Economist Adam Smith

Adam Smith was often known as the 'founding father of economics'. He was born in Kirkcaldy Scotland in 1723. At the tender age of 17 he went to Oxford in 1951 and became a professor of Logic at Glasgow. The next year he gained attention by taking the chair of Moral Philosophy. He published two books one called the Theory of Moral Sentiments in 1759, and the other called An Inquiry into the Nature and Causes of the Wealth of Nations in 1776 which really put Smith in the spotlight.

In his first book, he develops the foundations for a general system of morals. Smith looks at man as self interested and self commanded. According to Smith, Individual freedom comes from self reliance, which is how a person is able to pursue his own self interests all the while commanding himself based on the principles of natural law.

In his second book, Smith uses precise detailed examples to acknowledge the cause and nature of the prosperity of a nation. This five book series is considered the first modern work in the field of economics. Through his research and understanding he was able to develop a analysis of the economic system. Some his more recognized work from the book is his examinaton of mercantilism and the concept of the invisible hand. Although not everyone agrees with Smith's ideas this book is reasonably the most valued book on the subject ever published. Without a question, it is the most priceless work in the field of free-market capitalism.

Although he died at the age of 67 he will always be known as one of the greatest moral philosophers and pioneers of political economics.

Unemployment in Canada

With employment insurance and unemployment reaching a high in Toronto, there is no doubt that Ontario along with the rest of Canada, better yet the world, is taking a big hit from the recent recession. As of January 2010 there are almost 800,000 people receiving regular employment insurance benefits in Canada alone. As of June 4th, 2010, Canada's unemployment rate stands at 8.1%, with Ontario having a 8.9% rate. This comes as an improvement from the 9.4% that was calculated by Stats Can in April of 2009. In addition, 67,000 full time workers have been employed, only to see 43,000 part time positions lost. 54,000 students coming into this summer aged 20-24 have been employed bringing their employment rate up 3.1% to 59.2% compared to May 2009. Those seniors 55 years of age or older that are out of work may be thinking to themselves that they have no chance in competing for jobs with the new generation of young men chasing for jobs. The stats seem to tell a different story, as employment for men 55 years and over have seen a 5.0% increase in employment since July 2009. Although it seems that the Canadian economy seems to be recovering it still has some ways to go as 670,000 people in Ontario alone have lost their jobs since October of 2008. Here are a following of graphs representing the employment trends in the past couple years.






Although different countries give different employment results, Canada seems to be one of the early nations in the process of climbing out of the recession. Although it will still take some time for our economy to fully recover, we are seeing big improvements as seen in the statistics shown.

Competition in Economics

In Economics, the term competition is referred to as the effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms. In other words it is two companies striving for a greater share of the market to sell of buy goods and services. Here is an example of a two companies that are currently in competition.





Arguably two of the biggest companies today in the technological world are now competing to take over the entire market. These two companies are Apple and Google. Whether its the Chrome or Safari, Android or iPhone, Adwords or iAds, it is a constant battle for supremacy. But whats wrong with some healthy competition, Right? Apple does not seem to think so as they have heard rumours that Google is planning to compete with their iTunes program. You would think that having sold 100's of millions of songs and such a huge customer base would never have a company to compete with. Google thinks otherwise, as they are in preparation to launch their own music program called 'Google Music' offering similar features as iTunes such as having the ability to purchase music and movies online. With such a similar product you might be asking yourself, will I really switch from purchasing songs off iTunes and switch to Google after having dealt with iTunes for so long? I am sure most would say no as you have gained a trust with Apple that would keep you going back. This is why Google is planning to offer the same online products at a competitive price hoping to steal some of Apple's customers. As Apple has iTunes compatible only Apple products, Google will need to do the same in order to compete. This is why they are planning to have Google Music only compatible with their Android phones which have started taking over some of iPhone's market. Google will need more time to prepare their product if they are to make this product successful but only time will tell if this becomes a hot product or just another failed innovation.

Demand

Demand

In economics, demand and supply are two very important concepts that help us understand more about how the economic system is operated. Although the economic system is not just consisted of demand and supply, understanding these concepts and the way they work is essential in learning more about economic issues and making good economic decisions. In this blog we will be focusing on demand specifically.
What is meant by Demand?
It refers to the various quantities of a good/service that people will be WILLING and ABLE to purchase at various prices during a period of time. It also pertains to the desire for a certain good or service, and the ability to buy that good or service.

The Law of Demand
The Law of demand states that:

As the price of a product falls, ceteris paribus, the quantity demanded increases; or alternatively, as the price of a product rises, ceteris paribus, the quantity demanded decreases. Example: when the price of gas goes down, the quantity demanded goes up.
The three reasons for the inverse relationship between price and quantity are:
1) Market size effect- a greater number of buyers
2) Income effect- purchasing power or real income increases
3) Substitution effect- some people will switch from other related products to gas. Example: less people will be inclined to take public transit to save on gas money.

The graphical representation of demand is known as the Demand Curve. The demand curve shows the various quantities of a good or service that people will be willing and able to buy at various prices. An example of a demand curve is shown below:What are the factors affecting quantity demanded?
1) Income: If someones income increase they will be more inclined to buy more goods and services than they did before. This is known as an increase of someones purchasing power. The demand for normal goods will increase as the demand for inferior goods will decrease.

2) Prices of related goods: Goods and services are related to one another in two ways: they may be classified as a substitute or a complement. Substitute goods are used to replace each other while complementary goods are used jointly. Example: An increase in the price of Coke will increase the demand for Pepsi because they are substitute goods. An increase in computers being bought would increase the number of anti-virus software programs being bought because they are complementary goods.

3) Tastes and preferences: a change in taste and preference will affect demand. Example: Apple's successful mac vs PC commercials increases the demand for macs due to a consumers change in preference about PCs.

4) Expectations: Expectations of consumers regarding prices in the future will affect present purchases of goods and services. Expectations that consumers have for the prices in the future will affect the present purchases of goods and services. Example: if the prices for gas is expected to increase tomorrow, consumers will purchase more gas today.

5) Population: The quantity of a product being purchased depends on the number of buyers in the market. Example: an increase in the number of tourists visiting Toronto would increase the demand for hotels and other services in the city.

There is almost no other product being in higher demand these days than oil. Here is a video explaining how oil deals with Demand.

Time, Scarcity and Choice in Relation to Opportunity Cost

"Time is Money". The last time i heard this saying i never really understood what it meant. But as i studied more on the topic of opportunity cost i got to learn a little more about what the old saying meant.

What is Opportunity Cost?

The textbook definition of the term is; the alternative that is sacrificed in order to obtain something else. Lets say you have a choice between two jobs (both of which you equally like) but you only have the option of picking one. The reason for this is; scarcity. You cannot choose both jobs due to the little amount of time you have in your day. You would not be able to manage two jobs at the same time, therefore only one job can be chosen. You are stuck in a dilemma. If you choose job A you will be missing out on what you will experience in job B and vice versa. So in this case if you choose job A, your opportunity cost is not being able to choose job B.

How does this tie into 'Time is Money'?

VS.




Lets say Harveys was having there "Free Hamburger Day' and your lunch break was coming up. You could go drive 10 minutes to get the burger and another 10 minutes to get back to work. Or you can just go to the cafeteria in your building and buy your lunch there. The time and gas you spend in getting the harveys burger would not be worth the time and money you could save at the cafeteria. So in this case, you would have a high opportunity cost going to Harveys. The cafeteria on the other hand would give you a low opportunity as it saves you time, which in the end saves you the money you would spend on gas driving to get your free burger.

How Opportunity Cost relates to Scarcity and Choice?

When it comes to Economics there are only a limited supply of resources that can satisfy a person's desires. Due to the fact that resources are scarce, we must use them wisely. Choosing between one thing or the other is a reoccurring theme in life that we must face, as we do not have the means to obtain both. Choice is a direct result of scarcity. To further explain the topic of scarcity here is a video about how it relates to water.



This video clearly shows how scarce the worlds fresh water supplies are and how important water conservation can be. Humans cannot live without water, therefore it must be consumed. But it is the amount we use that's important in conserving our water. The Opportunity Cost in consuming water is the depreciation of the worlds freshwater supplies. So next time you feel like letting your tap run, just think of this video.