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KPCC and the Supermarket Guru Jointly Fail

It seems to me there is a simpler and more direct explanation: demand. Higher prices for any product reduce quantity demanded. And for a specific item such as beef, demand elasticity is likely to be fairly high. The reason firms are not raising retail prices is simple: it would not be profitable because they would lose more unit sales than they would gain from the higher price. Continue Reading →

Venezuela Reminds Us Again Why Price Controls Don’t Work

Scarce goods and services (pretty much anything with a price) must be rationed somehow. Letting the price of a good adjust takes care of the problem automatically. If the price is below equilibrium, quantity demanded will exceed quantity supplied. The price will rise until the two quantities are equal. Continue Reading →

Money, Income, and Wealth

money is used to purchase goods and services. While income and wealth are valued in money units, that is their only relationship with money. Income is the annual flow of purchasing power earned by an individual. Wealth is the accumulation of past saving plus any increases or decreases. Continue Reading →

Regulation Economics

First Lady Michelle Obama has heavily promoted healthier school lunches. This is the first regulation. Many schools (including our local high school) have signed up for this program. The school cafeteria now sells food that many students do not want to eat. Aha! An entrepreneurial opportunity. In this case the entrepreneurs are food trucks. These folks park on the street behind the high school (actually right next to the tennis courts). Students flock to them to pay for food they actually want to eat. Continue Reading →

More Data on the Minimum Wage

The damage from a minimum wage hike depends on the overall labor market. If the job market is buoyant, as it is in the fracking boomtown of Williston, N.D., fast-food workers may already make more than $9 an hour. But when the jobless rate is high, as it still is in California and New York, the increase punishes minority youth in particular.

That is what happened during the last series of wage hikes to $7.25 from $5.15 that started in July 2007 as the economy was headed toward recession. The last increase hit in July 2009 just after the recession ended, and as the nearby chart shows, the jobless rate jumped for teens and black teens especially. For black teens, the rate has remained close to 40% and was still 37.8% in January.

A study by economists William Even of Miami University and David Macpherson of Trinity University concludes that in the 21 states where the full 40% wage increase took effect, “the consequences of the minimum wage for black young adults without a diploma were actually worse than the consequences of the Great Recession.”
Continue Reading →