eventually...

Mind Maps:

Aggregate Demand




Aggregate Supply




p.s. thanx,Dima, for mindmanager license key)

negative externalities ( obesity and smoking)

Today I'm going to talk about two examples of negative externalities, which are, actually, the most wide-spread ones.

1. Obesity
You may think that if people suffer from obesity - it's their own life.
So why is it considered as a negative externality?

In fact, obesity now became a serious problem not only for people themselves, but for the whole nation.

According to BBC News, in England almost two-thirds of adults and a third of children are either overweight or obese.
It has a great impact on social services, for instance, government has to invest money in reconstructing school gyms and canteens, so that it is suitable for overweight people.


And, of course, that affect taxpayers, which are to cover the costs of all these government actions.

What are the ways of reduction people's obesity? It is obvious: advretising heathy products and healthy lifestyle, government subsidies for healthy goods producers in order to make the price for this goods lower than the price for high fat goods.

2. Smoking

'Smoking kills' - that is what is written on each pack of сigarettes. Government is also going to take some actions aganist smoking such as:
1. Banning tobacco vending machines
2. Restricting the display of tobacco products in shops ( which is already done in Canada, but didn't affect the consumption of cigarettes).
3. Add an 'anti-smoking' picture (for example, a photography of smoker's lungs) to each pack of cigarettes.

But will that really stop people from smoking?
I guess it will reduce cigarette consumption to some extent, but won't solve the problem entirely.

However, the cost of cigarette pack may have an influence on people smoking, especially young people.
Let's compare Russia, where a cigarette pack costs no more than 2 dollars, and UK, with 10 dollars for a pack.
60% of men and 30% women smoke in Russia aganist 26% and 23% in UK.

But , on the other hand, that it is not only high prices that affect tobacco consumption, but also national habits and the way children are brought up in both countries.

Talking about impact on people's material life - the situation is similar to the first one (obesity) - tax paid by people is about 9bn pounds each year - a substantial amount of money!

book review

As the MindManager doesn't work I used the time to finish my book.

'Discover your inner economist' by Tyler Cowen.

We are used to think that economics is all about graphics, diagrams, difficult calculations - but it isn't. Economics doesn't end with forecasting stock prices - it may be applied and it is applied in our daily life.
That is what this book tells us about - how to deal with our everyday problems using our economic knowledge.

Tyler Cowen explains how people's behaviour is affected by economic principles: the dirty dishes parable, the car salesman parable, the parking tickets parable - let's take the first one as an example.

If parents want to make his child do the dishes, they may consider paying him money for doing housework as a good idea.
And many of them really beleive it works, but, however effective it seems to them, it doesn't.
That is simply because the child takes status of working for the parents as immature or even humiliating.
Another bad point is that the child doesn't put an effort in doing his work properly - because he is paid for that anyway.

So probably the only way to make a child happy to do the washing up is to let him know how important it is for the family and how highly the parents appreciate his ability and willigness to help. This tactic may seem simple, but it unexpectedly does a good job.

That is only an example of what this book is about -you will find a lot more about incentives, penalties and rewards and the impact these have on our life.
You can even find out ( and I did) that you use some of this methods yourself (but never thought about it).

The advantage is that the book is written in plain language with the examples provided for each new topic, - it's like the author has a friendly conversation with a reader ).

In conclusion, I'd like to say that I enjoyed reading this book ( not just because I HAVE TO enjoy it and write a positive review :) ) and I'd advise to read it anybody who wants to get familiar with a different application of economic science.

P.S. In fact, I like reading, but I'm too lazy to do it unless I'm forced to, so, thank you, Chris ))


things to do

some key points of the yesterday's philosophy class

The main topic of Monday class was 'The awareness'.

We consider ourselves being awake, but are we really awake?

That's the question.

There are 5 levels of awareness:

1. Deep sleep state ( we can't even dream in this state )

2. Dream state

3. Sleep-waking state (my usual state)

4. Waking state

5. High consciousness

To move from state#3 to state#4 there is a useful exercise.

You should concentrate on all your senses. Feel the clothes touch your skin, listen to the sounds outside, feel your feet on the ground. That is how you come to presence.

another view on this topic:

http://everything2.com/index.pl?node_id=589307

following the David's example..

#11 Clean my shoes )))) 

#12 Send an e-mail

#13 seems to be unreachable...

not 750 words but anyway

A short beginner’s guide to the credit crunch causes.

If you are still alive, you have probably heard about the world credit crisis, which also had a great impact on the whole economy. But let us start from the beginning....

The origins of the current credit crisis lie back in 2007, when the subprime mortgage crisis took place.
In order to avoid the economy moving into recession, the US government cut interest rates down to 1%, but with a plan to increase this rate slowly by the amount of 0.25% each year approximately.

Therefore, many people started to take ARM’s - adjusted rate mortgages, in other words, mortgages with NOT constant interest rates.

But what happened later: when the loans went back to the normal monthly price, it became unaffordable for many people to pay their mortgages back.
That couldn’t have created such a big problem unless another important factor - house prices - had played a great role in widening this crisis.

Normally the banks would cover their losses by selling the houses, but as the house prices went down, banks faced great losses and, as a result, the lack of liquidity.

Banks found it hard to borrow money from the wholesale markets and even to lend to each
other, which caused the global credit freeze.

That crisis affected the banks all over the world and for some of them ( Nothern Rock was the first) the nationalisation was inevitable.
Another important action taken by government was a bail-out of 700bn of pounds to buy ‘toxic’ assets from the banks.

That all illustrates the main events and the basic points of the credit crunch.
But it is still not over...

just a quick note

The law of diminishing returns.

More and more hours I 'invest' in writing the book, less and less productive I am....

just reviewing 'The Times' article

While governments are trying to prevent the economies from falling in recession and making decisions about rescue plans, let’s have a look at some strange, but rather good consequences of the recession.

According to “The Times”, during the recession people’s, so-to-say ‘non-material’, life tends to improve!

Why does this happen?

During a downturn people work less, therefore they are less stressed and have more time to, for instance, go to the gym, visit their parents or even... cooking at home!
That reduces fast-food consumption and makes people healthier! Isnt’ that a good point?

An interesting fact: it was found out that for every 1 per cent increase in unemployment rates, the death rate decreases by 0.5 per cent!

Summarising all the benefits:

1.decrease in smoking
2.decrease in drinking
3.people become healthier and lose weight ( due to increase in activity)
4.people enrol in higher education
5.decrease in death rates
6.people drive less -> roads are less crowded
7.decrease in prices for necessities, petrol and houses

Enjoy the recession!)

http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article4916300.ece

The market for oil

PES mind map

factor rewards mind map

philosophy courses

I'm talking about that evening courses

Was it useful? Or was it absolutely pointless? I can't tell it certainly so far.
But one thing is clear: whatever you study, it improves your English, which is the first thing we came here to do, actually.
And even though I didn't understand some things our group was talking about, I hope it's not going to be a problem in a few weeks.
The teacher even wondered where we are from and suggested to explain all unusual words, that' was very nice )). In general, the atmosphere is quite friendly there, which, of course, supports learning.

BTW,
I'm also going to attend Economics courses on Wednesday.

friday entry

Why are seatbelts mandatory in cars but not in most school buses?

Most of the children go to school by school bus and it is one of the safest ways for children to get to school. Otherwise, children have to go on foot or cycle,and they take risks(for example, of being knocked down by a car). But, at the same time, most of the buses still don't have any seatbelts. Why?

The main reason is children's health. It has been proved that shoulder seatbelts are unsafe for small children. Moreover, during different crash-tests it was found out, that seatbelts can cause more drawbacks than advantges, for example, in case of evacuation they can slow down the process.

As for me, I'd vote for mandatory seatbelts, because in some cases it can help people to survive and you can never be careful enough to avoid accidents.

wednesday question

Is it efficient for people to share the bill when they go to a restaurant?

Usually if you go to a restaurant with your friends, you agree to split the bill and you don't mind if you pay a little more than you really have to pay out of the whole bill. 

But in this case people tend to order more expensive meals, or simply eat more than they usually do. 

That can be explained by psyhology: if you pay separately, you will have to pay a lot more, but if people split the bill, you'll only have to pay a little extra.

Therefore, it's more efficient for people to share the bill, in order not to pay more, because sometimes it can also be really unfair. ( for example, if you have only had a cup of coffee and your friend have tasted 7 different meals).

tuesday question

Why do theatres discount prices on spare tickets just before the performance whereas airlines and rail companies raise prices for last minute customers?

Ok, the answer seems to be simple.  

Demand for airlane tickets is inelastic, because if a person wants to go somewhere, he has no choice and buy the ticket even though it costs double price. 

So, airlanes and rail companies administration understands that the higher the price is, the more revenue they get and raise prices for last minute customers.

Now, what's about theatres? 

The demand for theatre tickets is usually elastic ( except for world famous musicals or if you are a theatre maniac ;) ).

That's why prices on tickets become very low just before the performance in order to sell all the tickets.