monday7econlive

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The Growing City of Sacramento

My hometown of Sacramento has been expanding tremendously over the past several years. The development of the Golden 1 Center in downtown, the new home of the Sacramento Kings, was a huge push forward. Since, many parts of the city are growing, and many new spots are popping up all over. For example, healthcare insurance company Centene is currently opening a center in my neighborhood of Natomas, opening up 2000 new jobs.

Positive Externalities

This rapid growth has many positive externalities on Sacramento’s inhabitants. The growth of the city is a topic of discussion amongst Sacramento natives, as it's very exciting to reap the benefits of growth. In the past 5 years, property sales in the area around the new arena have totaled $1.8 billion. A new plaza surrounding the arena has emerged named Downtown Commons, referred to as “DoCo” by Sacramentoans. The area around the arena is now home to tons of new shops, restaurants, business, and real estate. Pedestrian traffic has increased by 47% downtown. Beautiful new art is popping up all over. The city has seen a growth in music events and an overall rise in culture. Sacramento’s urban core is being revitalized, and the new endless list of things to do and see is a real treat for all those who call it home. 

Negative Externalities

The growth and development of the city is also having a negative impact on many of its residents. Commuting to downtown has gotten much worse, especially state workers - commute time has even doubled for some. The demand for housing has been on the rise, and so has the price. We recently sold our family home in Sacramento, which we originally had bought for $350,000. Because of the influx of people and the rise in demand for housing, we were able to sell the house in 2018 for $440,000. The demand was so high that we sold it 2 days after putting it on the market. Here’s a graph showing the change in demand for houses like mine, and how it has affected the price:

Now, this is a positive externality for us. However, the change in house prices hasn’t been great for everyone. Many people are being pushed out of the city because they can no longer afford their homes or their rent. Therefore, homelessness has also been on the rise. Gas prices have also gone up on average. The cost of living in Sacramento is now a shock to natives.

Sachnoor Bisla 

78948753

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Aliza Hasnain (ID: 36083980)

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Coronavirus Takes Flight: COVID-19 and the Airline Market

COVID-19 refers to the respiratory disease caused by a novel (new) coronavirus that was first detected in China. It has been named “coronavirus disease 2019” and abbreviated to “COVID-19”. The respiratory disease has now been ruled a global pandemic It has spread to around 100 locations internationally, with a total of around 106,000 global confirmed cases and around 5,000 deaths. As a result, precautions have been made to prevent the spread of the disease.

With the unified efforts around the world to prevent the spread of the disease, there has been a clear effect on the economy and several specific markets within it. One of the major markets to take a hit from COVID-19 is the airline market. The airline market has been the target of a coronavirus-related travel slump. With Easter and spring break around the corner, it is clear that airlines had expected increased air travel and business for the season. However, many outside factors have caused a sharp drop in demand for air travel. One can easily observe this by looking into the airline stocks in the airline sector. Airlines such as Delta Air Lines, JetBlue Airway), Southwest Airlines, American Airlines Group, and many more have massive blows to their stock share prices with some even reaching -50% price change.

The effect of COVID-19 is a textbook example of a supply and demand chart. The overall demand for air travel has had a downward trajectory due to the external forces acting on the airline market. The fear of getting the COVID-19 virus has caused the consumer to be wary of air travel, and instead look for alternatives. As a result, the overall demand for airline tickets has lessened while the supply has remained constant.

The result of this effect has been clear: airlines are struggling to gain altitude.

As a result, various airlines have been scrambling to reduce airfares as a way to attract brave consumers. Domestic airfares in the United States are being slashed with the average price change being 30%. However certain destinations with heavy traffic have gone beyond that average. For example, a round-trip flight between New York City and New Orleans costs $97, which is around 70% lower than the average price, per Hopper (a website where you can book and compare flight prices).

In conclusion, it is clear that COVID-19 has a great effect on how consumers interact with the economy. By looking at certain markets one can understand to what extent an external force can have on a specific market and the routine competition within it. The airline market is no different considering the fact that it is estimated to lose $100 billion as a result of the virus and the overall travel restrictions. As the consumer looks into alternatives for air travel, the producer has a responsibility to look into alternative options if it wants to stay afloat, or in this case take flight.

CESAR VENEGAS (#38913946)

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The Economics of the Venture Capital Industry

Venture capital is an industry where a lot of where the money is moved is determined by where the economy is headed. Instead of exploring certain products in the economic sense, we are going to look at industry economics as supply and demand affect decisions made within the sector.

To put it simply, venture capital is “a form of private equity and a type of financing that investors provide to startup companies and small businesses that are believed to have long-term growth potential” (Wikipedia). Since venture capital is quite broad, we are going to focus on B2B (business-to-business) SaaS (software as a service) companies as our venture capital target.

As more startups begin to rapidly get founded, there is a huge increase in demand for software products that make starting these companies easy, fast, and cheap. A technology trend that fascinates me is the increased demand for middleware software.

So, the economics for the middleware market is that demand curve shifts to the right because there is a technological need for these products in order to enable more early-stage startups to excel and have a higher success rate overall.

As an engineer who has built from scratch and integrated middleware for various startups in the past, I saw firsthand the significant impact that this technology has on the way companies design their data pipelines efficiently. Aside from this technology being the data pipeline connecting services together, it also aims to push for the democratization of certain complicated processes that would usually require someone more experienced for the task, increasing efficiency and reducing cost. Zapier did just that and found a way to democratized software product integrations in a way that made them accessible to just about anyone. Intercom made it extremely easy to set up an integrated customer messaging app to optimize communication with prospective and existing customers. 

As the number of new startups grows exponentially year-over-year, the demand for middleware technologies is increasing. They empower founders to take advantage of huge amounts of research and development that they could not possibly afford themselves and the ability to swap out what can be improved or does not work as expected. It has never been so easy to create a product by having access to resources that were once accessible only to well-funded enterprises within the reach of entrepreneurs with tiny budgets and/or limited technical development expertise.

With the immense increase in the number of middleware companies coming out and flourishing, the supply of these companies in the market inherently shifts to the right as well.

Both the shifts of the supply and demand curves to the right benefit the market a lot because this double shift makes the price demanded and supplied equal the original but also increasing the quantity demanded which creates a very healthy market in terms of both the long and short term.

With all of this economic information, venture capitalists are actually very confident in what the middleware market will bring in terms of new early-stage startups whose mission is to make processes easier, faster, and cheaper. This technique can be applied to any industry and helps these venture capitalists make the better decision for who to invest in for the best return.

Julian Rachman

UCI NET ID: rachmanj

UCI ID #: 36651792

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My uploaded pictures were a bit grainy. Here’s an access to my powerpoint on Google Drive. Thank you :)

Esther Jung/ 31321491

Monday @ 7 pm

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Narcos: A Monopoly

Ian Ferrier

ID: 67084685

Throughout the 1970′s-80′s, Miguel Ángel Félix Gallardo created the largest cartel the world had ever seen in an effort to formalize direct passages of Marijuana, Cocaine, and Opium to the United States. This effort by him would enrage the United States and start the official “War on Drugs”. 

Miguel Gallardo (known to many as “Félix”) created his empire by combining the forces of mini-cartels in Sinaloa, Juarez, Guadalajara, Tijuana, as well as the Medellin and Cali cartels of Colombia for Cocaine. Once he won over his hometown cartel in Sinaloa, he moved on to each other one within Mexico. He would either try to negotiate peacefully or, if you refused, would take you by force. His effective strategies of avoiding the federal police to even recruiting the Minister of Defense is what made him known as “The Godfather”. 

In economics, a monopoly exists when a specific person or enterprise is the only supplier of a particular good. As a result, monopolies are characterized by a lack of competition within the market producing a good or service. In Mexico’s case, Félix took control of all Marijuana transportation and distribution. 

However, Félix’s desired more than just Marijuana. He successfully negotiated with cartels in Colombia about the movement of their Cocaine and Arms throughout Mexico. Because these illegal goods were easier to transport, pack and distribute, Felix’s marginal revenue would exponentially increase even further than it already was because of him controlling an entire monopoly over all illegal goods in the North and South Americas. 

Growing up, I’ve always desired to be a successful businessman with honed negotiation skills. Félix was exceptionally cunning, intelligent, and clever when it came to his businesses. Currently, I watch the show “Narcos: Mexico” on Netflix, which accurately depicts Félix’s rise to power in detail. Although I do not agree with his line of work, his work ethic is something to admire and is one trait I aim to model myself after as I grow older into this rapidly evolving and moving business world. In order to be successful in the business/economics realm, I understand that you have to take the biggest risks, you must be sly in your tactics, and ambitious in your understanding of the gains/loss your economy can afford. 

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The Economics of Boba

I made a prezi on the economic applications of the boba market. Enjoy :) 

https://prezi.com/view/x89mp5QdtlhGkeqqWZm0/

Yllana Casim // 41271552 // Mon. 7pm

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Shortages in the Teacher Labor Market (Orange County)

My personal motivations for discussing the economics behind the teacher labor market shortage was that I had been exploring different concentrations to integrate into the Mathematics degree I am pursuing here at UCI. Seeing Math Education and Secondary Teaching as a candidate, I wanted to experience the extent to which the social benefit of educating and making an impact on the lives of young students can outweigh the notoriously low pay grade for teachers.  I volunteered and became a TA for the After School Education and Safety program (ASES), a state-funded initiative (i.e. a corrective subsidy). ASES was understaffed in Tustin and promptly approved my application. My work was mostly grading homework for 7-8 grade math classes, but I certainly saw myself contributing “social capital” (a positive externality) in that I was being a role model in an at-risk, low-income community in that I would sometimes share with the students, my experience becoming college-ready throughout high school so as to entice them to succeed in school. Unfortunately, with the outbreak of the covid-19 virus, I’ve been laid off after one month in service, but regardless, the opportunity proved really insightful aperture into under the ways economics impacts my life.

(private costs) The current average annual salary for a teacher in Orange County is $64,459.   This is a disincentive for those considering a career in education since the cost of living in Orange County is very high and such a pay grade barely makes ends meet. As a result of there being a lack in teachers, There is a Market Shortage in teachers. By increasing the annual salary, to say, a higher number like $80,840 the supply of teachers coming out of universities and entering the workforce would increase thereby curtailing the market shortage.

(social costs) In treating with social costs we must also consider the external benefits that teachers reap on society: An increase in the number of teachers could help to meet the needs of an ever growing population of students => Students could perform better in school => More students graduating on time and entering University => A more educated workforce => a more productive economy. As it stands right now with the low salary for teachers, the social shortage in teachers would be even greater since society puts external worth in educators beyond their salary. In order to address the social shortage, the government or perhaps a trust should make it so that teachers are paid a higher salary, through a corrective subsidy. The quantity of teachers entering the workforce would increase thereby meeting demand shifting the market closer to the Social Equilibrium. Paul Chan Nguyen Trinh 87724228

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Jonathan Alderete ID# 50178397

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UC Irvine Times

Written By Andrea Esquivel ID:79299148, Kayla San Pedro ID: 81556078, Marianna Lare ID: 15203656, Jacob Morales ID: 94778885

Breaking News: COVID 19 Aka Coronavirus is Affecting our Market Economy  

Coronavirus causes panic not only among the U.S. but the entire globe

COVID-19, otherwise known as Coronavirus originated in Wuhan China, a  strain of virus that had never in history been associated with humans. There are currently 125,288 confirmed cases, 4,614 deaths and 118 countries, areas or territories with coronavirus cases according to World Health Organization (WHO), declaring the virus as a pronounced pandemic. As Coronavirus spreads across the nation, and contaminates thousands of people around the globe,  people have begun to take intense precautionary measures to prevent further infection of this virus. Italy and China have tightened their strict quarantine, and as a result of the escalation of coronavirus cases, and an increase of deaths due to this virus, the United States has imposed a ban on flights to Europe. Panic and extreme precautionary measures are causing a downfall in the global economy. In China, due to thousands being in quarantine, many are without jobs. Not going too far, our own local markets are experiencing scarcity; limiting resources in a society that cannot fully produce all the goods and services individuals wish to produce, of greatly demanded items such as face masks, hand sanitizer, and necessary food items like water and toilet paper. Markets such as Costco have been depleted of water, and toilet paper. Hand sanitizers and disinfectants are a not show in local markets, and if bought online, markets take advantage of the vulnerable great demand of these products raising the prices significantly, causing not only an economic effect in the short run, but also in the long run ultimately leading to an economic downfall that we are now starting to experience today.  

With the quick spread of Coronavirus, individuals are being rapid to buy necessary goods. Meaning that essential items are of great demand, therefore the demand increases in the short run, shifting the demand curve to the right/up,  while suppliers cannot produce any more than they are producing right now. Therefore the supply remains the same. As shown in the graph above, the demand curve shifts to the right, causing an increase in price.

With the knowledge we have gained from Microeconomics this quarter, it is to be predicted that in the long run demand will decrease, due to people losing jobs, individuals not being able to afford basic goods will result in aggregate demand decrease. Currently the global price for oil has significantly dropped as well as the price of wheat, government bonds, and industrial metals. Since the prices of a lot of raw materials are dropping, it is resultant that there will be a spending slowdown. In addition, as bond prices decrease investors will soon stop buying, dropping the entire market economy which can be reflected in the decrease of demand as shown in the graph above. 

Airlines experiencing economic disruption from COVID-19

As a result of fear in individual consumers and recommendations from global health organizations, social distancing is highly encouraged to maintain a 6-foot radius between people. Markets that provide services involving social interaction with individuals in contained proximity are experiencing a deficit in customers leading to a deficit in expected economic activity. Specifically, airlines are looking at drops in annual revenue due to the decrease in demand of flights. Fear amongst individuals has led flights to be cancelled and an overall global drop in the demand of airline flights. The demand shift has shifted downwards leading to lower quantity consumed.  The supply curve has not changed since the number of flights available are, for the majority, the same.  As a result airline tickets are selling for as much as half the price normally and the airline industry is estimating losses to as high as $29.3 billion USD (US Dollars). This decrease in travel has separated a number of students from their families in this stressful and frightening time. Not until the virus is no longer an issue, will students again be able to purchase flights and reunite with their families, returning the market to its equilibrium state.

The wall street journal reports that global panic from the COVID-19 outbreak has caused a mass shift in demand for household and hygiene products such as toilet paper, surgical masks, water and hand sanitizer in the United States. As a result of the panic, suppliers of these products, such as major retail brands like Costco, Walmart and Target, are experiencing mass shortages and consumers are reporting empty shelves for these products. The above graph depicts this scenario in that the demand curve for surgical masks will shift upward, causing an increase in price and a need for suppliers to increase their quantity of surgical masks to meet the newly heightened demand. This same scenario will also apply to toilet paper, water and hand sanitizer for suppliers in the United States. With a shortage of these supplies, those wanting to purchase them face an inflated price that they will have to pay or choose to go without the products, putting themselves at risk.

[monday7econlive]

Econ Live: Weekend Trips to my Parents in Oceanside

Kwanyong Yoon #14298931, Discussion- Monday 7 pm.

Every 2 weeks or so, I make a trip down to visit my parents in Oceanside every weekend to spend time with them. Due to the lack of a reliable transportation system, my mode of transportation involves using Uber to get to the Metrolink Train Station down in Tustin to catch a train to Oceanside Metrolink station. This of course adds both financial and time complications into my weekends and unfortunately these weekend trips also have a cost associated with them. 

Throughout this Econ Live assignment, I’m going to be explaining everything I do, everything that has to happen for these trips, and what is considered when I plan my trips. I will be talking about the role of incentives within this trip,trade offs and opportunity costs, factors that shift demand and supply curves, and how externalities that were out of my power affected these trips. 

The first thing to talk about when discussing my trips down to Oceanside are the incentives or the reasons I go down there so often. While an obvious benefit from these trips is the fact that I can go down to see my parents and spend time with them, there are other incentives that encourage me to come to Oceanside.  

Examples include: 

When I go down to Oceanside, I am able to eat really good food that my mother makes for me when I come down.

While in Oceanside, my close proximity to the ocean allows me to go down and hang out at the beach.

While at home, my backed up mail and any other important documents can be addressed. 

It’s much easier to schedule hangouts with my friends while in Oceanside.

Other incentives affect my trips as well. For example, one weekend it was predicted to be raining and due to this fact, I planned on canceling my trip due to the fact that I don’t like going out in the rain. As of recently, I have stayed away from going to the Metrolink station due to the recent outbreak of the Coronavirus. As the station is a public place, my family has objected to my usage of the train system and have arranged to pick me up if I need to come down to Oceanside.

This is indicative of one of the main principles of economics, that people think on the margin. 

In addition to this principle, the idea that people face trade offs when dealing with resources are prevalent in this situation. Trade offs are in simple terms, something that you give up such as time or resources in order to gain something of preferably more value. In addition, these trade-offs are often expressed as opportunity costs as I sacrificed resources in order to attain something else of value. Due to limited availability of time in my life, I faced various trade offs when I would come down to Oceanside for the weekend. Some of these are: 

Studying for midterms or going back home

Watching a movie or going back home

Go back to my hometown and hang out with friends or going back home

Saving money or going back home

Helping my friends out with a club event or going back home

This decision caused considerable deliberation on my part as I had to balance the various benefits and resources that would be used in order to come down to Oceanside. There were several times that I chose attending the trip over the other options and vice versa. The reasoning behind me choosing one trade off over another is that one trade off has more value over the other trade off. In the following table, I go into detail of the trade offs stated above, and state the opportunity costs and effects of it. 

Now after deliberating over the benefits of each trade off, I would plan my trips down to Oceanside and the associated logistics of this process. With this trip, there are two main costs of going down to Oceanside. One is as I have said, the Uber ride to the Tustin Metrolink Station. This a classic example of a service completely dominated by the demand of this service. If many people want to use Uber, the prices for Uber correspond to this demand and prices go up.  

As you can see with this graph, the demand curve for Uber rises in the afternoon compared to the evenings due to the demand of the service at this time. Demand curves in general only really shift due to the number of available substitutes, consumer preferences, and the shifts in the price of complementary products.This shift to the right shows how the demand shifts the price upwards as the average price of each transaction rises. Now this is indicative of the factors that shifts demand curves to the left or the right as the quantity demand can shift the price of the good left or right. Now these shifts can make the equilibrium price or the amount that I have to pay shift up or down due to the demand of the people around me and the times that I schedule my Uber ride whether it’s in the evening or afternoon has an impact on the prices.

The other cost is the train ticket prices for the Metrolink station. With Metrolink, it resides in a oligopolistic market due to the fact that only Amtrack and Metrolink operate trains down to Oceanside and this helps their supply curve as they have not a lot of competition. With supply curves, production capacity, production costs such as labor and materials, affect this but Metrolink’s supply curve is different.  Due to the fact that the Metrolink is operated and largely funded by the state, their prices are able to be set in stone. This is the result of state subsidies as they allow the Metrolink to cement their prices and not fluctuate due to shifting demand like Uber does. This is especially prevalent due to the fact that the demand for Metrolink also shifts dramatically due to the seasons. I have noticed that Metrolink has many more customers using their services in the summer but not so much during the winter. 

Even though a normal business would shift their prices around, Metrolink doesn't as the subsides keeps the prices for students at eight dollars and 75 cents. The effect of subsidies keeps the equilibrium price of the train ticket down as shown in this graph as the state helps support the trains. 

However there have been instances in which have demonstrated to impact my trip in unexpected ways. For example, when it rained for a few of my trips, this caused me to cancel my trip down to Oceanside due to both logistical and personal reasons. In addition, this recent outbreak of the Coronavirus has caused some difficulties with these trips down to Oceanside. 

It's important to note that these are  the effects of externalities, the cost or benefit that affects a third party who did not choose to incur that cost or benefit, has on the demand of certain services or goods. As I mentioned before, the rain caused me to cancel my trip down to Oceanside but this is also an effect on the prices for the Uber. In times of rain or harsh weather, there is a noticeable drop within prices of the Uber trip and the availability of the Uber. As an example, when the weather is colder and has recently rained, the price of the Uber ride to Tustin Metrolink Station drops from 15 dollars to around 13 dollars per ride. This noticeable drop in the prices shows how the demand shifts downward when there are less people willing to use Uber due to the colder weather and the rain. This translates into a decrease in the price of the Uber trip due to the model of Uber’s pricing reflecting the demand for Uber rides. 

Now with this Coronavirus, I see that this affects both metrolink and Ubers demand as less people are willing to go out around town. As a result, both businesses are facing losses due to the demand of their services falling while the supply isn’t impacted due to no factors affecting the drivers and the trains. This has led to a decrease in pricing for Uber and the amount of people on the trains for Metrolink. 

While this may not have included any additional expenses that were expended, this sums up the economics behind my trips to Oceanside. 

[monday7econlive]

Economics of the Chicken Sandwich

During 2019 announced what would prove to be the start of a chicken sandwich war, with its now infamous Popeyes Chicken Sandwich. In merely two short weeks demand for the Popeyes chicken sandwich caused stores across the US to sell out. By starting a twitter feud with rivals Chick-fil-A and Wendy’s Popeyes brought the inevitable eyes of countless potential customers towards Popeyes and as a result ad awareness for Popeyes hit an all time high in Aug of 2019.

Unsurprisingly as advertisement awareness spread and word of mouth got out Popeyes Chicken Sandwich became one of the most sought after foods during this time. People lined outside stores for hours on end. Eventually when stores began to sell out wild stories appeared of armed customers demanding the chicken sandwich or of the chicken sandwich selling for several thousand dollars on eBay. In order to meet the overwhelming demands Popeyes had to vastly increase their supply across their chain of stores and increase staffing. Popeyes had caused a forty percent growth in sales due to the popularity of their chicken sandwich. 

Andrew Fang ID: 31294903

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COVID19, Econ, & I 💞

https://create.piktochart.com/output/44952224-econ-live-project-pauline-apresto-67649522

Pauline Mae Apresto (67649522)

The link above is for my econ live project on how the recent Coronavirus has impacted the economy of my daily life and surroundings.

It has one small interactive feature which could be accessed through going through the site piktocharts but besides that, below are the slides.

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Apple Marketing Strategies and the Psychology of the Consumer

To what extent does marketing and product placement play a role in allowing Apple to develop into the world’s most valuable company?

Consumer behavior is defined as, “The study of individuals, groups, or organizations, and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society.” This definition brings up four fundamental points:

• Consumer behavior can be used in the context of an individual, group, or organization

• Consumer behavior entails the use and disposal of products and the study on how they are purchased. In the business of marketing, product use is of great interest because it is able to influence where a product is positioned on the market and how the supplier can increase consumption of their product. Knowledge of product use can also lower the environmental impact of technologies because it will allow for improved product disposal (i.e. Apple’s Liam disassembly robot that recycles products from 1.2 million units per year per robot)

• Consumer behavior can be related to tangible products or services and ideas

• Consumer behavior can have an impact on society (i.e. positive marketing of alcohol affects national health and the economy)

The study of consumer behavior also has many practical applications. One of these applications is marketing strategy –  better marketing allows the consumer to value a product more, thus increasing revenue. An example of marketing strategy is the fact that most snack food commercials are aired late in the afternoon, when consumers are hungriest and most receptive toward food advertisements. Another example is the timing of product releases. In general, it is understood that new products are adopted by few consumers but as the life cycle of the product progresses, the product will begin to saturate the market. Marketing strategy shows that companies that introduce new products must be financed enough so they are able to stay afloat until their products become successful. It also shows that the impression of initial customers determines the choices of future consumers.

Social marketing is another form of marketing. This involves getting an idea across to a consumer. Rather than selling something explicitly, social marketing uses a knowledge of consumer attitude to change the mindset of the targeted audience.

In the realm of marketing, there are a variety of factors that can influence the decision of the consumer. To determine the tastes of the consumer, companies implement a large number of consumer research methods. Market research is used to give consumers what they actually desire. Sometimes, this may differ from what the consumer thinks that they desire. Research also reduces the risk associated with introducing a new product. Primary methods of determining consumer behavior include surveys, focus groups, personal interviews, observation of consumers, and mass data collection. Each one of these methods provides insight into the mind of the consumer and can help companies market their products in an attractive manner.

When advertising, companies use the psychology of consumer behavior to attract, convince, and convert people to a product. Some of the principles used are:

• Priming: Exposing the consumer to a stimulus which affects how they respond to another stimulus. Small details in the background of an advertisement can subtly impact the mind of the consumer. For example, two groups of people are given the world “yellow” followed by “banana” or “sky”. The “yellow-banana” group is quicker at recognizing the second word because of the association between the color and the fruit.

• Reciprocity: The idea that if an entity does something for another person, the other person will want to give back to the entity. This phenomenon is able to be seen in restaurants where waiters give customers mints or candies after the end of the meal. This simple act reaps a 3%-5% benefit in the tip left for the waiter.

• Social Proof: People adopt the ideals of groups they trust.

• Loss Aversion: People do not like to lose what has already been gained.

• Scarcity: The rarer an opportunity or product, the more valuable it is to the consumer.

• Anchoring: People base their decisions on the first piece of information received. This can be seen in all stores that have sales on products. Companies display the “initial price” as the Manufacturer’s Suggested Retail Price (MSRP) and put the sale price beside it. This gives the allusion that the consumer is receiving an “outstanding” deal.

• Baader-Meinhof Phenomenon: When the consumer encounters a product for the first time, they begin to notice said product everywhere. Confirmation bias reassures the consumer that the product is somehow omnipresent.

• Verbatim Effect: People remember the gist of an advertisement, not the specific details

All of these factors are utilized by companies to improve their marketing so that their ads persuade consumers into purchasing the products or services displayed.

Since the implementation of its three-point system, Apple has made a name for itself in the world of marketing. The three-point system is as follows: empathy for customer needs, the complete focus on only the most pertinent issues, and the imputation of only the most desired qualities of their products to the consumer. Implementing the three-point strategy has proven to be extremely effective and has become one of Apple’s most coveted strengths. In 2014 alone, Apple’s marketing budget totaled 1.2 billion dollars. This may seem ludicrous, but the returns made on their marketing investment rectify such spending. Apple iPhone’s and iMac’s make their way into numerous movies and television shows. Beats headphones and speakers are worn by the most elite athletes and the most prominent singers in pop culture. This primes and influences the financial decisions of the consumer. Apple has even won the CMO Survey Award for marketing excellence, an award that goes to companies that set a standard for marketing excellence within their specific industries, from 2009-2015. The difference between Apple and its competitors is their dmarketing efficiency. In 2013, Apple spent 0.64% of its annual revenue on marketing while Samsung, a rival of Apple’s in the phone and tablet markets, spent 1.75%. Versus its closest competitor, Apple spends more than 1% less on marketing and advertising to its consumers while selling more products. In essence, this allows Apple to grow at an astonishing rate. The brand value of Apple grew 5% from 2015 to 2016 making Apple worth 178 billion dollars.

Whence exploring Apple’s marketing, it is important to note the demographic characteristics of the target market. Appealing to children requires a much different marketing strategy than marketing to people 65 and over. Apple’s main market consists of men and women of middle to upper income from ages 18-34. A total of 45% of all iPhone users fall within this age group.

Users ages 34-35 represent another 32% of the total number of iPhones used. Men represent 60% of Apple’s consumers while women only represent 40%. On average, Apple product users are highly educated and work white collar jobs with incomes over 75,000 dollars per year. It is also important to implore the psycho-graphic characteristics of the market. Apple appeals to these consumers by not just selling a brand, they advertise a mindset. Apple compels customers to believe that purchasing an Apple product makes the consumer exceptional and as such, Apple is able to charge a premium on their devices. Although Apple has a smooth and integrated ecosystem between phone, media player, computer, and wearable’s, their products can be seen both as a durable and Veblen good. Apple’s products tend to last more than 2-3 years, yet the brand itself is created to be conspicuous. The sleek aluminum bodies and lustrous Apple logos make a statement. Because the iOS and OSX systems are exclusive to the Apple ecosystem,

prices are somewhat inelastic as displayed by the graph above. Since the inception of the iPhone, the price has increased dramatically. The highest end iPhones may cost more than 1000 dollars. Price Elasticity of Demand (PED), a measure used in economics to show the responsiveness of a quantity demanded of a good or service to a change in price, can show the inelasticity of iPhones.

PED = %Change in Quantity Demanded/%Change in Price

As prices increase, the quantity demanded for iPhones and Apple products in general remains the same. Marketing has allowed Apple to charge a premium for their device without question from the consumer. The main driver of this ability is value-based marketing. Apple uses its branding campaigns to allow the consumer to obtain a predisposed notion of the values of Apple products. Once the consumer buys an Apple product, the consumer realizes that others will recognize the value. The product itself becomes a symbol of status and fills an intrinsic psychological need. By selling products at high prices, Apple scores its revenue from the high profit margins thus aiding Apple in becoming the world’s most valuable company.

Apple’s business model has allowed the company to capitalize on economies of scale by decreasing costs and increasing profit margins. Apple is able to operate what is essentially a software, hardware, service, and retail business. Other computer companies are unable to provide product differentiation, at the same level, for the consumer. Apple, on the other hand, sells computers that feel premium and provide an easy to use, unique, and integrated software experience. This integration increases brand value and customer loyalty. Typically, people stay within the Apple ecosystem once purchasing only one product because of the familiarity that is entwined with the company’s software experience. Consumers may start off by buying an iPod; Once they fall in love with the user interface, they invest in bigger purchases. In a sense, the integration of software across all Apple products causes each purchase to become a complement. These complements, as demonstrated below, shift the demand curve to the right because a purchase of one product leads to an increase in demand for other products in Apple’s lineup.

Apple, a company that originated in a garage in Cupertino, California, has now become the world’s most valuable company. Using marketing strategies and the behavior of the consumer, Apple retains a large portion of the computer electronics products and services market in all areas of the globe. The efficiency of their marketing and a unified user interface allow Apple to flourish despite premium pricing. Consumers who purchase Apple products become recurring customers after experiencing the straightforward software and exceptional build quality. The theory of supply and demand can be used to illustrate the inelasticity of Apple products. However, the quality products and services yield high customer satisfaction and ensure that Apple remains at the pinnacle of success.

Aditya Chowdhury

ID:32622195

[monday7econlive]

This is a remix of the classic song, “Never Gonna Give You Up” by Rick Astley in terms of Perfectly Competitive market suppliers. It may not be the greatest remix out there, but it’s the best our singing ability can do.

Lyrics:

We’re no strangers to competing

You know the rules and so do I

Perfect competition is what I’m thinking of

You can buy this product from any other guy

I just wanna tell you that I’m leaving

No costs to enter or exit the market

Never gonna make a profit

Never gonna change the market

Never gonna increase my price and hurt you

Never gonna change my product

Always gonna take the price

Never gonna monopolize and hurt you

We’ve been producing, for so long

You want lower prices but you’re too shy to say it

Long-term equilibrium, so much fun

Lower prices means negative profit

And what if the market price falls?

Don’t tell me you don’t know what will happen

Maybe I’ll exit the market

Maybe I’ll stay right in

I can do both because there’s no restrictions

Will never make a long-term profit

It’s impossible to change the market

I’d never change my prices and hurt you

Never gonna make a profit

It’s impossible to change the market

Never going to change my price and hurt you

Maybe I’ll enter back in

Maybe I’ll exit right out

Maybe I’ll do both because there’s no restrictions

Never gonna make, Never gonna make

(make a profit)

Never gonna make, Never gonna make

(make a profit)

We’ve been producing, for so long

You want lower prices but you’re too shy to say it

Long-term equilibrium, so much fun

Lower prices means negative profit

And what if the market price falls?

Don’t tell me you don’t know what will happen

Our wonderful composers and singers in this project are as follows:

Adam Musaffar - 95141591

Paul Yu - 32465645

Juan Melgarejo - 18103647

Harold Hua - 13858225

Please enjoy the song and provide us with proper feedback before we perform on “America’s Got Talent.”

[monday7econlive]

Inflation and Small Businesses

A quarter. A piece of metal pressed, stamped, and refined with only $0.25 value to its name. Treasured more in the past than our rapidly, developing present day. Finding a quarter on the ground or between couch cushions is more common and less of a triumph when found. Today, the quarter has been forgotten due to its decreasing value in an economy with mass amounts of inflation. For someone before the mid-1960’s (the great inflation period) a quarter  could get someone a lot more for the quarter’s value. Ever since 1964 the rate of inflation has gone up about 2% per year. Inserted below is a graph representing the percentage of inflation over the years. Starting from 1910-2020, data collected by InflationData.com.

For this reason, business owners, vendors, or any seller for that matter have to account for this percent of inflation and adjust their prices accordingly. I know first hand what it is like to deal with an issue like this. For my parents, quarters are what keep their business running. As proud owners of a local laundromat in Redondo Beach, CA my parents rely on quarters to start their machines, pay their bills, and help them maintain a successful business. For them, each 25 cent value adds up to their income. Every year my parents have to access their income and see if their set prices are working for their customers. This is a hard task because they want to be a laundromat know for their amazing prices and great quality, but they still want to make money even with their rising expenses and yearly rent increases. It is hard for my parents to adjust prices because their regular customers notice very quickly and feel a sense of betrayal. In order to keep up with this growing economy my parent have to make price adjustments on washing machines and dryers. The price changes that they make are not massive, however even the slightest change in price can have a major impact on their business. For example, my parents set the price of a washing machine at $2.75 per load. If my parents were to rise their prices by 50 cents and make it $3.25 per load their customers would not be happy. They would take their business else where to try and find a cheaper rate. That is why inflation not only effects prices but it effects supply and demand of a product or service. Customers might not think that the price increase is worth the service and will not continue to come to the laundromat. They will find another Laundromat in the area that can accommodate to their need for lower prices. Here is a graph showing that shift in supply and demand based off the price change:

This price change will have an effect on both the supply and demand. If customers are going elsewhere for their business then the amount of washes will decrease shifting the demand to the left. The supply will then shift down because there will be less people wanting to wash their clothes, which decreases the amount of water or electricity that the business has to pay for.

Not only are my parents having to try and maintain low prices with the rapid inflation rates, but they have to deal with competition that can be potentially taking their business. Inside my parents Laundromat there is a wash and fold service and allows for customers and come in and get their laundry done for them. They pay to get their laundry done for them for the convenience and affordability. Unfortunately, in recent years my parents have noticed a decline in the wash and fold aspect of the business because of the online laundry services. Laundry services online are making it as easy as ordering a package. They come to your house, pick up your laundry, and you have it back within 24 hours of your order. The graph below represents when happens to my parents business and the online services offered. This online service is considered a substitute good/service, the graphs below show what happens to the economy for both businesses as the substitute good grows in popularity:

Luckily for my parents, laundry services are considered an inelastic good/service because people will always need these services if they can not afford their own washer or dryer. This means that their business can afford to increase prices without driving away too many customers. But on the other hand, my parents just have to be strategic with how they set their prices and not drive customers away to keep up with growing expenses. I am glad that my parents have a business that I can continue to learn from and see first had what can affect price, quantity, and a plethora of other topics that we cover in this course. My parent’s business continues to teach me more about the economy everyday, which allows me to become smarter with money.

Riley Christie

Student ID: 44275183