Economic Decisions of Thanksgiving Break

Over Thanksgiving break, my grandparents came to visit my parents and me. Despite their age, both my grandma and grandpa travel frequently, but given their limited income they faced limited travel possibilities without living beyond their means. After much thought, my grandpa decided to start a small business endeavor, and market himself to cruise lines as a bridge instructor. After ten cruises teaching bridge, however, it became clear to my grandparents that- although less expensive than it would have been otherwise- they still incurred costs greater than benefits by going on cruises. Just like a firm, my grandpa found himself operating in the long-run below his individual average total cost curve, and chose to leave the market.

The day before Thanksgiving, a packaged arrived for my Dad in the mail. Rarely in our household has a single package be an object of such controversy. My dad had caved, buying a flat-screen television, making us possibly the last family in Chagrin to get rid of our antiquated TV and embrace the trend of high-definition. Influenced by changes in technology boosting supply, and changing tastes revoking the flat-screen’s boxy predecessor, my father made the purchase despite the avid protests of my minimalist mother. When it arrived, the TV itself boasted cost-efficiency, asserting via the packaging that it carried operation costs nearly a third of the costs associated with a TV like the one we formerly used. Though it boasts a low opportunity cost, the flat-screened television has still not gained my mother’s approval.

A staple of my family’s Thanksgiving celebration is desert which always features a pie often bought from the local supermarket. While in the past we’ve had one pumpkin and on pecan, this year the pie varieties differed. Instead of pecan pie, my grandmother purchased mincemeat, largely due to the high cost of pecans. My grandmother’s refusal to continue purchasing pecan pie given their price increase demonstrates that- to her at least- pecan pie is an inelastic good. Given her reduced income from recently retiring, the preference for mincemeat pie reveals it as an inferior good, while pecan pie is normal. Also inferable is that mincemeat pie is a substitute good to pecan pie.

Over my break, I grew increasingly tired of the music on my ipod. While eager for some new songs, I faced a dilemma of how to acquire them. I had two option- buy the songs off itunes for nearly a dollar (sometimes more) apiece, or get my music through less reputable methods. While itunes would guarantee me high-quality audio, I could get songs for free from a youtube to mp3 converter albeit with often lower quality. After evaluating the costs and benefits of each option, I opted for the mp3 converter. Despite the occasional sacrifice of sound quality, my utility from free songs still exceeded that of songs purchased off itunes.

After a long day of assisting my mom and grandmother in the kitchen, I eventually got to sit with my family and enjoy the Thanksgiving meal. After consuming significant portions of mashed potatoes, stuffing, roasted vegetables, cranberry sauce, and of course turkey, my enthusiasm for the food I helped prepare began to wane. I had reached the point where, despite the yearnings of my taste buds, my stomach couldn't tolerate more of the heavy Thanksgiving spread. At the point where I started valuing each bite less and less, until consumption stopped adding to my enjoyment and began detracting from it, I stopped eating. My decision demonstrated the law of diminishing marginal utility, that when I increased consumption of a product while keeping consumption of other products constant, I experienced a gradual decline in the marginal utility derived from consuming each additional unit.

        The Economist recently released an article detailing the technological advancements of Africa. Although it still lags far behind other continents in technology, use of cell phones, the internet, and social networking has risen dramatically. While demand for electrical power has already overtaken a meager supply, 24% of residents in Mogadishu access the internet at least once a week. Many access the internet through cell phones, often Chinese models. As inferior goods, Chinese cell phones are more popular in often poverty-stricken Africa than in North America or Europe. Mobile-phone operator Safaricom has 12 million customers, and has been recognized as the most profitable business in East Africa. Their dominance is largely due to rising demand and absence of competition allowing Safaricom to monopolize and expand the market for mobile phone services. The Economist notes “There are already 84m internet-enabled mobiles in Africa. It is predicted that 69% of mobiles in Africa will have internet access by 2014. A week’s worth of data can be had for $3.” Currently, the cost of mobiles with internet access carries to great an implicit and explicit cost, preventing many from purchasing them. However, the costs are expected to drop in coming years. Given the increase in cell phone usage, it would be expected that texting would increase as well, but this is not the case. For those who can afford it, Facebook has made mobile-access to the site free of data charges, and this has made Facebook more valuable compared with texting, although the two serve the same purpose. Disease, corruption, and general instability in Africa has, thus far, kept technological expansion to a minimum. Despite unfavorable conditions, use of cell phones and the internet has still risen, and is likely to continue to rise. 

Today the Wall Street Journal published an article questioning whether the U.S. economy can remain competitive in the world-market with the continued expansion of China’s economy.  WSJ quotes economic historian Niall Ferguson, asserting the U.S. “has gotten bloated with bureaucracy, litigiousness and excess regulation” when explaining why China’s market is more appealing to many manufacturing firms. I think that this is shortsighted. Yes, the U.S. has stricter regulations than China. We also have melamine-free baby formula. Ferguson brings up a very relevant issue: the necessity of regulations. While I recognize regulations create market inefficiencies, they are a necessary evil in order to protect often unassuming consumers and a fragile environment. We also need financial regulations, as counter-intuitive as that may seem. For example, financial regulations may have prevented the mortgage crisis. McClatchy News Agency asked in a recent article; “Why didn't Wall Street firms tell potential investors that the bonds they were selling them were rotten? Why did their business partners, including subprime mortgage lenders, ignore glaring evidence that borrowers weren't qualified and give loans to virtually anyone with a heartbeat?” They misguided and misinformed investors because they could, given the lack of regulations. Although many like to blame regulations for the U.S.’s economic shortcomings, repealing or even reducing regulations is not the way to improve our stagnant economic growth. In order to allow the U.S. to remain competitive against burgeoning economic powers, we need innovation to cause an outward shift in our production-possibilities frontier curve. A need for innovation makes improved education prudent. Although I have little patience with, or affinity for math or science, increased emphasis on these subjects and education in general is prudent, especially when the educational achievements and standards of the U.S. are continually surpassed by other nations