Topic 5: Ripple Effects and Elasticity

One of the fundamental economic ideas is that choices have secondary, or "ripple" effects. Imagine throwing a stone into a still pond. The primary effect is the splash it makes, but it also sends out ripples that spread out over the surface of the pond which bounce off of other objects making further ripples. The ripples going in different directions and bump into each other, creating patterns that are difficult to predict. For this journal entry, watch the video "The Ripple Effects of Oil Prices," then write about how the ripple effects of a change (up or down) in the price of oil affects the various markets that make up the economy. How does it affect you and your family? At first you might think, "Not at all," but when you think about it more deeply, it is clear that because of oil's importance in the production of every good and service that is produced, a change in its price effects everyone (albeit differently). What other goods and services can you think of that have such an inter-connectedness with other goods and services? How does the idea of elasticity affect the markets when prices change? For which goods and services is your own demand relatively elastic? Inelastic? Why?

• When the price of oil changes and either increases of decreases, products that use oil to work and processes such as manufacturing are effected. For the products that use oil to work, they are complements to oil, so if the price of oil increases, the price of these products will also increase.  Some examples of complements include vehicles such as cars and motorbikes. The total price of the processes such as manufacturing may also increase because many small parts in manufacturing require oil.
• My family and I are effected by the change in oil price because we must pay more for oil, meaning that our transportation fees and costs will increase. This may lower our demand for oil and force us to choose other means of transportation that either doesn't need oil, or could lower the oil expenses of the family.
• Another good and service that may effect others so much may be wood. Many products, such as paper and materials for construction, are made from wood. Even though we have other substitutes for paper and materials for construction, these are still the primary form of material used (paper for books and posters and newspapers, etc.).
• Elasticity affects the marketing by describing the changes of quantity in ratio to price. Inelastic means that no matter what the price is for a product, the demand is the same. An example of this may be medication. No matter the price of medication, if I'm sick, then I will definitely get medicine to make myself recover. Elastic means that no matter what the quantity is for a product, the demand is the same. I do not have any demand for totally elastic goods in real life. Even though this is possible in theory, it's hard to find totally elastic goods in real life.

Topic 4: Where Choices Lead

A number of very specific choices have led you to be in this particular class in this particular school. Each choice represents not only what was gained, but what was foregone in order to get you here. What was forgone is defined as the opportunity cost of what was gained. In your opinion, what have been some of the opportunity costs of getting you into PAS in general and this class in particular? Keep in mind that money is only one kind of cost--there are many more things that make up opportunity cost, both tangible and intangible. Considering that you most likely had little control over many of the decisions that got you here, do you think the decisions that were made were rational? In other words, if you analyze the costs and benefits, do the benefits outweigh the costs? Why or why not? If you had been in total control of your life, would you have made the same decisions? Explain.

• Some of the opportunity costs of getting myself into PAS in general include me giving up the choice of other schools (which may or may not be local schools), the money that was spent so that I can enroll in this school, and the time that I must give up in order to go to PAS (this one can also apply to when I go to other schools). Some of the opportunity costs of getting myself into AP Microeconomics class may be other classes that I could have taken, or the time that I have to spent to go to this class (I could be doing my work in a study hall period).
• I believe that the decisions I made were rational, because these decisions are the best in my opinion and preference. Coming to PAS, though it's very expensive, will be able to help me get into a good college and help my future better. The benefits exceed the cost because I will be able to earn the money spent back if I have a higher degree of education. Taking AP Microeconomics is also a rational choice because even though I must give up another class, this subject is the one that will mostly likely help me the most in the future, both in college and in the work environment. If I had been in total control of my life, I would most likely make the same decisions; I will make the decision to come to PAS because it opens up opportunities, and taking AP Microeconomics was my own choice in the first place.

Topic 3: Incentives to Attend School

We have talked about the incentive (benefits) and disincentives (costs) in class. After watching the video "Incentives for Perfect Attendance", think about how schools attempt to get students to go to school. What are some of the incentives schools use? What about disincentives? Which do you think are stronger incentives for getting students to attend school, rewards or punishments? Why do you think so? What about at your own school? What kind of incentives do you have to attend school? Are these incentives effective? Did your behavior or that of other students change because of the incentives given at PAS? Why or why not? What do you think is the goal of the schools in the video? Is it the same as the goal at PAS? Why do you think the incentives used by the schools in the videos are so different from the incentives used at PAS?

• Some incentives that schools use to motivate students to go to school includes academic and physical rewards. Academic rewards are generally talking about a higher grade, or better standardized test scores. Attendance also contributes to participation grades in class. Physical rewards may be prizes such as laptop computers and cars (which is the example used in the video "Incentives for Perfect Attendance". Disincentives may be when the student has better alternatives such as a stable job, or the need to be somewhere else, such as finding work to support his or her family. Stronger incentives for school are definitely rewards. As in psychology, punishments usually create negative emotions and negative feedback, and sometimes they may backfire and result in a decrease in school attendance.
• For my own school, our incentives to attend is mainly self-motivated; we want our academics to be strong so that we can get into a good college. This incentive is pretty effective for a society like Taiwan, because many Taiwanese students believe that education is very important and values education a lot. If there are punishments such as missing days in our curriculum, our behaviors usually change because we care about it.
• The goals of the schools in the video is to get good school attendance so that the schools can get federal funding from the national government. This is a different goal for PAS because PAS is a private school and it wants its students to get into good colleges and universities instead of getting funds from the government.

Topic 2: Scarcity at School?

As we have learned, scarcity is an economic fact of life. We always want more than we can get with our given resources. This forces us to make trade-offs; we give up one thing in order to get another. This is true in every type of society, including that of our school. Write about some examples of scarcity that the different entities at PAS encounter (students, teachers, office staff, and so on), then write about what those entities have to give up in order to get what they want. Finally, write about your own experiences with scarcity at PAS. What are the resources that you want more of? What keeps you from getting all that you want? What are some examples of some trade-offs that you have had to make?

• One of the examples of scarcity that the different entities at PAS encounter may be time. People do not have enough time to do what they must do. For example, during the breaks, many students do not have enough time to do the multiple things that they want to do, such as going to their lockers or going to the bathroom. When the students choose to do one of the two, they must give up the other (this is a trade off, and the second most desired option that the student chooses not to do is the opportunity cost. Sometimes, teachers and staff also face this trade off and the opportunity costs; they have to decide whether they want to do one thing or the other.
• Some of the scarcity that I face at PAS includes the example mentioned above: not enough time to go to places where I want to go, such as my locker and the bathroom. Another scarcity that I face is that I cannot choose to take all the classes that I want to take because my class schedule is limited, and those classes sometimes clash with each other. I must make tradeoffs: if I want to pick one class, then I lose the opportunity to take another class.

Topic 1: The Big Questions

  Michael Parkin, the author of our textbook, asserts that there are two big questions in economics. The first is “How do choices end up determining what, how, and for whom goods and services get produced?” If you think about PAS as an economy, and everyone at PAS as both a producer and consumer, what is the “what”? In other words, what goods and services are produced? Who produces those goods and services? How are those goods and services produced? For whom are those goods and services produced? Who makes the choices governing what, how, and for whom goods and services get produced?
  The second big questions is “When do choices made in the pursuit of self-interest also promote the social interest?” In your opinion, in what way to the choices made at PAS about what, how, and for whom reflect different people’s self-interest? In what way, if any, do they reflect the social interest?

• The goods and services produced in the PAS economy are educated persons. In other words, us, the PAS students. How are these goods and services produced? The answer is through our teachers. Our teachers are the ones who educate us, and therefore, the ones who "manufacture" us. For whom are these goods and services produced? This question has two answers, one specific, one broad. The specific answer is our parents. Our parents are the one who "ordered" for educated children, or products. On the broader scale, we are the goods and services that will eventually be let out onto the "market" of educated, high human capital labor. The person who makes the choices governing these questions is of course our Head of School, Mrs. Pamela.
• When PAS make choices such as creating a student council, it is reflecting people's self-interests because having a student council will help the students voice their opinions. Also, the student council plans events that people want, which is self-interest. When PAS create rules such as the late policy, social interest is reflected because this is for the good of the society in general: the school wants to drill the concept of being on time into people's minds.