friday3econlive

[friday3econlive]

The Costs

Life is about choices, sometimes the choices are easy and other times they are difficult. It doesn’t matter whether you choose the “correct” one or the “wrong” one. Each choice you make has a cost. That cost is known as opportunity cost, which is the cost of passing up the next best choice when making a decision. An example of this is choosing to go to college instead of working right after high school. In this case the opportunity cost is the 4 years of work experience and pay that you would’ve received if you chose to work.

Opportunity cost is apart of everyone’s lives  and that includes me. During this quarter I was planning on finally building my 1990 Nissan 240sx. The engine blew and the transmission was going bad ,so I decided to buy a new engine with a manual transmission instead of putting another automatic one. The total cost was around 1500 for the engine and transmission plus the parts necessary for it to bolt in an run. This decision cost me more money and time than if I would have just gotten another engine with an automatic Transmission. By getting a different engine and Transmission the opportunity cost is the amount of money and time I would have saved. There is another opportunity cost in the decision to go with manual over automatic and that is that automatic is easy to drive and maintenance cost because it doesn’t require much beside replacing transmission filter and oil. While in a manual the oil is more expensive, it is replaced more regular and plus replacing the clutch when it goes bad. For me even though the opportunity cost of staying automatic are better , than spending extra in time and money to convert it to  manual. That is because Ill have a sense of accomplishment that I built not bought my car and to me that is better than the money and time I would have saved.

How its sitting right now

How she was

[friday3econlive]

Should I Upgrade My Phone?

Every year or so I am confronted with the same question, “Is it time to upgrade my phone?” The truth is that I can live with the phone I have currently, for a couple more years even. But, I still go through the motions of lusting over new features like screens with near perfect resolutions, better graphics cards and cameras, and in some cases, the completely useless ability to use Animoji. If you are unfamiliar with Animoji, it is simply a feature that uses voice and facial recognition to allow you to communicate as a cat or dog graphic.

Yes, nothing truly necessary but very, very cool. The company I am focusing on here is Apple. First, let’s get into the opportunity cost. Considering the fact that prices of Apple’s new Iphones are getting into the $1000+ territory, the opportunity cost is quite large. With the money that I could be saving with my current phone, I could pay off student loans, apartment rent, and everyday necessities like food, water, and transportation. If I were rational, the decision would be easy: pass on the new phone. Apple understands this, however, and tempts me with incentives (benefits) to counter the opportunity cost. Aside from the new features introduced in each new Iphone iteration (the biggest incentive), Apple has also set up some interesting programs, one of which is the trade-in program I participate in. The idea is that you trade in your current phone to receive a discount on the new Iphone. In reality, this program works as a gains of trade. Apple understands that resources are valuable and becoming more scarce. By accepting iphone turn-ins, they are able to recycle precious material rather than spending more money on sourcing them elsewhere. Furthermore, buyers are able to monetize their old phones which would typically become paperweights and use it towards the cost of a new phone.

Another incentive that Apple gives are discounts to students (15% off)  and free headphones. While the value of these aren’t that great individually, couple it with the trade in program and you essentially have most student’s interests. Last years phone will essentially get you $300-500 off the new phone, so really you would be getting the new phone at close to 40-50% off with a free pair of headphones. To the consumer, this makes the decision that much easier. The last “incentive” (ploy) that Apple uses is IOS compatibility. Older phones cannot operate on the newer IOS and hence cannot take advantage of the new apps and features. If you want these, you have to upgrade, or else you’ll be left in the dust. Apple has ingeniously coupled this “need to upgrade” with their Macbooks and I-watches. If you upgrade one, there is a high chance you’ll upgrade the others to take advantage of their combined features. With this, they’ve created a never ending cycle if one is brand loyal, which I am... and now, starting to question?

Pitting the opportunity costs against the incentives, I usually will determine whether I get a new Iphone or not. While I do hold a grudge with the higher prices, I have upgraded every year. Interestingly enough, I realize that I am partially to blame for the increase in price! Because of people like me, who have a willingness to pay and like to stay up-to-date with tech (tastes), and increasing income, the demand of Iphones has not only increased, but become near inelastic!

As long as new features are included that are desired by consumers, Apple can literally pick their price (appropriately) without affecting demand critically. There will, however, be a point where the price is too high and demand and supply will have to reach a new equilibrium. We shall wait and see what happens then.

Alan Hua

52609752

[friday3econlive]

Taxes: Sometimes it pays to be a Hipster

“In this world nothing can be said to be certain, except death and taxes.”- Ben Franklin

Some call them theft, others call them a civic duty, but regardless of your opinion, you have to pay taxes. Now there are many taxes, from mortgage’s to the infamous income tax to special taxes on gas that go to California Road Development. Now according to a poll performed by Pew Research Center 64% of people believe that Corporations don’t pay enough in taxes. Which yields the question: How do corporations pay their taxes on items they produced? 

Let’s Find Out!

When a company is looking at how much and at what price they should make and charge for a product they will look at a graph such as the one below. Here you can see that there is one line that represents demand and the other is supply. The point at which they cross is called the equilibrium (Eq). This is the point at which the company should supply the product at in order to meet the demand providing the amount and charging the price indicated by the graph.

This is the point at which the company should supply the product at in order to meet the demand. You are able to calculate the amount of the product you should supply as well as the price that you should charge for the product. Since the supply is equal to demand the company will know that they are supplying the amount that will be consumed by the market.

 BUT WHAT ABOUT THE TAX?

So lets say that the Government wants to add a $5 tax on the product in order to combat some of the environmental affects it has on the environment. Now the way for a company to effectively incorporate the tax into its business plan would be as the graph is below. We would shift the amount produced in the graph until we had a price difference in the two lines of $5, as shown in the graph below. Now since the company will now have to charge a higher price for the item the amount of quantity produced will be less. Now you may be thinking to yourself. So wouldn’t the company just add $5 to the price of the product and just call it a day and the answer is Not Exactly.

You see to see who bares the burden of paying the tax we can add to our graph as is shown below. The area created by the tax, that is above the dotted line connecting P to Eq is what the people end up seeing reflected in the cost and then the companies take the Burden that is underneath that price equilibrium. The reason is, is because of the fact that it is more effective to do it this way, if the company just raised the prices instead of taking a small bit of profit loss then they would loose way more customers.

Why does this matter and why does being a hipster have anything to do with this?

Well if you look below at the three graphs you can see a variety of different supply and demand curves that yield some different tax paying outcomes.

Graph #1

Here you can see that the slope of the demand line is WAY BIGGER than the supply curve and do to the process of which companies calculate who bares the burden of the tax we can see that it yields a massive burden on the consumer and that is because the tax will have a greater affect on the companies ability to provide and not as much on the customers who want to buy that product 

Graph #2 

Here we see a graph that are pretty balanced between the supply and demand curve and because of that the tax burden falls pretty evenly between the corporation and the consumers.

Graph #3

Now here’s the exciting graph; because the demand of the product is greatly affected by the change in the price a giant proportion of the tax will fall upon the company and not be represented in price changes for the customer

So how does this pertain to hipsters?

Well hipsters have eclectic tastes and tend to partake in products that are very specialized and have definitive value. As well, hipsters are willing to change allegiance to various companies if the cost of their favorite products suddenly increase. Because of this Products that fall in line with the hipster crowd tend to have a supply and demand curve similar to the one in graph #3. This means that if Uncle Sam ever decides too add a tax to your favorite hipster products you most likely won’t have to pay for it because of it!

Donald Isbell

61929571

[friday3econlive]

Transcript

First Interview

Keith: Good morning to our listeners! Welcome to our new podcast series, Enlightening College Opportunities Now Live or ECON Live! I’m your host Keith Tran. Today we have very special guest from University of California Irvine who is pursuing a major in Aerospace Engineering, Darren Leung.

Darren: Good Morning Keith, thanks for having me, it’s a pleasure to be here. So I saw you posted on Twitter last week opening the floor up to discussion about college. I’m super excited to be here to answer some of these questions with you.

Keith: Yes, yes I did. Thank you for being here. So here on ECON live, we like to ask college students like you to give their life story and talk about the opportunities that they have encountered  before, during, and possibly even after college. Our goal is for college students to open up and talk about their experiences in order to educate those that are aspiring to attend college too. You are free to talk about whatever you’d like. How’s that sound ?

Darren: Sounds good to me! Let’s do it.

Keith: Sweet ok, let’s get started. Our first question for today is, “Why did you pursue college?”

Darren: Well first, I love airplanes. Like...I really love airplanes and I hope to go into the aviation industry as my future career. College is where most people do their growing and is truly the milestone where people become responsible adults. In the field of aviation and engineering, the majority of people solely rely on my calculations and knowledge to get it right the first time. It’s kinda like a social contract between society and engineers. Seems like it’s pretty important to most companies that require extremely knowledgeable individuals to take care of the lives of all people.

Keith: Oh wow, that’s super fly. So, you talked about how college is a place for you to grow and become a responsible adult. What kind of adult responsibilities have you gained in college?

Darren: Well, I’ve definitely learned how to manage my time and be efficient with my trade-off’s. Not only that, I’ve learned to become more detail-oriented which is crucial in engineering because one false mistake can easily lead to the failure of the plane, structure, etc.

Keith: In econ, opportunity costs are essentially the gains you had to give up in order to make a certain decision. In your case, what sacrifices did you have to make to attend college?

Darren: Multiple sacrifices. One of my other options besides college would have been entering the air force because the experiences there are more hands on than they are in college where most of the content covered in college is in theory. Another sacrifice I had to make was being away from friends and family. I’m originally from Northern California and surprisingly going to UCI 350 miles away was my closest option. Although, I think the struggle and the sacrifices are worth it because a degree is a badge of honor and not to mention that I’m the first in my family to attend college so I’m really proud of that. Other factors to take into account were costs for college like tuition, food, textbooks, etc. I don’t come from an extremely wealthy family so keeping costs down was a priority. Fortunately UCI is considered a best valued college and after being here for a while, I can comfortably say that I made the right decision.

Keith: Do you think the benefits that come with these costs will trade off in your favor ?

Darren: Yeah, I’ve done a cost benefit analysis before. LIke I know that if I attend college, I have a much higher likelihood in finding a desirable career in the industry because I have the knowledge and experience. College is kinda like an investment, where we spend money to earn an education with the high hopes of redeeming a much greater reward which is our pay in the workforce.

Keith: That’s an amazing story of yours. Truly remarkable. Unfortunately that is all the time we have today. Thank you so much Darren for taking the time out of your busy schedule to be here. This has been Econ Live.

Second Interview

Keith: Good morning listeners! Welcome back to ECON Live, I’m your host Keith Tran. Last time we invited guest speaker Darren Leung from UCI onto our podcast, and today he’s here again with us.

Darren: Hey Keith, nice to see you again. So last time we were discussing the sacrifices and tradeoffs, also known as opportunity cost, that I made that got me to college. I wanna take a few minutes to ask you about your own college experience. Feel free to talk about anything that you are comfortable sharing. Is that alright?

Keith: Yeah of course, earlier today I posted on Twitter opening the floor up to discussion about college. Because of how successful our first show was, we got quick questions from people wondering about the opportunities during the actual college experience. I haven’t seen these questions, but I am looking forward to answering them.

Darren: Perfect. So let’s see....So we both know that college is very expensive. So our first question: can you name a time where you had to decide whether you wanted to spend or save money? And what would that cost you?

Keith: Yea, definitely. I have to make these kind of decisions on a daily basis. Going back to the whole economic concept of opportunity cost, one of the biggest decisions I had to make this year was whether or not I should continue commuting or live on campus. I commute from the city of Anaheim which is an approximately a thirty minute drive. On a monthly basis, commuting has explicit costs like auto insurance, gas, parking permit, and repair costs that all have definite number values and implicit costs like the income I could be making instead of driving. Assuming I’m making minimum wage, the total monthly cost is around $820. On the other hand, if I were to live on campus in a double room apartment, the rent itself after a minimum wage income would be a sacrifice of around $800. Comparing living opportunity costs, staying on campus would be cheaper, however I realized that food is a significant part of my monthly cost. If I lived on campus, I would have to buy individual groceries and also cook my own food, but really I most likely would’ve gone out to eat pretty often which ends up being even more expensive. If I stay at home, I can lessen the cost of groceries by buying in bulk with my family’s Costco card and also meal prep with the help of my siblings. I end up saving a lot of time and labor that way.

Darren: Oh wow, I’m assuming you’ve done a cost-benefit analysis of your food before. Can you give us more details about how much money meal prepping saves you?

Keith: Yea I for sure have! Surprisingly, it saves you a bunch of money. Back in economics I learned about production costs and how certain costs are variable and others are fixed. Meal prepping requires the initial fixed cost of buying the plastic containers to store the food which were extremely cheap, about $20 for 15 of them. Assuming i’m eating twice a day and I’m preparing full meals 5x a week  consisting of a protein and rice and buying in bulk, the cost for raw ingredients comes out to be around $40 each week. In this case, the ingredients would be considered variable costs. Cooking the meals take a little time, but I value it to be around 2 hours each week or $22 each week assuming I make minimum wage during that time. In total, meal prepping costs like $82 for the first week, but only $62 each prior week. That sums up to a monthly cost of about $268. If I were to eat out 5 times a week, that would be $100 each week. A month sum of $400. That saves me a large difference of $132 to save up or spend on other enjoyable activities.

Darren: Awesome, that’s so cool. Anyways, that’s about all the time we have today for ECON live. Keith, I just want to thank you again for having me because I feel like I was able to learn more about economics and how it affects our lives.

Keith: Absolutely! you were a great guest! I feel like I also learned about how economics brought us to this moment doing this 2nd interview. But yep, we are out of time. Thank you Darren. This has been Econ Live.

Keith Tran (68762484) 

Darren Leung (39464446)

[friday3econlive]

Opportunity Cost Everywhere

Every day, we have to make some decisions in our lives and everything in life has an opportunity cost. Between options we face, if we choose one, the cost for that choice is the other options. And that basically is the opportunity cost concept. The economic definition of opportunity cost is the loss of potential gain from other alternatives when one alternative is chosen. Each of us have a vast rang of different actions and decision on daily basis which will result in different costs. So, going out with friends for movies instead of staying home and studying for the finals, driving an expensive sport car with low MPG and high insurance rates instead of saving for university tuition fees, buying a pizza instead of some groceries, all are examples of opportunity cost. In my economic class I learned that how intuitive, and useful this concept of opportunity cost is and how I can use it to make better choices and decision.

In my case, I leased an Infiniti Q60s a year and half ago. The car itself is costing me $475/month for 36 months, plus the insurance that I pay $130/ month, and the gas money I spend is usually $65/week. So, to sum up, what I’m losing in order to have my car for 3 years is $31140. This amount is the opportunity cost of getting my car; this money could be used in any other alternative ways. For example, now after a year and half, I’m in university instead of college and my tuition fees are higher than before. I have to pay $2560 per quarter and for the two years that I’m going to be studying at UCI, that will sum up to an amount of $15360. I could have easily paid of my tuition fees if I hadn’t leased my car. In addition, I would have ended up with $15780 which I could use or spend in any other way or even lease a car with lower price.

With the knowledge of the opportunity cost that I have now, it allows me to focus on what I actually want in long term not what I want right now. It is important to mention that opportunity cost is personal and differs from person to person, time to time. In my case, if I was 50 years old or knew that I’m not going to get financial aid and have to pay tuition fees, I would never lease the car.

[friday3econlive]

The Interrelated Nature of Spending for Apple Products

I’ve always been a fan of Apple products and the way the they build an ecosystem through their various products. For example interaction between a Mac and an IPhone is pretty seamless. The same cannot be said for the interaction between IPhones and PCs. So for those that prefer to use the MacOS environment they might feel compelled to purchase another product by Apple just because of they are built to be in some ways dependent on each other.  I am Computer Science and Engineering major and in my experience with development for apple products, I have noticed that this is more so true for developers. To develop for IOS one must have a Mac with Xcode. I love Apple products because of their software but their business model is something that I very much dislike. They create necessity for the purchase of accessories or other products to enhance the overall experience. For example they have eliminated a regular audio port on IPhones so customers must now buy dongles to use older headphone that use analog jacks.

After learning about complementary goods and the different factors that affect demand. I began understand more how companies like Apple like to manipulate these factors to keep customers still buying their products. Even though they would sell inferior hardware at a ridiculous price point. Essentially the premium expense on these products is supposed to be justified by the unified environment. I think personally the environment is worth the expense however recently they have not been keeping up with industry standards for hardware. Apple will always have sales for their products since all their products complement each other.

[friday3econlive]

Caleb Lee (33906664)

Dante Garcia (14824308)

[friday3econlive]

THE LINK TO ACCESS THE CHILDREN’S BOOK:

https://www.storyjumper.com/book/index/62349265/5c0af29e8e288

Attached above is a children’s book I created about the Law of Diminishing Returns. It is about a girl named Audrey and how she has to learn the hard way about this particular concept. I chose this concept to create my story because it can be easily applied to life and is common to everyone. The Law of Diminish Returns states that in productive processes, adding one additional factor of production will at some point yield lower incremental unit returns while holding all other factors constant. Essentially, this means that not every unit of input will lead to a proportional increase of output because at one point, adding more input will give a decreasing rate of return.To me, I interpret this concept as the more you add to something, the less you get out of it. The first example I learned about the Law of Diminishing Return was about a corn farmer. This farmer has one acre of land. The factors that will stay constant is the amount of seeds he plants, the amount of water used, and the amount of labor he will give. However, he is deciding how much fertilizer to use in order to grow corn. As he increases the amount of fertilizer, the output of the corn will increase. However, it may also reach a point in which the output will begin to decrease because too much fertilizer can be poisonous. This example shows that there will be a point in time where the additional output of corn gained from one additional unit will be smaller than the additional output from the previous increase of fertilizer. Keep in mind that this concept does not mean that the total production starts to decrease. The total production is actually still increasing, however, the amount of corn produced by increasing the fertilizer will decrease.

This concept of Law of Diminishing Returns is not only about corn produced by a farmer. It can be applied to everyone’s daily life and it hits close to home. This concept can be applied to anything, such as reading, cars, and food. For me, I sometimes think of this concept when I apply it to food. Just as the story, I would always crave Kicking Crab every few months just as how Audrey craved chocolate cake. I learned my lesson just as she did. Kicking Crab is one of my favorite restaurants. I would crave it a bunch of times throughout several months. A few times in my life, I had it every week for about two months. I would always crave it and in order to satisfy my craving, I would go with friends, family, etc. Even after receiving a food coma and a stomach ache after eating, I would end up going the following weekend. However, the more weekends I would go, I would stop eating as much and eventually, I would stop craving and not end up at the restaurant. Just like Audrey, I had too much of the delicacy because the more times you have it, the less satisfying it becomes. The fourth or fifth time you have something may not be as good as the first time you had it and this can be traced back to the concept of the Law of Diminishing Returns. This leads to the fact they I sometimes do not want to eat at Kicking Crab for a few months. Then later on, I would want to crave it and eat it several times continuously in a few months, then it would fall back into the same routine of not being satisfying again. This shows that the more input (the more times I ate at Kicking Crab) gave me a decreasing rate of return (Not craving/satisfying anymore which made me not want to eat there for a while).

    As I look back at my life, I noticed that Law of Diminishing Return happens quite often in my life. Another example that I experience is when I read a few chapters for homework. For biology courses, it is a requirement to read a bunch of chapters where each chapter may be consisted of 40-50 pages. So, sometimes I may read 15 pages in one hour, but in order to make the process of reading go faster, I may decide to speed up my reading and make my goal to 25 pages an hour. This may lead to finishing the reading more quickly but it decreases the amount I retain and understand the concepts. So, if I continue to add more input where I read more pages in an hour, I will have a decreasing rate of return where my understanding of the reading will decrease. As you can see from my own life and Audrey’s Life, the Law of Diminishing Return can be anywhere from the food you eat, to the amount of pages you read, to the amount of fertilizer you add into your soil, etc.

Here are a few pictures of me at Kicking Crab whenever I crave it:

Serena Hermosura

ID # 87291250

[friday3econlive]

Opportunity costs represent the benefits an individual, investor or business misses out on when choosing one alternative over another. Such as to decide what to buy or where to travel. While financial reports do not show opportunity cost, business owners can use it to make educated decisions when they have multiple options before them. Because they are unseen by definition, opportunity costs can be overlooked if one is not careful.

 About 3 months ago, I realized that I have to make a decision between purchase a car to commute to school or call a Uber everyday because me and my friend decided to live off-campus during our first year. This is an example of opportunity cost. Our apartment is not very far from school, therefore, the cost of Uber is not really high, unless I do that everyday. Also, I always want to have a car for my own. So I decided to calculate the money I have to pay to help out my decision. So the cost of one round trip to school on Uber charge me $30. Let us see that I have to do that 250 days a year. 250*30=7500. 7500*4 years= 30,000. However, if I want to take a short trip around our city with my friends, I have pay extra money. However, the car I want to purchase cost me about 40,000 dollar totally. Gas was going to be an additional expense added on to that car purchase. However, if I have a car, I can go anywhere I want with just a little cost of gas.

 Finally I decided to purchase a car. In the short run call a Uber to school is a cheaper way, however, if I decide to live off-campus for a long run, purchase a car is a better way. Besides, I always want to have a car. Now, the only extra expense is insurance and gas. I can take all of these to get a better way.

 This is just one of a perfect example of opportunity cost in our daily life.

 Longji Wang

ID#94686947

[friday3econlive]

Desires or Necessities?

Through the course of Econ 20A, the concept that stuck to me the most would be the concept of opportunity costs. It is the idea that something must be given up in order to obtain something else that is more favorable. Every day people are constantly faced with difficult if not challenging decisions, where their actions would affect their future. Although some problems and decisions are not as impacted as others, people still have difficulty deciding, even if it’s as simple as deciding what to eat. Should I go and eat something as nice as steak? Or should I eat something that would only fill me just right and keep me healthy, like a salad? These questions, although they seem very simple, makes a person really think whether what they eat is beneficial or not. Eating a salad would benefit the person in the future that they are eating healthier foods. While eating red meat, although it’s very satisfying, would make the person gain fat and therefore, may cause health problems in the future. The opportunity cost of eating salad is that the person is giving up the steak. While the opportunity cost of eating the steak would be that the person is losing out on trying to be healthy. The opportunity cost is what the person gives up, as said before.

One problem that always arises for me during the school year is the decision on how to spend my time and money. The questions that always arises for me during these times are: should I do it or should I not? The main aspects of my problem revolve around school and my wants. Should I continue to study and save my money or should I take a break and buy myself a ticket to a Kpop concert? Is it okay if I skip studying for the day and catch up afterward? What if the artists don’t come back to perform after this year? Will I have enough time to catch up on my reading and notes? I always have a difficult time deciding what choice to make. Throughout the year, there are many Kpop artists that tour the US and I would like to see them. If I were to choose to study and save my money for other things, the opportunity cost of this is the concert and being able to meet the artists. The good side to this decision would be that I am able to spend more time focusing on studying and getting better grades and being able to save money for other uses. If I were to choose to buy and go to the concert, the opportunity cost would be that I am giving up my time to study and broaden my knowledge as well having to spend the money that I have saved up on the event. The good side to this would be that I am able to enjoy and listen to the artists to whom I’ve like, sing live and being able to experience the moment. The future that these decisions would be affecting would be on schooling and on experience. It’s all about the decisions that we make currently that would affect the future. It really makes people wonder whether to prioritize their wants or to prioritize or their needs. A question that all have difficulty deciding.

Joanne Hoang

81776100

[friday3econlive]

Application of Economic Concepts with DoorDash

Two days ago on the night of December 5th, I faced a tough decision. My family and I were hungry and thirsty, but it was absolutely cold from a rainy night. We had some homemade food in the fridge, but my family wanted a slightly fancier dinner with outside food and drinks because… it was my birthday. By the way, food and drinks are private goods because they are excludable since you need to pay in order to receive them and they are rival in consumption since a purchase of the limited quantity of food and drinks can potentially prevent others from purchasing them if the food or drink establishment sells out. 

Despite it being my birthday, I was the one responsible to actually go out and get the food and drinks for dinner, since my parents were both sick and my siblings couldn’t drive, but I realized that I faced a formidable opportunity cost. Not only would I have to leave the comfort and warmth of my home into the chilly and unbearable rain, but I would also have to spend time driving to the food and drink establishment, potentially waiting in line, waiting for my order to be made, and driving all the way back to my house. This was precious, valuable time that I would be giving up, in which I could have been doing my intensive homework and studying instead to relieve some stress, as deadlines and finals from my classes were coming right around the corner and creeping up behind me. Yes, you could say I was also lazy to just get up and go. In addition to this implicit opportunity cost I just described, there was also a clear explicit opportunity cost: the gas money for the distance of the round trip and the money I would need to use in order to purchase the food and drinks. From the explicit opportunity cost, I realized another principle of economics, that people face trade-offs, because this was money that I could have easily spent on buying myself a nice birthday present for myself such as a new video game of clothes, or simply just putting into my savings account in the bank to accrue money from an interest rate.

Before leaving to purchase food and drinks, I assessed my options to discover any possible alternatives that I could take instead, and luckily, I discovered there was a much better alternative for me! Lately, I have been occasionally using an on-demand courier service for food and drinks called DoorDash, from the convenience of my phone. If you have ever heard of UberEats, GrubHub, or Postmates, DoorDash works very similarly to these, as they offer basically the same service. In fact, the four of these companies are essentially an oligopoly, as they control most of the market output for this service and offer a similar or identical service. Anyway, I can basically order the food and drinks that I want from the DoorDash application, the food or drink establishment would make the food or drinks, a DoorDash driver would pick up the food or drinks, and then deliver it straight to my door. Basically, my family and I would get fed AND I would get to stay in the convenience of my warm home on a rainy, cold night. That sounds absolutely convenient and great! There’s only one catch. Besides the cost of the food itself, I had to pay an additional delivery fee, because it would be too good to be true if that was also free, right?

Let’s sidetrack to a little analysis of the on-demand courier service industry for food and drinks before we talk about this delivery fee. Over recent years, the market for these services has grown immensely because of the convenience that the service provides and how easily accessible the service is through mobile or web applications. In this case, you can see that people are responding to incentives, another economics principle, which is the incentive of the convenience for food and drinks delivery. At the same time, that also means that people have a significant amount of people have changed markets from buying food and drinks in-person to this new market. We can represent that in the following graphs:

The demand curve shifts left in this market because people are demanding less in-person food and drinks, in favor of on-demand delivery services for food and drinks. 

The demand curve shifts right because new people, who want outside food, are entering this market for the convenience of the delivery of food and drinks to their doorstep. As the graph shows, this causes an increase in the quantity but also an increase in the price. However, I realized that restaurants generally do not raise the prices of their foods and drinks, or if they do, by not that much. Why is that? Well, since people are now not buying food and drinks from the food or drink establishment itself, but instead are referring to the on-demand courier service application itself for the list of partnered food or drink establishment near them, the non-partnered establishments are now missing out on a lot of revenue and potentially economic profit. As such, more and more food or drink establishments are now partnering up with DoorDash, UberEats, GrubHub, and Postmates to be more accessible to a greater range of people and be able to earn more revenue in return. These food and drink establishments are the inputs for the market for on-demand courier service for food and drinks, and the additional amount of inputs leads to the supply curve shifting right in the following graph:

Thus, the price for the food and drinks generally remain the same or very close to the original price that you would get in-person, while the quantity increases even more. In the above graph, we assumed that the magnitude in the demand and supply shift were equal to each other, hence P1 is equal to P2. In addition, this increase in the partnered food and drink establishments create a positive externality in the form of increased product-variety from the increase difference food choices and better options from establishments that are rated higher than others. I definitely benefit from this positive externality because I love having a greater variety of food cuisines and from highly-rated places. Meanwhile, the negative externality of the pollution from natural gas vehicles driving to and from the food or drink establishment to my house remains about the same, because the DoorDash driver is just doing the driving in place of me.

Back to the delivery fee, DoorDash has to make money somewhere or what would be the point of them providing this service? DoorDash needs to have an incentive in order to keep running as a service. Well, DoorDash makes money from this delivery fee and a commission fee from the partnered food or drink establishment, so it has a monetary incentive. As a result, I need to pay this delivery fee if I want to receive my order of food and drinks at my doorstep. Fortunately, that is completely fine to me because the typical delivery fee is between $2 to $6, depending on the particular food or drink establishment, but my willingness to pay for this convenience of delivery is more than that, which I would say is around $10 because personally, I would rather go buy the food and drinks in person at that point instead of using DoorDash. I would have consumer surplus from using the DoorDash service, so I’m more than happy to use the service as is so that I could order my food and drinks, rather than to do it in person.

However, DoorDash offers an additional subscription service called DashPass, which is a $10 fee a month, that allows subscribers to enjoy free delivery on orders that are least $15 or more from DashPass partnered food or drink establishments, which most of the places in my area are. In other words, after about 2 to 3 orders, the savings on the delivery fees pay for the DashPass itself, and there is potentially much more savings if I keep ordering more in that particular month. DashPass is an electronic subscription-based service so the marginal cost for DoorDash is basically $0. From the economic principles, rational people think at the margin so the company is more than happy to offer unlimited amounts of this subscription for customers, in order to get more profit, because the marginal revenue will always exceed the marginal cost. Thus, DashPass is considered a club good because it is excludable due to the recurring charge but not rival in consumption because one person subscribing to DashPass does not prevent another person from doing the same.

Anyway, it’s safe to say that I indeed have DashPass, and I’m saving quite a considerable sum of money that more than pays for the cost of DashPass. At the end of the day, my family and I got some savory, flavorful fried chicken wings from Wingstop for my small little birthday celebration, in addition to some delicious, thirst-quenching boba from Ding Tea — through the amazing on-demand courier service of DoorDash. I also didn’t have to leave the comfort of my home on a rainy and cold night, and I got to work on some homework and study for my impending finals while I was waiting for my food and drinks to arrive. All I had to do was pay a delivery fee to DoorDash, which I technically didn’t have to at all because of DashPass! How awesome was that?

Kevin Nguyen

ID #: 54244511

[friday3econlive]

Graphics Cards, Bitcoins, and My Attempt to Upgrade my PC on a Budget

Computers and PC games have been a passion of mine for quite some time. While I don’t play anything that is too graphically intensive, my current computer was starting to get a bit outdated. A year ago, I upgraded my processor, motherboard, RAM, and upgraded to an SSD harddrive. After some research, I decided I would get an Nvidia 1070Ti for my new graphics card. However, since it had just been released at the end of 2017, I decided I would wait a few months for the price to come down from its initial $450 price tag. Thanks to the economics of supply and demand, that turned out to be a very poor choice.

Around the middle of January, I checked back in on the 1070Ti and found that it had actually gone up in price. At this point, it was around $600. Assuming that was just a fluke, I ignored it and checked back in a week to find that the price had increased by another $20. Still thinking that something must be wrong, I looked at the prices of other graphics cards to find that they were all substantially up in price compared to where they “should” be. After some more research, I found that the crypto-currency (especially bitcoin and ethereum) boom was driving the cost of graphics cards way up.

Since crypto-currencies are “mined” by using your computer to solve what are essentially very difficult math problems, it was profitable to purchase high end graphics cards (including 1070Tis) in order to do this mining. The profitability of mining increased alongside the value of bitcoin and the like. Here is the value of bitcoin over the last year and a half:

As you can probably guess, the profitability of mining dramatically increased the demand of cards like the one that I had my eyes on. The supply of the cards was relatively fixed in the short term due to the difficulty of increasing production capacity on such intricate electronics. With a fixed supply and rising demand, both equilibrium price and quantity shot up. Not only did the cards become extremely difficult to track down in February, but when I did finally see one in stock, the price was anywhere from $750-$1000. Look at how closely the chart of 1070Ti prices over the last year and half matches the bitcoin value chart:

Over the first half of this year, I continued to regret my decision to not buy the card back in December. However, watching the declining value of bitcoin and ethereum, I knew that demand for graphics cards would eventually fall back to a level where they would be affordable. Finally, around a month ago the prices returned to their initial MSRP. Even though electronics like this typically drop in price over the course of their first year, I was simply happy that they had returned to their initial level and jumped on the chance to finally finish my computer upgrade.

An additional lesson in the economics of the situation appeared last month in November. While the short-term supply was fixed, the long-term supply was not. As the manufacturers ramped up production, Nvidia projected their quarterly revenue as though the demand would remain high (which it did not). When their November quarterly report to investors showed less revenue than projected along with excessive back-stock, their stock dropped by 19% (even though their revenue was way up compared to last year). If I had foreseen this, I would have held out on my purchase just a little longer. I probably could have saved even more as Nvidia will likely begin dropping their prices to sell their extra back-stock that resulted from their slightly overzealous attempt to catch up to demand. Still, I am happy with my purchase, and I owe my savings to my understanding of supply and demand and a little patience.

Andrew Brown

45494470

[friday3econlive]

Economic Cost vs Accounting Cost

Most people believe economic cost and accounting cost would be the same thing; that is, however, very untrue. Accounting costs only envision the explicit costs (direct payment of money). Economic costs cover not only explicit costs but opportunity costs too. There are very big differences between the two. For example, my family was planning on going to New York for Christmas this year. Accounting costs would only consider the direct payments which would be the plane ticket, food costs, hotel expenses, and transportation costs (taxis, Uber, etc). Anything that would involve a charge onto a credit card or a payment in cash would be considered as a part of the accounting costs.

Using a quick search on Google, the cheapest flight possible would be $610 for round trip. Since I would only go with my two other siblings, we would have to multiply the cost of a ticket by three totaling to $1,830. Assuming that food will cost us approximately $40 a night and we’re staying there for 14 days, that will cost us a total of $1680 ($40*14*3) in food alone. My older sister lives in New York and offered to house us for free, so hotel expenses will be zero. My older sister, however, hasn’t bought a car yet so transportation services must be included.

According to uberestimates.com, a four seat Uber ride has a base fair of $7 on average with a per mile rate of $3.75. Assuming we won’t leave outside a ten mile radius and are willing to walk within two miles, we should assume that the average distance of a trip will be 6 miles. Thus, the cost of a single Uber ride will be approximately $29.50. Realistically, we won’t need an Uber every single night so I’m going to average the total trips to 7 days within the two weeks. With back and forth trips, the total transportation cost will be $413 ($29.50*2*7). The total accounting cost of the trip would be right under $4000 at $3923 ($1830+$1680+$413). That’s a pretty costly trip for two weeks even viewing it solely through the accounting side.

Now, let’s consider economic cost instead. The only difference between the accounting cost and economic cost is the opportunity costs that appear in economic cost. Opportunity cost is defined as the loss of a potential gain by choosing one alternative instead of another. Opportunity costs can include, time, money, or even happiness. To keep it simple, we’re only going to consider money related economic costs. Both my siblings that I’d take to New York have jobs that they won’t be able to attend if they go on this trip. My younger sister works at Ding Tea for minimum wage and about 20 hours a week. This means she would earn $220 per week ($11*20) if she didn’t go to New York with us. My brother has a much better accounting job averaging about 30 hours a week at a rate of $20 per hour. This means he could earn $600 per week ($20*30). I also would want to work during the holidays to be able to afford gifts so I would work as well. Since opportunity costs can include hypothetical trade offs, I will assume that I work a minimum wage job and get about 20 hours a week as well. My total would be the same as my little sisters and thus no extra calculations are necessary. The total opportunity cost in this case would be $2080 ($600*2+$220*2+$220*2) with the assumption we’re gone for two weeks.

Now that we’ve solved for opportunity cost, we can solve for total economic cost. Total economic cost is the accounting cost or explicit costs plus the additional opportunity cost. The total economic cost would then be $6003. This is BIG difference of over $2000 if we only considered accounting costs. Although explicit costs alone could be useful, economic costs also need to be considered.

Student: Shawn Hamidjaja

ID: 41565069

[friday3econlive]

Economics of UPS

Trina Duong

42594133

[friday3econlive]

Life vs. Trade-offs

We often say that we have to make choices, that seems just simple multiple choice questions but sometimes we don’t realize the whole processes of calculations of its costs that have gone through in our mind.

I drew out the least times the trade-off I have to make after calculating it’s opportunity cost on a day.

If I make at least 5 trade-offs a day, then a week it would 35 times, a month would give me 155 times to choose, and 1825 times for a year. Therefore in the next 4 year of college, I get at least 7,300 times to make changes in my life. It tells me there is nothing to complain about life.

Yuhe Jin

32361628

[friday3econlive]

Eat Less Meat, Save Our Planet

Everyday, we all eat to survive (or sometimes just because we want to). And as a staple for many meals, meat is almost always included in some type of way, whether it is used as a main dish or as a side ingredient. Of course there are growing numbers of restaurants and people that try to opt out meat in their lives due to its effects on health and climate change, but the majority of this planet continues to consume meat in most of their meals. This includes me, as I have been eating meat as long as I can remember. 

When looking at the bright side of eating meat, I would say that not only is it delicious, but it can also be easily accessible to find and eat. There are fast food restaurants in every corner who cheaply serve food to hungry customers, and most of the food items ordered consist of meat. Whenever I go to a restaurant, it is easier for me to find a meat option and choose that meat option because it’s irresistible and out-of-habit. But when looking at the long-term effects of consuming meat, I can see that it affects important factors in my daily life: environment and health. 

If we look at the process of producing meat, we can see that meat producers emit pollution through the animals. For each animal produced into meat, a large amount of pollution overtime is released into the environment, creating a health risk for anyone who breathes in the air (which is practically everyone). In economic terms, this relates to our course, as it would be considered a negative externality created by these meat producers. 

In the market, this negative externality causes the cost of society to be bigger than the private cost of meat producers. We can visually see it being portrayed in the graph below:

When analyzing this graph, we can see that it is most beneficial for society as a whole if meat producers produced at the optimum equilibrium, where meat is best valued. As of today, I do not believe that we are at this optimum level. With the planet getting more worse each day (and more quick too!), the value of consuming meat for society today has decreased more than ever. With growing awareness of veganism/plant-based lifestyles and technology to create Impossible Meatless Burgers, real meat has devalued tremendously. When I compare my eating habits of the past to today, I can really say that I consume way less meat than I did before, thanks to new delightful food options other than meat. And because of this change, meat producers need to produce at the new optimum equilibrium. 

So in order for meat producers to produce at this level, one way could be to internalize the externality through taxation. Doing so will create incentives for both producers and consumers as they consider the effects of their actions. This tax will force producers to create at a lower quantity because the pollution and health detriments would be included as external costs. This will eventually increase the price of meat, causing consumers to see the incentive to buy less meat. Personally, if meat got expensive, I would not buy as much as I did before and would rather get cheaper veggies or other sources of protein. 

But there is another way as well, and it is quicker and easier – if we make it to be. To dispute this negative externality and draw awareness to meat producers, we ourselves can consume less meat overall. I have, and still increasingly can, consume less meat than I have previously in order to create less pollution, gain better health, and bring disadvantages of meat to attention. This will then affect meat producers if we do not consume (or demand) as much as they supply, causing them to figure out a way to solve this negative externality, whether it is through producing meats in environment-friendly ways or by being more conscious in how and what they produce. 

So together, we should eat less meat, be more healthy, and save our planet. I am not saying that we need to cut all the meats out of our lives (although it would be a huge plus) but rather stating that even skipping to eat meat daily is great for society in general. Into consideration of these negative externalities, I have already been cutting out meat these past few years, as far as to try different lifestyles like veganism, plant-based consuming, pescatarianism, and vegetarianism. When that became difficult to control, I simply tried to at least eat only one meal a day with meat and the rest without. Maybe you too can start off with Meatless Mondays?

Lee Ji Yun

26961458

[friday3econlive]

Learning economics in Econ 20A has helped me broaden my perspective on the world in ways that I had not expected. Before taking this class, I thought that I would simply learn concepts that were applicable to corporate business situations and I had no idea that economics is all around me and that I would be noticing the many aspects of economics that are present. As the weeks of the quarter passed by and as I finished each section, I realized that I was noticing new economic principles every week, especially when going to the grocery store. I would like to share a few of those thoughts that I had while browsing the aisles of the supermarket.

In the first few weeks of this class, we learned about the 10 Principles of Economics. I realized that the third principle, “rational people think at the margin”, was applicable to me, the consumer as I stopped at the snack aisle at Albertsons. On the price tag for the Hot Cheetos it stated that I could pay the full price of $3.79 or pay a discounted price of $1.79 if I buy two Hot Cheetos with the club card. As a person who is thinking at the margin, I considered what I could gain from the extra bag of Hot Cheetos. Although I only intended on buying one bag, the additional bag would lower the cost of each bag significantly and I would actually be paying less for 2 bags with the club card than I would for 1 bag. I could not resist this offer and grabbed two bags and placed them into my cart. The law of diminishing return is also applicable here as every additional bag of Hot Cheetos becomes less and less desirable. After eating one bag, I would get tired of the hotness and would be more interested in a different kind of snack that doesn’t set my mouth on fire. I knew that I only wanted to pick up one bag of the Hot Cheetos but the benefit of a lower price that I could gain from the second bag made me decide to include the less desirable, second bag in my purchase.

Similarly, I was reminded of another economic principle when I was browsing the aisles for chips on a different day. When I was walking past the chips, I noticed that there was a new competitor in the market: Fritos Flavor Twists. These honey barbeque flavored, twisted corn chips were marked down in comparison to the surrounding chips of a similar size. I decided to give them a shot because I was a fan of Fritos, because my friend was eating them a few days back, and most importantly because of the lower price. I really enjoyed the chips and decided to buy them again but when I went back to Albertsons, I noticed that they were all gone. The whole section for flavor twists was missing and they seemed to be out of stock for a few weeks. As I had learned about surpluses and shortages, these concepts came to mind and I realized that there was a shortage because Fritos did not have good grasp on how much the customers would demand for their new product. The demand was larger than Fritos had expected and therefore they were not producing at the equilibrium level. To restore the equilibrium level, Fritos must increase their price so that the demand would decrease but the increased price would help them maximize their profits.

At CVS, I experienced a form of price discrimination. At around 1:00 am, I was brushing my teeth to go to sleep and I realized that I had run out of toothpaste and decided to go buy some before I forgot. I looked up Albertsons on my phone but realized that they were closed so I decided to head over to CVS just in time before they closed. I picked up the toothpaste that I always buy but I realized that it was priced at $10, slightly more expensive than I had imagined. I was too tired to reconsider my options so I ended up paying for the toothpaste and after the purchase, the cashier handed me a long receipt with many coupons attached to the end. As I was slightly dissatisfied with the expensive toothpaste that I had just bought, I took a look at all the coupons and decided that I could save some money by coming back and using the coupons. After running out of mouthwash, I returned to CVS and was able to save a whopping $7 on a few items. I was thrilled to save so much money and was looking forward to the string of coupons on the new receipt. As a college student with not much income, I was able to take advantage of the price discrimination that CVS had to offer. If I had been a working adult with a steady income, I might not have bothered to save the coupons to use in the future. Through these coupons, CVS was able to attract different types of people and make them pay their respective prices that reflect how much they are willing to pay for a product.

These observations may seem trivial but I was surprised by how relevant economics is in people's day to day lives and it made me realize how important it can be on a larger scale. A door has opened to view the world in a new way that was not possible for me until I learned about economics. It also feels like the invisible hand is always watching! In the future, I will most likely continue to pick up on various economics concepts and I hope to learn more about economics in the near future.

Kai Malloy

#62023627