Incentives

An incentive is a cost or benefit that motivates a decision or action by consumers, businesses, or other participants in the economy. Some incentives are explicitly created by government policies to achieve a desired end or they can just be part of the wacky world we call economics. The most noted incentive in the study of economics is that provided by prices. When prices are higher buyers have the "incentive" to buy less and sellers have the "incentive" to sell more. Price incentives play a fundamental role in the. When prices are higher buyers have the "incentive" to buy less and sellers have the "incentive" to sell more. Price incentives play a fundamental role in the allocation. When prices are higher buyers have the "incentive" to buy less and sellers have the "incentive" to sell more.

Examples:

1.    If I complete exemplary work I will receive a good grade. My incentive to complete exemplary work is to receive a good grade.

2.     If the employee works hard, then a customer will give him a better tip. The employee’s incentive to work hard is in hopes that the customer will give him a better tip.

3.     If the customer is looking for a comfortable shoe, then he will base his purchase on quality. The customer’s incentive for buying a quality shoe is that the shoe will be comfortable. 

Running in Place Reflection

The Running in Place Project was a fun, interactive, and challenging activity that involved deep thinking and a strong economic knowledge. As an individual, I was comfortable with the material, and was able to apply the information effectively into the project. However as a group, our actions were hindered by a lack of communal material comprehension and overall effort. Yet, the project still remained interesting and intriguing.

            One of the most interesting parts of the project was the plethora of correct answers. At first, having more than one correct answer was a little intimidating. However, as time went on, the amount of correct answers allowed the group to research and explore the best options. In fact, the multiple correct answers forced us to be completely confident in our decision. On top of having to support of answer choice, we had to explain why the other options were simply not as economically efficient. Also, in selecting our shoe, we had to compare all of the shoe choices. Since they all held some validity, we had to go through each type of shoe individually and weigh the pros and cons. For example, the image shoe provided more profit, however it cost much more to produce, therefore resulting in lower revenue.

However, choosing one right answer out of many other correct answers was not the most difficult portion of the project.

By far, the most difficult part of the project was navigating through elements of the project without given directions. I felt somewhat overwhelmed with the amount of choices available because of the lack of directions. However, after making a decision and sticking to it, the group was able to move forward without adversity. Since Mr. Holden was a visual learner, our group decided the best method of education was a Power Point Presentation. Once our group reached our method of teaching, the lack of directions became less difficult to maneuver through. Making out decisions proved to be slightly more difficult. Most of our time was dedicated to teaching new students the material covered in class dating back to the first day of school. Juggling making decisions, creating the project, and teaching the information from class was very difficult when done all at once. Coincidentally, the project did teach me new ways of communicating within the group environment.

            Our group took advantage of the Google Documents application. Through this tool, our group was able to add, subtract, and alter the project from any location. Being able to edit that project from anywhere allowed for effective time management while establishing consistent communication. However, our biggest obstacle came in the form of new students with a lack of economics knowledge and medical drawbacks. While the outcome was work we could all be proud of, not every person contributed equally as members of a team. Without naming names, a core group of the team executed most of the research, the application, and the presentation at its entirety. Looking back on this project, I learned to be more selective on my team or group members. I also learned to make sure all the members of the group have equal knowledge of the material covered.

            Overall, the Running in Place Project helped me understand and apply the material learned in class into a presentation. Working with others allowed for more work to be done under and shorter time span. While the members of the group were not ideal, I learned some very valuable lessons for my next endeavor in a group project. I would highly recommend the project as an informational tool to assist students in mastering the economics material.

Introductory Paragraph for First Essay

"Entrepreneurs and their small enterprises are responsible for almost all the economic growth in the United States." Former president Ronald Reagan said these words to acknowledge the success of the free market in America's current economy. In fact, President Reagan credits the entirety of America's efficiency on the foundation of the United State's free market economy. America's vast success is both a testament to its individual capabilities and economic ethics. Economic ethics tend to be left behind in a dominant economy, which can lead to materialism and gluttony. However, America's current market economy promotes self-interest, not greed and selfishness.

Who Feeds Paris?

The first chapter of Naked Economics begins with an interesting story about how an advertising strategy by Coca Cola Europe proves to be a losing proposition at the start of 1989 but ends in impressive results by the end of 1995. There are myriad of different ways everyday that make modern economy work. Wheelan begins with the question, "Who feeds Paris?" as a starting point to explain how markets are powerful influences in an individual's every day life. Wheelan explains how markets use prices to allocate scarce resources and how markets are self-correcting. Wheelan expounds on how the market gears up and aligns incentives such that individuals work for their own self-interest for an improved standard of living. In no uncertain terms, the author explains how the Soviet socialist economy failed because the bureaucracy of the government controlled the economy. This chapter makes a strong stand that it is not fair to impose preferences on others. He alleges that it is "bad economics to impose preferences on individuals whose lives are much different from all the rest." (pg. 7)

Wheelan continues to use Cuba's economy as an example of bad economics. Wheelan pinpoints the failure of the economy based on the lack of competition. Competition between two businesses boils down to who can produce a product for the least and sell it for the most; therefore creating the best total revenue. Revenue is defined by the total cost minus the total profit.  In a free market economy, competition allows the more efficient and productive companies to flourish, leaving the less capable corporations in the dust.  In Cuba however, a product cost the same at several different locations. Through this type of economy, businesses would close simply based on location. If two sellers offer the same good at the same price, the consumer will use their utilities, or money, to purchase the good from the more convenient, or closer, location. 

Pro and Con List for Restaurants

1.     Proand Con List:

〈     Taco Villa

o   Pro-well known to students, quick, easy, tasty

o   Con-not vegetarian, unhealthy 

〈     The Wildcat’s Den

o   Pro-reasonable prices, students teaching students, support other course offerings

o   Con-not vegetarian, no profit to student council, maybe be run inefficiently

〈     Veggie Vittles

o   Pro-vegetarian, very healthy, eco friendly

o   Con-maybe expensive, eco friendly aspect may over take taste

〈     Consumer Sciences Kitchen

o   Pro-vegetarian option, low price, government involved, healthy, cheap, profit willbe given to the Consumer Science program due to budget cuts

o   Con-not taste based, the profit will not be given to the student council

〈     Fleur-de-Lys

o   Pro-acclaimed chef, very taste

o   Con-expensive, not vegetarian

〈     Bubba’s Steak House

o   Pro-well known, healthy, filling

o   Con-not vegetarian, maybe expensive

〈     Sally’s Soups and Salads

o   Pro-vegetarian, healthy, tasty, 

o   Con-

〈     Bennie’s

o   Pro-tasty, good price, well known

o   Con-not vegetarian

〈     Hunan Wok

o   Pro-well known, low price, tasty

o   Con-not vegetarian, not healthy 

〈     The Borscht Palace

o   Pro-tasty, healthy

o   Con-not vegetarian, expensive

〈     The Pasta Place

o   Pro-cheap, well known

o   Con-not vegetarian 

〈     The Roastery

o   Pro-vegetarian option, healthy, tasty

o   Con-expensive

Demand

PxQ=TR
Substitute- a replacement, inverse relationship with the product
Compliment- a good used in harmony with the product, direct relationship

Why can Benny sell more burgers at 1 dollar than 5 dollars?
According to the law of demand, Benny can sell more burgers at a cheaper price because the lower price of a good translates into a higher demand. By selling a cheaper burger, his customers have to give up less to purchase his good. Therefore the opportunity cost decreases.

Why can Benny sell more burgers at 1 dollar, than Sally can sell salads at 1 dollar?
Because there is more demand for burgers than salads.

Factors of demand of burgers:
Taste, Income, number of consumers, expectations,  and price of related goods

What is the relationship between total revenue and demand?
The two have have a direct relationship.

The Law of Demand

A microeconomic law that states that, all other factors being equal, as the price of a good or service increases,consumer demand for the good or service will decrease and vice versa. 


This law summarizes the effect price changes have on consumer behavior. For example, a consumer will purchase more pizzas if the price of pizza falls. The opposite is true if the price of pizza increases.