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Money. Can't live without it. Can't buy everything with it, but if you're living in any developed economy chances are you have it. You want more of it, wish it could buy happiness, and sometimes despise it, (or at least those who want yours).
But underneath the surface of it all what is money? From a macroeconomic standpoint what does money represent? This article will provide a brief summary on the 3 functions or purposes of money.
Here is a personal story on everyone's second favorite time of year. Tax time!
| 2008 was the first year my young friend had an official job. Her T4 arrived the other week in the mail. So we sat down to do her tax return. Being that the T4 was the only official document she needed to record, we did a paper return. (Readers with good memories will remember that I advocate software to do most tax returns. However, the visual representation of the paper return is a good teaching tool.)
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When my friend saw her T4 she was incredulous. “I did not make that much money!' she exclaimed. (How many of us have felt the same way). The reason she didn't believe the number in box 14 (for Canadian taxes) was that her bank account was more or less at the SAME balance as before she started her job.(Can anyone identify with her?) After some mental calculation she concluded that yes she had made the official few thousands. Interestingly enough she has now set herself a budget as to how much she can save and spend from each pay cheque. I will report back to you later this year on how long that vow will last, (with her permission of course)
So she diligently started filling out the lines and numbers as I showed her. Being that she is under 18 she did not have to pay CPP. She wasn't too impressed that one of the perks of turning the age of majority is that one now has to pay CPP. Basically she would get back the minimal amount of tax she paid. About three quarters of the way through the forms she started grumbling: “All this work to get back $26. “ “It's not worth it.†she said. She was not impressed that we had to put it in an envelope and wait several weeks for the refund to come back. “Let the government have the $26 they can spend it better than me.†What do you think dedicated readers? Are you going to bet on the Stephen or the teen? |
Here are some intro explanations and examples of microeconomic principles behind profit maximization, marginal, and average revenue. In our examples we will make some assumption in perfect competition scenario.
Assumptions of perfect competition:
Looking for introductory information about profit maximizing output for producers (firms)? Look no further than DiscussEconomics' microeconomics article section for the latest information on the economy. Let's begin by asking: How do we know if we have maximized profits or losses?
Decision Rules for Profit-Maximization
Rule #1
Select a quantity where MR (marginal revenue) = MC (marginal cost) and MC "cuts" MR from below.
Using this decision rule, we have three possible profit outcomes: Continue reading this article »
This continues a previous post on profit maximization. The question we want to continue with is when should a firm shutdown? Then answer is when P (price) = AVC (average variable cost).
This is the output where firms are indifferent between producing the profit-maximizing quantity (ie. loss-minimizing quantity) and shutting down operations. Take a look at this graph to help you understand the when and where.
The Alberta government's stimulus package is expected to bring a 3.5 per cent increase to oil production this year. But damage brought on by low prices per barrel, inconsistent government policy and the emerging PR nightmare surrounding environmental pressure may cripple investment in Alberta’s oil sands for a very long time.
In 2007, Dark horse candidate-cum-leader of the Alberta Tory party Ed Stelmach made a bold and unprecedented move to increase oil sands royalties owed to the Alberta government, a move that cooled the well-known love affair between the petroleum producers of Alberta and the provincial government. At first, the move was heralded as a success by many observers. Continue reading this article »
Bailouts seem to be the new trend in this recession. Companies, such as AIG (American Insurance Group) have received a helping hand just as they were on the brink of failure. President Barack Obama has been confident that these bailouts are the best course of action—that they will benefit the economy, rather than damage it even further. But what should companies be allowed to use this bailout money for?
AIG has recently paid $165 million dollars in bonuses to the very people in its company that led them to failure in the first place. AIG claims that legally they had to pay these bonuses because of predetermined contracts. Continue reading this article »
Billionaire Warren Buffett recently stated on CNBC that the U.S. economy has 'fallen off a cliff." These are scary words coming from someone who has generally been an optimistic man when it comes to investing and economics. As he states that he has never seen people more afraid about the future, Warren Buffet still holds on to the notion that change can and will happen. Just as he say holds true his feeling that sound investing requires patients, so does the healing of the U.S. and world economy.
What can we learn from Warren Buffet? Millions of Americans are finding themselves drowning in debt. This is not news. The vast majority of people we know do not have the bank account of Warren Buffet to fall back on when jobs are lost and times get tough. What we do have, however, is the opportunity to live smarter and spend smarter. Continue reading this article »
Producers have Long Run Costs
Recall that:
> In the short run some costs are fixed.
> In the long run fixed costs become variable.
> Consequently, a firm's long-run cost curves differ from its short-run cost curves.
Long-Run Cost Minimization
Continue reading this article »
Let's start our introduction to monopolies by offering a definition: An industry comprising of only one firm. Examples include utility companies (gas, electric, water), rail, and cable companies.
Reasons for monopoly:
(1) No close substitutes
- If substitutes for a good exist, the firm would face competition from the producer of the substitute.
(2) Barriers to entry
- If a single firm is to remain the sole producer, particularly in the long run, there must be some berrier preventing other firms to enter into this industry.
