Friday, May 13, 2011

Another Population Pyramid...Longevity will be the death of us!!

Source: The Economist
  ""THE world’s population will reach 7 billion by the end of October, according to the latest projections from the United Nations. For the first time the UN has attempted to look as far ahead as 2100, using various assumptions about how fertility and mortality rates might change over the years. The average of these estimates suggests that the global population will cross 10 billion by 2085. By 2100, 22.3% of people will be aged 65 or over, up from just 7.6% in 2010. The bulk of population growth is expected to come from the developing world. Africa’s population will rise from 1 billion in 2010 to 3.6 billion in 2100. In 1950, 32% of the world’s people lived in today’s rich countries. By 2100, only 13% will.""

Nice interactive graph showing US population shift from 1790 to 2010...I think the invention of air conditioning can explain this...

Why have LCD TV's come down in price so much and so fast? Nice Graphics here showing why...

This graphic shows the change in price of various widths of LCD TV screens since their introduction into the marketplace.  It is quite remarkable how the price of the larger screens have decreased the point where price is somewhat irrelevant. The only decision you face is how big you want your TV to be. 

Source: Wired
The primary reason is illustrated in this next graphic.  Since 2007 the widths of screens, the most expensive component, have increased significantly because of a technological break-through in the production of the LCD screens themselves. Note the dramatic increase in widths during the 2007-09 period:
Source: Wired

""Like multicore computer chips, Android smartphones, and Starbucks coffee, LCD TVs are getting cheaper—and bigger—all the time. Inevitably, your brother-in-law’s new 55-inch TV cost less than the 48-inch model you bought two years ago. Why? Science! See, flat-panel displays are made by machines that print arrays of circuits on sheets of glass and then slice those sheets into screens like high tech brownies. And since 1999, those machines have increased in size by 800 percent. Thus, the Law of Big Glass: The larger the glass printer, the cheaper—or bigger—the TV.

In 1993, the industry-standard tool for “printing” display circuitry, a TFT-LCD deposition machine, could work with glass no bigger than about 18 inches square. Today, they can handle sheets that are 11 feet on a side—the size of a garage door—and just a millimeter thick. A 20-inch flatscreen TV cost $1,200 in 1999; it costs just $84 today.

The law applies to organic LED displays, too—which is great, since they’re brighter and more energy-efficient than LCDs. OLED screens use a related manufacturing process, and right now they’re printed on 4 x 5-foot sheets. But the Law of Big Glass says 55-inch OLEDs will someday go for less than $1,000 at Costco. By then you’ll probably want a tiny, ridiculously expensive holodeck""

What is the World's Worst Dictator biggest crime against humanity? Genocide? Torture? No, it is an economic term that harkens back to the 1970's...

This came from Parade Magazine. They profile the World's Worst Dictators.  They give a one line overview of their "crimes against humanity".  As a teacher of economics, I am glad to see that Stagflation is number 1 on the list of high crimes...

Monday, May 9, 2011

A typical college student graduates with $22,900 in loans...I say this is AWESOME!! Read why here...

The graph below shows the average student debt load over time a student accumulates when they graduate from college---$22,900.  Yes, this is quite a bit of money, but NOT alot.  The income the average college graduate earns over the course of their working life will pay this back and MUCH MORE.  You are more likely to stay employed over time and if not, then more likely to find work sooner.  You are more likely to work in a job you actually like and have a passion for.  This is not to say people without degrees don't experience these things too, but the ODDS are much less then with a degree.  Is this piece of mind worth alittle (alot)?  What else could you spend/invest $22,900 on that will earn you a rate of return that amounts to several multiples of that $22,900.  It is the price of a moderately price car that will last you less than 10 years.   

While I agree that the price of college tuition is too high (whole other discussion), I am not sure so much hand-wringing should surround the level of debt. You get what you pay for, so don't go to school just to get a degree. Go to school to get an education (yes, there IS a difference) that will repay you not only in dollars, but in quality of life and piece of mind.  Where am I going wrong???? Take your shots.
Source: Real Time Economics

""In the long run, the investment is probably worth it. Education is a much better reason to borrow money than buying cars or McMansions, and it endows people with economic advantages that the recession and slow recovery have only accentuated. As of 2009, the annual pre-tax income of households headed by people with at least a college degree exceeded that of less-educated households by 101%, up from 91% in 2006. As of April, the unemployment rate among college graduates stood at 4.5%, compared to 9.7% for those with only a high-school diploma and 14.6% for those who never finished high school.""

Wages paid to Chinese factory workers are increasing rapidly. Does this mean a resurgence in US manufacturing? Does globalization have a natural "self-correcting" mechanism?

The graphic below shows the rise in wages paid to the average Chinese worker in the past year. In dollar terms, the amounts are still small compared to US wages, but they are increasing. China has become the world's manufacturing floor based on its comparative advantage in relative wages paid to workers, but that advantage is slipping.  This bad news for consumers of imported Chinese products because they WILL become more expensive in the near and medium term.  The GOOD news is that the closing of the wage gap will aid US workers in parts of the US where wage rates are generally lower.  Even though the wage differential is still significant, it will become less advantageous for producers to re-locate to China based solely on wages paid to workers.  Once the wage gap between American and Chinese workers closes, the only other significant criteria for locating a business in either place is worker productivity.  Are we ready to match them head to head?

Walmart customers have too much month left over at the end of their money...This may be the most revealing comment on the state of the economy yet...

Opportunity Costs are impacting Walmart.  The effects or rising gas and food prices are hitting other sales departments within Walmart.  People have to make choices about spending their money.  Some goods, like food and gasoline are a relatively inelastic part of people budget, meaning when the price rises it does not severely impact the decrease in quantity demanded for those items. They are "must haves" in the short term.  More money going for one good, means less for others that are not "necessities" or can be done without in the short term. This is what Walmart is experiencing according to this executive:
""Wal-Mart (WMT) CEO Mike Davis has been quoted as saying that the firm’s core customers are “running out of money,” that the end-of-month sales fall-off is becoming more noticeable as high gas prices and increasing food inflation take their toll. But it’s not just a cyclical story.""--SOURCE HERE
Walmart for a long time has benefited from "down-trading" when the economy turns bad. In economic terms, Walmart is an "Inferior Good"--as Income DECREASES the demand for Walmart INCREASES. Walmart is a substitute for higher priced retail stores like J.C. Penny, Sears, Target, Tom Thumb, Albertsons, etc. However, they may have hit a wall and there is no place else for people to down trade to--except perhaps -99 Cent stores or....Goodwill's...

Sunday, May 8, 2011

Is gasoline a substitute or a complement for motorized scooters? Whatever the relationship the demand for them is going through the roof!!

The recent spike in gas prices is benefiting the bicycle and motor-ized scooter industries: 

Bike, scooter sales pick up speed

""Sales of new bikes rose 9% in the first quarter of this year, compared with the same period in 2010, and sales of road bikes — commonly used in commuting — jumped 29%, says Scott Jaeger, senior retail analyst with Leisure Trends Group, a Boulder, Colo.-based retail tracking firm. Sales of gas-powered scooters are up even more: nearly 50% in the first quarter compared with a year ago, says the Motorcycle Industry Council, a trade group. "We see spikes when fuel prices rise," says Ty van Hooydonk, the group's spokesman, noting many scooters average 60 to 80 miles per gallon.  When gas prices last peaked in the summer of 2008, Census data show bike commuting rose 15% nationwide from 2007.""

 Normally we think of gasoline as a complementary good, one that is used with another good such as cars. In this case, as cited in the article gasoline, bicycles and scooters are substitute goods. In economics we define goods as substitutes if the increase in the price of one good increases the demand for another good OR the decrease in the price of one good decreases demand for another good.  The relationship between price and quantity demanded is DIRECT in the case of substitute goods.

The increase in gas prices is increasing the demand for bicycles and gas powered scooters. It is very easy to see that a bicycle is a substitute for gasoline because they are not used together. But it is more difficult to see how a motorized scooter, which uses gasoline is a substitute for, well, gasoline.

I think the easiest way to understand this is to establish the "strength of the connection" between the two goods. Although I use gas in my scooter I am trying to GET AWAY from the high price of gasoline by substituting to a good that will allow me to consume as little gasoline as possible. If gas prices decreased and the demand for, say,  gas-guzzling SUV's increased, then consumers are RUNNING TOWARDS  more gasoline consumption---gasoline and SUV's are Complementary goods--the decrease in the price of gasoline increases the demand for SUV's.  Complements have an INVERSE relationship between price and demand.   

We can extend this to hybrid and other fuel efficient vehicles.  Gas prices increase and the  demand for these categories of cars increases. This meets the definition of Substitute goods.  Gas prices increase and the demand for SUV's deceases. This meets the definition for the goods to be Complements. 

On the AP Microeconomics test, they usually don't divide the line this thin. However, it will be in your interest to deepen your understanding of the differences between Substitutes and Complements.

Should Engineering majors pay more in tuition than English majors? Is this an idea whose time has come??

Below is an article on charging students in certain majors more in tuition based on the earning potential of that major. This is a way of capturing, in the present, some of future value of your degree.  It SEEMS like a good idea.  Engineering, Science and Medical degrees are more "capital intensive", meaning they require more physical facilities than most other degrees.  These are expensive to provide and benefit a smaller part of the student body.  It is fair for latter group to subsidize the former?  I am not sure about this development. I welcome your arguments either way.

UNL tuition may vary by majors

An engineering student likely will make significantly more money after college than an English major.

So the University of Nebraska-Lincoln is proposing a new tuition structure to allow it to charge engineering students significantly more for a bachelor's degree than it charges English majors.

UNL Chancellor Harvey Perlman is scheduled to present a “differential tuition” proposal to the NU Board of Regents Friday.

Specific details are being kept under wraps until Friday's meeting. But the proposal is expected to allow UNL, for the first time, to charge more tuition for some undergraduate programs than for others.

It would be a watershed departure from the concept that all Nebraska resident undergraduates should pay the same tuition for their degrees — currently $198.25 per credit hour — no matter what they study.

EXCELLENT (and entertaining) video on the basics of Keynesian Economics---A vital concept in Macroeconomics

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