Nice GIF showing how Chicago neighborhoods have changed over time in terms of income inequality.

Here is a GIF (CBSChicago) showing the change in the Greater Chicago area in terms of median income. De-industrialization as we moved from goods production to service production? Globalization? "White Flight"? Federal tax /housing policy? Local governance? Drugs and/or Crime?  Short answer is probably yes to all of the above.

According to the key on the graphic the colors represent areas where incomes are either above or below the "median income".  For instance GRAY represents areas where the income is from 75% to 125% of the median. Example: If median income in an area was $50,000 then half the residents of the area earned at least $37,500 but not more than $62,500.

As you see the GIF move through time more Green AND Pink/Red-ish areas emerge and crowd out the Gray.

The Green areas are where incomes are significantly greater than the median (getting richer--pulling away from the median upward) and the Pinkish to Red areas are where incomes are significantly less than the median (getting poorer---pulling away from the median downward).



Here are still shots I took of the GIF is you need to look at it at a more leisurely pace.

If the Ukraine falls food insecurity will rise in many parts of the world...

From the USDA:

Over the last 15 years, Ukraine has emerged as a major supplier to world markets for several agricultural commodities, including wheat, corn, sunflower oil, and rapeseed.  Wheat is a traditional export, with annual shipments varying with crop size. For 2013/14 (July/June marketing year), Ukraine’s wheat exports are forecast at 10 million tons, or about 6 percent of world wheat trade.  During the last decade, Ukraine’s corn production and exports have expanded, with 2013/14 (October/September) exports forecast at 18.5 million tons, making Ukraine the world’s third-largest corn exporter.  Robust production growth is also behind Ukraine’s emergence as the world’s dominant supplier of sunflowerseed oil, with 2013/14 (September/August) exports forecast at nearly 4.1 million tons, or about 57 percent of global trade.  Ukraine has also become a significant exporter of rapeseed, with 2013/14 (July/June) exports forecast at about 2.2 million tons, or 16 percent of world trade. Despite recent political developments in Ukraine, so far there is no evidence of significant shipping disruptions that might alter the 2013/14 Ukraine export forecasts. 

An "eggs-elent" article to teach various components of Demand.

A very short article in Quartz regarding the decline in the consumption of eggs in the US and how it can help teach the basics of Demand.

If teaching and/or learning about the "Demand" it identifies several key concepts relating to the difference between a change in quantity demanded vs a change in demand.  This is the bane of existence for every student and teacher of economics! :) There is also a bonus example of the difference between and Normal Good and an Inferior Good.  Good times ahead!! Read on.  :)
Americans once ate nearly twice as many eggs as they do today

1. They’re more eggspensive…

“Egg consumption is affected not only by the price of eggs, which has been rising, but also the price of competing protein products, like meat, which have been falling."

When the price of eggs INCREASES the Quantity Demanded for Eggs DECREASES.  This conforms to the Law of Demand, which suggests that the price of a good and the quantity demanded are INVERSELY related to each other.  A price change results in a movement ALONG the market demand curve (up and to the LEFT or Down and the RIGHT).  If the income you spend on a good is fixed and the price increases your money has less purchasing power and your quantity demanded for a good DECREASES.  If price decreases, your money has more purchasing power and your quantity demanded for a good INCREASES. This is known as the "income effect" and helps explain why a demand curve is downward sloping.

The second part of the quote suggests a "substitution effect" in the market for eggs where the prices of related/substitute goods have an affect on the market for eggs.  As the price of eggs increases the quantity demanded for eggs decreases (movement ALONG the demand curve) because there are viable substitutes available, other proteins in a variety of meats.  DO NOT confuse the difference between the two (Substitution Effect vs Presence of Substitutes)!!

2. …they got caught up in health scares… 

“The major factors behind egg consumption trends are consumer preference factors, in particular, concerns over the cholesterol content of eggs and the risk of coronary heart disease and stroke,” the US International Trade Commission noted in a 1999 report. 

One of the determinants of demand OTHER THAN PRICE that will SHIFT a market demand curve is "a Change in Consumer Preferences". The change could be positive which would cause consumers to, at every given price, INCREASE their quantity demanded relative to before the change in preference.  This would shift the market demand curve to the RIGHT indicating an INCREASE in demand.

However, the change noted above is negative, suggesting the quantity demanded is LESS than it was before at that price.  This would shift the market demand curve to the LEFT, indicating a DECREASE in demand.

Lastly, there is an example for a lesson on the difference between "Normal" and "Inferior" goods.

3… and people make more money. 

When people get richer, they tend to consume fewer eggs, according to the US International Trade Commission. Americans are a good deal richer than they were in decades past—the median US household makes roughly 19% more than it did back in 1967, according to US Census data.

With a "Normal Good" an increase in income will increase the quantity demanded for a good. It becomes more desirable as you make more money.  Give me MORE of this good at a given price!

This suggests you might be substituting AWAY from another good that becomes less desirable as you make more money---that would be an "Inferior Good". Give me LESS of this good at a given price!

I hope this helps you understand some of the more difficult concepts surrounding Demand Curve analysis.

Let me know if it works for you! :)

What is the price of a Lime in your neck of the woods? Photos welcome if you happen to be out shopping!

Lot's in the news about the current lime shortage in the US.  Most limes we consume come from Mexico. Due to weather AND gang activity, the price of limes has shot up in a very short period of time.  HERE and HERE you will find excellent reviews of what is happening.

According to the US Dept of Agriculture, the price of limes last week (Friday, March 28th) was $.37 cents each (a "weighted average price") and the week before that they were $.53 cents each.

Cobbled together from USDA data HERE

I just went to a Krogers in my neighborhood (northern burbs of Columbus, Ohio) and here is what a lime was selling for (4/1/2014):



How about where you live?  If you are out shopping take a picture and I will add it to this posting and we can see how it plays out in different areas of the country.

Thanks!

Nice short video about the progress the world has made in the past 50 years (20 for that matter). Louie Armstrong was right...

It's a wonderful world....Feeling down about the state of the planet and its inhabitants?  Here is a little pick me up that will put things in context.

The world is a far more wonderful place than in any time in history.  I believe that is true if you really think about it.

Explain-er with real life example: The difference between accounting costs and "economic" costs. This is why every one hates economists but love their accountant.

Here is a graph (HT: Big Picture Agriculture) that shows the relationship over time (1972-2012) between the Average Total Cost ("ATC") of producing a bushel of corn  (RED line) and its Market Price (BLUE line).

You can see at various times the ATC exceeds the price and vice versa.  Sometimes they make a profit, sometimes they lose money...So goes the agricultural commodities market and the roller coaster that is farming.

Look at the year 2006.  I inserted a dotted line to show in 2006 the price of a bushel of corn equaled the Average Total Cost of Producing a bushel of corn  The lines intersect at $2.50.  So, the farmer is "breaking even"...right?

Not so fast.  I believe I am making a correct assumption in assuming the creator of this chart included cost data that is ONLY comprised of "Accounting Costs" or "Money Costs".  This simply means explicit costs that are paid for with cash (or credit).  Accountants care only about accounting costs when they tally up the numbers and then subtract them from Revenue to obtain "Accounting Profits".

Economists, on the other hand, care about explicit accounting costs and IMPLICIT opportunity costs---are you surprised? Probably not...

Economists believe that the farmers accountant UNDERESTIMATES the cost of being a farmer because opportunity costs are not added to the the total cost of farming.

Simple example.  Lets say I make $50,000 per year as a teacher but decide to quit teaching and become a farmer.  In the first year I make enough in farming to pay myself $40,000.

This $40,000 is an accounting cost (real money paid to me!). However, economists take it one step further and suggest that I have to account for that lost $10,000 income I experience when I choose to farm.  

My total cost to farm is not $40,000, but $50,000.  Economists add in that $10,000 in foregone income as an implicit cost for me and my farming operation.

Once I add in the additional implicit cost of $10,000 that accountants do not, then my ATC of producing is going to be HIGHER than what you see at ANY POINT in the above graph.

The RED line will shift UP at every given price. 

So, for the most part, profits will be LESS in economic terms as opposed to accounting terms because of the inclusion of implicit opportunity costs.

Go back to 2006 on the graph. If we add in the opportunity cost then the ATC of producing corn will be something MORE than $2.50 and instead of breaking even as accounts would figure. The farmer will experience "economic losses".

My labor is not the only implicit cost economists like to account for.  Go here for a more comprehensive look at the topic.

There has to be an accountant vs economist joke in here somewhere. Because I teach economics I don't have much of a sense of humor, so you tell me a good one.  :)

A short lesson on the difference between a "Constant Cost" and "Increasing Cost" Production Possibilities Frontier. A must know for AP Econ!!

Understanding the difference between a "Constant Cost (Straight Line)" and an "Increasing Cost (Concave)" Production Possibilities Frontier (PPF) is not necessarily a difficult concept, but it one that does seem to be-devil the student in an introductory economics class.

I put together a series of slides that takes you through the differences step by step.

The main purpose for the PPF is to illustrate the principle of Opportunity Cost when it comes to resource allocation. If an economy is at Full-employment to get more of one thing then something has to be given up.

Sometimes that trade-off may be "constant"--the resources taken away from the production of one good are "perfectly adaptable" to produce more of another good.  A simple example is a farmer who has land where he can grow Corn and/or Soybeans. The land suitable for growing corn is the same as the land for growing soybeans (I live in Central Ohio--I see this just down the street). One the same acre of land, the farmer can get a maximum yield in corn or soybeans. Switching from one to the other entails virtually no cost in resource allocation for the farmer.  How it affects society is another question.

However, if the crop mix is different and the resources used are NOT easily adaptable for a different use, then the opportunity costs are not constant but "increasing".

I use Corn and Rice as an example below.  The land use for either is not identical.  If I want to grow Corn where I once grew Rice then it may take 2 acres of rice field acreage in order to get corn yield equivalent to what I would get out of land perfectly suitable for corn production.  My opportunity cost for more rice is not just one acre or rice production (Constant Cost) but two acres (Increasing Cost).

If the farmer persists in converting more of the rice field into corn production, then it may take 3 acres to get the equivalent in Corn. So on and so forth.

TINSTAAFL!   Corn and Rice---now I am hungry.  My opportunity cost of doing this blog entry is a delayed breakfast. You gave up eating lunch to read it.   I hope it was worth it to you.  Was for me.  :)

Full-employment, Progressive Era style. Nice photo of bowling pin setters in 1910.

This photo accompanies a nice article on "The Rise and Fall of Professional Bowling". 

It was taken in 1910.   From Wikipedia, here is the description of it:

1:00 A.M. Pin boys working in Subway Bowling Alleys, 65 South St., B'klyn, N.Y. every night. 3 smaller boys were kept out of the photo by Boss. Location: New York--Brooklyn, New York (State) Hine, Lewis Wickes, 1874-1940, photographer. April, 1910

Child Labor in action.  Nice illustration for a history class.

I am 53 years old and I remember watching bowling on TV in the late 60's.  I was a big deal! But I missed its real heyday long prior to that (pre and post WWII).

If you are interested in the subject or just like reading about historical cultural niches that people have mostly forgot, then this may be for you.

Source: Priceonomics

See how the price and quantity sold of the simple i-Pod as changed over time since its introduction in 2003. The i-Pod is Dead, Long Live the i-Pod...

Ok, it is not really dead, but it is on its way to becoming an impulse buy in line at the grocery store.

The iPod will go down in history as a breakthrough technology that lead to the "i"-everything revolution in consumer electronics.

When it debuted in 2003 (yes a short 11 years ago) its introductory nominal price was $400.00 (see left scale, blue line. Using the BLS inflation calculator for overall changes in prices, in today's dollars that would be equivalent to $510.30.

Following the BLUE line you can see the price dropped rapidly as more units were sold (GOLD line using the Right Hand scale).

In 2006 the price stabilized at its longer term price floor of just over $150.00 regardless of the number of units sold (with some seasonal fluctuations). Those seem to coincide with the very high peaks that center on the Christmas shopping season. Pretty consistent, eh?

For an additional reference point, I put the price of an i-Pod today (estimated at $155.00) in 2003 dollars: $121.47.  That is a 70% reduction in price using 2003 prices ($121.47-$400.00 = -$278.53/$400.00). Or you could use 2014 prices.

During that time, the general level of all prices, as measured by the Consumer Price Index, increased 28%.

Wish we could innovate with the cost of gas and or electricity to this extent so our heating bills would be lower by 70%.  :)

Source: Twitter Tweet via Quartz

A survey suggests businesses won't reduce staff, maybe slow hiring of new workers BUT raise prices if the minimum wage goes to $10.10. Let me show you how this is possible.

The Wall Street Journal had this graphic based on a recent survey regarding business sentiment towards a potential increase in the Federal minimum wage to $10.10 per hour.

Sixty-one percent of businesses won't cut their existing workforce (Red means NO, Blue means YES), which is good. About 52% say they won't reduce hiring in the future. Not a ringing endorsement going forward, but we will take it. About 63% say they would raise prices.  THAT doesn't sound good.

So, good for low wage workers who have a job. This is easy to quantify. Not so good for low skilled workers not in the labor force now but may/will be in the future. Not so easy (impossible?) to quantify.  Not good for people who purchase goods/services produced from low wage/low skilled labor. This is VERY easy to quantify.

Source: Wall Street Journal

In AP Microeconomics we have a unit called "Factor Markets" in which we use a very simplified model to graphically illustrate the "Profit Maximizing Number of Workers" a firm will hire given the changing market conditions, such as it described in the graphic.  

According to what you will learn below (all the relevant info is embedded in the slides) the ONLY way the conditions above can be met (no cut in workforce and possible reduced hiring) is if PRICES INCREASE.

The highly competitive industries that employ lots of low wage/low skilled workers AND is dealing with a relatively slow economy, this seems very difficult.  

But I am going to go with it and show you how it is possible for everything to work out just as the graphic suggests.  

Let me know if you spot any mistakes in content. Constructive criticism always welcome.

Which is the most and least expensive city to attend an NBA game for you and 3 friends? For once, geography does not seem to matter. See interesting data here...

Here is an interesting survey of NBA (National Basketball Association) teams and how much it costs to attend a game.  Lots of interesting data on individual costs for various items, from tickets to parking.

This report compiled a "Fan Cost Index".  It shows how much a "basket" of items costs for you and 3 friends to attend a game in all the cities that have a franchise. I highlighted that in YELLOW and they are in descending order from most expensive to least.

Here is how the report characterizes the components of the Fan Cost Index (FCI):

The Fan Cost Index® comprises the prices of four (4) average-price season tickets, two (2) cheapest draft beers, four (4) cheapest soft drinks, four (4) regular-size hot dogs, parking for one (1) car, two (2) game programs and two (2) least-expensive, adult-size adjustable caps. Costs were determined by telephone calls with representatives of the teams, venues and concessionaires, along with information provided on the teams’ official Web site, or through outside sources. Identical questions were asked in all interviews.

Source: 2013 Team Marketing Report via PRICEONOMICS

Nice real time data and graphs to illustrate a Price Floor. A must know concept for the AP Microeconomics test!

Agricultural commodities are produced in technically what is called a “Perfectly Competitive” Market. .  

The prices are established in commodity exchanges, like the Chicago Mercantile Exchange (CME), based on world-wide demand and supply.  Farmers simply have to accept what is offered.  In economics, these producers  are termed “Price-Takers”.

Agricultural markets are relatively stable over time, but because of many endogenous and exogenous variables that can and do affect farming, prices fluctuate.  Sometimes the price is higher than normal, sometimes lower.

In order to smooth out this pricing volatility nations often employ various polices to make the price a farmer receives for their crop more predictable over time.  The Unitied States does this within the context of the US Farm Bill.

One such policy the government uses to aid farmers is called a “PRICE FLOOR”

Price Floors legally establish a MINIMUM PRICE that the Farmer will receive per bushel of crop harvested. 

If the market price falls below the Price Floor, the government makes up the difference so the farmer receives the pre-determined Price Floor price.  This is what is termed a "BINDING PRICE FLOOR". 

If the market price rises ABOVE the legal Price Floor then the farmer receives the market price and the Price Floor becomes irrelevant. This is termed a "NON-BINDING PRICE FLOOR".

Below is a series of graphs I made to illustrate both binding and non-binding price floors.  For labeling purposes, I used Soybeans BUT it could apply to any of the commodities.

Within the slides I inserted a graph that shows the ACTUAL price floors past, present and future for Soybeans, Corn and Wheat as established in the recently passed US Farm Bill.  I got this from HERE via Agricultural Reader.

This is a MUST know concept for the AP Microeconomics test! Hope it helps.

A grade earned in an introductory college course is a pretty good predictor as to whether someone is going to major in that subject. HOWEVER, men and women respond very differently to that grade. Nice graphic with an example here.

This graphic comes from a study by Harvard professor Claudia Goldin (click for an article by her on this topic).

It shows, by grade attained in an introductory economics class, which gender is more likely to continue on and major in Economics.

When BOTH men (blue bar) and women (red bar) receive an "A" in the class, women are slightly more likely to go on and major in the subject.  However, as the grade earned gets lower women flee the major at a much higher rate than men do.

In other words, men are undeterred by a lower grade in deciding to major in economics and women quickly have second thoughts and move on to something else.

Economics suffers from a deficit of females in the major similar to the STEM majors.

This excellent analysis HERE at the Washington Post goes deeper into the potential reasons.  I highly recommend it if you are interested in the issue.

Source: Washington Post

Not in my area of expertise but here is what I think happened to Malaysian Flight 370.

I want to go on record with my theory of what happened to Malaysian Flight 370.

I just saw a profile of the pilots on CNN.  The co-pilot is a young-ish man and has been photographed smoking AND carousing with ladies in the cockpit.

The plane seems to have exhibited a pattern of flying that is intentional (sharp turns and a gain/loss/gain/loss in elevation) and under the control of SOMEONE.

In a 777 flight simulator, CNN reporter Martin Savidge sitting in the co-pilot chair, easily turned off  the transponder beacon.  Could do it with little notice from the pilot. 

I think the co-pilot was under pressure (real or imagined) and in fear for his job/career as a result of "indiscretions".  He cracked, folded, went crazy, choose your descriptor.

Well, that is what I think at 6:07pm Eastern on March 14.  

TurboTax e-mails price increase threat without giving ANY details. Not cool, Turbo Tax, not cool...

Just received this e-mail a few minutes ago from TurboTax, which I use for doing my Federal and State tax returns.

The yellow highlight is mine.

If I don't finish my return by March 21st they are going to increase the price for their so-called "Valued Customers".

Checked their website and could not find any pricing information in regards to this specific e-mail.  The message itself does not provide a clue as to how much it will increase.

Bad marketing move, Turbo Tax, in the middle of tax season.  Why make this "threat" on your customers at this point?

Did I say bad marketing move yet?

Give me a break...