Plain Sense Economics

In the March 30 edition of The New Yorker, David Owen makes a good point about the relationship between the economy and our environmental scorecard:
[T]he world’s principal source of man-made greenhouse gases has always been prosperity. The recession makes that relationship easy to see: shuttered factories don’t spew carbon dioxide; the unemployed drive fewer miles [...]

In Microeconomics today we talked about how wages are set in part by the dollar value of the marginal product of labor (the incremental dollar value of adding one more worker) and the supply of those workers.
In his blog in October, Greg Mankiw pointed to a chart from PhDComics.com that is sure to warm the [...]

When we tackle the demand curve and the various determinants of demand, one of the influences we discuss is that of income. In a normal good, when income goes up demand for that good goes up. So demand for dinners at nice restaurants would be expected to rise as the economy (and people’s incomes) rises.
There [...]

In another post we talk about the concept of price elasticity – which measures how responsive consumer demand is to a change in price. The general elasticity approach can apply to supply (reaction of suppliers to a change in market price) and income (change in demand as a reaction to a change in consumer income).
Another [...]

Early in our Principles of Economics courses we introduce the simple, competitive market, which has many buyers, many sellers, no barriers to entry, reasonably full information, and no government intervention. We also explain how Adam Smith, in his book Wealth of Nations, preferred the market’s ability to establish a new equilibrium as if guided by [...]

In my earlier post on Externalities I mentioned that one form of government intervention to correct a negative externality is a Pigovian tax. Named after the English economist A.C. Pigou (pee-GOO), this tax attempts to bring outside, social costs into the decision that a seller makes in a market.
“…come again?…” Here’s what I mean…. [...]

Somewhat to my chagrin I discovered that I hadn’t posted on externalities – which is an economic concept important to understanding public policy options. So on with it…
In a nice, idealized market place the buyers and sellers come together at a price point where the private benefits of the purchase to the buyer equal the [...]

We read/hear in the news media about changes to the U.S. trade deficit. This page from the Census Bureau shows that in the month of October, 2007 the trade deficit was $57.8 billion. That’s large in anyone’s book, but it is not ballooning as it has in earlier months. Two forces (at least) are at [...]

Tyler Cowan, who writes in the Marginal Revolution blog, contributed this piece in the November 18, 2008 of The Washington Post. He both defines and applies opportunity cost. Here’s an excerpt -
But all these figures don’t quite get at Iraq’s real cost. Indeed, we usually don’t even frame the question the right way. We’d [...]

Earlier we looked at the difficulty in voting for taxes and levies that will pay for a public good. In the case of the Ashland school levy, social and community values won the day. This post discusses the theory and definition behind public goods and common goods.
Public Goods…
… have three important characteristics:

They are a good [...]