Monday, December 21, 2009

ANNOUNCEMENT: The final is now a take-home exam.


Since it is still unclear when the final will be rescheduled and I would rather avoid the complications associated with rescheduling a test over winter break I am just going to give you guys a take home assignment:

It is due on Wednesday Dec 30th. The Word document is HERE

Important details:

1. This must be in my mail box in the Economics Department or emailed to me at by NOON on Wednesday December 30th. Any emails time stamped after 12:00pm on Wednesday or not in my mail box when I pick it up on Wednesday will not be graded.

2. If you email the test to me the test must be sent to me as a SINGLE attachment with NUMBERED pages. Tests submitted as multiple files or without number pages will be marked down a full letter grade. Finals submitted in person will also be marked down one full letter grade if they are not stapled.

3. Because this is a take home test the questions do not all come from the homework questions. The final is to test your understanding of the material, not your ability to copy the answers from the textbook. I am testing the same basic stuff but the examples are different than those in the homework assignments and those gone over in class.

4. Complete answers will need a clear, coherent and concise written explanation. It will be obvious if a question also needs a clearly and completely labeled graph or a clearly labeled balance sheet. Because this is a take home test and you have the time to be precise I am going to take of significant points for graphs that are not completely labeled.

Sunday, December 20, 2009

The final has been postponed.

Queens College is closed tomorrow. The final will not be held tomorrow. I will post information about when the final will be held as soon as I find out.

Wednesday, December 16, 2009

Why is there always a Burger King next to a McDonald's?

So the good people who brought you those two "This American Life" pod casts about the economy recently had a show that reminded me of on of my favorite ideas in economics. All of you are just looking at the blog to get information for the final but reading this blog post is a great way to procrastinate.

The show is from the podcast Planet Money: Episode 128, "Friend of Foe". It's easily found on ITunes.

Okay, so, we start out on a beach with two hot dog venders. They can be hot dog venders, gold merchants or Indian food restaurants. Basically the assumption here is perfect competition. That is, these hot dog venders sell the same product for the same price. That means that consumers (beach goers) are indifferent between buying goods from both hot dog venders. The reason they sell hot dogs on the beach is because the idea is easier to illustrate in two dimensions.
Now originally the two hot dog venders decide to divide up the beach equally. Assume that I have basic graphic design skills and that the blue and the red squares are the same size. By the way, those dots are the hot dog venders.

After standing on the beach for 8 hours a day 7 days a week Vender A realizes something:

If Vender A stands just to the left of Vender B a lot more customers—who only really care about how far they have to walk to get a hot dog—are closer to him than they are to Vender B.

Naturally Vender B catches on pretty quickly

Now Vender B has the bigger market share.

To save myself more embarrassing illustrations I’m going to just say that it should be clear that there is only one place on the beach where the two hot dog venders finally stop pushing their carts all over the beach:

Here they are both right next to each other. There is no reason for either vender to move further left or right since that means they will lose market share to the other vender. Basically they have the same market share they would have had if they had just agreed on the intuitively equal division of the beach and they would have saved themselves a lot of pushing their carts around.

And so you have it, it is economically rational for the always to be a Burger King next to a McDonald's.