this point as well. When countries refuse to adopt certain world standards and
promote damaging policies, we should use this practice in order to provide an effective and
efficient route of punishment.
(315 words)

BlaneParrish Jan 2, 2008

Free Trade equals low prices. It is not a very difficult statement to comprehend. When the supply
of a good or service increases then the price of that good or service decreases. By limiting the
supply of foreign goods through sanctions, we guarantee that prices will not be as low as
possible. We do not allow the market to stabilize itself and allow the natural (as in the
equilibrium without sanctions or trade restrictions) equalibrium price to be reached. The higher
prices do not benefit the consumer at all. Trade using true comparative advantage would be a
benefit to all parties involved in both the short run and the lone run.
In addition, I think I came up with a situation where trade is not neccesary. Steve and Bob (this is
not the same Bob who injured himself on the fence) both produce ice cream and gloves. Steve
produces 100 of each in a year. Bob, on the other hand produces 1 of each per year. I cannot
think of any good reason why these two should trade. Steve has absolute advantage in both ice
cream and gloves. He also has the same comparative advantage as Bob for both ice cream and
gloves. Can anyone think of a reason why these two should trade? All of this is assuming that ice
cream and gloves have the same market price and that producing ice cream and gloves is the
only job that these two men have.
(246 words)

NancyM333 Jan 3, 2008

"Steve and Bob (this is not the same Bob who injured himself on the fence) both produce ice
cream and gloves. Steve produces 100 of each in a year. Bob, on the other hand produces 1 of
each per year."
Blane--I had to comment on your quote above. I really like the possibly unintended pun on the
glove making of Bob.

Scarcity of Wiis
peytonrocks Dec 31, 2007
http://www.kentucky.com/101/story/259581.html
Show more replies (5 hidden)
danielarudman Jan 1, 2008
Also, the reason the demand for other game consoles has not gone up because of the Wii scarcity
is simply because the Wii is different. PS2 and PS3 are fun and have the same basic concepts
behind them, but I havent really heard of anything like the Wii that could be a sufficient

substitute. The customers demands are different, and other game consoles seem to not be
satisfying to them.

GeorgeSun Jan 2, 2008

daniela is right! there is no substitute for a Wii. It's too fun.

BenKretschman Jan 2, 2008

The Wii is a fun video game system, but if people only knew about the hidden dangers that the
system has, it would not be as popular. I played the "Wii" system this winter break while visting
my relatives in Arizona. It is a great system, yet it as a downfall......it causes many injuries. My
dad didn't stretch his arm before playing a game of Wii golf. The next morning, he woke up and
his arm was swollen. He realized that he had pulled a muscle in his forearm while preforming the
demanding technique of the golf swing on the Wii. The demand for Wiis would drastiscally
decrease if more people knew that playing Wii can cause physical damage. Not to mention the
emotional scars left behind because of the embarassement of being injured by a video game
system. It is just a matter of time till supply catches up with the demand since I believe demand
for the Wii will go down in the very near future.(167 words)

peytonrocks Jan 2, 2008

Kris, I understand your anger at my post about kids getting fat but I guess I'm talking about
myself. I have been playing the Wii I got for Christmas non-stop since the 25th but I mostly play
Wii fishing and target practice. On occasion I might break a sweat boxing (which is very tiring)
but I'd say on the whole I've gained weight. One funny story I have is we were just at the beach
and my brothers went out to fish on the dock and I was inside Wii fishing. My mom kicked me
off the Wii. It was horrible. And Ben, Wii does have dangers. My dad was playing Wii tennis
against my brother and ended up knocking a lamp over and it hit my dog. I agree there is no
substitute for we. Everything else sucks.

jcleare Jan 2, 2008

Economically speaking hoarding the all the wii's to drive up the price seems to be a pretty smart
play by Nintendo. It doesn't take an economic genius to understand that if there is a wii shortage
and demand for wii's will go up and people will be willing to pay more money. I was thought the
concept of wii sports in general was a little wierd. Wii tennis is really and I have played it on
numerous occasions but it is basically a lamer version of actually tennis as is true of nearly all
the wii sport games. I would venture to say that ping pong is probably more of a workout than
wii-tennis. Now I understand that most people just play for fun and its not always convenient to

be able to go to a bowling alley or tennis court but if it becomes a cubstitute for actually physical
activity I would be concerned. I live less than a half a mile away from a tennis court and unless it
was sub 50 degrees outside it would be hard for me to play wii tennis without thinking about
how weird it was.

jcleare Jan 2, 2008

I guess ultimately it doesn't matter and the importance of wii sports really has nothing to do with
economics. (Last 2 posts 212 words)

AndrewC48 Jan 2, 2008

I think this problem is moderately funny. When you think about how drastic the lack of supply
the Wii is currently experiencing, it brings to mind all the conspiracy theorists that have ever
complained about The Man, when referring to the government or large corporations. It is
funny to think that Nintendo could purposefully be holding back the supply of the Wii to drive
up prices and demand. All those people who say that they could be doing this intentionally are
hilarious. Think about it. The price of the Wii hasnt changed at all since it has first came out last
year. It was $249.99 then and it is still $249.99 today. The only places where the price has gone
up significantly for the Wii is on places like Ebay or other buy/sell organizations throughout the
planet. The ironic thing is that when the prices go up in these places, Nintendo does not profit.
The profit in fact goes to the people who bought the Wii originally from the company at $249.99
and then sold it for exorbitant prices to people desperate to get their hands on one of the gaming
systems. Now if the price of the Wii directly from the manufactures went up, then Nintendo
could perhaps be doing this on purpose. But until that happens, there is definitely no conspiracy
behind the elusive Wii.
(227 Words)

NatalieJordan Jan 2, 2008

I want a Wii. (4 words)

christinabins Jan 2, 2008

If the scarcity of Wiis only benefits people that sell them on eBay, then why does the
manufacturer continue to make them so scarce? In theory, Nintendo should be acting in their own
rational self-interest: selling as many Wiis as possible. Clearly, they could still sell more Wiis at
$250. Which leads me to believe that 1. There actually IS a conspiracy, or 2. Economics isn't
real. I'm going to have to go with the latter.

christinabins Jan 2, 2008

solid 72 words.

BlaneParrish Jan 2, 2008

Scarcity is a beautiful thing! It is the basis for all economics. From Pokemon cards (you know
you loved them and still have a collection of your best "shiny" ones in your closet) to the overly
expensive black truffles (truffle oil is a great way to get the truffle taste without the truffle cost),
our lives are founded upon scarcity. There is never going to be enough of anything for everyone.
It is that simple. Personally I am not effected by the shortage of Wiis (although my grandmother
does play Wii against others in her retirement home), but I am slightly surprised by the show of
ethics by Nintendo. Not raising the price during the holiday season? I cannot help but applaud
the integrity that Nintendo has shown (unlike other people who seem to sense desperation and go
for the monetary carotid). Places like eBay allow people to seize upon the weaknesses of others,
but is also a part of the market economy that we love so dearly. I read a story about a man who
sold his son's Christmas present, Guitar Hero III (which I am aweful at), after he caught his
smoking pot and made over $5000. As a football card collector I thrive on scarcity. Without
scarcity, those cards are worth about as much as the ink and cardbord they are made with. I, for
one, am grateful for scarcity. Without scarcity our lives would be completely different. I can
hardly imagine what this world would be like.
(252 words)

PaulD128 Jan 2, 2008

This is actually a decent article, considering that Kris uses a Wii to get his exercise. It proves a
point though; we can only work as fast as our slowest component. Or at least thats what they
want you to think. We can all produce outside our productions possibility cure, but for how long.
The response is as long as we want. If the demand for Wii increase then the only logical thing for
Nintendo to do is increase their production of the item, right? WRONG! Nintendo does, in fact,
the opposite. By decreasing the number of Wii to the public, the only increase the popularity of
the product as well as the demand.
I, myself, have received a Wii this past Christmas. My parents tell me that my Father had to wait
in line a Toys R Us at four in the morning to get it. A few minutes before opening the store, the
manager of the store told everyone in line the exact amount of Wiis in the store (lets say 50 for
this example). The people in line were given a number corresponding to their location in the line.
Then only those first 50 were guaranteed a Wii. However this creates a dilemma. But what about
customer number 51. After handing out the tickets, does this person still stand in line? Of course
he does. Just in case person number 32 decides not to get the product, number 51 will have a Wii

for their child their Christmas. So is the thinking of every customer in that line (well... up to a
certain point). It's pure genius on Nintendos part though. Nintendo can continually sell their
product, even if it was released a year ago. Other product like the Xbox 360 and (not really) the
PS3 have only maintained or decreased in their annual sales. So, go job Nintendo. Youve
managed to beat the system and still come out on top. (Words 326)

reacting to articles
peytonrocks Dec 31, 2007
how do u post reactions to articles? like those 1000 words you need to have? i dont get it

peytonrocks Dec 31, 2007

disregard this everyone. im stupid

BenKretschman Jan 2, 2008

wow

Ginny81190 Jan 2, 2008

awe pj its ok babe...

Supply and Demand of Wheat Prices in the US

rchan1 Dec 17, 2007
http://www.usatoday.com/money/industries/food/2007-12-17-wheat_N.htm?csp=34
I was about to do an article about soybeans in China, but then discovered it has absolutely
nothing to do with this topic. Just thought I'd throw that in.
I'm not quite sure what is considered to be expensive for a bushel of wheat, but apparently, the

high demand for wheat has caused prices to rise at a soaring $10.095 for a bushel of wheat. :O
The problem that the article introduces is that US supply of wheat is limited. When supply runs
low this can only mean that prices levels will increase and reduce GDP because companies and
countries are no longer willing to pay a higher price for a bushel of wheat. I guess the main
problem is not how to supply more wheat, but are there other alternatives to wheat? If not, how
can we fix this? One can't simply replace wheat, because wheat is in many things we eat, such as
bread, cereal, oatmeal, etc. After all...eating your wheaties every morning is important!

LizaGurley Dec 26, 2007

Its articles like this that make me really ponder imposing questions such as: "What on Earth
would we do without wheat?" I mean, if the prices of wheat continue on their escalatory path,
how will hungry and nutrition-deprived folks receive their ever-so-vital daily intake of wheat?
With the United States supply of wheat drastically limited, prices are sure to increase. However, I
yet again ask myself: "Self, could there possibly be a limit to how much companies are willing to
pay for a bushel of wheat?" Let's hope not, lest all Americans become wheat-less. In response to
Raymonds questions, I am not entirely sure if there are any other alternatives to wheat. Possibly
flour or corn :)... I really don't know. How about maize, like the natives used to use? If nothing
else, maybe we should start looking for a new source for wheat in order to cure our ailing
shortage.

peytonrocks Dec 31, 2007

This article makes me cringe just thinking about the possibility that I may not get my vital daily
dose of Lucky Charms in the morning. And then picturing the situation that poverty-stricken
areas are in makes me think myself lucky. Maybe we could start growing potatoes more and have
that be our main source of carbohydrate. We could ship potatoes by the billions (they're pretty
cheap) to hungry children all across the world. Since many can no longer afford wheat, it is
becoming more and more necessary to find an alternative good. Maybe the answer lies in that
ever-growing root called the potato. Everyone likes them, whether baked, mashed, or fried
(french fries).

BenKretschman Jan 2, 2008

While the idea of replacing wheat with potatoes appeals to me personally, the potato is harder to
cultivate which is why fewer of them are made. Have you ever seen the episode of Dirty Jobs
where Mike has to go harvest potatoes? Well, that job is on that show for a reason. The job is
messy and very time comsuming simply because the potatoes grow underground. Wheat can
easily be chopped down while potatoes must be dug out of the earth. Now, on to the problem
with the wheat shortage. There is a shortage of wheat which causes priices to increase. But, if
everybody stopped growing foods that are not native to their region, we would not have this

problem. Farmers grow whatever will make them the most money, that's just the way it is. But, if
the government could put limits on which regions could grow certain types of food, our amount
of food produced would increase drastically. (159 words)

BlaneParrish Jan 2, 2008

Do not knock potato bread before you try it! Still, it would be difficult to think about what we
would have to eat in the cafeteria if wheat was not on the market to most of the world's
population. I can't think of a single person who doesn't like bread. Growing potatoes seems like a
viable option, but we should not depend on a single crop to save us. After the potato famine in
Ireland we should know better. Another plausible option would be genetic engineering. There has
not been too much research in this area and a small breakthrough could drop prices sufficiently
and might also save some lives in the proces(did you know that some genetic engineers
developed corn that turns red when it needs water because previous corn plants did not show
dehydration until just before they died?). There is no doubt that wheat is one of the most
important food products in the market today (although most people would agree that the
importance of a Greebe far surpasses any other food item on the planet) and it would be very
difficult to live without it.
(190 words)
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