12/12

• Profit = Total Revenues - Total Costs
• implicit costs, which includes opportunity costs, need to be factored in
• Economic Profit = Total Revenues - Total Implicit Costs and Total Explicit Costs
• implicit costs are the opportunity costs, money or something else foregone
• Profit- whatever's left over
• not possible when there is certainty
• certainty present, then more people enter your market, shift the supply curve or demand curve,  and inadvertently change your revenues
• bid up the prices; increases input costs
• Wage
• contractual agreement between the worker and the firm that specifies what the worker has to do and what his/her compensation is
• point- eliminate uncertainty 
• rent's point as well
• Profit vs Nonprofit companies
• profit- entrepreneurs make the decisions; profits tie with betterment of socitey: society better, profit up    society down, profit down
• nonprofit- entrepreneurs don't make decisions; NO feedback loop
• Feedback loop and Losses
• mute the losses and the feedback loop is destroyed
• results in unexpected and unforeseen closing due to not being aware of losses because of no feedback process

12/9

Profits, Losses, and Entrepreneurs

•  Companies make money by satisfying needs, not causing them
• Profits do not necessarily have a negative connotation
• doesn't mean companies are exploiting us
• Entrepreneur Process
• Find out what people want
• Get the Means to produce said product
• Land 
• explicit cost
• rent: buying land
• implicit cost
• rent: opportunity cost of renting home to others for $
• Labor 
• explicit cost
• wages: paying the labor
• implicit cost
• foregone wages
• Capital
• explicit cost
• rent
• implicit cost
• foregone rent
• Explicit Cost + Implicit Cost = Total Cost
• implicit= opportunity cost ; explicit= product cost
• Profitability
• Rental Rate + Appreciation Rate - Interest Cost
• Rental Rate = Annual Rate/Price of Good
• benefit of buying is the foregone rental payments
• Example: Lease for 1 yr = $12,000    Buy= $32,000 Annual Rate/Price of Good     $12,000/$32,000= 37.5%
• Appreciation Rate = change in asset price/price
• Example continued: -8,000/32,000= -25%
• Interest Cost
• Example: 10%
• Example finished: 37.5% - 25% - 10% = 2.5%
• The 2.5%  is the amount that would be saved if the product was bought. 

week 14 reading

The Sumptuary Manifesto

It seems that this is a declaration that we should create new laws to dictate how people should live freely. Some of these changes can be beneficial but at what cost. The tradeoff appears to be reduction of individual human rights for society being better off as a whole. No matter how better off society might stand to be, it'd never work. People would judge their individual opportunity costs to be too high and the majority rule would supersede the sumptuary supporters

EWOT week 12/5-12/9

When I go into a store to buy something and I have to pay for the price of the product and its tax, at least I know some of the tax's burden falls on the seller as well. It's not all on me.

12/7

• Taxes prevent mutually beneficial transactions from happening
• Taxes easily distort information
• Taxes require a very considerable amount of time and effort
• Sales Tax
• buyer pays 
• reminder: in excise tax the seller pays
• New Equilibrium is where the sales tax line and supply line cross (aka the price tag)
• two prices
• Bubble Gum graph as an example
• initial P= $3 Final P = $2.75 Tax Paid= $1.00
• Buyer's Total Cost= $ 3.75    Seller's Total Cost= $2.75
• Burden (Real Cost From Initial Price)(how the tax is paid)
• Buyer:  $0.75
• Seller: $0.25
• Economic Incidence is independent of who has to pay the tax
• determined by relative elasticity 
• when buyers are insensitive (inelastic), they'll pay the bigger burden of the tax
• buyers are elastic, the sellers will pay bigger burden
• supply and demand curves inelastic
• tax won't be distortionary 
• Subsidy
• Doesn't matter who is subsidized
• relative supply and demand of product is what matters

12/5

The Economic Incidence of Supply and Demand Changes

Application: Taxation

• Depressions and recessions make taxpayers question what they value
• Prohibition failed during the Great Depression because a great percentage of tax revenue came from the liquor tax; revenues trumped drinking dangers
• Excise Tax: the legal respnsiblity of the the tax is on the seller
• supply taxed shifts in parallel to original supply
• price does not increase by the amount of the tax
• drives a wedge between the price buyers are wiling to pay and the price sellers are willing to sell
• because the tax is greater than possible transactions, those transactions wouldn't have happened
• Tax Evasion increases the costs associated with taxation

12/2

• Price Ceiling
• Rent Control Example
• $ Ceiling makes people pay more for their apartment 
• poorer quality
• laundry
• food
• Increasing supply is desirable
• Raise in price
• clears the table (economic table)
• Graphs
• Change in the curves in terms of steepness or flatness changes
• Elasticity
• Price Floor
• lowering wages
• results in reduction of worker supply
• Rarity vs Scarcity
• scarcity is relative, only happening  when the want exceeds the amount
• rarity is not relative, quantity demanded almost always equaling the supply
• Black Market- Drugs graph 
• a drug becomes illegal then
• the supply curve becomes much steeper, more elastic
• the costs increase
• competition is influential factor