tag:blogger.com,1999:blog-69343810235962858472024-02-20T02:31:51.832-06:00The Economics Metaphor<center>Content and teaching ideas for Intermediate Microeconomics</center>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.comBlogger159125tag:blogger.com,1999:blog-6934381023596285847.post-490773845682303762011-10-17T08:32:00.000-05:002011-10-17T08:32:14.485-05:00Regulation - does it raise costs or only shift costs?This is an interesting piece for the general argument that it makes - if it isn't on the balance sheet is it still a cost? The author argues, yet it is. <br />
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<img alt="http://www.nytimes.com/2011/10/17/opinion/safety-regulators-dont-add-costs-they-decide-who-pays-them.html?_r=1&ref=opinion" height="420" src="http://kwout.com/cutout/n/ec/9h/rwd_bor_rou_sha.jpg" style="border: none;" title="Safety Regulators Don’t Add Costs. They Decide Who Pays Them. - NYTimes.com" usemap="#map_nec9hrwd" width="518" /><map id="map_nec9hrwd" name="map_nec9hrwd"><area alt="" coords="402,8,500,20" href="http://www.nytimes.com/2011/10/17/opinion/safety-regulators-dont-add-costs-they-decide-who-pays-them.html?_r=1&ref=opinion&pagewanted=print" shape="rect"></area><area alt="" coords="396,26,396,26" href="http://www.nytimes.com/2011/10/17/opinion/safety-regulators-dont-add-costs-they-decide-who-pays-them.html?_r=1&ref=opinion&pagewanted=all" shape="rect"></area><area alt="" coords="402,31,500,43" href="http://www.nytimes.com/2011/10/17/opinion/safety-regulators-dont-add-costs-they-decide-who-pays-them.html?_r=1&ref=opinion#" shape="rect"></area><area alt="" coords="402,53,488,65" href="http://www.nytimes.com/2011/10/17/opinion/safety-regulators-dont-add-costs-they-decide-who-pays-them.html?_r=1&ref=opinion#" shape="rect"></area><area alt="" coords="400,125,500,133" href="http://www.nytimes.com/adx/bin/adx_click.html?type=goto&opzn&page=www.nytimes.com/yr/mo/day/opinion&pos=Frame4A&sn2=f8475720/9aad5d74&sn1=b22f892c/8a5d73fc&camp=foxsearch2011_emailtools_1629906c_nyt5&ad=BEMH_120x60_9-16&goto=http%3A%2F%2Fwww%2Efoxsearchlight%2Ecom%2Fthebestexoticmarigoldhotel" shape="rect"></area></map><br />
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<a href="http://www.nytimes.com/2011/10/17/opinion/safety-regulators-dont-add-costs-they-decide-who-pays-them.html?_r=1&ref=opinion">Safety Regulators Don’t Add Costs. They Decide Who Pays Them. - NYTimes.com</a> via <a href="http://kwout.com/quote/nec9hrwd">kwout</a></div>
</div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-74965302841385664222011-10-13T11:39:00.000-05:002011-10-13T11:39:41.262-05:00Our Bungled Energy PolicyNordhaus argues for Pigouvian taxes, particularly on our use of Coal to generate electricity, and points out that a U.S. only policy on oil consumption will not do - there needs to be a global system put into place to reduce consumption <br />
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<a href="http://www.nybooks.com/articles/archives/2011/oct/27/energy-friend-or-enemy/?page=1"><img alt="http://www.nybooks.com/articles/archives/2011/oct/27/energy-friend-or-enemy/?page=1" height="354" src="http://kwout.com/cutout/x/p8/jd/c36_bor_rou_sha.jpg" style="border: none;" title="Energy: Friend or Enemy? by William D. Nordhaus | The New York Review of Books" width="483" /></a><br />
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<a href="http://www.nybooks.com/articles/archives/2011/oct/27/energy-friend-or-enemy/?page=1">Energy: Friend or Enemy? by William D. Nordhaus | The New York Review of Books</a> via <a href="http://kwout.com/quote/xp8jdc36">kwout</a></div>
</div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-45393300102710405882011-10-10T17:03:00.001-05:002012-03-14T12:56:49.511-05:00Price DifferentialsAn essay that decomposes price differentials into cost differentials or price discrimination, with several examples of each. One reason for students to learn demand theory is because of how knowing that can help understand how sellers set price.<br />
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<img alt="https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0Bz9kxuxY68EJMzI3MDA2NzktZGU1ZC00ODAyLTg3OTUtY2YwMjUxY2ZhYjdi&hl=en_US" height="181" src="http://kwout.com/cutout/9/3p/6w/dc3_bor_rou_sha.jpg" style="border: none;" title="Price Differentials.pdf" usemap="#map_93p6wdc3" width="536" /><map id="map_93p6wdc3" name="map_93p6wdc3"><area alt="" coords="421,0,471,14" href="http://dictionary.reference.com/browse/arbitrage" shape="rect"></area><area alt="" coords="35,65,141,81" href="http://en.wikipedia.org/wiki/Law_of_one_price" shape="rect"></area></map><br />
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<a href="https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0Bz9kxuxY68EJMzI3MDA2NzktZGU1ZC00ODAyLTg3OTUtY2YwMjUxY2ZhYjdi&hl=en_US">Price Differentials.pdf</a> via <a href="http://kwout.com/quote/93p6wdc3">kwout</a></div>
</div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-29713931154356647222011-10-10T17:00:00.000-05:002011-10-11T11:11:51.989-05:00Price Differentials - a ReadingThis is a voice recording of the essay.<br />
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Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-79017481747794589792011-09-03T20:02:00.000-05:002011-09-03T20:02:15.787-05:00testJust trying out the new blogger tools on The Economics Metaphor site.<br />
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<br />Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-18137187088733148422011-08-30T08:10:00.001-05:002011-08-30T12:16:41.625-05:00Risk and UncertaintyThis chapter is based on <a href="https://docs.google.com/leaf?id=0Bz9kxuxY68EJM2FmMmU4MGMtODhkMS00OTc1LTlkZDktZTY4Mzg4MjZlNTQ1&hl=en_US">this Excel workbook</a>, which has nine spreadsheets. While much of this follows the standard approach on this topic, the first two worksheets are preliminary material, about diversification, when that is beneficial and when it isn't owing to riskiness of the underlying assets and to systematic risk. The third worksheet covers the St. Petersburg Paradox and shows that an expected utility like assumption that embeds a notion of risk aversion resolves the paradox. There are also some notes on the math and philosophy of probability embedded as a word document. Those notes are also <a href="https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0Bz9kxuxY68EJODU1NTFlODktMDZiYi00ODI0LThjOWYtZWJmOWRlMWM0Mzk2&hl=en_US">available as a separate pdf file</a>. Students will most likely be familiar with the beginning of the notes, but the stuff near the end on Jensen's inequality and degrees of risk aversion are likely to be new.
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<br />There is then a worksheet on the Expected Utility Hypothesis, another that offers a critique a la Kahneman and Tversky, then a two-state version of the state-preference model so we can draw indifference curves, a subsequent worksheet on the demand for insurance, and the two concluding worksheets, one on moral hazard, the other on adverse selection and the lemons problem. Several of the worksheets have textual narrative to amplify what is explored in the graphs.
<br />Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-11459433260568030172011-08-30T08:09:00.002-05:002011-08-30T09:40:34.374-05:00Portfolios and Diversification.This initial video gives a counter intuitive example where putting all one's eggs in one basket is less risky than diversification because the underlying asset is safer and there is systematic risk. The example is meant to encourage students to consider when diversification is effective at reducing risk.
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<br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-9787605346334958872011-08-30T08:08:00.002-05:002011-08-30T09:40:50.933-05:00Diversification with Independent ReturnsThis video shows the benefits in risk reduction when the assets have independent and identically distributed returns.
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<br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-58520262553261754082011-08-30T08:07:00.001-05:002011-08-30T09:41:04.473-05:00Risk AversionThe willingness to pay for a lottery is typically far less than the expected dollar value of the lottery.
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<br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-34988614554938209832011-08-30T08:06:00.005-05:002011-08-30T11:46:23.340-05:00The Expected Utility HypothesisThe geometry of expected utility is considered and related notions (certain equivalent, risk premium) are introduced.
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<br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-52720109920053923112011-08-30T08:05:00.000-05:002011-08-30T11:49:36.885-05:00Frames and AnchorsA critique of the hyper-rationality implicit in the Expected Utility Hypothesis.
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<br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-30449245453535966672011-08-30T08:04:00.000-05:002011-08-30T11:49:07.441-05:00State Preference ModelThe indifference curve approach to risk preference.
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<br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-6167592521584888522011-08-30T08:03:00.000-05:002011-08-30T11:48:38.486-05:00The Demand for InsuranceInsurance is modeled as a way to move income across states. Full coverage is demanded when the variable load is actuarially fair.
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<br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-89875847421047911732011-08-30T08:02:00.000-05:002011-08-30T11:48:08.961-05:00Moral HazardUnder full coverage the insured will not take precaution even if that is socially efficient. To induce the insured to take precaution, the insured must bear some of the risk.
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<br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-87022625155799173282011-08-30T08:01:00.002-05:002011-08-30T11:51:36.381-05:00Adverse SelectionAkerlof's Market for Lemons as applied to insurance markets.
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<br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-21926351827626292542011-05-04T18:25:00.002-05:002011-05-04T18:32:32.836-05:00The Firm and Industry SupplyThe chapter is based on <a href="https://docs.google.com/leaf?id=0Bz9kxuxY68EJYjY3YzkzYTktMTFjYy00NTdjLTkzYmItOWY1OTIzNTIwNzI0&hl=en">this Excel workbook</a>, which has more worksheets than the preceding workbooks, 10 in total. The first worksheet is a brief essay to provide some background on the theory of the firm and to develop the Marshallian ideas - short and long run. There is no video for that worksheet. It is meant to be read. There are videos for each of the subsequent worksheets.Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-82200535204706384472011-05-04T18:24:00.002-05:002011-05-04T18:51:02.401-05:00Production PossibiltiesThe infamous curve from Econ 101 where students are first exposed to Guns or Butter. This one is at the firm level, where the firm can produce multiple products.<br /><br /><div style="text-align: center;"><iframe src="http://www.youtube.com/embed/OdiZCjlNsCQ" allowfullscreen="" width="608" frameborder="0" height="476"></iframe><br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-44544203200869732552011-05-04T18:23:00.001-05:002011-05-04T18:55:07.846-05:00IsoquantsIsoquants are to the firm as indifference curves are to the consumer. Since indifference curves have been belabored earlier, isoquants get short shrift. But some time is spent on the cost minimization problem, which is the dual of the expenditure maximization problem. <br /><br /><div style="text-align: center;"><iframe width="608" height="476" src="http://www.youtube.com/embed/7SprYBPIbBA" frameborder="0" allowfullscreen></iframe><br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-45002309058833694362011-05-04T18:22:00.002-05:002011-05-04T18:58:26.390-05:00Short Run Production FunctionAdam Smith's division of labor and the Law of Diminishing Returns.<br /><br /><div style="text-align: center;"><iframe src="http://www.youtube.com/embed/-rNCk_UBl1Y" allowfullscreen="" width="608" frameborder="0" height="476"></iframe><br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-82757156338341828062011-05-04T18:21:00.001-05:002011-05-04T19:04:30.286-05:00Production TableA tabular form of the short run production function. <br /><br /><div style="text-align: center;"><iframe width="608" height="476" src="http://www.youtube.com/embed/kxrEvCEUTCM" frameborder="0" allowfullscreen></iframe><br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-18927832545301731082011-05-04T18:19:00.000-05:002011-05-04T19:08:01.710-05:00Short Run Cost FunctionThe hardest graphs in the spreadsheet. <br /><br /><div style="text-align: center;"><iframe width="608" height="476" src="http://www.youtube.com/embed/WlO3bG4uyYY" frameborder="0" allowfullscreen></iframe></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-48049935901534793592011-05-04T18:18:00.001-05:002011-05-04T19:31:06.596-05:00Cost TableA tabular form of the short run cost function.<br /><br /><div style="text-align: center;"><iframe width="608" height="476" src="http://www.youtube.com/embed/giZYn4sSU0k" frameborder="0" allowfullscreen></iframe><br /></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-59866469102869499472011-05-04T18:17:00.000-05:002011-05-04T19:39:48.074-05:00Short Run Industry SupplyThe industry supply curve in the short run is the horizontal sum of the individual firm supply curves.<br /><br /><div style="text-align: center;"><iframe width="608" height="476" src="http://www.youtube.com/embed/UIfWa0pmn_0" frameborder="0" allowfullscreen></iframe></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-88724779650359870992011-05-04T18:16:00.001-05:002011-05-04T19:47:43.498-05:00Long Run Average CostThe relationship between the long run average cost curve and returns to scale, plus the relationship between product price an industry dynamics.<br /><br /><div style="text-align: center;"><iframe width="608" height="476" src="http://www.youtube.com/embed/dWuoIERSXAU" frameborder="0" allowfullscreen></iframe></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0tag:blogger.com,1999:blog-6934381023596285847.post-14033760775049326062011-05-04T18:15:00.001-05:002011-05-04T19:55:48.038-05:00Long Run Industry SupplyEntry and exit in a constant cost industry. Then an increasing cost industry and a decreasing cost industry as well. <br /><br /><div style="text-align: center;"><iframe width="608" height="476" src="http://www.youtube.com/embed/2hanu4Wukls" frameborder="0" allowfullscreen></iframe></div>Lanny Arvanhttp://www.blogger.com/profile/05597426421997599777noreply@blogger.com0