Friday, July 9, 2010

Did Lebron James make his decision based on Supply-Side Economics? Taxes matter...

Business and Media Institute - "While sports reporters have sought agents and teammates for the inside scoop on where NBA superstar free agent LeBron James will sign, there’s another person who may know The King’s next move: his accountant."

Based on a $96 million, five-year contract, here's an estimate of what LeBron James would pay in state income taxes:

New York: $12.34 million

New Jersey: $10.32 million

Ohio: $5.69 million

Florida: $0.00

From Carpe Diem

Wednesday, July 7, 2010

Who gets "burned" by the 10% Tan Tax that just kicked in? The Owner? The Tanner? The workers who lose their jobs?

     A 10%  "Tan Tax" took effect on July 1st. The tax was part of the health-care reform package that was recently passed into law and was meant to pay for some part of the new health-care mandates.  I wrote about this at the time (click HERE for that blog entry) because Congress WAS deciding whether to tax tans OR elective cosmetic surgery.  Because of interest group pressure from doctors the tax was levied on tanning salons instead. 
     I wrote about the Tan Tax in terms of elasticity, or what would be the change in quantity demanded of tans be in response to the increase in price of tans due to the tax.  Elasticity of Demand is determined by taking the percentage change in Quantity Demanded and DIVIDING by the percentage change in Price (including the tax).  If the result is greater than 1 then the good is considered Price Elastic.  This means consumers/purchasers ARE sensitive to changes in price of the good. 
     The comment below is only an empirical observation by an interested party, but if we take it at face value then we can assume demand for tans is quite elastic (2) to very elastic (3). 

Tanning salons feel burned by 10 percent 'tan tax'

"In 26 years of business this is the worst I've seen it," said Scott Shortnacy, owner of the Arlington Solar Planet as well as six other branches in the Washington area. "Normally for people who tan, it's a part of their lifestyle. They keep doing it even in a recession. But everybody has been looking for ways to cut back on those areas. ... Our sales are down 20 to 30 percent."

If, in fact, tans are Price Elastic, the burden of paying the tax will fall on the business mostly and on the consumer to a lesser extent. This will increase the cost of doing business and "at the margins" some/many operators will reduce/layoff staff (the largest cost of doing business) or close altogether.  Jobs for lower skilled/lower educated workers will become more scarce...Something to think about...

What do a Vegemite Sandwich and "Kookaburra Sits in the Old Gum Tree" have in common? Apparently a flute solo...

Men at Work must pay royalties for copied riff in 'Down Under'
"A judge ordered Australian band Men at Work on Tuesday to hand over a portion of the royalties from their 1980s hit "Down Under," after previously ruling its distinctive flute riff was copied from a children's campfire song....But the penalty — 5 percent of the song's royalties — was far less than the 60 percent sought by publishing company Larrikin Music, which holds the copyright for the song "Kookaburra Sits in the Old Gum Tree."  "Kookaburra" was written more than 70 years ago by Australian teacher Marion Sinclair for a Girl Guides competition, and the song about the native Australian bird has been a favorite around campfires from New Zealand to Canada.Sinclair died in 1988, but Larrikin filed a copyright lawsuit last year. In February, Federal Court Justice Peter Jacobson ruled Men at Work had copied their song's signature flute melody from "Kookaburra."

More support for "The more you learn, the more you earn"---BUT is it a good thing??

The graph below shows the differences in pay, in terms of educational attainment, someone in 1979 earned with someone in 2009.  There are lots of inferences you can draw from this data (if you read the accompanying link you will see some).  Can everyone go to college? If not, what should they do?  What can the nation do to make sure the income gap created by an education gap not increase more than it has? Should we even do THAT?   What do you think!!

Do You Earn More Than Your Parents Did?

Tuesday, July 6, 2010

4th of July Poll "What country did America gain its Independence from?" umm...Social Studies epic fail...

"The fourth of July is Independence Day in the US. 1,004 US residents were asked who independence was declared from. The results? A little concerning, shall we say."--Data Driven

Click HERE to go to website and change the demographics---Interesting results..
Source: Chartporn

I-Phone4 and the cost of its component parts---Very nice breakdown!!

A very nice, if incomplete, breakdown of the component costs for the I-Phone4, and where those parts come from.  It is quite amazing how the parts make their way around the world and into a finished product.  It is hard to say how much Apple makes in profit from each phone because many other costs (fixed and variable), in addition to the ones shown here, are not included.  However, it is instructive to look at the various component costs because those do include fixed and variable costs (accounting costs which are JUST explicit costs of production).  The article contains many fascinating Microeconomics concepts, but the main point is that labor, which is the largest variable cost of producing MOST goods, is increasing at the assembly point of the world-wide production chain. This visual will be helpful in AP Microeconomics when we discuss cost of producing/normal vs. economic profit, international trade, etc. 

From NYTIMES: Supply Chain for iPhone Highlight Costs in China

A breakdown of the same numbers and a different take on the topic are contained in this pie chart from Carpe Diem 

Monday, July 5, 2010

Food Prices at Historical LOWS...Stop complaining and eat your Veggies!

All societies, one way or the other and to differing degrees, pursue the social goal of meeting peoples "needs and wants".  Needs are things that have no viable substitute and are universal in nature regardless of where you live on the planet, such as food, water, air, shelter. Everything after that is up for debate and enters the realm of "wants".  Even within a need, like food, there are embedded "wants".  We need food to live BUT the kind of food we eat is a want.  I can subsist on a cup or two of rice a day (millions do) and live, BUT I "want" pizza, burgers, pasta, etc.  
     There is a strange paradox afoot when we look at needs relative to wants.  The things we identify as needs are life-giving/sustaining, BUT we (by "we" I mean Americans, and perhaps citizens of other developed countries) feel entitled to pay the LEAST for them and demand the best quality.  Seems as though the market has responded over time in delivering better food (certainly room for debate there) in much greater quantities through mechanization of farming equipment, technological advancement in food engineering/fertilization, transportation, food packaging to avoid spoilage, domestic competition, and free (freer) trade with the rest of the world.  If we pay less for a pesky need like food, then we have more income left over to purchase "wants", which after all, make life worth living, right?  The graphs below help illustrate these historical developments. 
      The first one shows food (as a broad category) as a share of one's disposable income (income leftover after paying taxes).  You can see there is a steady decrease over time.  The second graph shows the vital commodity milk, as a direct consumption good or input into making a myriad of other goods, and its price change over time. 

 Looking at these two graphs, primarily the first one, you could deduce that:
(1) Food prices are not cheaper, but that income has dramatically increased (many do not believe this) so food expense has become smaller relative to incomes.
(2) Food has indeed become cheaper, in real terms, even though incomes have not increased
(3) A combination of both

What do you think?  Am I missing something? Fill me in, please!
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