Externalities, can lead to government intervention for a inefficient market economy, (Krugan, Wells, 2009, p. 434).  A common term to understand the basics of why policies are written to companies that are producing a good but an unintentional harm affects its consumer.  The perfect example is focused towards many power plants.  One certain power plant is coal, in which the burning of coal emits sulfuric dioxide that accounts for most of air pollution, (CoalEducation.org).  As a policy maker, you are try and persuade the government to enforce polices on a local coal power plant which has been known for its harmful emissions and causing nearby residents to develop several health problems.

            First policy is, thanks to Pew Center (Pewclimate.org), list’s several reasons why coal burning becomes a major problem for its gas emissions.  Although coal is a cheap source of energy, the ultimate downfall is that it’s responsible for nearly half of the world’s greenhouse gases.  In addition, much of USA is dependent on its electricity for coal burning.  This adds more greenhouse gases every day as coal is continued to be used.  As the USA, and other nations, maintains its dependency on coal, this will add to the demise of our home planet.  To begin with, these gases create the often called “Global Warming Effect”, (EDF.org).  In a brief summary: since the 1700’s an increase in greenhouse gases have increased due to industrialization; an increase which the Earth cannot naturally discharge; this creates a blanket in the atmosphere that is heating the Earth’s surface more each year.  Examples include: extreme weather, thinning ice/icing seas, threat to human health, (EDF.org).  If we fail to reduce such gases from coal emissions, this “Global Warming Effect” will be the very destruction of our planet unless we can make a change. 

            Second policy is thanks to Health and Environment Alliance, (Env-Health.org), is focused more on health, specifically in the EU, but can still apply to USA because all humans have health in common with each other.  This policy points out that a reduction on emission gases could save the nation millions, if not billions of dollars on health care due to the harmful effects of gas emissions.  Some problems have been known to affect blood, central nervous system, and also cause cancer (BBC.co.uk).  There are many more health problems that begin from gas emission.

            The reasons why these policies should be enforced on this power plant is because public and government are growing more concerned with the safety of its people and the world as a whole.  During his current presidency, President Barrack Obama has taken a significant part into supporting cleaner energy.  His roles in support for Recovery Act Investments for Clean Energy involves manufacturing cleaner energy technology, advancing in vehicle technologies, renewing and improving the electric grids throughout USA, (WhiteHouse.gov).  Moreover, these policies will also help the power plant understand why consumers demand the emission reduction.  In recent news, locals of Bokoshie, OK were fed up with getting sick due to the effects of their provided power plant, (Bartlesvillelive.com). If the policies are placed, the community can look forward to a safer and cleaner environment without having to worry much about health problems.  Another reason is if residents have no need to worry, new development may occur and over a period of time, that means more customers to provide for.  Placing these policies can benefit both the families of the community, as well as the investors of the power plant.

            An estimated cost to reducing emission in USA will be an average of $50 billion annually or $1.1 trillion by 2030, (EnergyandCapital.com).  If the coal power plant uses a “Carbon Capture and Sequestration” (CSS), the cost to produce electricity can expect to increase by 15-80%, (ClimateCentral.org).  Investors to the power plant may consider increasing rates on electricity by means of reducing emission, which will also reduce health risks.  As a result, consumers will pay less on healthcare and can compensate to an increased electricity rate.  An option other than CCS is a nuclear power plant.  By converting coal power plants to nuclear power plants the cost will pay itself off in the long run, (CBO.gov).  Overall the cost will be expensive, but the investment well worth it.  Aside from converting to nuclear, it would be best, if not cheaper if the power plant was forced to investing in CCS and get involved with the community.  This is also another option for the power plant can get involved with the community and reduce the consumption of electricity.  According to Nick Hodge, the most economic way to reduce emissions is upgrade HVAC and insulations in buildings, (EnergyandCapital.com).      Inevitably, people will speak up and the power plant will have to react or face the consequences.

Sir Shannon Scott Williams

January 24^th, 2010

ECON220

Unit 3: Discussion Board

            Let us begin with importing, goods and services purchased from other countries, (Krugan, Wells, 2009, p. 196).  A good example of an imported clothing company is Jayli Imports, which is a company that specializes in “Bohemian style hippie wear”, (Jayli.com).  The current best selling product for Jayli, is the Long Halter Pumpkin Dress.    

Next, exporting, goods and services sold to other countries, (Krugan, Wells, 2009, p. 196).  The perfect example is Carhartt “100% made in the USA since 1889”, (Carhartt.com).  My favorite product is the 8” Logger/Linemen Boot.

            After reviewing importing/exporting between Jayli and Carhartt, I see that most imported products from Jayli are less durable compared to Carhartt products.  Jayli may be designed for fashion purposes; where as Carhartt’s products are designed for hard-working purposes.  However, I know many people in Georgia that wear Carthartt clothing just for fashion reasons.  Nevertheless, if one is to buy an imported durable product, it’s likely that it will be more expensive versus a durable exported product.  For example, on my honeymoon vacation, my wife and I went shopping in Stockholm, Sweden.  While shopping, I came across a several pairs of Chuck Taylor’s Converse Sneakers.  Domestically in the USA, the average prices for these are around $40.  However in Sweden, they sold for more than $120, the most expensive shoe in the store.  Another situation is when I was also browsing Armani clothing.  In Sweden it is fairly reasonable, however in the USA, Armani can be very expensive.

            In my point of view, I prefer quality.  If I am to purchase a product, price is next in line for my criteria.  So when I look for a product, imported/exported may have the same quality but if one is more expensive just because it is imported, then I would rather purchase the domestic product because it’s cheaper.  In addition, I would rather purchase a domestic product to support the national employment, than seeing many fellow Americans without jobs.  Products of the fashion industry produced in the USA, help supply job for those who live there.

Armstrong, Kotler. (2009). Introduction to Marketing (9^th Ed.).

            Jayli Imports. (2007). Jayli clothing style. (Jayli.com). Retrieved 1.25.2011, from,

Carhartt. (2011). Carhartt motto. (Carhartt.com). Retrieved 1.25.2011, from, http://www.carhartt.com/webapp/wcs/stores/servlet/HomeView?storeId=10051&catalogId=10101

Sir Shannon Scott Williams

January 17^th, 2010

ECON220

Unit 3: Discussion Board

            When I think of perfect competition, I think of something similar to a monopoly, however the difference is that a perfect competition is a market in which all other participating markets are price-takers, (Krugan, Wells, 2009, p. 330).  In USA, the government tends to put limits on monopolies, but most obstacles for perfect competitions are left out, (Krugan, Wells, 2009, p. 331).  Choosing a perfect competition should be the matter of what is the first line of a production (eg. steel used to make automobiles).

            To my knowledge for the local area, there is a chicken farm named Kagel’s Chicken Farm.  Factors that help support Kagel’s are that there are several different types of buyers and sellers for whole chickens, eggs, and fertilizer.  Buyers would be slaughterhouses for live chickens, food stores for eggs, and those in need of fertilizer.  Sellers, like Kagel’s, would be those limited to chicken farming.

            Being that Kagel’s is a base supplier, this makes it a price-taker giving it the advantage to alter production without heavily affecting the market price for its products, also known as a standardized product.  Kagel’s and other chicken farmers sell their products at market price, a base price that is offered in the marketplace.  Perfect competitions, like Kagel’s, cannot change prices based on their production due to the ease of entry and exit for farming.  Due to this, governments do place regulations for safety.  The regulations include: all poultry establishments develop and implement a written sanitation standard operating procedures (SSOPs), requires all meat and poultry establishments to develop and implement a HACCP program, (Economic Research Service, 2009).  Other regulations are more specific to slaughterhouse industries.

            In conclusion, the perfect competitive market is narrowed down to the beginning of what a product could be.  The competitors for perfect competition are limited to those willing to participate.  In the case for Kagel’s, and others alike, their supply must weigh a certain amount before being sold.  Kagel’s products are sold at market price.  Consumers who wish to purchase products from Kagel’s are those of the slaughterhouse industry which supply uncooked or pre-cooked chickens to their consumers.  Other consumers are food stores interested in the eggs which the chickens produce.  Also, there are consumers for fertilizer which is produced from chicken manure.  In order for Kagel’s to enter and remain in business, they must meet government safety standards.  In the real world, Kagel’s has the advantages of their consumers due to the great demand from each industry.  If one industry decrease demand for a product, Kagel’s still has the opportunity to deliver to another industry.

Armstrong, Kotler. (2009). Introduction to Marketing (9^th Ed.).

Economic Research Services. (2009). “All poultry establishments develop and implement a written sanitation standard operating procedures (SSOPs),  requires all meat and poultry establishments to develop and implement a HACCP program”. Ers.Usda.Gov

Retrieved 1.18.2011, from, http://www.ers.usda.gov/briefing/foodsafety/private.htm

Sir Shannon Scott Williams

January 10^th, 2010

ECON220

Unit 2: Discussion Board

            The winter seasons’ temperature for south eastern United States changes more than today’s gasoline prices.  One week it could be a steady 32 degrees Fahrenheit and the next week temperatures’ could rise to 45 degrees.  With the new job I have, I sometimes have to work outside.  Now, this week, the coldest so far for this season, I needed a winter jacket from the local hardware store.

            At the time of shopping I noticed several different types of jackets: heavy duty ($150), light duty ($25), stylish ($125), and all-purpose ($50).  There were plenty of options to choose from, and since this was a work-jacket, I didn’t need anything too fancy or expensive.  Due to the upcoming cold predictions, I know that I absolutely needed a jacket to prepare for, so even if the sales attendants changed the prices on scene, I would still make a purchase.  The jacket I chose was the all-purpose ($50).

Changing the prices of a product can affect revenues earnings.  To determine this, economist use the price elasticity of demand, which measures the responsiveness of the quantity demanded to changes in prices (Krugan, Wells, 2009, p. 144).  The elasticity is based on the availability of substitutes, the specific nature of the good, how much income is spent on the good, and the amount of time consumers have to buy the good.  They classify the responsiveness to elastic if the changes in quantity demanded are greater than the changes in prices.  Inelastic if changes in quantity demanded are less than the changes in prices.  Unitary elastic if changes in quantity demanded equals the changes in prices, (QuickMBA.com, 2009).

            Based on those factors, my jacket would be inelastic due to my spending wasn’t very much, the product is a necessity, there were many jackets to choose from, and I had all season long to purchase the jacket.  During this current economy, demand wouldn’t change much because of the cold weather conditions and consumers are likely to purchase the good even if prices are changed.   In addition, it is logical for businesses to change prices on products when there is a change in demand (eg. winter clothes, spring clothes).

Krugan, Wells. (2009). Economics (2^nd Ed.).

            Worth Publishers. AIU Online Version

            Economics plays a role in all societies, both developed and undeveloped.  Even during the beginning of our time, goods have been produced, and even traded.  Thus to understand a simple economy, consider the following scenario: there are two people who each live on an isolated island.  James is one person, and Michelle is the other.  In order to survive, each person must produce and consume potatoes or chickens.  Both persons may produce any combination limited to their resources.

            Within each economy, there are opportunity cost, what you must give up in order to get (Krugan, Wells, 2009, p. 8), which applies to James and Michelle’s scenario.  Given that James may produce either 80 pounds of potatoes or 40 chickens per year, what are his opportunity costs for potatoes?  What are his opportunity costs for chickens?  See the below calculations:

James opportunity costs for 1 potato: 80 potatoes = 40 chickens== > 80/80 potatoes = 40/80 potatoes == > 1 Potato = 1/2 Chicken.

James opportunity costs for 1 chicken: 40 chickens = 80 potatoes== > 40/40 Chickens = 80/40 Chicken == > 1 Chicken = 2 Potatoes.

Summary for James: Opportunity cost of 1 potato is 1/2 chicken. Opportunity cost of 1 chicken is 2 potatoes.  Note, we cannot assume that James can produce a fraction of a chicken (1/2 chicken), only we calculate this to determine the opportunity cost for a potato.
 

Michelle, if devoted all of her time, she can grow 200 pounds of potatoes each year.  If she were to raise chickens, she could grow 50 chickens per year.  What are her opportunity costs for potatoes?  What are her opportunity costs for chickens?  See the below calculations:

Michelle’s opportunity costs for 1 potato: 200 potatoes = 50 chickens== > 200/200 potatoes = 50/200 Potato == > 1 Potato = 1/4 Chicken.

Michelle’s opportunity costs for 1 chicken: 50 chickens = 200 Potato== > 50/50 Chickens = 200/50 Chicken == > 1 Chicken = 4 Potatoes.

Summary for Michelle: Opportunity cost for 1 potato is 1/4 chicken.  Opportunity cost for 1 chicken is 4 potatoes.  Note, we cannot assume that Michelle can produce a fraction of a chicken (1/4 chicken), only we calculate this to determine the opportunity cost for a potato.
 

            Now that we understand what James and Michelle can produce and their opportunity costs, let’s take a look at who has the advantages.  Obviously Michelle, can produce more potatoes, or chickens, than James throughout the year.  Due to this, she has the absolute advantage, an activity if he or she can do better than other people (Krugan, Wells, 2009, p. 33).  Moving on, to comparative advantages, producing a good or service if the opportunity cost of producing the good or service is lower for that individual than for other people (Krugan, Wells, 2009, p. 31).  Michelle has the lower opportunity cost for potatoes, ¼ chicken, based on the previous calculations. James has the lower opportunity cost for chickens, 1/2 potato, based on the previous calculations.  Due to these comparative advantages, Michelle should specialize on potato production where as James should specialize on chickens.

            Suppose if Michelle and James specialized on their comparative advantages and decided to trade their resources at a rate of 2.5 pounds of potatoes per 1 chicken.  How would this affect their economy?  See below calculations:

Before trade = Michelle = 25 chickens = 100 Potatoes == James = 20 chickens = 40 potatoes

Specialization = Michelle = 200 potatoes == James = 40 chickens

Math for Michelle = 25 x 2.5 = 62.5 == 200 – 62.5 = 137.5

Math for James = 40/2.5 = 16 == 40 – 16 = 24

After trade = Michelle = 25 chickens = 137.5 potatoes == 24 chickens = 40 potatoes

            Based on the calculations, each person would be better off if they conducted a trade in their specialized product.  Each person would work less to get more, and result in profit from trade.

            In conclusion, societies, large or small, developed or undeveloped, an economy exists regardless the situation or at least wherever there are resources involved.  Relative to James and Michelle’s situation, everything begins with opportunity costs.  From that point on, absolute and comparative advantages can be calculated in order to determine what this person or that person should specialize in producing if they consider to trade.  It is logical that economies across the world will trade due to the different locations of limited resources such as oil, iron, food, etc.  and how each are able to produce them.

            Krugan, Wells. (2009). Economics (2^nd Ed.).

            Worth Publishers. AIU Online Version