ct136333-blog

[ct136333-blog]

Two main weaknesses in buying locally are the increase in price and the decrease in variety. It is cheaper to produce goods elsewhere where minimum pay is a lot lower than the US. A decrease in trade would result in a decrease in specialization thus a decrease in consumption (looking at a production possibility frontier).

I will still, on occasion, buy locally to support local companies. Not all that money will stay local but a lot of it will. Not all that we consume are products. There are many services that are purchased and that is all local as well. I have mowed many lawns and that money stayed local. But I can definitely see the disadvantages to buying local; higher prices, less variety, that’s a big difference of our world now and our world 500 years ago.

Strengths to buying local would be more local jobs, there aren’t import taxes, there would be more demand for a product locally thus the supplier would need to increase supply. There are also a lot of costs in transporting products such as containers, plastic wrappings, fuel, drivers, etc. All of that would be minimized if the producers and consumers were local.

The difference between trading with Wyoming and China would be the country regulations. There might be import taxes, import fees, but in China it would be cheaper labor. China also has a lot more variety to offer because it is a country and they produce a lot more than Wyoming. I think the main difference would be that of variety and lower prices.

[ct136333-blog]

Understanding a production possibilities frontier helps me better comprehend the opportunity costs of certain goods. It also makes sense to me that the graph is not linear as resources are used to make a certain good. There might be one resource that is more apt to create one good but if it is used to create another, it can still make that good but just not at the highest caliber. There is a balance that must be weighed in determining which goods to produce at the expense of another. That basically is the economy: how the scarce resources are used to produce goods. I also found interesting the connection of efficiency with this graph and how sometimes there is a lot of inefficiency due to policy makers and political leaders looking for more equality. There obviously is a lot more going on in the world and with the economy but it is a very helpful tool in determining opportunity costs of one good to another. I think it is a very useful tool in understanding the economy in terms of opportunity cost and efficiency.

I have frequently heard that we should move more production and labor to other countries. This is a normative statement because this is an action some people believe should be taken. It is an opinion on what should be done. This is an important subject because what is decided to be done will alter the economy. If more labor is sent elsewhere, while it will be cheaper, that money is being sent to another country to be used and cycled in another country but if that labor was kept domestic, it would be more expensive however, the money would stay local and be circulated locally.

[ct136333-blog]

Studying more about the economy I have come to realize the importance and success of a market economy. That and the huge influence consumers have on pricing goods. It seems to be a very delicate balance between what cost is needed to make a product and what people and willing to pay for that product. If there is a change in the price, a profit is no longer made (due to production costs) or it is so expensive that people won’t buy the product (again resulting in a lack of profit).

I am curious as to how a profit can be made when items are discounted and priced below the production cost. That is beneficial to the consumer but for the manufacturers not so. Products are constantly going on sale and having discounts and so I wonder how that affects profits of the manufacturer and the economy as a whole.

I also wonder why in other countries the price tag says the actual price, how much one will be paying in the end while in the US the price tag does not include the taxes and therefore one ends up paying more than the price tag says.