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| | Once we realize that the "bad" drives out the "good", it becomes possible to anticipate and correct it. The "bad" can be prohibited, excluded, or stopped immediately as it occurs. Better yet, can the "good" drive out the "bad"? | | Once we realize that the "bad" drives out the "good", it becomes possible to anticipate and correct it. The "bad" can be prohibited, excluded, or stopped immediately as it occurs. Better yet, can the "good" drive out the "bad"? |
| | | | |
| − | === Is the Converse of Gresham's Law True? ===
| + | The converse of Gresham's Law would be this: the "good" drives out the "bad". |
| − | | + | It seems to work. No one hears profanity in church, or is afraid of being robbed there. The greatest achievers in world history would read the Bible daily. Even before Christianity, Alexander the Great slept with a copy of the masterpiece book the ''Iliad'' under his pillow. Napoleon, Stonewall Jackson, George Washington, and other successful military leaders made an effort to have the "good" of the Bible drive out the ugly side of war. |
| − | The converse of Gresham's Law would be this: the "good" drives out the "bad". Is it true? | |
| − | | |
| − | It seems to work. No one hears profanity in church, or is afraid of being robbed there. | |
| − | | |
| − | <more>
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| | | | |
| | == Consumer Surplus, Revisited == | | == Consumer Surplus, Revisited == |
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| | <use graph> | | <use graph> |
| − |
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| − | == Exam Tips ==
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| − |
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| − | We will have our midterm exam in two weeks (during class #9). Here are the topics that will be on the exam, with an approximate weighting similar to the CLEP exam for college credit:
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| − |
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| − | * 10%: The basics (defining economics, also scarcity and opportunity cost)
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| − | * 20%: Supply and demand, including price controls (price ceilings and floors)
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| − | * 15%: Elasticity
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| − | * 15%: Utility, indifference curves
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| − | * 30%: Decisions by a firm (cost measures, marginal product, short and long run, returns to scale, MR=MC)
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| − | * 10%: Miscellaneous, including consumer surplus, efficiency, transaction costs, Coase theorem
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| − |
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| − | On any multiple choice exam, you can improve your score significantly by improving your test-taking skills. This includes:
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| − |
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| − | *reading the question carefully, and rereading if necessary; never miss a question due to misreading it
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| − | *eliminating incorrect answers before choosing the correct one
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| − | *not leaving any questions unanswered if no points are deducted for wrong answers (neither the CLEP exam nor my exams deduct for wrong answers)
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| − | *preferring answers that are worded in a way that fits the question as a key fits a lock
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| − | *disfavoring answers that have sweeping or broad terms in them, like ALWAYS and NEVER
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| − | *avoiding changing answers away from your first impression, unless you have a good reason to do so.
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| − |
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| − | Many questions on a multiple-choice exam can be answered correctly even though you didn't know the right answer beforehand, if you follow the above test-taking skills. One of my former students was told he would not have to take a particular exam in college, and he did not study for it, but was then surprised when the teacher made him take it anyway. Using these test-taking skills that he learned in my courses, he obtained the highest score -- higher than many students who studied many hours for the exam.
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| | | | |
| | ==Example: Homeschool Dinner Event== | | ==Example: Homeschool Dinner Event== |
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| | ===On the “supply side”:=== | | ===On the “supply side”:=== |
| | + | |
| | + | You can make the task easier by setting up committees for different tasks: |
| | | | |
| | 1. Selection Committee. This includes choosing the location (probably a church facility), a caterer (probably nearby), and a date (probably a weekday). | | 1. Selection Committee. This includes choosing the location (probably a church facility), a caterer (probably nearby), and a date (probably a weekday). |
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| | ===On the “demand side”:=== | | ===On the “demand side”:=== |
| | + | |
| | + | Committees help on the "demand side" also: |
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| | 1. Ticket Sales Committee. This includes setting the prices, marketing the event, and selling the tickets. | | 1. Ticket Sales Committee. This includes setting the prices, marketing the event, and selling the tickets. |
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| | On the demand side, an opposite perspective must be taken. Here you want to reach the highest possible price in selling tickets or spaces for sponsors in the program. Good salesmen or sellers are often the opposite of good buyers. The roles are the inverse of each other. | | On the demand side, an opposite perspective must be taken. Here you want to reach the highest possible price in selling tickets or spaces for sponsors in the program. Good salesmen or sellers are often the opposite of good buyers. The roles are the inverse of each other. |
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| − | What would entice someone to attend a dinner? How can you make the event look as attractive as possible? How should price discrimination be used to maximize the income? | + | What would entice someone to attend a dinner? How can you make the event look as attractive as possible? Could price discrimination be used to maximize the income? |
| − | Here are the prices on a fancy fundraising pro-life dinner dance at a nice hotel that I just received in the mail:
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| | | | |
| − | Table Host (for ten): $2000
| + | Perhaps you would like to show initiative and organize the next homeschool dinner! |
| − | benefactor: $1000 per person
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| − | patron: $500 per person
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| − | sponsor: $250 per person
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| − | supporter: $150 per person
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| − | Can’t attend but enclose donation of _______
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| − | It is trying to raise money for a good cause, and sets its prices on the high side. A popular, conservative congressman is the guest speaker. Do you think this pricing maximizes the amount raised for the worthy cause? Does this use price discrimination?
| + | == Exam Tips == |
| | | | |
| − | ==Assignment==
| + | We will have our midterm exam in two weeks (during class #9). Here are the topics that will be on the exam, with an approximate weighting similar to the CLEP exam for college credit: |
| | | | |
| − | Read and, if necessary, reread the above lecture. Our midterm exam is in two weeks and this assignment is lighter than usual so that you can begin preparing for the exam this week. But do answer 5 out of the following 6 questions:
| + | * 10%: The basics (defining economics, also scarcity and opportunity cost) |
| | + | * 20%: Supply and demand, including price controls (price ceilings and floors) |
| | + | * 15%: Elasticity |
| | + | * 15%: Utility, indifference curves |
| | + | * 30%: Decisions by a firm (cost measures, marginal product, short and long run, returns to scale, MR=MC) |
| | + | * 10%: Miscellaneous, including consumer surplus, efficiency, transaction costs, Coase theorem |
| | | | |
| − | 1. One of the best motivators in business and in life is ___________.
| + | On any multiple choice exam, you can improve your score significantly by improving your test-taking skills. This includes: |
| | | | |
| − | 2. Identify the four elements of ''perfect'' competition.
| + | *reading the question carefully, and rereading if necessary; never miss a question due to misreading it |
| | + | *eliminating incorrect answers before choosing the correct one |
| | + | *not leaving any questions unanswered if no points are deducted for wrong answers (neither the CLEP exam nor my exams deduct for wrong answers) |
| | + | *preferring answers that are worded in a way that fits the question as a key fits a lock |
| | + | *disfavoring answers that have sweeping or broad terms in them, like ALWAYS and NEVER |
| | + | *avoiding changing answers away from your first impression, unless you have a good reason to do so. |
| | | | |
| − | 3. Give an example of nearly perfect competition between two firms, and explain why.
| + | Many questions on a multiple-choice exam can be answered correctly even though you didn't know the right answer beforehand, if you follow the above test-taking skills. One of my former students was told he would not have to take a particular exam in college, and he did not study for it, but was then surprised when the teacher made him take it anyway. Using these test-taking skills that he learned in my courses, he obtained the highest score -- higher than many students who studied many hours for the exam. |
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| − | 4. Do you think the converse of Gresham's Law is true with respect to speech and conversation, such that good speech or conversation (such as discussing the Bible) drives out bad?
| + | ==Assignment== |
| | | | |
| − | 5. Describe how you can use competition, perhaps even competing with yourself, to motivate you to achieve more.
| + | Read and, if necessary, reread the above lecture. Our midterm exam is in two weeks and this assignment is lighter than usual so that you can begin preparing for the exam this week. But do answer 5 out of the following 6 questions: |
| | | | |
| − | 6. We are going to have our midterm in two weeks. Think of a question that you would like to see answered or clarified at the next class.
| + | 1. Identify the four elements of ''perfect'' competition. |
| | | | |
| − | old questions:
| + | 2. Describe how you can use competition, perhaps even competing with yourself, to motivate you to achieve more. |
| | | | |
| − | 4. Suppose you own a widget factory having fixed costs of $10,000. In addition to the $10,000, you have variable costs of $2,500 for each widget you make. Worse, the factory can make only 3 widgets in an entire year! Your widget sells for $5,000. Someone offered to buy your factory for $10,000. Should you sell it?
| + | 3. We are going to have our midterm in two weeks. Think of a question that you would like to see answered or clarified at the next class. |
| | | | |
| − | 5. One day, you visit Wal-Mart to see if you can sell it some widgets. Wal-Mart said it has good new and bad news. The good news is that it wants high volume. The bad news is that it wants a price so low that your MC=MR for every unit sold to it. Should you agree? Explain.
| + | 4. Do you think the converse of Gresham's Law is true with respect to speech and conversation, such that good speech or conversation (such as discussing the Bible) drives out bad? |
| − | | |
| − | 6. Suppose you own a company that has marginal cost (MC) = $9, average total cost (total cost divided by total output) = $11, average variable cost (average cost of variable inputs, like labor and materials) = $5 and price of the sold good (P) = $8. Should you make any additional goods at these numbers? Should you shut down your company?
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| − | 7. Suppose you are running a dinner event at a free facility that has 24 tables seating 8 apiece. Your marginal cost (MC) is $15 per person. Suppose your speaker costs $3500 in fees and expenses. Suppose your demand curve is this: at price P=$15, quantity Q=200; at P=$35, Q=120; at P=$50, Q=70; at P=$60, Q=40; at P=$150, Q=7. How would you price and market your tickets?
| + | 5. Suppose you own a company that has marginal cost (MC) = $15, average total cost = $20/unit, average variable cost = $8/unit and a price of the sold good (P) = $14. Should you make any additional goods at these numbers? Should you shut down your company? |
| | | | |
| − | new questions:
| + | 6. Suppose you are in charge of running a homeschool dinner this year. Suppose the facility costs $500 and there are 20 tables of 10 persons each. Your marginal cost (MC) is $18 per person. Suppose your speaker costs $2000 in fees and expenses. Suppose your demand curve is this: at price P=$15, quantity Q=300; at P=$35, Q=150; at P=$50, Q=100; at P=$60, Q=50; at P=$150, Q=10. How should you price and market your tickets to make this dinner a success? |
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| | ===Honors=== | | ===Honors=== |