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Monday 4th 2019 Microeconomics courses Hi everyone, My name is Djems Destin, I'm living at Long Island (NY). This is my first experience through online courses and I already know that I can count on your support to be successful in this class. Mathematics is one of my favorite subjects and one of the courses required to get my second bachelors in operations management. My first one is in finance where I have had over 10 years of experience by working for some organizations in Haiti where I'm from. Today I am happy to be with you to go further with my dream. Good work to everyone and success in your studies. Djems Textbook Readings  

Read Chapter 1, “Ten Principles of Economics,” in Mankiw, Principles of Microeconomics. Read Chapter 2, “Thinking Like an Economist,” in Mankiw, Principles of Microeconomics. Be sure to read the Appendix to this chapter as well.

Discussion Forum 1 / Wed due date for posting Public policies often alter the costs and benefits of private actions. Why is it important for policy makers to consider both the direct and indirect effects of public policies? Select a particular public policy with which you are familiar and discuss two positive and two negative aspects of that policy. What goal do you think the policy makers were trying to achieve in effecting that policy? Do you believe it was successful? Why or why not?

Public policies have direct and indirect effects, policy makers are required to be wellinformed about the state of the market in order to measure the short- and long-term impacts on the economy. Because the expected impact through public policies may not be there and can cause unexpected consequences. For example, public immigration policies have been changed by the Trump Administration. Two major effects can be foreseen: regularization of the system with new selection criteria and strengthening control mechanisms over the immigrants. Similarly, at the side effects the rate of illegal immigration has been increased and a considerable delay in the processing of legal immigration applications.

Public policies are there to ensure equity and transparency. In this particularly case they aimed, of course, to protect the fundamental interests of the American citizens. However, according to a report by the American Immigration Lawyers Association (AILA), these new public policies impede legal immigration to the United States, to the detriment of American businesses, American families, local communities and the economy.

References: 1) https://www.aila.org/advo-media/tools/advocacy-made-easy/stop-the-corruption-of-uscisand-eoir-missions 2) https://www.forbes.com/sites/andyjsemotiuk/2019/08/23/immigrants-troubled-by-trumpsnew-immigration-policy-restrictions/#833c6b03b346 3) Read Chapter 1, “Ten Principles of Economics,” in Mankiw, Principles of Microeconomics.

Hello Djems, Thank you for contributing to our discussion on the direct and indirect effects of public policies. Generally, public policies, as expected, are politically inclined. The motive that underlies the foundation is more powerful than the policies themselves. For example, some public policies may be designed on the John Stuart Mills’ utilitarianism—also commonly referred to as teleological ethics(Levine, 2006) that generally rotates about the premise that the end result or outcome justifies the means. Although the intent is aimed at opportunity maximization, human tendency is predicated upon purposeful behavior (McConnell, Brue, & Flynn, 2012) and it may overshadow the positive intent of the public policy. The direct effect of public policy may be measured in terms of improving the wellbeing of society for which such policy is intended. Consider, for example, the state government of New Jersey plans and implements an infrastructure program that involves expanding the Garden State Parkway. This policy would create construction jobs and even facilitates faster commute of residents traveling to and from their employments. However, an indirect effect may be measured in terms of number of highway deaths resulting from over speeding. The balance between the direct and indirect effects of public policies need to be struck between the overall or aggregate benefit over cost. Effective allocation of scarce resources (Mankiw, 2015) for the most good should be the primary goal of public policies. Question: Based on what you now know about the direct and indirect effects of public policies, if you were a government official what would you do to ensure that public policies serve the best interests of society?

Elles doivent etre appliquees avec des mesures d’accompagnements visant a renforcer toutes les infrastructures ayant des liens directs ou indirects dans le domaine d’intervention. Ainsi je penses que les effets escomptes seront atteints. Il ne suffit pas d’extendre le highway mais aussi il faut revoir les mesures disciplinaires et securitaires avec toutes les instances concernees dans l’interets de la communaute

For best efficacity and efficiency the public policies must be implemented with accompanying measures designed to reinforce all infrastructures (institutions) with direct or indirect links in the field of intervention. So, I think the discount effects will be achieved. For Illustration The extension of the Garden State Parkway must be supported by a re-examination of the disciplinary and security measures with all the bodies concerned which working for the in the interest of the community.

References Levine, C. (2006). Taking sides: Cashing views on controversial bioethical issues (11th ed.). Dubuque, IA: McGraw-Hill/Dushkin. Mankiw, N. G. (2015). Principles of microeconomics (7th ed.). Mason, OH: Cengage Learning McConnell, C. R., Brue, S. L., & Flynn, S. M. (2012). Economics: Principles, problems, and policies (9th ed.). New York, NY: McGraw-Hill/Irwin.

Module 2

STUDY MATERIALS Textbook Readings  

Read Chapter 3, “Interdependence and the Gains from Trade,” in Mankiw, Principles of Microeconomics. Read Chapter 4, “The Market Forces of Supply and Demand,” in Mankiw, Principles of Microeconomics.

ACTIVITIES Module 2 has two activities. Please consult the Course Calendar for the due dates.

Discussion Forum 2 In Discussion Forum 2, post your response to the following discussion topic. Reply to at least two classmates' responses by the date indicated in the Course Calendar.

Give an example of a monopoly and an example of perfect competition. Explain how each of your examples matches the textbook definition of that market structure. i

Monopoly exists when a specific seller the only supplier of a particular commodity (good or service) for all demand. This seller has the ability to raise prices cause his stranglehold on the inputs and No close substitutes. Luxottica is a giant of the eyewear. It owns over 80% of high-profile eyeglass and sunglass brands through the world. Perfect competition is an ideal type of market structure for every economist where supply and demand melt perfectly; firms and households has a neglect impact on the price and equilibrium is the law. The stock market has the characteristics to be a perfect competitive market: - homogeneity of goods; - Many sellers for similar good or service; - Competitive price, stakeholders cannot influence the market

“Give an example of a monopoly and an example of perfect competition. Explain how each of your examples matches the textbook definition of that market structure.” Monopoly exists when a specific seller the only supplier of a particular commodity (good or service) for all demand. This seller has the ability to raise prices cause his stranglehold on the inputs and no close substitutes. Luxottica is a giant of the eyewear. It owns over 80% of high-profile eyeglass and sunglass brands through the world. Perfect competition is an ideal type of market structure for all economist where supply and demand melt perfectly; firms and households has a negligible impact on the price and equilibrium is the law.

The stock market has the characteristics to be a perfect competitive market: - homogeneity of goods; - Many sellers for similar good or service; - Competitive price, stakeholders cannot influence the market

ihttps://en.wikipedia.org/wiki/Luxottica https://www.snopes.com/fact-check/does-luxottica-own-80-of-the-eyeglass-industry/ Chapter 4, “Ten Principles of Economics,” in Mankiw, Principles of Microeconomics.

Questions: Can monopoly be considered an economic evil. If so, how can it be prevented Overall by breaking up the monopoly we open the market for competition which drives down the prices until the equilibrium of the market. By opening for competition, the market brings diversity, innovation and the buyers will be able perform its self-interest. And household and firm can work for their own better off. In 1890 the Congress passed the Sherman Antitrust Act , almost unanimously these laws regulate the conduct and organization of business corporation and pure competition for the benefit of consumers. It’s An act to protect trade and commerce against unlawful restraints and monopolies. In 1914 they reinforce the Sherman Antitrust Act by the Clayton Act of 1914 and the Federal Trade Commission Act of 1914 to prohibit price fixing, cartel operation, restrict the mergers and acquisitions of organizations and the abuse of monopoly power. In Spectrum Sports, Inc. v. McQuillan 506 U.S. 447 (1993) the Supreme Court said: “The purpose of the [Sherman] Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself”. https://en.m.wikipedia.org/wiki/Sherman_Antitrust_Act_of_1890

Module 3 Discussion Forum 3

Why is the concept of elasticity important? What does it tell economists? Choose an industry with which you are familiar and tell whether you would classify it as either elastic or inelastic in the short run and long run. (Keep in mind that we are talking

here about supply elasticity, not demand elasticity.) Explain your answer using determinants of elasticity. The concept of supply elasticity is one of the tools of the legal profession to measure the responsiveness of the quantity supplied when price changes for any reason (technology, public policy, taste, expectation). This tool help for example the producer to have the correct behavior in short and long run by producing. Economist can use it for market prediction and macroeconomic projections. Different scenarios can occur from one firm to another, cause each of them has different limited capacity for production. High elasticity indicates the supply is sensitive to changes in prices, low elasticity indicates little sensitivity to price changes, and inelasticity means no relationship with price. Indeed, in most markets for goods and services, prices bounce up and down more than quantities in the short run, but quantities often move more than prices in the long run. The underlying reason for this pattern is that supply is often inelastic in the short run, so that shifts in supply can cause a relatively greater change in prices. But since supply is more elastic in the long run, this latter movements in prices are more muted and quantity adjusts more easily.

Question: What economic factors determine the price elasticity of demand?

The law of demand tells us when price decreases consumers will buy more and less when price increase. Price elasticity of demand help the actor’s economic to decide how much to charge, what to produce, tell the governments what item to tax and what are the public policies to equilibrium the economic market. Different scenarios could occur when we studied the responsiveness of the demand to the policies charging. By using the percentage method, the economic measure the degree to which demand is price elastic or inelastic and they state: 1) Demand is elastic when the quantity demanded responds substantially to change in the price. For instance, Coke VS Pepsi. If the price of coke increase the quantity of it demanded will proportionally diminish. In contrast, ceteris paribus, the demanded of Pepsi wile increase. When products are perfectly substitutable their demand are elastic. Furthermore, some products such as gasoline has less elastic demand over long time horizon. Luxury products have elastic demand when prices rises, the quantity demanded falls. 2) Demand is inelastic when a specific percentage change in price result or substantially change in quantity demanded. In such cense we say demand is slightly inelastic when price change decrease slightly the quantity demanded as milk or staples. When price change consumers continue to buy milk but they just reduced a bit the quantity consumed. And it’s the same for necessities doctor visit, they switch to the cheaper one. 3) Also, demand could be perfectly inelastic, the percentage change equal zero mean which means that there is no response from demand to a change price. When you are sick it doesn’t matter how high price is, you just need to be healthy as insulin or any products which doesn’t have close substitute. In sum, the elasticity reflects the consumer’s preferences and expectation. Here are some rules generally which could influence the price elasticity of demand: o The availability of close substitutes o Necessities versus luxuries o The Market size o Time horizon

o Income

Discussion Forum 4 What happens to the gains from trade when a tax is imposed? Choose an industry in which you work or with which you are familiar. How would a tax affect sale, supplier revenue, and consumer buying power in that industry?

Governments collect taxes to increase their revenues or tax base for public ends. Then they share this to the community in the form of public service or projects for the well-being of the whole community and also use it to intervene in the economic market for the purpose of adjustments or stimulations. when a tax is imposed in a specific market both buyer's surplus and the seller's surplus are reduced, regardless of whether a tax is imposed on a buyer or a seller, both will experience a reduction in surplus. Otherwise, the quantity sold in the market will be decreased and the gain realizes or the tax revenue is this quantity sold multiplied by the value of the per unit tax collected. It’s is counted as part of total surplus. Because the tax alters the quantity that is sold in the market, it will result in a deadweight loss which represents a trade not realized among some buyers and some sellers that don’t get any benefit from trading in such conditions. For example, in Haiti, when the government wanted to finance school curricula in 2011 throughout the country, it imposed a tax of $1.5 on all transfers from abroad to Haiti because the market for the transfer of funds represented 25% of the GDP amounting of US $2.8 billion. Since 1981 to 2011 this It was a way for the Haitian’s State to find the necessary financial means to finance these public projects. By doing this they reduced the income of the benefit holders and the profit of transfer agencies such as Western Union, Moneygram and others.

From 1981 to 2011 the amount of transfers to Haiti has increased from US $64.8 million to US$2.8 billion and after the tax was applied until August 2019, the transfer amount fell by more than 10% amounting of US$2.5 billion. Taxes can be tricky because even though they can benefit us, they can also hurt us. It hurts economic efficiency. Taxation causes deadweight loss because it causes buyers and sellers to change their behavior. Ref: Mankiw, N. G. (2015). Principles of microeconomics (7th ed.). Mason, OH: Cengage Learning McConnell, C. R., Brue, S. L., & Flynn, S. M. (2012). Economics: Principles, problems, and policies (9th ed.). New York,

https://www.brh.ht

Question: Would you consider taxation to be a necessary evil to society? The main task of any State is to serve and protect the nation and taxation is one of the means that the State give itself to accomplish this task. As outcome, this latter uses it to produce public goods and services such as national defense, roads and others. But taxation remains a double-edged sword also has a dual impact, positive for the government and sometimes negative for consumers and providers of private goods and services. For example, the sale of alcoholic beverages has increased by 30% from 2011 to 2018 so, the Trump Administration has decided to increase taxes on alcoholic beverages by 2% each year, notably the spirits beverages from 2020. This decision can be seen on several aspects:

a) The consumption of alcohol creates costs for society; health care issues, loss of lives and property (accidents and crime). By taking this decision government wants to reduce the welfare of those consumers by shrinking the consumption of alcohol and foster them to change their behavior; b) For those who are in this trade of alcohol beverage sales, their price will be increase and because of the elasticity of the demand curve the quantity supplied will decrease proportionately. Their revenue will move closer to their cost and reduce their profit; c) As supply and demand will shift to the left, in the short run, the welfare of the society will increase with less accidents and crime, limited cases of health care issues cause of consumption of alcohol; d) Tax revenue of the government will increase. In sum, the collection of taxes helps with the rest of the nation because it returns back to the community in forms of financial aid (Medicare, retirement, unemployment benefits etc.) and public goods such as road improvements, the building of parks and more. However, when I consider the Luffer's Curve which

has demonstrated the flip side of taxation, I can say that taxation is a necessary evil to society.

Ref: Mankiw, N. G. (2015). Principles of microeconomics (7th ed.). Mason, OH: Cengage Learning

https://www.cbo.gov/budget-options/2018/54815 https://www.statista.com/statistics/207936/us-total-alcoholic-beverages-sales-since-1990/

Discussion Forum 5 Give an example of a positive and a negative externality. Would a Coasean solution resolve the economic efficiency of the externalities you cite? Why or why not? Externalities are when the actions of an economic agent have a positive or negative impact on the wellbeing and behavior of other agents and this impact is not taken into account in the calculations of the agent that generate it. Externalities can be positive or negative. Negative externality is when the cost was imposed to a bystander who not involved in the production or consumption of good or services. Such examples of negative externalities like air pollution from factories, water pollution or better noise pollution from roommates or drivers. In 1980, towards such street of New York we could saw this sign “Don’t Honk” by the Administration of Transportation in order to prohibit noise pollution from drivers. Who will overrule this law, has to pay a fine of $350. Since 1990 to 2003 the fine has been double and the office of complaint related that, 7,400 people have been arrested and 111,180 summonses have been issued over the course (Arch. New York Times, 2013). Now, the problem with drivers is about cellphone usage while driving. Furthermore, transport causes considerable damage to the environment. Even though external costs do not have an explicit market value, they can be observed in expenditures on police and infrastructure management, hospital charges, public health spending and the loss of quality of life (European Commission, 2008, p) We talk about Positive externalities when the market produces less than the socially optimal quantity of the good or service, since there is a benefit to society that is not captured by the individual. Education can have been taken as example, the benefits are not only individual but also ...