In Short As I mentioned in an earlier post, people should focus on what they are best at, and buy/trade for everything else they need. Specialization increases productive capacity and the total sum of knowledge of a community. Example 1 … Continue reading
In Short Compensating Differentials are a fancy way of saying that people are not willing to do horrible jobs unless they are paid more. Wages vs. Comfort If we take 2 jobs that require equal skill, on average the total … Continue reading
In Short A competitive market has many companies within it, with the price charged equal to the marginal cost. A monopolistic market has one company in it, with the price above its marginal cost. Competitive Market The whole idea of … Continue reading
In Short Within every market transaction there are buyers (demanders) and sellers (suppliers). Also, there are bystanders who are affected by the transaction that are not part of it. The effects on these bystanders are externalities. The costs and benefits … Continue reading
In Short Elasticity is how behavior in a market changes in response to a change in price. A demand curve can be described as elastic or inelastic. A supply curve can be described as elastic or inelastic. See post on … Continue reading
Last month, I wrote about how the Dow was down and almost every portfolio was up. I made the point that the Dow Jones Industrial Average is not the market. It is quick and easy sample to look at and … Continue reading
Introduction Previously I talked about supply and demand. In short, supply is how much of a good is being offered on the market. Demand is how many people want to buy that good. Equilibrium will tell you in a market … Continue reading
In Short A bubble is when the price of an asset rises far above any measure of its intrinsic value. People think prices will go up forever and buy (paying any price) because they think it will be able to … Continue reading
In Short In addition to objective measures of risks as I mentioned earlier, there is also an emotional side to risk, which is how much fluctuation a person can mentally handle within their portfolio. My Sensitivity Analysis Whenever I meet … Continue reading
What is Economics? Economics is the study of the interaction between people within a market context. For example: Person A sells chairs, how do they maximize their profit? What is the Market? A market in the context of economics refers … Continue reading