Micro Econ AP 2nd Semester 2019

Warning: this post contains spoilers for the movie "Avengers: Infinity War." Thanos, the space warlord titan of the Avengers universe had a supposedly perfect plan to bring balance to the universe. With all of the Infinity Stones in his possession, his single snap at the end of the movie eliminated half of all sentient life in the Marvel Universe. While this outcome did not "feel so good" for those eliminated by the snap, the real balance of the universe still was unachieved because of the economics behind this half extinction. This curiosity led me to something surprisingly quite established: Thanosian Economics or Thanosnomics.  The rationale behind Thanos' plan draws heavily from the economist Robert Malthus who proposed the idea that the human populations grows exponentially while food supply sees linear growth. As a result, the finite resources will result in a decline in economy, otherwise known as the Malthusian Trap. This occurs when suppl...

A bank run is a situation in which bank customers have a suspicion that a bank will fail and thus all try to withdraw their money from the bank. Because of the sheer amount of customers that are withdrawing money, a bank that would not have otherwise failed fails because more money is withdrawn than the bank can provide. These bank runs gained their notoriety during the time of the Great Depression because many consumers were actually losing all of their money due to bank failures. This post will attempt to understand the rationale behind bank runs and how they have been prevented today. Essentially, bank runs derive from the fear of losing money. The fear is completely understandable because it's essentially losing all your money because of another entity's mistakes. However, this fear is blown up and exaggerated in the consumers' eyes more a multitude of reasons. A large culprit is the effect of mob mentality or following the crowd. When one person has a suspicion t...

            As we learned earlier this year in class, Napster initiated the digital boom in the music world. In the end of the 1990s, musical artists were making $15 million a year from physical record sales. Following this digital boom however, these sales fell by 60%. Nonetheless, the music industry has not stopped growing and artists have continued getting more money. The key? Diversification.  When record sales declined to become just a minor revenue stream, hip hop blazed the trail for modern music economics. Concerts and record revenues were no longer sufficient to sustain hungry artists, so the music industry had to look for other streams of revenue.  The obvious first answer is with the internet. Songs and albums were internet commodities that could be bought and sold virtually just as they were being bought and sold in stores. However, a crucial reason why rap and hip-hop has risen to the success in our current da...

One of the keystone assumptions in microeconomic theory is that of rational behavior. Essentially, this among many other assumptions is what allows for economists to predict volatile human behavior when it comes to spending habits or anything to do with economics on a day to day basis.  Rational behavior is the decision-making process that an individual has when making choices to gain some sort of utility for an individual. The assumption is that people will make choices that will grant them their preferred level of benefit or utility. Another assumption made within this theory is that people will either be better off or worse off after each decision they make. This principle assumes that "rational" individuals will make the best decisions that will give them the most personal utility. Digging deeper however, this assumption is less one dimensional and is more logical and accurate at looking at human economic behavior. For example, within the assumption of ration...

If you've been on a flight recently, chances are it was an airplane manufactured by Airbus or Boeing. These two companies currently make up 99% of large plane orders across the world, and has little to no competitors. Their sheer control over the industry is largely due to their scramble for control in the past, as seen in the consumption of smaller companies and mergers. Hypothetically speaking, antitrust laws should be in place to prevent such actions that severely reduce competition, but the reason why this "super duopoly" exists is because of the lack thereof. When Airbus and Bombardier joined, the FTC reviewed the joint venture but eventually decided in court not to block it.  While these companies are huge and dominate the industry, there is quite a bit of competition between themselves. This can be simplified in an example of protectionism and the prisoner's dilemma. In order to gain market power over each other, subsidies can allow for one count...

The tragedy of the commons, commonly believed to be originated from Irish sheep farmers, is a basic example of the prisoner's dilemma we are studying in class. The prisoner's dilemma in simplified terms is essentially where each individual has an individual incentive to defect or not cooperate for the general good. As a result, the outcome is mutual defection because it is individually rational for each party, but collectively suboptimal. This is rather arbitrary and general, so we will look to the example of farmers allowing sheep to graze. In the case of two farmers competing for grazing land, it is both parties best interest to use the land fully before the point where the soil becomes unusable. Both farmers would hypothetically maximize gain from the land if they were to hold back from overgrazing to prevent desertification, soil erosion, and invasive weeds. If both parties were to cooperate and play fairly, there would be evenly distributed profits hypotheticall...

As covered in the documentary in class, the World Trade Organization (WTO) sparked a large backlash in public opinion. Many people had little to no knowledge on the issues, but organization leaders banded to act as a force for change. These protests were some of the first major mobilizations organized on the internet, and set a precedent for the protests of the future. These were reported online and allowed people to virtually sit in on the WTO website.  Most notably, 10,000 protestors surrounded a center for WTO functions on November 30th. People engaged in relatively peaceful protest with the intention to halt the processes of the World Trade Organization. They would engage in sit-ins, lock themselves to metal pipes, and chain themselves together. Their efforts would prevent the opening ceremony, but not without some recoil. The police resorted to tactics like tear gas, rubber bullets, and pepper spray, leading to projectiles thrown by protestors in return. The protest...

Commonly noted as the conference that birthed the IMF, the Bretton Woods Conference was primarily convened to prevent the mistakes of the Great Depression and arrange for war finances. The meeting took place in 1944 during World War II to prepare for the eventual defeat of both Germany and Japan. Among the issues addressed in this conference, there was a clash in ideologies between White and Keynes—economists of the time. A new currency exchange system was created known as the Bretton Woods System which would serve to replace the previously established Gold Standard. This economic system would keep currencies in check because each country would peg their own currencies to the currency of the United States, and the United States would peg its currency to gold—promising an exchange rate from dollars to gold. This would prove to stabilize the exchange rates. Another institution established by the Bretton Woods Conference was the IMF, which would play the role as the emergen...