Friday, January 30, 2015

Russians rush to stores to pre-empt price rises

Click here to read the article. One of the factors that can shift demand curves is expectation of future price. If, for some reason, you expect a fairly big price increase in the near future, your demand today will increase. That is, the demand curve will shift to the right.

It seems like this happened this past December in Russia. Here are excerpts from the article:
"Russian consumers flocked to stores Wednesday, frantically buying a range of big-ticket items as they looked to pre-empt price rises following the staggering fall in the value of the ruble over recent days.

As the government looked at ways of easing the selling pressure on the ruble, which has slid 15 percent in just two days and raised fears of a bank run, many Russians were buying cars and home appliances — in some cases in record numbers — before prices for these imported goods shoot higher.

Swedish furniture giant Ikea, for one, has already put consumers on notice that its prices will rise Thursday, which resulted in weekend-like crowds on a Wednesday afternoon.

Shops selling a broad range of items are reporting record sales while some have had to suspend operations, unsure how far down the ruble will go. Apple, for one, has halted all online sales in Russia."

"The ruble has suffered catastrophic losses this week as traders fretted over the impact of low oil prices on the Russian economy, as well as the impact of Western sanctions imposed over Russia’s involvement in Ukraine’s crisis."
 If the value of your country's currency falls, it makes imports more expensive.

Wednesday, January 21, 2015

Another Semester Has Started

Welcome to any new students. I usually post something 2-3 times a week. The entries usually have something to do with a basic economic principle that is related to a recent news story. If you want to learn more about me go to Why is college so hard? (you may have to be patient with this site but the article is not long)

If that link is not working try this one

Tuesday, January 13, 2015

Dagwood Bumpstead Explains The Hedonic Treadmill

Click here to see the strip.

Dagwood: Boss, I need to talk to you about my need for a little raise.

Dithers: Bumpstead, haven't you heard that little raises are gateway raises to unhappiness?

Dagwood: Gateway raises?

Dithers: Of course little raises merely create cravings for bigger raises. Before you know it your little raise only makes you hungry for more extravagant raises. It never ends my boy, the hunger grows and grows and it all begins with one little tiny raise!

Dithers: Trust me son...I'm only trying to save you from years of unhappiness down the road.

(later Dagwood gets home and talks to Blondie)

Blondie: Gateway raises?

Dagwood: It's complicated.

This reminds me of a WSJ article Can Money Buy You Happiness? by Andrew Blackman. Excerpt: 
"One of the main reasons why having more stuff doesn’t always make us happy is that we adapt to it. “Human beings are remarkably good at getting used to changes in their lives, especially positive changes,” says Sonja Lyubomirsky, psychology professor at the University of California, Riverside. “If you have a rise in income, it gives you a boost, but then your aspirations rise too. Maybe you buy a bigger home in a new neighborhood, and so your neighbors are richer, and you start wanting even more. You’ve stepped on the hedonic treadmill. Trying to prevent that or slow it down is really a challenge.”"