Electrified Roads
Question: To dynamically charge vehicles, it is probably enough to electrify the stretch of 20.000 km of highway in Sweden. Would 20.000 km of electrified road be a public or a private good?
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Author: admin
The purpose of a market
When we look at the economy as a system, markets are subsystems. From this perspective, the price mechanism describes how some elements of the market system interact with each other. But what is the purpose of a market?
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Excess supply of retail space
I have arrived at the price mechanism, how excess in demand drives prices up, and excess in supply drives them down – under normal circumstances and with everything else unchanged -, to end up at an equilibrium price and quantity cleared. But what happens to the excess supply, or the excess demand?
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CO2 shortage?
We read a lot about climate change, caused by CO2 emissions that are too high, but I never realised that CO2 is actually produced by gas manufacturers for customers in the food and beverages industry.
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Inferior goods are not inferior at all
Food products that show a fall in demand when incomes go up, are referred to as inferior goods. The example of an inferior good giving in my textbook is bread, and in Dutch textbooks you’ll often find potatoes as an example of inferior goods. I would not label bread, and potatoes as inferior.
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Price war or advertising collaboration?
One of the things I like about my textbook, is that it treats advertising as a separate influence on demand. In Dutch textbooks this is often raked up with other influences on taste. The author of my textbook even takes it one step further, by pointing out, in the chapter on price elasticity, that, in theory, you could calculate elasticity for anything that influences demand. So, I figured, this includes advertising. Therefore I did some research on advertising elasticity.
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The demand curve and the supply curve for waste
Do we realise that demand for goods, and often services too, comes with a supply of waste? So, if we take a normal, negatively sloped, demand curve, and trace the price down the curve, quantity demanded is growing, and so is waste. This gave me the idea that for every demand curve, there is a complementary supply curve of waste.
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What Companies Strive For
Just because some economists claim that owners of firms want to maximise their reward for ownership, their profit, does not necessarily make it true. Although we might observe that many owners of firms try to maximise their profit, this does not mean owners of firms, or firms, cannot have other objectives.
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Purpose: to allocate resources
I am pleasantly surprised that my textbook introduces the topic of economic systems with “The function of an economy is to resolve the basic economic problem” – the allocation of resources. I would like to be a little bit more specific though: The function of an economic system is to resolve the basic economic problem within the boundaries of the earth system, and with the inclusion of all.
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Division of labour
In the era of industrialisation, specialisation was the driver. It’s improvement of productivity was unsurpassed. The author of my textbook uses the well known example of the worker who could make 20 pins a day if he did all the stages in pin-making himself, whereas the same person can make 4,800 pins when he and nine others divide the work. This is virtuous when production needs to grow and labour and capital are scarce – it is then essential to increase labour productivity and the rate of capital utilisation. But what if labour is not scarce?
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