Instructions: This is a place for you to express you opinions and idea about topics from class. In the space below, write freely about the issues we are learning in the current unit. Begin your entries with: "(Your name) says:", for example:

Sunny Kim says: Just like how Drew and Dana felt, after taking the AP Economics course for two weeks, I could also sense that economy is not just about money, but it's a science and it's pretty much related to our daily lives. Among various concepts and terms that we've covered so far in the AP Economics class, most of them were scientifical and also they could be applied in out daily lives. For example, the term 'circular market' shows scientific parts of economics. It tells us how firms and households work together symbiotically and how factor market and product market play specific roles in the flow. Meanwhile, concepts like consumer surplus and producer surplus are life related ideas that we always live our life with. The AP Economics class, eventhough it's getting harder, I think it's quite important to our daily lives and future because it's a study of how the world flows.

Mina Song says : We didn't learn yet, but while i am reading the chapter 18, i am confused in page 344, 345 Price Elasticity along a Linear Demnd Curve. I understand the table 18.1 the totalrevenue and total revenue test, and I got how to draw and I think i know what it is trying to reveal by the graph. but I am still uncomfortable with it. Is it right that on graph 18.3 (a), the graph shows that as price is high, the elasticity is high that firms have low revenue, and for graph 18.3 (b), it shows that extreme prices of the products have too high or low Ed that it is not also proftable to firms?????

Christina Hu Says: Ok, thanks Yun Qi! I posted my question before reading the section on equilibrium, but I still had some doubts even after that (and I needed credit for the forum post), so I left my comment up here. But thank you for clarifying! :)


Yun Qi Mok says: Christina, the two laws do contradict, but they are supposed to work together. This is the equilibrium that economists always strive to reach. The Law of Demand states that consumers buy more at a cheaper price, but the Law of Supply states that manufacturers should increase production at a higher price. Each side is looking to benefit itself; consumers for a cheap price, manufacturers for a high price. When the two curves intersect, this shows the equilibrium price and quantity demanded is aceptable to both parties. Your example is exactly right, Apple wants to sell ipods at 1000 dollars each, but it wont because they know people will buy more at 300 dollars. Just because they want to do something, doesn't mean it is necessarily the best choice.

Christina Hu says: Hey guys, I'm a little bit confused about chapter 3 and the Law of Supply, which says that firms will produce and offer for sale more of their product at a high price than at a low price. Wouldn't that not work, since according to the law of demand, as prices increase, demand decreases? If a firm sold more at a higher price, nobody would buy those products, and if a firm sold less at a lower price, there would not be enough to go around. For example, Apple could make ipods 1000 dollars each, but then fewer people would buy them, and their overall profit would be less than if Apple sold ipods for 300 dollars each, since there would be a greater demand for $300 ipods. I'm confused about the Law of Supply. Could somebody please clarify?

Dana Yeon:
From just two weeks of learning about economics I learned that economics is not necesaarily related to New York Stock Exchange, Morgan Stanley, or money, but that it is a part of our every day lives. I am fascinated to learn more about the more mechanical sides of it. Furthermore, I found the concept of comparative advantage the most intriguing as I had no idea that absolute advantage and comparative advantage were two different things previous to this. I just believed that whichever one seemed to produce more at better quality was the better choice of the two; I never stopped to think about the opportunity costs. Finally, I found opportunity costs also very interesting as sometimes I would find myself wondering about what I would be doing if I hadn't been doing what I was doing after reading science fictions books in which the main character could be in two places concurrently. Thus, learning about opportunity costs and how an individual is giving up the second best alternative highlighted how we could never know the consequence of the foregone activity. All in all, I am very glad I took the AP Economics class this year.

Jonathan Lau says:
Wow, two weeks of econ class and I have already learned so much. The word "economics" seemed so simple before, yet after only studying one unit, I have already learned just how complicated and complex it can be. For example, the first graph we learned about, the Production Possibility Curve, seemed really simple at first; consumer goods, capital goods, and full employment, that's it. But after going more in depth, we learned that this simple graph can also reflect scarcity, trade-off, and opportunity cost. And even more complex is the circular flow model we just learned about. It is crazy how this simple diagram represents how the world's economy works.

Drew Venkatraman Says:
I'm not going to lie, I was one of those people who thought that economics was about money and I guesss in some cases it can be. But I'm more interested to find out how resources play such a HUGE role in all of it. I never realized there was a social science dedicated wholly to the allocation of our resources, and frankly im pleasantly surprised. I know that money is interesting but just learning about how the interactions we make on a regular basis affects everything around us is just so fascinating that I'm so happy I took this course.

Michael Daily says: I personally find economics interesting because of the massive amount of cooperation it takes. It amazes me that countries can exchange goods and trade with each other at such a high level of cooperation. Last class we looked at comparitive advantage and how two countries trade two goods with each other. It is fascinating that a country that produces much more than another country may find it in their best interest to import that good because of oppurtunity cost. The fact that cash flows all around the world, between rich and poor countries, is a simple concept but it still amazes me.

Alex Goldman says: I find economics interesting because it takes such a complicated subject such as the economy and makes it into a science. For example, while examining the circular market flow in class I realized how unbelievably complex the concept of market is. We discuessed how the market flow is made up of households, firms, the factor market, and the product market. As simple as it sounds, if you actually begin to think about what each mechanism consists of, the subject becomes dauntingly complex. Take the millions of buyers with their personal preferences, each having to make choices and sacrifices between hundreds of thousands of goods and services. The implications for businesses and households are tremendous. Yet in AP Econ we are able to fit this vast concept into a neat little diagram with four boxes. Truly fascinating.


Robert Wang says: When in economics class during the discussion about the capital goods vs consumer goods graph, I wondered... Do any countries really lean more towards the consumer goods side? I understand that a coutnry may have just suffered a drought and its food resources are dangerously low that the country might choose to invest far more in consumer goods. However, considering the average nation, do they simply find the point where they can create enough consumer goods to not have a scarcity in that good and then invest the rest of the resources in capital goods? Another idea I had was that a nation could invest deep in the consumer good line and then once they have a good excess of consumer goods, to switch completely to capital goods. With time, that would allow the nation to advance their technology which will thus help them increase their production of consumer goods. Is that idea plausible? It seems like it would be in theory to me at least.

Hansen Gu says: Rob: I was also wondering the same things. I think that countries try to find a balance between consumer and capital goods. Investment in capital goods increases future consumer good production while investing in consumer goods is for an increase in production too, but in the long run, not as great of an increase as if a nation invested in capital goods. So if a nation invested deeply in consumer goods to make sure they did not have a problem providing food, for example, it may have been wiser to take some of that investment and increase capital goods as they will most likely improve food production more in the long run. Plus, I find it very important to invest in capital goods, not only for the long term intentions, but also to keep up with other nations. Technological advances in production are crucial to maintain an advantage or wield more economic output in markets. And to Alex: yes, I agree completely with you. I particulary find interesting the different elements of personal choice, sacrifice, and self-interest and how what we do everyday is economics.

Jessica Chiang says: After reading about the differences in a command economy system and a market economy system, I began to wonder why countries still have command systems even though they seem to not work. With the producers and laborers lacking incentive, the quality of the products are bad. Also, there is no competition and the concept of supply and demand does not exist. The citizens who live in a nation with a command economy have no real joy in working, as they don't have to think about anything; all they have to do is follow instructions. Even when resources are scare, they will keep producing products using that certain resource just because their government tells them to. They don't know how to adjust their economy to maximize their profits or to make maximum use of their resources. It seems pretty brainless...So, why don't nations with command economies switch to market economies? Is it only because the leaders of the nations want absolute power?

Rebecca Sung says: Like a lot of people that posted, I feel that I have learned more about what economics REALLY is. Before, I always thought that economics had a lot to deal with money; everything relates to money. But, I learned that cost of goods and services not only dealt with explicit costs, but implicit costs too. I learned a lot about the Circular Flow because we "brought it to life" in class and it was interesting how everything was related to each other. In the Absolute and Comparative Advantage lesson, it was applicable to real life; for example, why do nations trade when they can produce their resources on their own.

Jennifer says: So far my AP Economics class has taught me what economics really is. Before, I remember commenting on the forum "What does economics mean to you?" and saying that economics is all about money, but I now I learned that it is not. I learned that economics is about how individuals and society make optimal use of resources under conditions of scarcity. Also I learned that there is no such thing as "free lunch". As many people have stated, somebody has to pay for the cost of "free lunch" to make it "free," and in many times the "free lunches" are a part of marketing strategy so it is not truly "free". Another thing I learned is that everything has an opportunity cost, and that opportunity cost does not mean only money but also includes the time and other sacrifice made to do certain thing. These are very basic concepts of economics that I have learned so far, but I am sure that these are among the most important concepts of economics.

Judy Chen says: Of course there is not such thing as free lunch, there is always opportunity cost when you've made a decision to do something. For example, your dad says he would give you a computer if you get good grade on every subject. For you, you own the computer without paying money. That means, on the other hand, you need spend more time on studying and finishing homework in order to get grades. Therefore, the extra leisure becomes the opportunity cost to watch tv, etc.

Sunny says: Like Jo, when i first singed up for this class, I did it partly to learn about how money is used and how to manage money in a successive way to make a huge profit. In my AP Economics class, I not only learend about how to use money and how money acts in society, but also learned about scarcity, choice, and opportunity cost. Moreover, we've covered how to interpret production and possibility curve and different types of economic systems. Among these important and memorable teachings, I found different types of economic systems the most necessay and crucial teaching. The two economic systems, the command system and the market system, are the outermost boundaries that cover the circular flow of money and our economy. These two systems are the most fundamental idea about this AP Economics because under those two economic systems, our world wide economy is running.

Jo says: When I first signed up for this class, I did it partly to learn about how money is used and exchange between but mainly to learn the different systems of economies present in the world and how they contribute to that countries success or failures. I got what I asked for right in the first chapter when we learn about command and market economies. What suprises me that the US, even with many people saying it is a democratically free economy with free markets, it is not. The way the US is not totally a free market is a good thing because without some government influence, though small, many people would be able to buy and sell illegal goods (ex. furs, weapons, body parts, etc.) without being penalized. This is the only part of the market the government has control over, which is needed. I also like to learn how and why countries with command systems fail before realizing that economic reforms are needed. The country I am living in right now, China, also is a country that switched from the command system to the open market, and being in a country that is trying to change and become a global power is pretty awesome.

Kathie says: After reading the recent blog article posted about luxury goods and the direct connection to the concept of demand and supply, it makes me wonder how ridiculous the prices will continue to grow. I'm curious, are there any concepts that perhaps solves this problem?

Trevor says: Before taking this course i thought i had a pretty good picture of what I was getting myself into, but now I realize that there is a whole lot more to economics. I agree with James in that countries would have to keep a friendly relationship, but the world is such a big place that I think it wouldn't be too hard to find another country to continue trade with unless the whole world was against them.

James says: In class we learned about the fact about how specialization within different countries can imcrease the total output of products and goods. Yet, I can't help but think that although applying this method might be the smartest thing to do economically, but would it also place a burden on a country? In class we used an example with the U.S producing airplanes and China producing toys. What if freindly relations between these two countries break apart and trades cease between the two countries? Then China would have all the abundant (and now useles) toys while the U.S has this surplus amount of machinary but lacks consumer goods. This will releash great pandemonium to both side's economy. So I think another benefit of specialization is that it keeps countries cautious in terms of their internataveional relations. If a conflict arises between China and the U.S, for example, the politicians of both sides would try their best to maintain a freindly relation because no one likes to pay the cost oflosing so many products that were once availible to them.

Margaret Says: True. I think thats what causes us to create allies with countries in fact, i think its the MAIN reason countries create allies. So the "invisible hand" and self-interest actually go further than the economy, they even reach national protection and politics. How intersting. Gosh, me and you, what insightful students.

Calvin Says: I agree with James. International trade does play a huge role on ensuring a good relationship between countries, especially when each country is producing base on their comparative. If the relationship gets bad, the result will be devastating. Some countries will be missing essential goods as they usually obtain them through international trading, on the other hand, they will also have a surplus for goods that they’ve put all their resources in. The United Nation uses this technique, which is known as sanctions, to punish those countries that don’t cooperate. This can also relate to one of the basics of business, where good business is base on good relationship

Jeewon says: I agree with Calvin. Actually, business and trade is all about relationships, and specialization, like James said, helps countries maintain a good relationship. The countries, even if they are about to break their relations, would eventually have to consider the costs and benefits of it. If China and the U.S. were to cease trade or any kind of interaction with each other, the cost would be the lack of toys that the U.S. would have to face without importing them from China, as well as the excess number of airplanes that the U.S. is now unable to export to China. In this case, the cost is greater than the benefit, and therefore the U.S. should not break their relations with China. Most of the time, countries are greatly affected when international trade is ceased, because every country specializes in something, and relies on other countries to obtain certain goods.

Mond says: Since there is so many responses regarding "free lunches" already, I decided to post my personal thoughts on the possibilities model curve. I find the production possibilities model quite interesting, because prior to the cause I always believed that the higher the benefit the better it is and the more it should be produced. However, in the case of marginal benefits and costs, this isn't the case. With the high marginal benefit, it is tempting to produce a large quantity of the product, which actually decreases the value of such product. For optimal profit, the marginal benefit and marginal cost should be the same.

Mina says: Free lunch or... any thing free.... There are no free lunch or any kinds of free things in this world, but the benefit of free is getting utility from the word of "FREE". As we know there are no free things, we have to provide many different resources to get that free things. But the final aim for getting that product is to gain utility. With the world of utility that give more than we provide, I think free products are more than free.

Jenny says: I believe that there is no such thing as a free lunch, and even for the ones who recieve it, charity is not free. As we learned in class, everything has an opportunity cost, and charity is not an exeption. For example, lets say someone gave away computers for schools that were in need. The students and faculty of that school would be very happy to get the computers, but they still have their opportunity costs, which in this case would be the additional electronic fees they would have to pay for the computers. Also, their health can be an opportunity cost. The new users would not have been exposed to the electronic radiation, but after using the computers, they would be, thus harming their health. So, to sum up, I believe that nothing is free.

Helen says: A bowl of soup served in a soup kitchen is NOT free. Its opportunity cost is the other things that could have been made with the resources that was put into that soup. The salt in it could have been put on on fries and the water in it could even have watered some plants. And maybe it seems like the poor guy's got nothing to lose for free soup, but he still lost his time to drink that soup. Even though he probably would have just sat around and do nothing if he didn't have that soup, he still lost time since he's not immortal. What if the time he went to drink that soup could have been the time when he found a hundred dollar bill on the street? So, no matter how you word it, NOTHING is free because you never know what you gave up when you are doing something.

Jason says: Wow helen, how DEEP! You're so... intelligent and... brilliant!

Conrad says: Although I'd like to think otherwise, it's true that the phrase "there is no free lunch" is true to the bone. Helen indeed helped to prove such a point, and the concept of opportunity cost doesn't stop there; every single potential object or product consumed by people has an opportunity cost, since whever one takes an action, there is always some kind of opportunity lost. The subject can be everyday as doing your homework, regarding whether or not you should do it now or procrastinate, or as serious as negotiating terms for an important cooperation, whether one choice is more favorable than the other.

Kevin H says: There is no such thing as a free anything. Everything has cost on it whether it be time, money, or something of value. The poor person receiving the soup may think he is getting it for free; however, he/she is using time and effort to go to the soup kitchen to get the soup; therefore, the poor person is only thinking in monetary terms that the soup is free. For example when a McDonalds coupon says you get a free icecream, theres always an opportunity cost along with it; for example, you must first buy a chicken sandwich before you can get the free icecream. In this case you would be spending money on the chicken sandwich, using time and transportation to get to McDonalds, and only after all that (the opportunity cost) do you get a "free" icecream. So, truly nothing in this world can be free.

Evan Zwisler says: I was thinking that if a country chooses to industrialize then the production capital goods will increase, lets say that is the Y axis. So the start of the line on the Y-Axis moves from five to 10. Then because the country is industrialized the number of consumer goods will increase. The start of the line on the X-Axis will move forwards. I hypothesize that an developing country will see a rapid increase in consumer goods once a middle class emerges due to an industrial revolution. Not only will the face value of having a middle class increase the production/consumption of consumer goods, people with money will buy nice things, but also the middle class calls for democracy.
Democracy often goes hand in hand with freer markets and lassie-faire enterprise, therefore allowing more opportunities for people to sell their goods and creating a larger market.

Kevin Yeh says: The key to understanding the "there is no such thing as a free lunch" idea is that just because some item has no monetary cost, does not mean other costs are not included in it. For example, if I decided to treat you to McDonalds, one of the costs would be that you would have to give up some other tasty food, like japanese all you can eat, in order to receive the "free" McDonalds. Although you did not have to dish out any money out of your own pocket, there is still a cost involved. Honestly, however, sometimes the opportunity costs of a "free" situation are just so minimal that they need not even be considered. These are the cases in which you might consider it to be completely cost-free. If I decided to treat you to japanese all you can eat, the costs are easily outweighed by the benefits. I mean, who cares if you can't have that McDonalds burger or if you had to take two hours out of you day? In the end, the benefits make the costs negligible. That is why it is sometimes hard to see the truth in the statement "there is no such thing as a free lunch."

Angel says: Since we are on the topic of free lunch...food and kevin mentioned "all you can eat" at a Japanese restaurant, i wonder if we ever profit from those all you can eat meals. According to the fundamental economic principle, human make rational decisions, so that would mean we boast to death if we are "rational". Because marginal benefit needs to exceed marginal cost for it to be a right decision....that's A LOT of food we have to eat to balance our bill. So maybe we don't have to eat that much food to feel satisfied...anyways does anyone know how much food those all you can eat food really cost? those restaurants must have a way to lower their resource cost or something

Kevin Chiu says: Nothing in the world is free as time is always an opporunity cost as no one can live forever (eg. if you perform a certain action, you will always have the opportunity cost of not performing a different action at the time). However, I think it is essential to realize that goods or services that provide a greater benefit than cost are just as good as "free" services or goods; people like "free" services or goods because they provide a guarenteed benefit since there are no costs.

Tim C. Says: Usually, when someone uses the word free, people automatically assume that free means no money. That's probably the main cause of confusion of the concept that "there is no such thing as a free lunch". Sure, if someone treats you to lunch or you get a lunch from the soup kitchen, it won't cost any money. But costs other than those that are explicit are still accounted for such as wasted time that you could have used doing your homework during the lunch period or having fun with friends. Like Helen said, in that time period, a million other scenarios could have played out but instead you were eating your 'free' lunch. The reason why people continue to eat their free lunch is because potential benefit of having a full stomach outweighs the cost of doing other things. Therefore, there is no such thing as a free lunch.

Nicole Says: When a poor person walks into a soup kitchen to get a bowl of explicitly "free" soup, what he's giving up is his time. I think that what people consider as an "opportunity cost" varies. For example, this poor man (or woman) could have spent his time walking around looking for old newspapers, which many homeless people sleep under. Although we wouldn't consider the opportunity to search for old newspapers as a loss, this person might. Therefore, the time that this man loses by getting a bowl of soup would be the opportunity cost and there is a "price" for his action. This leads me to the point that opportunity cost is relative. Is opportunity cost relative? Should things be universally considered an opportunity cost, or can it vary from person to person?

Serena says: It's very tempting for people to have a free gift or anything to them that's free. Before i used to think that "free" means you don't have to pay, i thought i was just as simple as that, but now i know, as long as you're making decisions, there's an opportunity cost involved. Take the soup for example, the person who received that bowl of soup might think he's lucky to get a soup for free, but as everyone says, is that bowl of soup really "free"? He might found a dollar bill on the floor at the time he spent drinking the soup; he might found a job or something else. We might not see the opportunity cost everytime when we do something, but it's there, when we make decisions, we are always giving up our second best alternative. So I agree with what Tim said, "there is no such thing as a free lunch". Everything comes with a cost.

Howard Says: Referring back to Angel's comment on the "all you can eat Japanese restaurants". They must be earning a fair amount of money because we humans make rational decision, or else they would have closed the restaurant long time ago. This means they must have really good market surveyor to help them keep the price from the food source down and at the same time making sure the the food is fresh, tasty and has great quality.

Richard Says: At first, "free" means without any single payment for me, but i realized that money is not the only thing we are talking about. Costs are extremely broad, it includes time, another activities that you may be doing at the same time; they are known as implicit costs. For instance, an internet pop up claims that if you click on the link, a free ticket to Thailand will be send to you as fast as possible. However, the cost for exchanging the ticket would be money spend on electricity for web surfing, and time spent to click the internet pop up. A lot of things in the world may seem free, but there is always a cost hidden behind.

Karen C. Says: When we go to a restaurant and just order, the food is already more expensive than they need to be, so that the company can get some profit (obviously). I think the reason that all you can eat restaurants still survive because the total cost to eat there for a customer is more expensive than the amount of money needed to make the food. And I do have to agree with Tim that people often believe there are things such as free lunches because they attribute all costs to money only. However, what about the people that are handing out things on the sidewalks? What's the opportunity cost for me to just reach up my hand and take one of the "free things" they're passing out? I won't really be losing any time (except the few seconds I take to reach for it) so I really have nothing to lose...right?

Elaine L. Says: As everybody's pointed out, and given that it's been drilled in our heads ad nauseum (just kidding!), it's fairly obvious that lunch is never free - nothing is. There are opportunity costs associated with my spending my time to go to the soup kitchen and get my soup, and there are monetary costs still for somebody along the time, even if it isn't me. Instead of going to a soup kitchen, I could have - as Helen stated - found a large sum of money on the ground! And even if I'm not paying any money for the soup, whoever is providing the soup had to raise the funds to provide the soup for me, money that could've gone somewhere else and time spent fundraising that could've been spent on something else. When you consider costs not your own, you're opening up another proverbial can of worms in that it opens up so many other costs that you couldn't possibly imagine the concept of a free lunch again. As for the all you can eat Japanese food...Well, they're charging 150-168RMB per person; a visit to any local market reveals ridiculously low prices for groceries and such. I can't give an exact value, but judging how much the average person eats and how much the ingredients in sushi, tempura and udon cost, it's safe to say the restaurants are making a huge profit.


Yun Qi Mok Says: Everyone is saying that there is no way that a "free lunch" exist. Of course, to the economist, that is true. The opportunity cost of the poor person going to eat at the soup kitchen includes the time he wastes traveling there and lining up in a long queue, as well as the choice of food that he could perhaps have taken elsewhere. However, all things considered, the poor man still, after weighing things like time and starvation, decided on the logical choice of going to eat the "free" food. It cost him much less than what he would have felt if he went hungry but saved the time to do...whatever he wished to do. Yet, if one is talking about normal circumstances suchc as the "eat all you want" restaurants, it is obvious that the restaurant profits. Even if one person eats an enormous amount of food to get his money's worth, about ten other people wouldn't. If the restaurant did not profit, then they would not have that service. "Free" is very relative, but it certainly does not exist.


Caleb Liao Says: First, I'd like to say how amusing it is for me to know that everyone decided to express their opinions on the basic concept of opportunity cost and how everyone also chose to articulate their opinions through the use of something relating to food or the example of a "free lunch" and how that's not possible. Secondly, I'd like to apologise for the previous run-on sentence, and for any other that is to follow. Thirdly, that I think the most important thing that we've learned so far is not the basic concept of opportunity costs, and how everything that involves a decision about the management of resources results in a cost in opportunity, but that the most important thing we've learned is the idea that there are different types of opportunity costs: constant, increasing, decreasing, and zero. I think that the idea that there are different types of opportunity costs, and that there are graphs that economists can produce to project those different opportunity costs, are what make economics such an important topic of study. For if we were to acknowledge that everything had an opportunity cost, but did not know that there were different types of opportunity costs, why would we every need to make economically strategic decisions? Not everything is black and white. Not everything is constant. Therefore one of the most important concepts in the realm of economics, is the concept of varying opportunity costs.

Michael says: On the topic relating to scarcity and it's rise to the field of economics. The scarcity of resources is a huge part of the overall function in economics, since all resources we come in contact or obtain are all scarce we learn to apply ways to control the use and flow the the limited resources in the world. Scarcity is the foundation on which economics can be built from. It helps use answer questions as to how much, how many, and what is to be produced.

Katherine Says:So, in class we discussed chapter 2. At the end of class Mr. Welker posed a question so I'm just putting it here;

Why is FREEDOM so important in a market system? If people are not free to choose, would a market system succeed in achieving an efficient allocation of resources? Explain.

Freedom is one of the basic characteristics of the Market system, without freedom of enterprise or freedom of choice, then how can producers choose what to produce? The economy would end up something like the command system, because the elimination of freedom means producers no longer have the choice of how to use their resources and will yield products that reflect the lack of freedom. This in turn affects the ability of the consumer to choose amongst products, and the product choices may not be what the consumers need or want and therefore they will not buy. Therefore it is not an efficient allocation of resources because if the product is not what the consumers desire, then they will not buy it and it will just waste valuable or scarce resources.

Chan Min says: In an economy, freedom is so important. This could also be tied together with the cup noodle price idea, where if the government decides the prices and gives the company no freedom in deciding the price, it will ruin the economic process and the bad aspects will continuously move down a chain, causing things such as bankruptcy. If people were not free to choose what products to produce and if they could not get all the profit they could make, sloppy products could be made. Also, no matter how well somebody calculates the needs for a product, people will rarely succeed getting a correct calculation. Once this calculation goes wrong, scare resources could be wasted and also products could not need the requirements of the consumers. In class, where we discussed the Russian problem, the government continuously required coats to be made. However, coats continuously piled up in stores, while there were rarely any shoes enough for everyone to wear.If there was freedom though, everyone would compete to maximize their self-interest and therefore it would help achieve an efficient allocation of resources.

Claire says: Adding to Chan Min's point, Freedom is very important in an economy as evident through the command system economy. In a command system, there is no freedom for the firms and businesses to produce freely. This could cause the total cost to exceed the total revenue, and therefore could have companies go bankrupt. In the command system, once a company goes bankrupt, it will go down the chain and affect others too.

Emily Yeh says: I think the definition of the word freedom makes a large difference in determining whether we can say a market economy would be successful or not. Someone could argue that only freedom of choice is really necessary for a market economy to work, while others argue that there needs to be a lot more freedom, such as freedom of expression for a market economy to be effective. Like take the example of a communist country. Although the political system is a lot less "free" than say a democratic system, the market economy has successfully increased the wealth of the people in the regions being targeted by government for economical growth.


Caleb Liao Says: In temples there are statues that are made completely of gold. When a country like Thailand takes a survey of all their available natural resources, do they count the statues as available resources?

I don't know if they do or not, but I'd assume that they don't. I think that they should.

Alice Says: Of course they wouldn't count golden temple statues as available resources. Why would they? The gold itself may be a resource, but as it has already been made into a statue and placed in a temple, we can assume that it is already being put to use in some holy religious manner that is suitable for temples. And as such, the gold is no longer a resource but a product being used daily by... the temple-visitors of Thailand. Unless the Thai government actually decides to invade their own temples and melt the statues inside, I doubt that they would ever be counted as an availabe resource. On that note, however, if a country under a command system of economics is in desperate need of gold, would it be justifiable for the government to order that all the golden statues in temples be melted for the nation's use? Isn't it arguable that golden statues really serve no purpose other than adding to the aesthetic value of the temple? In this case, if the gold could serve some other purpose that would be more beneficial to the country's economy, and the only opportunity cost would be one that doesn't drastically affect the people's lives, why would it be wrong for the government to interfere and take the gold (assuming that temple statues are not privately owned by anyone)?

Julie Lin says:FREE DOES NOT EXIST. i thought that was pretty weird, until i learned about opportunity costs. it really didnt make sense at first, what about a situation where your closest friends treats you to a dinner, totally free of $$, and there is nothing better you want to do other than just eating with a couple of friends, how is that NOT FREE for you? well ok, it is free for you, but its not free for your friends. this is the first thing i learned about economics, nothing is free. everything has a cost. (i personally think that its pretty pressuring to think this way, "i'm paying my time for this!")

Jason says: In response to Julie's post. I think even for YOU the dinner at your friend's house is not free. Because you had to give something up to enjoy that dinner, like an evening with your family or a quiet evening by yourself, both things that surely have some value to you. So if you value time with your family and quiet time alone, then you are giving up something of value to have dinner at your friend's, in other words there is an opportunity cost and that meal is not truly free!

Jeff Ye says: Replying to Alice's post, i'd just like to ask a question. Would it be justifiable to tear up the Mona Lisa if the government could use the material in a more productive way, as the only oppurtunity cost would be one that doesn't drastically affect the people's lives? The government should not, and probably does not, have the right to destroy art and historic artifacts for their own needs. If they did, then the treasures in the tombs in Egypt would probably all become bracelets, necklaces etc., while medieval castles in Europe would be torn down to build shopping malls. Countries refrain from destroying historical sites and artifacts within their borders because even though their destruction wouldn't directly affect anyone greatly, the cultural and historical loss is just too great of an oppurtunity cost.

Kevin Yeh says: Well, the gold in the statues would be considered resources maybe, but theyre not exactly AVAILABLE if they are sitting in temples as statues that ppl worship or whatever

Jack Lo says: In my opinion, I think the gold is still a resource. It may not satisfy the everyday basic needs of the people, but it is still kind of a service. The statues are probably used for some sort of religious ritual or practice, and so in a way, the statues are providing a service to the people.

Christina Hu says: The gold wouldn't be considered a resource in the first place, because to the local people, it's a god. And you just don't destroy gods for ANY reason.

Jacques Zhang says: Wow, that's a lot of posts. Anyway. About the whole gold statue and historical artifacts thing: Yes, the gold in the statues is a valuable resource. If absolutely necessary, the government is open to the option of using that gold as a resource. Whether it is moral to destroy these historical and religious artifacts/objects/structures is another issue.
Back to the argument about freedom being an important part of the market system: The freedom given to people in a market system is essential because it allows for basically anything to be done. You can manufacture and sell anything that you like as long as it's within the law. A man's will to gain more profits and then become richer is driven by his greed, and that greed is fulfilled because there are no limits to what he can do. If people did not have freedom, then there would be limits on what one can achieve. Besides, greed is good, isn't it?

Soyeon Yoon says: The gold in the statues should not be regarded as resources because it is already used as a material in the statues. You cannot just take away a part of finished product even if it is gold, silver or even diamond. The government may have a right to take the gold if it is inevitable for it to prosper the nation's economy and living standard, but the government certainly does not have the right to destroy the property that is not in possession of it.

Jessica Ng says: Well, I personally think that no way the gold in the statues should be regarded as resources. Perhaps technically, on practical means, they can be referred as a resource, but I highly disagree that they should. These statues are cultural artifacts, and should be protected, in fact, many of them are probably already protected by global organizations and NGOs such as UNESCO. There is a reason these artifacts are being protected; they are of sentimental and cultural value to the global community, and provides a source of education. However, I also want to point out that there might be a chance that these artifacts might become of use by the country depending on the economic system of that country. If the country's in a pure command economy, obviously the government is free to do whatever it wants with what they have. And if they want to consider the gold as a resource to use, then obviously it's "within the law" as Jacques pointed out. I mean, after all, they ARE the ones who carry out the laws! So basically my point is 1) It depends on the value of the artifact, or whether it is important as to be protected, and 2) it depends on the economic system of that particular country.

Kevin Ma says: Back to the topic of freedom in the market. Because there is freedom in the market, there is competition. Because there is competition, whoever is producing it is motivated to made a better and cheaper product. The freedom in the market adds efficiency. So if there was no freedom in the market, many things today would probably not exist. We would have the most basic of everything, no upgrades. For example, in a command system, why would the person making the mp3 be motivated to make a better one? He has no competition. But if there were two people making mp3s, they would compete to sell more. The only way to do that is to make a better one. So freedom in the market adds competition.


Kristie Chung says: I agree with Kevin, if it was an command economy, there would be no incentive for the producers to come up with better ideas or to produce goods with better quality. On the other hand, in an market economy, it becomes essential for producers to constantly innovate and come up with better ideas and follow the trend of what the consumers want. This is because they have to compete with other producers for better products in order to sell more and make more profit. Thus, if a business does not progress according to the consumer's trend in the face of competitors, the business will bound to in the long run, fail.

David Xu says: I think you have to first define what "freedom" in the market is. If freedom of the market is being able to make choices in what you want to buy and produce, then of course, there must be freedom in a capital economy for the market to adjust accordingly. The freedom that is entailed, allows consumers to pick what they want, and in doing so, they inadvertently disclose to the producers how well their industry is doing. For example, people get to pick what kind of clothes they get to wear, they can pick from a variety of kinds. If people tend to like t-shirts the most, the demand for t-shirts will go up as supplies dwindle and thus, companies producing t-shirts know that they need to produce more and could theoretically charge more. If there was no freedom in the market, then there can be no "invisible hand" adjusting the market in the way that best suits the consumer and what they want. Adam Smith knew that self-interest is what drove the economy and without choice, there is no way to voice our self-interest.

Sharon Li says: I agree that freedom to put forth self-interest and produce according to the wants of the market is the key to development in the economy. A "central planner"'s opinion on which products should circulate in the economy is not wholly representative of what all the consumers would want. Self-interest of individuals is a vital motivating factor for economical growth. Customers purchase products according to self-interest to communicate to firms which products to produce. Business owners can fluidly enter and leave markets according to changing consumer tastes, in pursuit of better income. Workers have the freedom to choose which jobs to devote themselves to. Without incentive, economies would go nowhere.

Andy Xu says: I think we all agree that the "free market economy", in which people act based on self-interest, promotes the greatest extent of growth in the economy. This principle defines the extraordinary growth rates in developing economies such as China during the past decade. From an economy where the government decides the wage, job and housing for all people before the 1990's, opening up the economy created a huge potential for economic growth. New products can now be manufactured to meet the demands of 1.3 billion people, the quality of labor has dramatically improved as people can now choose what jobs they want to work in, competition in the market are made by new private firms, reducingthe number of government owned enterprises, not to mention the technology and resources imported to China through trade. Althrough the government still owns many monopolies in significant industries such as in the case of China Telecom, Baosteel and Petrochina, a greater degree of free market is being realized every year. In fact, there were even rumors about the Chinese government rewriting land laws in favor of private land ownership earlier this year. Therefore, China is an appropriate example of an approaching free market economy.


Timothy says: Adding on to Andy's point, present-day China reflects a monumental shift from a (what I like to call) primitive command economy to a market economy. The theoretical aspects that would make communism work do not consider the infinite greed that can be expected in human beings; this hunger for money and power prevent the ideal "equality" among all people. This realization by the Chinese government in the post-Mao era has allowed a shift in economy from the command to market. China's large attempt to "catch up" to western nations was only approximately half a century ago: the Great Leap Forward failed as the consumer goods were being used to make capital goods. As we learned from the Law of Increasing Opportunity Costs, resources are not perfectly adaptable, and certainly, it was shown during this time period. During the rule of Deng Xiaoping, the economic reform (which still goes on today) was highly successful, perhaps implying the superiority of market over command economies.

Cassy says
I'm really curious about how economists decide the international currency exchange rate. I understand that the value of money reflects scarcity of resouces. So when there is a sudden cut of resources, inflation occurs, everything costs more. That explains the prices of goods under the supply and demand principle, but I don't see how that can determine exchange rates. Like why one day RMB to USD is 8:1 and then another day it's 7.8:1?

Charlie says:
Well, quite honestly, I was about the drop the class when I found out it had nothing to do with money. Because after all, I signed up for this class because I thought it was all about money. But after two classes, I decided to keep this class because it was actually more interesting than if it was about money. The applicable-ness of this class makes it relatively easy to understand and fun to learn. Everything is logical. (i.e. demand goes up, prices go up. demand goes down, prices go down.) Furthermore, I am actually glad that this class isn't about money because now, economics applies to everyday life that I can relate to, which makes it all the more interesting. So yeah, this is mytake on AP Econ for now. Gotta go study for the test. Peace.

Taka says:
Ahh the wonderful world of economics. Its interesting to see how economics works in the world. Before I thought it was just plain trading of goods and services but there's more to it! Plus we're right in the middle of a booming economy so economics seems more practical. As we plunge deeper into the 21st century, its inevitable that we will run into economics. Maybe it will grow to the point where economics is necessary to even compete in such a fast growing market.. who knows! For now i'll try not to slack off and learn economics so that i too could think like an economist and keep up with the rest of the world.

Annie Sung says: When I signed up for economics, I just wanted to try something new, so I didn't really know what I was up for. BUT. Today a huge lightbulb went off in my head when I finally got how to calculate comparative advantage using cross multiplication, and that was an awesome feeling. Especially when I could relate it to my daily life. It seems as though economics is a fundamental part of our lives, but we don't really pay attention to it. Before taking this class, I never realized that me choosing to eat a chicken sandwich for lunch could have so many possible costs. But to digress no more...relating to some conversations above, I agree that freedom is an essential part of economics. Of course, competition is the fundamental part, but without freedom, there would be no competition. After all, all of us live for the purpose of everybody else. Therefore, if we are at liberty to enter and leave a market, we keep the economy in progress, and create new competitions, driving up prices and introducing new products. Also, I am wondering the same thing as Cassy - how are international exchange rates determined? It's always been something I've wondered about. I used to think that some powerful nations just dictated the rate, but at this point, I'm sure there's a better - and correct - explanation out there...

Howard Jing says: I know that the whole freething has been done to death by now, but I refuse to believe that there is no such thing as a free lunch. I mean, yes we all know by now that "free" things like soup kitchens still have to expend resources and labor in order to keep themselves supplied, but what about the simpler thing in life? Like breathing. As far as I am aware, we do not pay for air. The effort we expend on inhaling and exhaling is minimal. In fact, try not breathing for several minutes. As you can see, it is far easier to breath than to not breath. And what about opportunity cost? I guess by inflating your lungs you are missing the opportunity to die, but not many people want to do that. Another thing that is free is sunlight. Sunlight is emitted from the sun, where it proceeds to travel millions of miles before entering the earth's atmosphere. There, harmful UV rays and other stuff are filtered out by the ozone layer and light continues to travel down until it hits your skin and triggers vitamin D production which keeps you healthy. Yes, both air and sunlight aren't processed by businesses, but this very fact means that they are free right?

Kai Lin Fu says: I guess Howard does have a point but in order to have the energy to breathe a person has to eat and, and food costs money. Although the air is free, humans can't survive on just air. Thus, the very reason anyone survives is based on basic needs and the only way to fulfill these needs is through money. The reason why we go to school and why were are here posting these comments is to educate ourselves so we can have successful futures. The reason for a successful future is so we can earn money and feed ourselves. That is the whole point. Therefore, this is no such thing as a free lunch.

Serena:
I just read an article about the supply and demand for illegal goods, and what i find interesting is that most of time illegal goods are really expensive, I guess it because alot of people want them but there's not enough supply. I was thinking that what if the government didn't make some of those goods illegal, will those goods still have a high demand and short supply? Many when there's plenty of supply for some certain goods, then the demand will drop and thus the price will decrease also?

Nicole:
If illegal goods were made legal again, they wouldn't be sold in places such as the Black Market anymore, and certainly I expect their prices to fall. However, this change in prices also depends on how available the good is. Just because it's legal to sell it, doesn't mean that it is abundant in our economy. The availibility of the goods therefore affects its demand and supply. There is also a factor of how common the good is. The reason for people wanting to obtain this good from the Black Market, could be that it is not obtainable anywhere else, thus increasing its price. However, once this good becomes common and easily found everywhere, the value of the good could possibly decrease.

Katherine:
I read somewhere, I forget where, recently that there was a debate on legalizing some drugs that are cheap and then sell them with a higher tax to produce so that the government can make money off of something detrimental to society. It goes along the arguement that just by saying something is "illegal" helps its market because society is told it's "bad" and suddenly it's more attractive. The debate lost though, because someone argued that it wouldn't work. Personally though, I think it might just. You can see it with how the US government taxing cigarettes has lowered its demand some.