Spending habits with demand and supply

Spending habits with demand and supply

Discussion Question:

The line between want and need seems to blur more and more each year as “luxuries” such as cell phones, cable, and a new car are now considered “necessities.” Many people trade-off buying things they need, such as healthcare items and healthy food in order to have the latest technology or spend a night out at the newest “in spot.” People from other countries often remark that, “poor people in the U.S. have more possessions than middle-class people in many other countries.” Why do you think this shift has happened? What is fueling it? Where do you think it will head? What do you think people who survived the Great Depression would think of these spending habits?

Needs refers to necessities that every individual requires in order to thrive. This means that without this particular thing, the individual will end up suffering mentally and physically. Want on the other hand refers to something that an individual desires and may or may not be in a position to get it. In the current world the line between wants and needs seems to blur. This is mainly because wants have become needs which is mainly due to globalization and the advancement in technology. Initially, people would survive with the basic needs only but in the current world, people need luxuries such as the internet in order to survive. This reduction in the difference between wants and needs will lead to the entire elimination of wants as they will be all considered as needs (Osberg, 2017). For instance, most people consider advancement in technology as a luxury but the reality is in the modern world people need this advancement of technology in most sectors such as the health sector. The great depression refers to an economic downturn in the world which had a major negative impact on the stock market. People who survived the Great Depression urge people to differentiate between wants and needs as this is the only way to ensure that people only spend on what they actually need and not on luxuries.

Discussion Question:

When we go to a local farmer’s market, the cost of vegetables is usually higher than the price in the local grocery store. Based on the concepts of supply and demand, why do you think this is so?

Generally, demand and supply have an impact on the cost of a particular commodity. The local farmer might be the primary supplier in a particular area. This means that the local farmer sells the vegetables to the owners of the grocery stores in that particular area in bulk. Therefore, there is more demand than supply at the farmers market. An increase in the demand for commodities more than the supply leads to an increase in the prices of that particular commodity (Roberts & Schlenker, 2013). This is why the vegetables at the local farmers market have a higher price. Since there are many grocery stores in a particular area, this means that the supply is equal to or even more than the demand hence the decrease in the prices of the vegetables.

Assignment:

Value, like beauty, is often in the eye of the beholder. A 1909 S VBD penny is considered one of the most valuable U.S. coins because of the small numbers that were minted. One penny can fetch several thousand dollars, depending on the buyer. Yet the actual value of the coin, if it were to be spent, is only one cent. It could easily be put into distribution at a convenience store, passed from hand to hand, without anyone who touches it even knowing its value. What does this say about the value of something?

As stated above, the value of something is just like the beauty of something. This means that just like beauty is in the eyes of the beholder so is the value of something. The value of a commodity depends on the individual acquiring the commodity. One individual may know the essential use of a particular commodity and hence considering its value high while another individual may not be aware of the use of a particular commodity hence considering its value low. In this case, the 1909 S VDB penny is considered of high value but its actual economic value is low. This penny was designed by Victor David Benner and hence the initials VDB. Victor was selected to design this coin due to his reputation in crafting things hence collecting very many medals in this sector. He then included his initials VDB in the coin’s design which were then removed later on due to their overbearing presence. Some of the reasons why this penny has a high value are because it was the first coin to feature an actual person, this person was not any other person but the American president. In addition, the US had not changed its one-cent coin in so long and hence this was the first change in more than fifty years. Finally, a limited number of this coin was minted and hence considering the coin very rare. These are the reasons why this penny is considered valuable despite its low economic value.

Based on the information presented above, the value of something is not constant to every individual (Rokeach, 2018). In this case unless the individual is aware that this coin was the very first coin to honor an American president and even the fact that there is a limited number of this coin, they will not be in a position to realize that the coin has a high value. Therefore, the value of a particular commodity is based on what the individual knows about that commodity. The more the individual knows the more they are likely to establish the actual value of that particular commodity. As much as the individual has limited information about a commodity then they will most probably think that the commodity has a low value. Therefore the primary determinant of an individual’s awareness of the value of a commodity is the information that the individual has on that particular commodity.

Gas prices are often talked about as having an impact on how much people drive. Yet if you ask most people, they will say most of their travel – to work, to school, to shopping locations, to see family – cannot be curbed more than slightly. Similarly, most people are not going to cancel a vacation because gasoline for their vehicle will cost them 38% more than the prior year. These being acceptable facts, explain why gasoline costs are even discussed in the media – especially to the extent they are – and whether you have ever altered your behavior on those costs. Include in your answer your views on why gas prices seem to go up almost the same instant that news outlets announce oil barrel prices are set to increase in the near future, yet they don’t ever seem to drop back down to the pre-hike rate even though oil prices decrease.

This gas price issue properly explains the concept that people have to adapt to changes in the environment in order to survive. This means that like in the current world, people have to adapt to changes in technology and globalization in order to survive. For instance, earlier on people would not take up new technologies in the claim that they have a negative impact on their health. Currently, people have already adopted new technologies as they have realized that it becomes harder to survive without new technologies. This is the same case in the issue of gas prices.  This issue also brings the idea of the blurring line between the different needs and wants. Since in the current world all wants have been classified as needs, people end up working harder to ensure that they fulfill their wants as they consider them as needs. Due to this, as much as the gas prices are high, people are not willing to forgo their movement from one place to another as much as this movement can be considered as a luxury. This is the reason why people still drive and even go on vacations even after an increase in gas prices.

Gas prices are normally discussed in the media because they have a huge impact on the economy of any given country. For instance, a decrease or increase in gas prices affects consumer spending which affects the prices of air tickets. In addition, gas prices also have a major impact on transportation which affects both businesses and households. These are some of the reasons why gas prices are normally discussed in the media basically because they have an impact on the economy. People definitely have to alter their behavior based on the prices of gas. This is because of the cost of different goods and services change based on the change in the prices of gas. Crude oil has different by-products whose prices are affected by the prices of crude oil. This means that once the prices of crude oil increase, the prices of gasoline will also increase because the gasoline is dependent on the prices of the crude oil. Since gasoline has an impact on the economy, people adapt to the new prices of gasoline easily and hence the demand for gasoline still remains constant even after an increase in the prices. Based on various studies, an increase in the prices of primary products affects the prices of the by-products which means that the prices of the by-product also increase. However, a consequent decrease in the prices of the primary products does not lead to a decrease in the prices of the by-product. This is the same case in crude oil and its byproducts. An increase in the prices of crude oil will increase the prices of the by-products which include gasoline but a decrease in the prices of crude oil will not lead to a decrease in the prices of gasoline. This is primarily because the changes in the price of crude oil may be due to changes in supply and demand of crude oil which have no impact on the demand and supply of the gasoline (Behrman, Lewis & Lofti, 2019).

3. Define the true cost of something. Is it what the store is selling it for; or what it cost to make it, ship it, and sell it; or what you are willing to pay for it? In your answer consider the example of an artist who creates a sculpture made out of $2,000 worth of nickels. Because the art is made up of $2,000 of actual money (40,000 coins) does that mean it’s worth that? What if the artist was willing to sell it for $800? Or what if he was only willing to sell it for $41,000? How does that affect the cost of the art piece?

The true cost of something is dependent on the cost of direct material, the cost of labor, and even the cost of manufacturing overheads (Anderson, 2019). Direct material costs refer to the costs of raw materials that are directly involved in the products of certain commodities. For instance, in this case, the direct materials would be nickels that are used in creating the sculpture. Direct labor costs refer to the costs that are used to take care of wages and other benefits given to employees who are involved in producing and manufacturing the products. In this case, since the artist is the only individual involved then direct labor refers to the effort that the artist puts in place to ensure that the sculpture is ready for sale. Finally, there are the manufacturing overhead costs that refer to other costs other than the direct material and labor costs that have to be incurred in order to produce a particular product. They, therefore, refer to the indirect material and labor costs for instance, the cost of the machinery to be used in the production process. In this case, indirect materials may include; cleaning supplies and even glue. All these costs put together make up the actual cost of a product. Therefore the true cost of a product does not refer to the price that the store is selling it for, or even what an individual is willing to pay for it but it refers to the cost of making, shipping and even selling the product.

In the example stated above, since the sculpture is made up of $2000 worth of nickels then this is considered as the direct materials of the sculpture and hence the actual cost of the sculpture should not be below the cost of the direct materials. In a case that the actual cost of the sculpture is below the direct material costs then the artist will be making a loss. In addition, the direct labor of the artist and other related costs should also be used in determining the actual cost of the sculpture.  This, therefore, means that in order for the artist to make a profit, then the actual cost of the sculpture should be more than the cost of direct material and labor as well as the cost of other indirect materials and labor. Since we are only aware f the cost of direct material then the final cost of the product should not be less than $2000 as this is the only way that the artist will be making a profit.

4. In recent years, more and more Americans have begun to evade jury duty, creating a serious problem in some courts, which have been forced to postpone trials because an adequate number of jurors were not available.
5. What is the cost to a citizen of serving as a juror?

Jury duty refers to the obligation that every citizen has to act as a jury when called upon or requested. A jury refers to a body of people that has been sworn and their primary role is to issue a verdict based on the evidence presented to the court and even issue a penalty based on the verdict. Therefore, a juror refers to a member of the jury. There are two primary costs to a citizen for serving as a juror. One of the costs is that their time is wasted (Bornstein, Miller, Nemeth, Page & Musil, 2015). This time would have been used in making their lives to improve their social classes. The other cost is security. A juror’s safety is at risk especially when they issue a verdict that does not favor the side that thought they were right. There are so many cases of jurors that have been killed after issuing a particular verdict. In addition, there are other costs such as childcare costs that are related to an individual called upon to serve as a juror.

1. For whom will the net cost be very low or even negative? For whom will the net cost be very high, perhaps even prohibitively high?

Research has shown that the most complaints in relation to extra costs which are as a result of been called upon to act as a jury are from self-employed people and young mothers (Connelly, 2017). The self-employed people have to skip work on that particular day in order to serve as a jury and end up suffering losses. The young mothers have to take care of child care costs since they are available to take care of their child on that particular day. These particular groups of people end up having net costs that are very high especially in situations where they are called upon multiple times. The employed people such as caregivers and even members of the armed forces can be excused from the jury duty calls and end up having low or even negative net costs.

1. Can you think of any simple system for reducing the average cost to citizens of jury service?

One particular system that can be used in reducing the average costs to citizens of jury service is ensuring that the jury duty calls make equally such that no one gets repeated calls when other people have not even gotten one call. In a situation where an individual is summoned in less than two years after the last time than the individual was summoned, then the individual has a right to be excused from the summoning.

1. What consequences would you predict if we moved to a complete volunteer jury system, under which the courts paid jurors a daily wage sufficient to obtain the services of as many qualified jurors as the court required?

This volunteer jury system would have more positive consequences that the negative consequences. One of the positive consequences is that no one would be forced to be a juror which then means that there would be no costs to a citizen of serving as a juror (Connelly, 2017). Therefore, the only individuals to serve as jurors are those that are not incurring any costs as a result of acting as a juror. In addition, only qualified people and those who have the knowledge or even concern of the issue in concern would be summoned for the jury duty calls. This eventually makes the verdict fair as it is based on the knowledge and skills possessed by an individual

1. Many citizens who faithfully answer every summons to jury duty have complained of their treatment at the hands of court officials who behave as if the time of jurors had no value whatsoever. For example, prospective jurors may be required to sit for days in a waiting room without ever seeing the inside of a courtroom. What is the cost to court officials of behaving inconsiderately toward jury candidates?

It is very unfair for the citizens who faithfully answer the summons to jury duty and end up been treated in a bad way by the court issues. Research shows that in most of the cases after an individual answers to summon to jury duty call and up wasting their time in the waiting rooms waiting to be called (Connelly, 2017). In this case, the court officials will have wasted their time which then costs them financially and even frustrates them mentally. The primary cost to these court officials is that people might end up having unfair verdicts due to facing frustrated jurors which means that they have not achieved their primary goal and objective as court officials.

References

Osberg, L. (2017). Needs and Wants: What is Social Progress and how should it be measured?. The review of economic performance and social progress: The longest decade: Canada in the 1990s. Montreal: IRPP.

Roberts, M. J., & Schlenker, W. (2013). Identifying supply and demand elasticities of agricultural commodities: American Economic Review, 103(6), 2265-95.

Rokeach, M. (2018). Understanding commodity values. Simon and Schuster.

Behrman, J. R., Lewis, J. D., & Lofti, S. (2019). The impact of commodity price instability on the price of its by-products. In Economics In theory and practice: An eclectic approach (pp. 59-100). Springer, Dordrecht.

Anderson, J. (2019). Determining actual product costs. CEP, 27-31.

Bornstein, B. H., Miller, M. K., Nemeth, R. J., Page, G. L., & Musil, S. (2015). Juror reactions to jury duty: Perceptions of the system and potential stressors. Behavioral sciences & the law, 23(3), 321-346.

Connelly, M. J. (2017). Jury Duty-The Juror’s View. Judicature, 55, 118.