Thursday, July 5, 2012
Economics A Simple Twist on Normalcy
Economics: A Simple Twist on Normalcy
Author: Kersten L. Kelly
Consumers have to right to choose what they buy and where they purchase their goods. Some prefer buying in stores while other use the convenience of the Internet to research and explore the many avenues opened to purchase small ticket items such as makeup, toiletries or even household supplies. Many use the net research the housing market, colleges and the costs of tuition and some even to buy cars. Consumers have many opportunities to purchase goods in an informed way. The author in this book helps the reader understand the meaning of elasticity, inelasticity, substitute good and much more. She even explains the connection between education and income, the housing bubble and many other issues and topics that I will highlight in my review.
Economics is defined by the author as, “ the science that deals with production, distribution, consumption of goods and services, or the material welfare of humankind.” But, for purposes of my review I will try to break it down into simpler terms. This review will highlight what the author wrote and her presentation. Since my fields of expertise are reading and writing in the educational field, I will highlight the areas in her book that I found rather informative and that I hope will encourage you to read it. Whether you know it you not everyday you employ some form of economics in your daily life. “ The goal of this book is to shed some positive light on economic theory and evaluation,” as stated by the author. Economics she states is a powerful tool. Everyone in the world drinks milk or most people do. If milk prices increased exponentially of a period of a year, and if you remember at one point in time they did, would you switch to something else as your source of calcium because that product is cheaper? What is the highest price you would be willing to pay for a gallon of milk? Great question. Think about your answer.
There are many questions the author asks the reader to consider on page 17 and each one is quite interesting and compelling if you really think about them. Driving on the highway to a store to shop, get gas or just doing errands requires that your car is filled with gas. Whether you want to pay for gas, groceries or any other commodity you have no choice but to spend the money for certain staples in your life. Cigarettes are really quite expensive and those who smoke must really need the nicotine and although I am sure that have read the health warnings on the label and know they can cause serious heath problems, would increasing taxes and raising the price even more deter them from smoking? Economics will make everyone better off! Economics strives to create an outcome that will be better for the person involved in wanting a specific commodity. For example: Candy: Because candy seems to be something that many feel is a great treat or reward they feel better when eating it. I do not eat candy but for those that do like our author this rates high on the utility meter. People measure their happiness according the author with a designation of utility meaning the better something is from the point of view of the consumer the higher the utility measure it yields. Hence: Candy. The author follows with what happened when she received an email that enticed her and many others to participate in an experiment. Deciding to become part of this testing group was easy as she realized she could profit by making some money. As you read Chapter One you will learn more about the experiment and how she related it to the Prisoner Theory dealing with how the police question prisoners and get them to either confess or deny that they committed a crime. Next she focuses on cigarette ads and how they appeal to the emotions of those viewing them. She states that men who smoke in these pictures are considered more masculine then men who do not smoke. She even references women who smoke or smoked the long thin cigarettes and are pictured in these ads as being portrayed as ultra feminine. The author research this and found examples to back up her statements which you can read on pages 21-29. Added into this research she sites a 1998 huge piece of legislation that was passed concerning the tobacco companies and stricter regulations placed on them in order to sell their product. Within the rest of Chapter One the author includes information about the Cold War, more about gas prices, professional football players using enhancing drugs in order to play better and the tobacco industry.
Chapter 2 discusses the payout matrix and the second part of the Prisoner Theory. In Chapter 3 would definitely interest most readers as she goes into gas prices in depth and the effect it has on drivers. Drivers are consumers that need gas. Case prices are definitely a sensitive issue. We know that certain vehicles require more gas and others more expensive gas in order to operate their cars, trucks, vans or buses. Gas of course is in demand and she defines it as an inelastic commodity. Filling up the take or going to the market you have no choice but to spend the money for the things you need to use in your daily life. She expands by explaining the differences between elastic and inelastic goods. Goods she definite as elastic are inelastic are based on the market demand as the price changes. Goods that are considered more elastic: when the price of the good drops dramatically the number of people who want it usually increases. If the price of the good increases the number of people that want it might decline. She elaborates more on pages 48-51. Cigarettes are a primary example of an inelastic good for consumers have no direct substitute that provides the same expense. Higher prices still do not deter people from buying them.
Chapter Four discusses Luxury Good on A Recessional Budget. She goes back to the Prisoner’s Dilemma, includes the Theory of Inequity Aversion. The theory that I will elaborate on is the Lipstick Theory, which everyone can relate to. To explain this in simple terms the Lipstick effect states, “ When consumers face an economic crisis such as a recession, they will purchase less costly luxury goods to feel the material void.” In other words rather than buying a fur coat or high end car they will buy expensive lipsticks, shoes, hair products and go for visits to a spa or extra manicures and pedicures to fill the void or their need for luxury. The rest of this chapter elaborates it and gives more examples for the reader. Chapter Five goes into the Theory of Dynamic Inconsistency. She also discusses in this chapter the Housing Bubble. The final three chapters deal with football tickets sold outside of the stadium before a game, How can Intangible Goods Bring Consumers Together and much more. Chapter 7 deals with How can Framing Impact a Consumer’s Decisions Making Process and the last chapter Why Does Comparing Three Goods Change Perspective. In this chapter she uses the example of the consumer going into a store to purchase a television and comparing three different brands, their features, costs and more.
Presenting a book that highlights a small glimpse of economics and imparting this information to the reader is hopefully what this author has succeeded in doing. Economics as she states many times throughout this book is part of our everyday lives and the real world. Read this book and see which areas apply to you, which areas you would like to know more about and decide how economics impacts your life. The book is concise, well written and to the point. To decide what you think about this topic and if it is really a simple twist to normalcy you will have to read it for yourself.
Fran Lewis: reviewer