You know it's bad when a term like "Quantitative Easing" gets more press than Lindsay Lohan. Many of us, though, don't know what it means exactly. In short, it is a way for the Federal Reserve (the Fed) to help the economy grow by pumping money into the economy. Using supply and demand - let's show what's going on here. If the demand for money remains unchanged while the Fed acts, what happens to the "price" of money? If the price of money goes down, what happens to the quantity demanded of other things like exports and investing in capital?
Here's a quick supply and demand problem. The officials at Foxconn (The main hub of Apple manufacturing) are going to increase the wages paid to their workers. What do you expect to happen to the price of iPhones and iPads?
I assume that Foxconn's decision to increase wages came from pressure by Apple who has recently been under scrutiny for how foreign labor has been treated. Do you think, though, that Americans would still be pressuring Apple to pay the people who manufacture their products more if they knew what this would do to the price of Apple products?
The U.S. government has decided to implement new sanctions on Iran. What this means is that the government has decided to stop demanding certain goods that come from Iran (mainly, oil) as well as limit the supply of US goods to Iran (property). What larger effects do you think these sanctions will have in the input/output markets? Are Americans helped or hurt by these sanctions?
Consider the following scenario: US households currently supply land to the input market. After the sanctions there are less demanders because Iran can no longer exchange money for land in the US input market. Could this be shown using a demand graph? What do you expect will happen to the price of land if demand decreases but supply stays the same?
From SmartMoney, here's a fun article about the 10 Things the Super Bowl Won't Say. For the purposes of the quiz you will only be accountable for the first one, "Good luck getting a ticket." However, Texas Tech gets a mention on number 7 so read on if you'd like.
What is going on in the background that drives the ticket price this high? How does scarcity factor into this scenario? Is the price of a ticket somehow sending a signal to consumers?
Here is a great article on how many Apple products have been made. For this article you will only be accountable for reading the first page, if you would like to keep reading please feel free to. Perhaps the line that stood out to me the most was that "Made in America" is no longer a viable option. If Apple were to move their operations back, what do you expect would happen to the price of iPhones, iPads, etc...? Assuming that the price of labor is more expensive in America, which it is, what would be the effect of such a move on the demand for Apple products or the supply of Apple products? Using a supply and demand graph, could you show this?
Here are a few additional questions I would like you to consider.
- From an economic standpoint, does it make sense to use cheapest possible labor?
- From an ethical standpoint, do you feel that Apple is obligated to produce in any one country?
In this NY Times article, the woes of this past summer are talked about with relation to world prices for cotton and other commodities. While this is applicable to many people who have grown up in the Lubbock area on a very personal level, it is relevant to us because it allows us to see an interesting supply and demand phenomenon. Consider the following quote from the article
"World cotton prices, which had been at historic highs, have fallen recently, Mr. Hudson said, but that is mainly because the sluggish economy and other factors have outweighed the loss of supply."
So what we're seeing is a decrease in supply initially made prices increase, but a decrease in demand has brought them back down. Using a supply and demand graph, could you show this? Can we predict what the new equilibrium price will be (higher or lower)? Hint: what if the supply curve shifted further than the demand curve. What has happened to the equilibrium quantity?
Recent talks in Washington are leaning toward free trade restrictions against China. The argument behind such a move is in response to the Chinese currency, the Yuan, being held below its equilibrium value (price ceiling anyone?) Consider the argument for trade restrictions from our point of view, supply and demand. If there is a restriction in the demand for Chinese goods, less Chinese currency will be demanded (compliments - you can't buy Chinese goods without "Chinese dollars"). What do you forecast will happen to the price of the Yuan, aka the exchange rate, when demand decreases? Could you show this using a supply and demand graph? In what way will trade restrictions affect other currency prices?
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