Journaling of Chapter 6: Supply, Demand, and Government Policies

     Chapter 6 further deals with supply and demand but in regards to government policies in competitive markets. Two main sections of this chapter are price controls and taxes.

     With price controls there are price ceilings and price floors. Price ceiling is the legal maximum on the price at which a good can be sold. Thus, price floor is the opposite, the legal minimum on the price at which a good can be sold. Both of these only matter if they are binding constraints. A price ceiling can only cause a shortage if it is set below the equilibrium price. A price floor can only cause a surplus if it is set above the equilibrium price.

     The next section is about taxes. A tax hurts buyers and sellers in the relationship because buyers have to pay more for their good and the profit made by the sellers decrease as well. The difference between what the buyer pays and what the seller receives is called the tax wedge. When there is a tax wedge, the tax burden will be heavier on whatever relies on the product more. A helpful example referenced in the book was on the cigarette market. Because cigarette users are likely to be addicted, they are more reliant on the supply so the tax burden will fall on them rather than the suppliers.

     I give this chapter a difficulty rating of 1 out of 3. It’s a very straightforward chapter. I get the concepts so I think I just need to work on applying it to supply and demand graphs as of right now.

Journaling of Chapter 5: Elasticity And Its Applications

     Chapter five is spent talking about the elasticity of demand and the elasticity of supply. Chapter 5 is pretty much just building off what readers were told in the previous chapter. At the end of the chapter, the writer(s) also included applications of supply, demand, and elasticity working together as one. 

     This chapter has so far been the most difficult for me to grasp. I would give it a difficulty rating of 3 out of 3. I only really started to understand when I read the section giving examples of applications. I understand the basic idea of elastic and in-elasticity based on the changes of quantity demanded or supplied versus how much the pricing of the product has changed. However, the equations or formulas really threw me off track. I think my confusion probably stems from the wording of how the authors define these computations. Basically, when they were just discussing the general concepts of each term, I understood. But once the math was thrown in there, it became much harder for me to follow what the passage was trying to convey. 

     However, it is refreshing to have mathematical concepts in social science. I’m intrigued with how economics is tied with math. I hope to understand more equations in economics soon so that I can learn to apply my knowledge to certain scenarios. I think this would be a very useful build and improvement from just understanding the general ideas of each economic term that we are taught. 

Article Review 1: Why The Keynesian Chorus Is Cackling Like Chicken Little

Why The Keynesian Chorus Is Cackling Like Chicken Little

A summarization of the article is that the writer is criticizing supporters of Keynesian economics who believe that the Federal Reserve is being too tight with money. They believe that the Fed is being too tight despite the fact that the Fed has been pumping free money for the past 80 months. 

Some things that I had to research in order to understand the article is first what the author was referring to when he said “Keynesian Chicken Littles.” Keynesian economics is the view that in the short run, economic output is strongly influenced by total spending the economy. As of currently, Keynesians think the Federal Reserve is being too tight. Tight Monetary Policy is a course of action where the Fed constricts spending in an economy that is growing too quickly and to curb inflation. 

Obviously, the author thinks the Keynesians are talking nonsense and I agree. I don’t think that any efforts made by the Fed have changed our economy by a noticeable significant amount. There are predictions that printing more money will help the economy but I don’t understand why we should do that. Yes, in the short run things might go well but in the long-run is what we should focus on because inflation always seems to come with an inevitable crash. 

Other than the main idea, I really wasn’t able to understand most of the article. Even when I looked up certain economic terms, I still couldn’t manage to make sense of some of the things the author would reference towards. The figures of tables and graphs were also hard for me to interpret.  

Journaling of Chapter 4: The Market Forces of Supply and Demand

     The entirety of Chapter 4 was spent on explaining the concepts of supply and demand. Throughout the whole chapter, supply and demand was explained through ice cream as the prime example. When the chapter was first introducing these concepts, it was relatively easy to me. This is probably because supply and demand are such popular terms when it comes to economics. I can now tie in supply and demand in market to firms and households which readers were introduced to earlier on in the book. Since supply is the quantity of the good produced, it is handled by firms and since demand is determined by what buyers want, this deals with households. I think this connection I was able to make helped me understand the rest of the chapter though it increasingly got harder to comprehend. I understand how supply and demand work individually and how they have their own curves and factors that either shifts or moves the curves but I had a hard time grasping supply and demand together. Mostly what I got from the section based on the two working together is that there will be equilibrium.  If the supply and demand does not reach the equilibrium, it can lead to either a shortage or a surplus. Each will lead to a decreased profit. I give this chapter a difficulty rating of 2. Though supply and demand are widely popular economic terms, I had not known that there were so many layers to it. Regardless, I am glad to see how some markets work.

Journaling of Chapter 3: Interdependence and the Gains from Trade

     Chapter 3 was mainly focused on the concept of comparative advantage. For most of the chapter, the author explained the idea of comparative advantage using a cattle farmer and potato farmer as an example. However, this example still left me a little confused.  As I read further on, the author gave an example of an application of comparative advantage using Tiger Woods and Forrest Gump. This example instantly cleared my concerns and made the principle easier for me to grasp. Basically, what I gathered from this chapter is that comparative advantage trumps absolute advantage when it comes to trade because comparative advantage weighs in opportunity costs. Thus, taking into account comparative advantage will ultimately allow you to gain more. I would give this section of the book a difficulty rating of 2 because even though I feel comfortable with this topic now I was earlier confused.