Concept: Vertical Supply, Shifts In The Demand Curve
Background: The season’s penultimate game was critical for the Cuervos qualification to the playoffs. Unfortunately, after that game, the Cuervos were eliminated. However, the Cuervos still had to play the last game of the season.
Question 1: Think about the Cuervos’ stadium and ticket sales. Let’s consider that the capacity of the Nuevo Toledo stadium is 30,000 spectators. Draw the supply curve of one Cuervos game’s tickets.
Question 2: Explain how the demand for tickets changes between the two games. Draw a supply and demand diagram representing this change.
Background: When Assane was a teenager, Claire needed a violin for her recital. The violin rental price for one day was 350 francs, while the price was just 1500 francs for the entire week.
Question 1: Why is the owner offering to rent the violin for a week for less than 2,450 francs (7 x 350)?
Question 2:This question may be too hard for a principles course but could fit an IO or Intermediate microeconomics lesson about price discrimination. Let’s verify why this strategy increases profits. For this, we need to consider two customers. Jean is willing to pay 350 francs for a day with the violin but only 800 francs for a week. Issa would pay. Show that the seller strategy allows maximizing profit when Jean and Issa are the only consumers (assume the seller has two violins and has no cost).Preferences can be presented using this matrix:
Background: Pablo Escobar calls a meeting with all local kingpins to urge them to form a coalition. Escobar offers to retain control of day-to-day activities. The other kingpins provide funding while receiving profits and security.
Question: How do you call such formal collusive behavior? Explain the reasons why Escobar and other kingpins agreed to market sharing.
Concepts: Shift of supply curve, inelastic demand, monopsony power
Background: With the help of US resources and intel, the Colombian military police destroyed cocaine labs all over the country, burning coca farms and seizing over a billion dollars in cocaine.
Question: Use a supply and demand diagram to explain why the US and Colombian governments sought to destroy labs and crops. Discuss the effectiveness of governments’ interventions.
Question 2: Out of the following statements we hear in this clip, select the ones that are considered “positive.” Which sentences are considered “normative statements”? Explain your choices.
Fighting the narcos was the same as fighting the communists.
The US Southern Command in Panama sent us a care package.
The price of cocaine in Miami was skyrocketing.
The ensuing gun battle cost dozens of men.
Lehder was immediately extradited to the States, where a federal court sentenced him to life plus 135 years.
For anti-narco candidate, Luis Carlos Galan, [the victory] would provide him the momentum he needed to propel him to the presidency.
Background: Player 111, a doctor, agreed to remove transplant organs from deceased players so that staff members could sell them on the black market. As in many other countries, selling transplant organs is illegal in South Korea. Instead, organs are typically donated by live donors when possible or by families after a relative passes away. Such a prohibition is equivalent to a price ceiling of 0 won on human organs. In 2019, there were 32,560 potential organ recipients on Korean waiting lists (data from the Korean Network for Organ Sharing – KONOS). Of these, only 1,612 patients received an organ donation. Network for Organ Sharing. Of these, only 1,612 patients received an organ donation.
Question: Using a supply and demand diagram, describe the effects of a price ceiling on the market for human organs available for transplant. Is the demand curve perfectly inelastic? Analyze the effects of legalizing the purchase and sale of human organs. Include ethical considerations in your analysis.
Background: While a fight breaks out between players, Gi-hun ties this violence to his past as an autoworker. The flashback scene depicts the injustice faced by labor workers in the aftermath of the 2008 global financial crisis. This scene was inspired by a real-life event when SsangYong Motors filed for bankruptcy in 2009 and laid off hundreds of autoworkers.
Question: How did the global financial crisis affect the automotive industry? Research the automotive industry crisis of 2008-2010. Find South Korea’s GDP growth rate in 2009 (https://fred.stlouisfed.org/series/MKTGDPKRA646NWDB#0). Compare its unemployment rate in 2009 to the United States (https://data.oecd.org/unemp/unemployment-rate.htm). Did South Korea experience a recession in 2009? Define the concept.
Background: Many young teenagers dream of becoming soccer stars. However, very few have the chance to even try. To become professional soccer players, young teenagers must join a development academy. Still, very few spots are available, and only the most talented are selected, which creates extreme competition between the teenagers and adds additional pressure on them.
Question: Describe the competitive process among teenagers willing to join development academies.
Background: The bounty receipt provides us with some information about Spike and Jet’s revenue but also some of their costs. While the reward for this capture was relatively high (the revenue), the costs were far from negligible. Spike and Jet receive a tiny amount of money when including all the direct costs kept by the authorities. However, those were not the only cost. They still have to cover their own expenses, which ultimately leave them no profit. As the quote from the clip exemplifies, it “barely covers fuel and nevermind food.”
Concepts: Shortage, price elasticity of demand, arbitrage possibility, black market.
Background: Jet wants to offer his daughter a rare and expensive doll. However, stocks are minimal, and the doll is available in only a few stores. Besides, the doll is not available in any stores where Jet currently is. However, an illegal reseller has one for sale for five times the price. Given how important the doll is for Jet’s daughter, he purchases the doll from the illegal reseller.
Question 1: From this situation, explain why the doll’s market is not at equilibrium and instead exemplifies a shortage. Could shortage encourage the development of a black market economy?
Question 2: After defining the concept of price elasticity of demand, draw two demand curves that represent the demand for this rare doll and the demand for a regular doll.
Background: A newspaper comprises a collection of articles dedicated to informing readers. However, not all articles that journalists work on or wish to work on are published. Harriet discusses her next article with her editor. She wants to write a piece about politics, but he requires her to write a portrait instead.
Question: What type of articles do you like to read? Compare your answer with people nearby in the classroom (give a couple of minutes to students to figure out they have different preferences, ask a few students to share the discussions they had, then ask the next question). How do you think editors are affected by the fact that people have different preferences over the articles they like or want to read?
Background: Sacred Games was shot in Mumbai, and several scenes show different views of the city. For several decades after 1947, existing rents were frozen. In 1999, the Maharashtra Rent Control Act was passed, allowing landlords to increase rent by 4% per year. Rent remained extremely low compared to market value. Sacred Games exposes some of Mumbai’s slums.
Question 1: Is rent control an example of a price ceiling or price floor? Explain the concepts. What are the unintended consequences of rent control that you may have noticed in Sacred Games? Are these similar to the ones predicted by economic theory?
Question 2: Use the supply and demand analysis to explain how rent control led to a shortage of dwelling units, which in turn resulted in a growing number of slums. Research population growth in Mumbai and discuss its impact on the shortage issue. You can use the following website: https://www.macrotrends.net/cities/21206/mumbai/population.
Categories: Microeconomics, industrial organization, game theory
Concepts: Cartel, monopoly.
Background: After one gang violated another territory, the two gangs discussed their exclusive territory and agreed not to deal drugs on each other territory.
Question 1: Why do gangs want the exclusive right to sell in a defined territory, and why is it so complicated for them to stick to their agreement?
Question 2: Create a payoff matrix to explain why it is potentially profitable for gangs to form a cartel and why, if they do, they also have an incentive to break the cartel.
Background: Making business often involves more than just producing and selling. The following clip shows three examples of situations related to doing business that are not directly about production and sales.
Question: Define “transaction cost” and explain why these three situations exemplify transaction costs.
Concepts: Price elasticities, supply and demand, First-degree price discrimination.
Background: Sergey needs a ride out from the quarantine zone after getting his family in Moscow. He only has one option. It is to convince the truck driver to stay and wait 15 minutes.
Question: Draw a supply and demand graph representing this situation, and explain the shape of the supply and demand curves in words. Discuss why Sergey ends up giving all the money he has.
Background: Tomohe was asked to observe Himura. The stated goal is to detect his weaknesses. However, she was not aware of the real objective of her mission.
Question: Is Tomohe affected by not knowing the real goals of her mission? Did lying to Tomohe help the mission succeed? Explain the consequences of such information asymmetry.
Background: Mia and Niklas discuss Jasper’s situation. He must work ridiculously long hours to access his experimental treatment for his Huntington’s Disease. They also discuss the cost of such a treatment for other patients.
Question: Why are drugs for rare and lethal diseases often very expensive? Discuss the economic mechanisms that aggravate the problem.
