Colander Chapter Questions

Macro ch 26: The Keynesian Short-Run Model, 5 February

1. Explain the "paradox of thrift." How is this concept related to deflation?

2. Choose one of the following shift factors for the aggregate demand (AD) curve and explain why it influences the curve: foreign income; exchange rates; income distribution; consumer expectations; monetary and fiscal policies; multiplier effect. 

3. Colander notes that the placement of the long-run aggregate supply (LAS) curve is inexact, and usually represents a range. Why is the LAS curve difficult to determine precisely?

 
MACRO ch 24: Economic Growth & Business Cycles, 21 January

1. Distinguish between "supply-side" and "demand-side" economic models.

2. Draw a graph that represents a business cycle. How do you think behavioral economics factors into these cycles?

3. Distinguish between total and potential output. Which of these can be measured more accurately? 

Micro ch 17: Work and the Labor Market, 8 January

1. Find a statistic about the United States workforce that you find particularly significant and make note of the source. This statistic could involve wages, unemployment, education levels, pay gaps, or anything else related to labor and employment. Be prepared to share and discuss this statistic in class.

Micro ch 13: Perfect Competition, 19 November

1. The author defines perfect competition as "a market in which economic forces operate unimpeded." What is meant by the "unimpeded" part?

2. From the graph on page 267, you can see that the demand curve in a perfectly competitive market is assumed to be perfectly elastic. What does this mean for prices and revenue for someone in a perfectly competitive market?

3. Perfect competition is largely a theoretical concept. Can you think of any industries or sectors of the economy that approach the criteria of perfect competition?



Micro ch 11: Production & Cost Analysis Part 1, 31 October

1. Distinguish between average and marginal product. Which of these is (or should be) more important in a firm's decision-making?

2. Define the law of diminishing marginal productivity and draw a graph illustrating it. Given a specific range of inputs and physical space, why must marginal productivity eventually decline? 

3. The law of diminishing marginal productivity assumes "all things held constant." What variables could allow a firm to escape diminishing marginal productivity? 

Micro ch 9: Comparative Advantage & Globalization, 17 October

1. Distinguish between tradable and non-tradable sectors and give an example of each. For a wealthy country, which of these is more likely to face pressure from globalization?

2. Page 191 lists a series of comparative advantages the United States currently enjoys. Which of these do you see as the most stable and why? Which do you see as the most fragile and why? 

3. Colander argues that the massive trade deficits the United States has been running for the last few decades cannot continue forever. Given the example of the US's trade deficit with China, what are two ways that balance can be achieved? 



Micro ch 8: Market Failure vs Government Failure, 11 October

1. Consider the following behavioral challenges with which government often struggles: free riders, adverse selection, and moral hazard. Which of these do you see as most problematic for the economy as a whole and why? 

2. Market failure can be defined as a situation in which people/firms looking to make themselves better off create large-scale problems in the process: put another way, a situation in which the free market makes things worse rather than better. Find a news article that describes something approaching market failure. Be prepared to discuss it in class and give some context about the situation. 

Micro ch 7: Taxation & Government Intervention, 8 October

1. Examine the graph on page 145 (figure 7-2). It shows that the initial effect of taxation on a specific good or industry is to shift the supply curve to the left. Why is the effect of the tax to move the supply curve rather than just adjust the price point on the line? In other words, why is the effect on supply rather than quantity supplied?

2. If a good or service is elastic, the supplier primarily bears the burden of the tax; if inelastic, the consumer bears it. Why is this the case?

3. Agree or disagree with the following statement and explain your reasoning: even in the most efficient tax situations, deadweight loss is unavoidable.

Micro ch 6: Elasticities, 26 September

1. Define "elasticity" as it applies to demand. Explain why elasticity of demand is higher at high price points than it is at comparatively low price points.

2. Consider the example of a Chipotle in Mentor, Ohio - a typical American suburb. Will elasticity of demand for this Chipotle be higher when it is the only fast-casual Mexican restaurant in town, or when a Qdoba moves in a few blocks over? Explain.

3. Elasticity of demand has major implications for how a company prices its products. Regarding elasticity, in what situation is raising the price of a specific product a good financial idea, and in what situation would a price raise be a bad idea?

Micro ch 5: Using Supply & Demand, 25 September

1. Consider the author's case study about taxi medallions - government issued licenses to operate a taxi - in New York City, beginning on page 108. In what ways did this medallion system help taxi drivers when demand was high, and in what ways has it hurt taxi drivers in the era of serious competition from Uber and Lyft? Consider the question within the context of supply and demand.

Micro ch 4: Supply & Demand, 20 September

1. Explain the difference between demand and quantity demanded. How are these two concepts represented in graph form?

2. Explain a situation that would cause a shift in the demand curve for a specific good. Draw a graph illustrating this shift.

3. Explain a situation that would cause a shift in the supply curve for a specific good. Draw a graph illustrating this shift.

Micro ch 3: Economic Institutions, 12 September

1. Examine the flow chart on page 56, which illustrates the exchange between households, businesses, and government in a market economy. What is the main role that each plays in this schematic?

2. Define "externality." Why is this an especially important concept for policy makers in government?

3. Colander talks about "de-merit" goods and activities, like use of opiate drugs. Recently, some US cities have opened "safe injection" sites with clean needles and recuperation areas in an effort to prevent opiate-related deaths. What do you think is an economic argument in favor of this policy? Against it? 



Micro ch 2: The Production Possibility Model & Globalization, 11 September

1. Explain the underlying concept of a production possibilities curve (PPC). The author uses guns and butter as examples of competing goods in a PPC - do guns and butter provide a good illustration of the main concept of PPC? If not, what would be better?

2. What is meant by comparative advantage? Give an example of this concept's application to the micro (individuals/businesses) and macro (regions/countries) scales.

3. The United States has lost a great deal of its comparative advantage in goods production to other parts of the globe in the last few decades. Generally speaking, why has this happened, and what can the United States do to offset those losses?

Micro ch 1: Economics & Economic Reasoning, 5 September

1. The author, David Colander, defines scarcity as "the goods available [being] too few to satisfy individuals' desires." Given this definition, is scarcity inevitable in a capitalist economy?

2. Define "opportunity cost." Think of a situation you or someone you know have faced in which a significant opportunity cost was involved.

3. Explain the concept of the "invisible hand" (described in two separate parts of the chapter). How do you see this concept influencing current political debates about the role of government in managing the economy?