First chapter Introduction

       Case 1: desire and choice

The Qing Dynasty Hu Danan editor of the "solution" man Yi book included a song "insatiable" poetry:

All day long struggle to hunger, just a full and vests.

Food and clothing are two sort complete, want to face beautiful wife.

Married a beautiful wife gave birth to the child, no land less hate foundation.

Bought more than a vast rural, less access to non boat ride.

Slotted head tied the mules and horses, with no official being bullied.

County Magistrate main thin also too small, but also towards the hanging purple.

To the hearts of men, in addition to the west is Nanke dream.

 

Case 2: Economics -- rational economic man hypothesis

 In daily life, everyone in unconsciously using economics knowledge. As to buy something in a free market, we love with vendors for a supply of sth.; to the bank deposit, we want to save a deposit or current account. Economics is how much effect on daily life, with stories about economist and mathematician can refer to.

It is the story of three economists and three mathematicians with the train to travel. The mathematician derided economists no true skill and genuine knowledge, make the knowledge also is a lot like "people are like the assumptions of rational"; while economists joke mathematicians too pedantic, the brain will not bend, the lack of rational choice. Finally, economists and mathematicians bet who travel to spend the least money. Three mathematicians everyone bought a ticket on the train, and the three economists only buy a train ticket. The conductor came to check the tickets, three economists have hid in the toilet, the conductor on the restroom door when checked, economists from the door gave a ticket, bought a ticket, so slip by. Three mathematicians at economists it saves two ticket money, is not convinced, then also follow suit on the return trip, bought only one ticket, the three economists did not buy a ticket on the follow on the car. Mathematicians thought, did not buy a ticket, see how you mix in the past. When the train began to check tickets, three mathematicians like economists like last time, hide in the toilet to go, but economists are sitting in the seat did not move. After a while, the toilet door, there was a knock on the door, and came the voice of inspector. Mathematicians obediently handed out tickets, but could not see the ticket inspector came back. Is the original economists as the inspector, the mathematicians ticket cheated, hide to another to go to the toilet. The mathematicians or was the last train attendant to check, obediently fill the three ticket, but economists are the only pay a ticket money, it made the round trip. This story is often economics professors as a joke to beginning students listen to, in order to stimulate the students interest in learning economics. But in most people including economics beginners, opinion, economics both dull and boring, full of statistics and professional terms, not the story interesting; and the economics always and money have connections, therefore, people generally think, the theme of economics is money. In fact, this is a misunderstanding. The real subject of economics is rational, the implicit and profound connotation of the poor is people's rational action fact. Economics on the rational assumption is aimed at individuals rather than groups. Economics is the way to understand people's behavior, it comes from the assumption: everyone has not only his own goal, but also take the initiative to choose the right way to achieve these goals. This hypothesis is not always right, but very practical. Economics developed under such an assumption, not only has practical value, can guide us in our daily life, but also because such knowledge itself full of rational enough to entertain the people mind, very enjoyable. Although we are in daily life often naturally or half unconsciously use of the knowledge of economics, but if the lack of basic knowledge of economics knowledge, it is easy to handle daily affairs reason is inadequate, give your life added a lot of unnecessary annoyance. For example, just bought a car, not after two days, the car is the price, most people encounter this kind of situation will become dejected and despondent, heart very depressed; if not long ago just bought the house, the house prices recently rose, be jubilant is a normal response to the general property buyers. Although these reactions with It's only human, but prices brought about by the depressing feeling is wrong.

 Economics thinks, the correct reflection should be: whether it is price, or price, should feel better. Economics thinks, for consumers, the most important thing is that you consume is what -- prices, price is how much and other commodity price is how much. Changes in prices before, your choice of combinations of goods (house, car and income balance buy other goods) that is the best thing for you. If the price does not change, will you continue this combination of consumption. The change in the price, you can still choose to consume the same goods, because the house, the car is yours, so, you can't because of price changes and feel worse. However, because the house, car and other commodity prices, the best combination depends on the price, therefore, the past combinations of goods is still the best is not possible. This means that there are now some of the more attractive option, therefore, you should feel better. New choice although there, but you are more interested in optimal selection of the original (original mix).

 In daily life, we are often disturbed by others why was paid more than me, always feel less than what they deserve, and economics tells us that this feeling is self inflicted, is wrong. Economics thinks others than their own earned more than is normal, you get is due, if they cannot rationally face, will only give their lives to bring unnecessary trouble and sorrow.

 This kind of trouble we encountered in daily life, mainly because of some misunderstanding on economics, it may be easier because of economic theory. "Supply and demand", "price", "efficiency", "competition" is everyone for having heard it many times economic terms, and these words mean is obviously, therefore, most of the time, it seems that everyone is the economist. People dare not before physicists or mathematicians display slight skill before an expert, but in front of an economist, who can be the price down the happy or depressed problems freely express their own views. In fact, there are many is not obviously the content of economics, not everybody imagination of so simple. In the field of economics, to go from "I heard" into "I know" realm and not be an easy job to do.

 Therefore, the correct grasp of economics knowledge, the method of economics thinking into daily life, so that we can more rational ground for all the chores of life, small to large to daily necessaries, marriage, will reduce the life of many depressed and unhappy, more happy, more laughter.

 

Case 3: Positive Economics and normative economics

 The fundamental difference between positive economics and normative economics is the judgment of value attitude. The economics of moral and immoral whether to involve value judgments, because the value judgment is the basic moral issues. Empirical economics rejection value judgment, it does not involve the moral issues, empirical analysis only know the fact itself, research on economic law.

 We give an example to illustrate the problem. Now on to the State Council to the ordinary people are very concerned about China's GDP and per capita GDP, because these two numbers. The former represents a country's comprehensive national strength and the latter reflects the prosperity of common people's life. From the empirical point of view, process these digital induction is the process of empirical analysis, if there is a suspicion of certain data can also re inspection. The specific number is objective, in the statistical process does not involve the moral question, only to answer is what. From the point of theoretical analysis to study, first, a reasonable rate of economic growth in China's current circumstances, determine a reflect the level of people's life well-off standard. In order to achieve this goal, the state should formulate industrial policy, monetary policy, and fiscal policy. The latter relates to a moral problem. Is not the same as for the latter question different people in different angle of the conclusion that the station gets. Some people believe that the economic growth rate is a good thing; some people believe that economic growth rate too fast is bad, should stop economic growth. These are subjective judgment cannot be tested.

 From the above example we see positive economics and normative economics are different, but it is not difficult to find that there are two contact. The results of the empirical analysis of digital, provides the basis for the formulation of national and the selection of appropriate economic growth policy; and the appropriate policy environment is achieved and guarantee the economic indices of guarantee. Therefore empirical economics is the economics foundation; and positive economics and normative economics cannot do without the guidance of. That is to say, some quantitative analysis are more specific empirical analysis. More high-level, qualitative, a decision analysis problem is normative analysis.

 

Case 4: the economics hypothesis -- bird problem

One day, the teacher out of an intellectual problem in the classroom, please Xiao Lan answer, teacher is the subject of this: "there are ten birds in the tree, shot and killed one, how many are left?". Xiao Lan asked: "is the silent pistol or other silent gun?" No, not at all. "The shots have how old?" "80-100 db." "That is going to shake the ear pain?" "Is."

"Hits the bird in this city to violate the law?" "No offense." "Are you sure that bird was killed?" Determine. Teacher was already impatient. "Please, you tell me how many are left on the line, ok!"

"OK, there is no deaf birds on the tree?" No. "There is no in a cage?" No. "The edge is also no other tree, the tree has no other bird?" No. "There is no disability or hungry fly away?" No. "Not pregnant belly bird?" "Not." "Bird's eye to have the flower? Assurance is only 10?" "No flowers, only then 10."

The teacher has full the forehead is sweat, and finishes class the bell sound, but small haze continues to ask: "how silly does not fear death?" "Afraid of death." "Will not shoot two?" Can't. "All the birds can be free?" "Can."

"If you answer no lie," Xiao Lan said confidently, "killed if the bird hangs on the tree didn't fall down, then remains one; if you fall, does not remain."

The teacher immediately fainted.

The second chapter  The theory of supply and demand

 

Case 1: the factors influencing demand

The summer of 2001, Suzhou park tickets from sixty yuan to ten yuan. For a time, more of the persons, the ten day of the park daily average volume of tourists reached an all-time best, to achieve total revenue of four million yuan. 10 yuan tickets from 250000 summer Suzhou Park, very enjoyable a fire.

"Fire", since July 20th 5 time evening. This is the park hosted the "first day in midsummer 2001 carnival night", tickets to 10 yuan from 60 yuan. That night, to the music of tourists up to more than 70000, far beyond the "best 30000 people" prediction, this figure, more is usually the park daily visitors 15 to 20 times, a record opening since 4 years of history of the most. until July 29th, for a period of 10 days of "Carnival Night" activities falling. The zoo sat down to one count, corkiness: this 10 days a total of 25 tourists million people, to achieve operating income 4000000 yuan, net profit of 250 yuan...... these indicators, were significantly more than the normal day Business Hours.

Under normal circumstances, Suzhou park tickets per person per 60 yuan, the total number of visitors every day in between 3000-4000, Business Hours from 9 a.m. to 5 p.m.. "Carnival Night" in the "amateur" time, namely from every afternoon 5 when to 10 at night, the tickets are reduced to 10 yuan. That is to say, "Carnival Night" these 10 days, the park without affecting the normal day business situations, extended by 5 hours every day Business Hours, turnover and profits have more than doubled.

"Carnival Night" and the park hosted the "fourth annual beer festival" at the same time. 42 related manufacturers to add to the fun park -- actually, the manufacturer is to promote and sell their products. According to the zoo in the past, the beer festival, park is to charge Factory "opportunity" costs, however, this is not receive or collect some, but the manufacturers shall provide free of charge to visitors "petty" enterprise advertisement etc.. For the payment of money, manufacturers can not happy? The park admitted, many vendors to participate, the big site fees, reduce the paradise in a "Carnival Night" activities of the risk, however, it is not the decisive factor to the final success.

"The key to fire", was originally a 60 yuan ticket is dropped to 10 yuan. Not only that, each to paradise "Carnival Night", with tickets, also can receive and 10 yuan tickets equal to the value of the beer, beverage and advertising shirts etc.. That is, the day the purchase of 60 yuan tickets after admission, the most active project will no longer charge; while the purchase of 10 yuan tickets after admission, high-tech projects and water recreation projects are still appropriate to charge a fee. In so doing, the zoo can at least ensure they do not lose money, so there are so many manufacturers support. Consumers, more than 60 yuan a ticket, because, some visitors only in part of entertainment consumption, or even just take an evening out into a cold, wind, especially for a family of three, is so cost-effective, spent a total of 30 yuan will be able to enjoy the cool air, fresh beer, wonderful the performance, the beautiful fireworks, free gifts gifts, benefits too! Manufacturers more fine - advertising, promotional products, but also cultivate the potential consumer group. In short, all earned.

Good will become the norm.

Question:

(1) in this case, why Suzhou park by reduced prices to obtain enormous economic benefits?

(2) why later Suzhou park is no longer the price? If you continue to cut prices Suzhou park can profit?

(3) what are your views on the current situation of the high price of many parks in Beijing? Why these prices do not fall down?

(4) for quasi public goods like parks, the price should be determined by what? What is the role of government in which?

 

Case 2: high income star right

If you want to listen to the concert have increased, and the singer's supply is unchanged, the ticket price will rise, because the concert organizers and singer can get more income from the high price of tickets, they also increase the concert performances can be introduced; similarly, if not so many fans, demand reduction, tickets the prices will decline, they will reduce the concert performances. If the singer added, ticket prices will decline, the concert session increased; also can be introduced to reduce, singer, ticket prices will rise, the concert will reduce the number. This is the economic analysis of the law of supply and demand.

 High income star is decided by the singer's supply and public demand, this is the role of the market mechanism of the results, since the singer's consumption needs are so great, and the supply side and scarce, that is to say in the market a few famous singers have completely monopoly position, so their high income is not only reasonable and just, a few star is out of competition. When the night to see popular singer earn more than ten years, many, is not balanced, but from the economic rationality of view, high income star is determined by the market.

 

Case 3: the law of supply and demand change demonstration appliance market price

According to the law of supply and demand, prices rise when the demand is greater than supply,; when the demand is less than supply, prices drop, this is the law of the market price changes. The law of supply and demand can be seen everywhere in our real life. Commodity prices are around the floating commodity value from top to bottom, but also affected by the impact of market supply and demand, and sometimes the price deviates from value phenomenon. For example, China's reform and opening up, the productivity level of backward production factory, the total demand of home appliance products is much higher than the total supply, appeared 89 years ticket queue panic buying refrigerator scenes, the most common of a refrigerator to sell 2800 yuan, also the clothing supplies. Although the impact is not inflation, but in terms of the domestic home appliance manufacturer's technical level and product quality, continuous years of price dumping, home appliances market for less than seeking, the firm's profit is considerable, so there are more and more manufacturers involved in home appliances products production, increased from several to dozens of a. With the continuous development of reform and opening up, constantly introducing advanced foreign technology and foreign home appliance products continue to enter, such as Sony, Toshiba, Samsung, Philip also saw Chinese appliance market this piece of cake, the more intense competition, the balance of supply and demand change, the original here for less than seeking, gradually transformed into oversupply. At the same time, due to the competition of the required product quality optimization, increasing varieties of style, from the low-end products to high-end digital products Goods are available in all varieties., product prices more market-oriented, the manufacturers are more high quality, bring consumers even greater benefits. In 2000 by Changhong color TV LED TV prices diving, air conditioning prices plunged in 2002, 2003, are increasingly shows the industry competition is fierce, at the same time, the concept of consumer spending more rational. Coupled with the consumer income affects the demand for commodities, the higher the income consumption grades higher, into the opposite direction to the inferior product demand. Today's home appliances market competition has entered the white hot, the manufacturers in order to compete for the market to win customers, price promotions, and even launched a large number of less than the cost of the special machine for a high market share, this is often due to quench a thirst with poison, many brand manufacturers close not to branch and gradually exit home appliances market. We can see, the price adjustment of supply and demand, the final result of competition in the market, the household appliances market more standardization, branding, gradually tends to the equilibrium of supply and demand.

 

Case 4: "is a chicken and egg"

Of course, there is a problem still can't say: what is to generate demand and supply, or to produce supply to demand? This is a bit like asking "is a chicken and egg". I think, maybe sometimes is demand driven supply, lot of new products is produced in people's strong demand; sometimes supply induced demand, such as fashionable, often provide out, just around the line of sight of people, causing people to demand. But in a certain kind of commodity price decision, two blades of supply and demand is like a pair of scissors, role is as common to determine the price of a product; at the same time the price is just like an invisible hand in the market economy spontaneously adjust the demand, adjusting supply, adjusting the results to allow the market to achieve. Equilibrium -- social rational allocation of resources.

In short, many things are in the economist's point of view, can be analyzed from the perspective of supply and demand. The demand is to provide product power, supply is to meet the needs of the premise. For example, to education, because of the existence of a large number of "education" products to people who need it, and the "education" in the supply of products, in order to meet the demand of products "education". If you want to go to school, education resources are fully utilized, and also reached the equilibrium of supply and demand of the education market.

 

Case 5: the abuse of government subsidies for egg

Data show that in 1995 the city of Tianjin, egg production and reduce the amount of 100000000 pounds, which in addition to the impact of rising production costs, defects and subsidy system is not unrelated. On the one hand, there is price subsidies to the actual purchase price egg reached 3.5-3.80 yuan / catty levels, when producers unregulated egg by non state run shop purchase, producers have in mind a very high psychological price, hope suffered due to compensate for the loss of price regulation (through this even if the government to producers because the sale and losses to the subsidies, but subsidies are high, but the nominal price is very low, the formation of a producer Cuo Jue), then the market price is pulled to a high level; on the other hand, lower prices to stimulate demand, which further aggravated the the contradiction between supply and demand sides. To solve this contradiction, not subject to price regulation under the condition, performance for the price rise. Survey data show, when the designated outlets were forced to 3.30 yuan / kg price to sell the egg, the egg farmers market price has reached 3.9-4.1 yuan / catty levels.

From the above analysis we can see, the price control but the egg market prices and instability, which is the failure of the system of arranging a not consistent with the economic laws, ultimately to be designers give up is inevitable. In fact, like egg, cabbage, the production cycle is short, alternative products the price level and the relationship between supply and demand, the best adjusted by the market: in the short term, egg prices rose, hand just stimulate its alternatives (such as meat consumption) of rising consumption, adjust the consumption structure; on the other hand, attract external (to) market supply, soon will be able to increase the local supply; at the same time stimulating resources flow to the production field, chicken was increased, so that the local egg supply to rise in the next production cycle is longer, the price dropped back again. In view of this, at least in some product areas, even from the maintenance of price stability, ensure the stability of people's lives with the goal, system arrangement is the most ideal choice of market regulation.

 

Case 6: why milk into sewer

I saw in the newspaper not long ago a story: Southwest dairy boss -- workers Huaxi Dairy Company Chengdu City tons of fresh milk into the sewers, in order to avoid huge loss. Quickly and its contract with dairy farmers had to put some milk into the sewer.

This reminds me of 30 years American depression scene: workers tons of fresh milk into the sewers, in order to avoid huge loss. Why the milk away? In fact, the reason is very simple: analysis with elastic theory that we have learned, whether it is American or we now Chinese, milk is a necessity of life, small elasticity, price increase sales revenue, make up for the loss of the price. Because after all, not cows do clothing, long production cycle, the elasticity of supply of small, is not sensitive to the market induction. 3 years ago, Chengdu area dairy industry development prospects, so a lot of enterprises (encouraged by the government) have engaged in dairy production, so that the milk run, once appear milk shortage. Milk prices rise, because small demand elasticity, improve the price increase of dairy farms and Huaxi dairy company income and profit. Therefore, the market regulation (plus the government encourages) results, to increase the amount of dairy farming, dairy farmers add up to big and small, milk production will reach 1000 tons in 1 days. Among them, 80 tons of fresh milk flooded into one of the top three Sichuan dairy Huaxi Dairy Co., ltd.. 3 years later, in greatly small the dairy company's participation, the market this cake at the current level of technology have been dug to the extreme, in other words, the market supply increase capacity and consumers demand didn't digest so much milk. Reflected in the Huaxi dairy company, only in accordance with the scale of operation of daily processing 60 tons of fresh milk, for 20 tons of excess. The 20 tons of how to deal with, and dairy farmers will contract is a long-term contract, not breach of contract, otherwise you will lose the milk source, whether price acquisition will broken business future or refuse. At the time, now dairy powers the scale advantage competition for markets and resources so practices, is to own the supply to decline, the last loss not pour the milk can match. Even if the present down part of the milk, the market has been reflected, 300 ml of milk prices from China before the Spring Festival of 2.20 yuan dropped to 1.50 yuan per piece; West China milk from 50 yuan to 39 yuan, cheaper than cola, mid-range of pure water. Due to lack of the milk price is to reduce the elasticity of income and profit.

The development of the market economy today, Chinese also began gradually to such things not too surprised, not like in the past to ask "vulnerable groups also can not afford to buy milk, but you pour it, how could it be?" This is completely strange to the issue of market economy. American the Great Depression of the 30's when pour the milk into the river is due to the lack of government macro-control, non government run consequences, then poured milk China caused this phenomenon is what reason? This is enough to arouse our thinking.

 

Case 7: the collection of consumption tax on high-end consumer goods

In 1990 American Congress passes a law on high-end consumer goods (luxury cars, yachts) impose consumption tax, the purpose is through the tax to rob the rich and assist the poor. But the result is, the rich pay taxes did not increase the number of high-end consumer goods, the production of these workers are injured. I had to cancel this tax in 1993.

According to the theory of economics, the consumption tax may be borne by consumers, may also be borne by the producers. Who is responsible for the goods much depends on the elasticity of demand & supply. High-grade consumer goods demand is elastic, i.e. tax increases prices rise, demand will be much reduced (instead of other consumer goods consumption tax), but the supply is inelastic, the producers can not quickly reduce production. So, the tax is borne by the producers, overwhelmed produce these goods business, but to reduce production or even closed, workers lost revenue and even unemployment. Want to help the poor policies but hurt the poor, it is not about the relation between tax and the demand and supply elasticity results in economics.

 

Case 8: the cobweb theory -- farmers to reduce the loss of evidence

When Apple prices relatively high, people have to "start" to plant the apple tree, after a few years later, the increasing number of Apple caused by pile up in excess of requirement, apple, apple prices have dropped substantially, this time Apple farmers will have the tree cut down. By planting apple have "down" phenomenon. The "horse" and "horse" phenomenon does exist in the real life, cause serious damage to the economic construction of our country. So simply relying on market regulation equilibrium while in the long run to supply and demand, but the transition process time is very long, and caused great economic loss. Due to price fluctuation makes the price deviation from the reasonable condition, the price is not reasonable and gave speculators caused the hair ill-gotten gains opportunity, so take government intervention to reduce price volatility.

In addition, due to the food market has "cobweb effect", the market once the impact will not be automatic adjustment. Therefore, the grain market is not completely open. Until today, many economists (including some food experts) that, due to the grain market there is a "spider web" effect, any external shocks in the grain market will be gradually enlarged and divergence, the market is unable to automatically adjust to the equilibrium state, so, it will be on people's lives, production brought about negative impacts. Therefore, the government must intervene in the grain market. But the government intervention can not achieve the expected results, the futures market emerge as the times require, perfect futures market can find future prices, stabilize prices on the spot market, farmers can according to the futures market price guide the planting, and the rational arbitrage, avoid change radically in the field of grain production in the profit and loss.

 

The third chapter   The utility theory

 

Case 1: the best things to eat

Rabbit and cat debate, what in the world's best to eat. The rabbit said, "the world's best to eat radish. Radish sweet and crisp to quench their thirst, I think of carrots to slobber."

The cat does not agree, said, "the most delicious thing in the world is the mouse. Rat meat is very tender, taste and crisp soft, delicious!"

Rabbit and cat debate, Each sticks to his own stand., went to the monkey.

The monkey heard, could not help but laugh: "look at you two idiots, even this bit of knowledge are not understand! What is the most delicious thing in the world? Peach. The peach is not only delicious, but also beautiful. Every day I dream in peaches."

The rabbit and cat, all shook his head. So, world in the end what is best to eat?

Description: the utility is entirely a personal psychological feeling; different preferences determines the different evaluation of the same commodity utility size.

 

Case 2: the diamond and the wooden bowl

A poor man lived, had to head an old wooden bowl wandering. One day, a fishing boat to help the poor. Unfortunately, the fishing boat encountered big waves on the voyage, the ship are almost drowned, poor holding a large timber, had survived.

The poor was washed up on a small island, the island chiefs saw the poor overhead wooden bowl, feel very strange, with a big bag of the best pearls and jewels for the wooden bowl, sent the poor home.

A rich man heard poor adventure, at heart, a wooden bowl can change so much baby, if I send a lot of delicious food, for much of the baby!" So, rich with a ship full of wine and table delicacies from land and sea, found the poor to the island.

The chief took the gift be profuse in praise, after tasting, claim to want to give him the most precious things. The rich heart secretly proud of. Looked up, saw the rich emirate holding hands, "gift", could not help but froze!

Description: rare.

 

Case 3: eat three bread feeling

American President Roosevelt after three terms, a reporter asked how he felt, the president not to utter a single word, just took a piece of sandwich bread let reporters to eat, the reporters do not understand the president intention, and don't ask, had to eat. Then the president even second block, the reporter still ate reluctantly. Then the president out of third blocks, reporters not to burst, quickly declined. When President Roosevelt smiled: "now you know my three term president. In it, the story reveals the important theory of Economics: a law of diminishing marginal utility.

Total utility is the satisfaction degree of consumption of a certain amount of goods and services from a. Marginal utility is the consumption of certain goods to meet the increasing degree increases one unit. We went from President Roosevelt to allow reporters to eat bread with. Assuming total utility consumption, reporter a loaf of bread is 10 utility unit, 2 loaves of bread is the total utility of 18 utils, if reporters have 3 bread total utility for 18 utility unit. The marginal utility of consumption a reporter bread is 10 utility unit, 2 loaves of bread is marginal for 8 utility units, if reporters have 3 loaves of bread with 0 marginal utility unit. These figures illustrate the reporter with the increasing consumption of bread quantity, is diminishing marginal utility. Why did the reporter stopped eating third bread because eat will not increase the utility. Also for example, the water is very precious, without water, people will die, but you have exceeded the amount you can drink, then the excess water does not have what use, drink the marginal value is almost zero, or is in below zero. Now our life is rich, we all have the experience of "eating every day can't eat table delicacies from land and sea in the dumpling fragrance". This is the law of diminishing marginal utility. Imagine if not decreasing but increasing what the result is, eat ten thousand loaves of bread is not enough. The drug is close to utility increasing, more and more covert poison. Drug addicts feel drugs than other consumption compared to think drugs to his to enjoy more than other kinds of enjoyment. So the drug addicts will sell the property, left his wife and children, would rather have little food to eat, in rags, but do not suck the poison. Therefore, fortunately, we live in the utility is decreasing in the world, in the purchase of consumption to a certain amount due to diminishing utility will stop.

 

Case 4: the contradiction between the stones and water

A gem and water contradictions in the economist. Water is more useful than the gem, but also much cheaper. How to explain this phenomenon? Water for people, the total utility is much larger than the gem, (water can not survive, no one can survive without the GEM) but the marginal value of water is much smaller than the gem. This is because people can with very little cost to get water, so we can go to water the flowers with water, the water used elsewhere and will not make people die of thirst. The gemstone scarce, therefore is only used in a few of the most valuable occasion. The price is equal to the marginal value, therefore, in order to get the gem will cost more money than water.

 

Case 5: buy something worth

Consumer surplus is refers to the satisfaction degree of consumers from the consumption of goods in more than he paid part of the price. Suppose at the auction, there is a new Elvis Presley debut album for auction, you and three Elvis Presley game (Zhang San, Li Si, Wang Wu) at auction. Each and every one of you all want to have the album, but each person pay a price co.. That willingness to pay you four. You are willing to use 1000 yuan, three to 750 yuan, Li four to 700 yuan, Wang five to 500 yuan.

The seller to sell the album, from the beginning of the 100 yuan price. Because you four buyers are willing to pay more, prices rise quickly. When the seller is reported 800 yuan, you get this album. Note, this album will be on the album's highest rated buyers. You use 800 yuan to buy this album, what benefits? You have offered 1000 yuan for this album, but only pay 800 yuan. You get 200 yuan of consumer surplus. And the rest three people participated in the auction did not get consumer surplus, because they didn't get the album, also did not spend a penny. So we can simply put the consumer surplus is defined as: every one of us is the consumer, there is a kind of subjective evaluation of the purchased items at the time of purchase, we can conclude: consumer surplus = consumers are willing to pay the price consumers pay the price.

 

Case 6: the best things in life are free

People often say that the best things in life are free. There are in fact the economics reason. Because in our consumer income is the set of circumstances, you buy a commodity must give up another kind of commodity. When the consumption of the last unit goods value coincided with the price equal to marginal articles. So when you according to their own wishes to buy enough quantity of the goods, the marginal value of a commodity is exactly equal to the price of the goods. If we say that the best things in life are free, so, it means that you do not give up any other things you can enjoy (such as a beautiful environment, fresh air, etc.). The marginal value of these things is equal to zero. Don't forget to marginal utility is the largest value equal to zero.

 

Case 7: the best purchase decision

Consumers no difference show different preferences, and the consumer's budget is illustrated in the income and price

Under certain conditions, he can consume the quantity of goods. Put the two together, can determine the optimal level of consumer purchase behavior of consumers -- the maximum of satisfaction, consumer equilibrium in what economists call.

For example: you take 1000 to slip the shopping malls, ready to buy a jacket and a pair of pants, you watch a brand-name clothing, this clothing while you like but prices exceeded 1000 yuan, also is said to bring you utility although large, but beyond your ability to pay can not afford to buy; you say you took 1000 yuan, sell clothing salesman and give you recommend a price of 1000 yuan of clothing, but you feel worth, after goods than three, based on the sufficient choice you finally chose like clothing, also happens to be 1000 yuan. Women love shopping, it is to choose the most satisfied with the clothing, on a commodity to decision "do you want to buy", will compare the effectiveness and price. When you are most satisfied with their purchase clothing, also is the least expensive, the utility maximization. Of course, "turnip green vegetables, each love somewhat" utility size is entirely subjective feeling.

 

Case 8: the income effect and substitution effect

"The good news! Now Coca-Cola is cheap, our income increased purchasing power. In fact our relative income increase, we are better. We can buy more Coca-Cola and other commodities "(this is the income effect). Also for example in recent years China's price level (living) in decline, according to experts estimate in 2002 of more than three years ago, life material prices by an average of 0.3, that is to say, 1999 to meet a family consumption expenditure is assumed to be 1000 yuan, after three years only 700 yuan, increasing 300 of our revenue element. "Coca-Cola now prices fell, I give up Sprite can get more." (this is the substitution effect) which you'll find an argument more convincing? In fact, the two statements are reasonable, dropped the Coca-Cola prices make consumers better. Coca-Cola and Sprite are normal goods, consumers to increase purchasing power for the two commodities. But at the same time, Coca-Cola consumer than Sprite consumption become cheaper. The substitution effect to enable consumers to choose more Coca-Cola and less Sprite.

 

Case 9: from "sister" to the "super singing girl"

The summer of 2005 may be doomed to belong to the youth culture of the summer: one side is the "Sister Lotus" is not out of the public eye and ear, the other side also ushered in the "super singing girl" the national finals hit, it is "you Changba me play". Two kinds of different forms of expression, cultural phenomenon in different ways, in fact have bred common context, but also to reflect the new characteristics of current China's youth culture, reflects the new problems of Chinese adolescent development.

"Lotus elder sister" by virtue of a seductive full face and a sexy very figure, with its explicit and supremely confident or self appreciation of text and exaggeration and the classic "S" type photo, in the Internet space set comprehensive, fast, interactive in one (precisely in Tsinghua University. BBS) fame, then caused the high attention of media. In the early summer of 2005, "Sister Lotus" finally completed the transformation from virtual to reality red star, but with the "super singing girl" competition process, she "always have how far, how far I can red" ideals are shattered in the depressed. "Super singing girl" attracted to 89 year aged 4 150000 "girls" competition Co. According to statistics, during the live broadcast in the finals, there are about 1/10 viewers on Friday night lock Hunan satellite TV, created hundreds of millions of people to participate in collective carnival.

In the face of "Sister Lotus" and "super singing girl" became a hit, received mixed reviews from all walks of life. It is undeniable that the society is a big stage, personal development, time is the background of shaping and hero, "Sister Lotus" and "super girls" is the result of "hero" rather than "Heroes create the times" results. For this kind of youth culture hot phenomenon, not only simple and non judgment, not adhering to the so-called "existence namely reasonable" philosophy, to allow someone to continue, but to make efforts to explore the underlying time and social background.

 

Case 10: a win-win automobile insurance

People under uncertain conditions, this creates a risk. Risk is the possibility of loss, the possibility of a kind of results can be used to indicate the probability. Probability is the possibility of a result. The probability of the risk is bigger. Many things happen the probability of risk can be based on historical data or information to estimate the. In the theory of probability, expected value and variance of measurement and comparison of risk is very important. Expected value with uncertainty about the event, is the uncertainty in the circumstances, the role under the influence of all the factors, the weighted average of all possible results, probability weights is each kind of results. The variance is also called the deviation, is the actual value and the expected value of the difference between.

Under the uncertain conditions will produce risk, how to avoid the risk of consumers, losses could be reduced to share the risk through insurance. Our car insurance as an example. The accident is the possible loss of vehicle, the probability is based on historical data estimation. Specific to the probability of each driver of the car accident is very small, but once the accident losses is enormous, if the applicant is to avoid risks can be insured, the accident caused huge losses of the risk to the insurance company. The insurance company will suffer? The answer is no.. Because the probability of insurance company accident on the whole society to calculate. As a result the insurance company which is the accident probability is 0.1, for example, your insurance is 100000 yuan, at the time of the accident. The insurance company will pay you $100000, that is to pay 100000 yuan premium for 10% people, the average minimum premium for 10000 yuan, so the insurance company did not lose money. The applicant has a small amount of the premium for insurance is beneficial. Focus on each individual premium insurance companies, and paid by accident person. This is the allocation of risk in the case of uncertain role. Insurance is the result of win-win outcome.

On whether the insurance and consumer's risk attitude, risk avoidance, risk loving and risk neutral. In automobile insurance as an example (not including compulsory), willing to insurance, is to think through the insurance risk is risk averse; some people are always luck, think myself not of the accident, not on the insurance, which belongs to the risk lovers; and most people are risk neutral, in accordance with the provisions should be give the parts must be on the insurance.

 

Case 11: "happiness formula" and "a Q spirit"

We spend in order to gain the happiness. What is happiness, American economist Samuel Sen with "happiness formula" to summarize. This "happiness formula is:" happy = utility / desire, from this equation we see desire and happiness is inversely proportional, that is to say the desire of people more and more unhappy. But we know that human desire is infinite, so much of the utility is not equal to zero? Therefore we are certain in analysing the theory of consumer behavior we assume that people desire. Then we leave the analysis of utility theory, then consider Samuel Sen's "happiness formula" really feel his happiness and desire. This paper too, no wonder he is Nobel prize.

In the social life have different understanding of happiness different people, politicians to realize their ideals and revenge as the greatest happiness; entrepreneurs to earn more money as the greatest happiness; we teacher, the students like to listen to his class as the greatest happiness; people often feel faint or as in the large happiness. Happiness is a feeling, I think happiness is happiness. But no matter what people generally have how much wealth as a measure of well-being, between a person's desire level and the actual level of gap is big, the more he pain. Conversely, the more happiness. From the "happiness formula" reminds me of "a Q spirit".

Lu Xun's image of a Q, is used to wake up Chinese people resign oneself to adversity that bad habits. I want to say is life if the spirit of Ah Q did not, do not feel happy, so "a Q spirit" is the life gets happy means under certain conditions. In the development of the market economy today, a growing gap between rich and poor, if the poor appetite is too high, it will only add to their suffering. It is better to use "contentment", with "a Q spirit" to reduce your desires, make oneself is poor but happy. The rich wealth more than the poor, he will pursue more if not he would not be happy.

"Contentment" is "and" stop "reconcile oneself to one's situation" "step as boundless as the sea and sky" the "Ah Q when ah q", these claims have economic meaning, we should make rational choices for their own maximized happiness.

 

The fourth chapter   Production theory

 

Case 1: sunk cost and enterprise decision

China Aviation Industry Corporation in civil aircraft development no longer route aircraft in 2000 August, and to the development of regional aircraft. This decision immediately aroused widespread controversy and rebound. The company and the American McDonnell Douglas signed in 1992 contract for the cooperative production of MD90 aircraft. In 1997 the project in full swing, the first successful flight test aircraft in 1999 2000 made in cooperation between the two sides, the successful test flight of second aircraft again, and the two aircraft airworthiness certificate issued soon get single America Federal Aviation administration. This shows Chinese has reached 90 in the trunk aircraft manufacturing and assembly technology of international level, and has a small batch production capacity. at this time, the MD90 project. In all kinds of support or opposition, discussed from the angle of nothing more than two aspects: one is the strategic development China aviation industry based on the consideration of economic factors, the two is based on the project. We don't want to discuss the previous point, in this regard aviation experts have the right to speak. From the economic point of view, provides the best case trunk projects, dismount dispute can be said for the "sunk cost". Many people are against an important reason for the trunk aircraft project dismount is, the project has invested billions of dollars of money, tens of thousands of people full dedication, time-consuming six years, at the end of taste victory when dismount loss is too large. This pain can understand the feelings, but did not form the project should go forward reason, because whether the project has invested much manpower, material and financial resources, for the horse, decision-making, are sunk costs cannot be redeemed.

 What is a sunk cost? Sunk cost is refers has occurred or commitment, unable to recover costs, such as the error caused by non recoverable investment. Sunk cost is a kind of historical cost, the decision is not controllable cost, do not affect the current or future decision-making behavior. In this sense, in the investment decision-making should be excluded from the sunk cost of interference. A measure of the investment cost of the project, the related costs can only be included for or select the action plan and the occurrence of. Related costs relevant to specific decision, action, must be considered in the analysis and evaluation of the cost, including the cost, difference between the future cost, replacement cost, opportunity cost. Non related cost refers to before the decision has already occurred or no matter what all costs, it has nothing to do with the specific decision, so in the evaluation and optimal decision-making process should not be included in the decision cost categories, such as the cost of the past, carrying cost etc.. From the decision of the correlation, sunk costs are making non related costs, if the decision is included in the sunk costs, will enable the project cost overvalued, thus the wrong conclusion.

Opportunity cost is not the usual sense of the cost, it is not a revenue or expense, but a possible loss of revenue or income plan. To China trunk line aircraft project as an example, what is the termination of the project's opportunity cost? It should be possible to proceed with the project of net income (net of new investment after). If you can't produce the positive net income, is the best way. Even with the positive net income, but also to see the return on investment (net income / new investment) is higher than the average return of enterprises. If lower than the average return, should also bear the pain.

In fact, "events" in the trunk project dismount is completely "Outlook". From the market watch, planned to produce 150 aircraft, to 1992 first signed when as a 40 frame, and then in 1994 to 20 aircraft, and agreed to by the Chinese subscription. But civil aviation only agreed to buy 5 aircraft, the remaining 15 frame is not available. One can imagine, in the absence of market situation, to proceed with the project will be how future earnings?

Of course, a given action decision of opportunity cost is sometimes difficult to measure, cost estimates may be highly subjective and arbitrary. In addition, the evaluation should consider the time value of money, with the discount index as the basis. All these should cause the attention of policymakers. Distinguish between decision cost and cost accounting in general, sunk cost is the decision or the economic evaluation. From the point of view of cost accounting, actually does not have what the sunk cost. For example a have been consulting fees and expenses of investment projects, when the environment changes need to decisions, these costs as sunk costs should not be incorporated into the decision cost scope. But in the specific accounting, should regard the decision results are different accordingly processing: if the final decision to abandon the project, these costs should be included in the current investment income; if the project to continue, according to the accounting standards benefit period in the item of cost allocation. Visible, an economic activity and for financial reporting purposes cost for decision-making purposes, is not always appropriate.

 

Case 2: the law of diminishing marginal returns the population theory of Malthus and

Economist Malthus (1766 - 1834) of a main basis of the theory of population is the law of diminishing returns. He thinks, with the population expansion, more and more labor to cultivate the land, the earth limited land will not be able to provide enough food, the decline in the marginal output and the average output of the final work, but there are more people in need of food, which will have a great famine. Fortunately, the history of human development and not according to the prophecies of Malthus (though he correctly pointed out that "diminishing marginal returns to labor").

In twentieth Century, technology development make a spurt of progress, change in many countries (including developing countries, such as India) food production, the average output of labor will rise. These advances include high-yield and disease resistant varieties, more efficient fertilizer, harvesting machinery more advanced. In the "war" after the end of the world, increase in total food production is always more or less than the same period of population growth.

One source of the increase of grain yield is the increase of agricultural land. For example, from 1961-1975, the percentage of Africa agricultural land accounts for the increased from 32% to 33.3%, Latin America rose from 19.6% to 22.4%, in the Far East, the ratio is increased from 2l.9% to 22.6%. But at the same time, the North American agricultural land from 26.1% to 25.5%, from 46.3% to 43.7% in Western europe. Obviously, increase the grain yield is more due to the technical improvement, rather than agricultural land to increase.

In some areas, such as Africa Sahara, famine is still a serious problem. Low labor productivity is one of the reasons why. Although some other countries there is a surplus, but the food from the high productivity area redistribution to low productivity in areas of difficulty and low productivity region because of low income, famine still threatened part of the crowd.

Question:

(1) since the prophecy of Malthus failed, do you think the law of diminishing marginal returns also play a role?

(2) would you please talk about "China too much of the population, will need the world to feed Chinese" or "who will feed China?" Point of view.

 

Case 3: Zhejiang to the big enterprise -- the returns to scale problem

Zhejiang enterprises especially the enterprises in Wenzhou to "small", "private", "low cost" and "labor intensive" known. These characteristics are the advantages in the past, in the future or advantages.

Experience has shown that, "small" is not necessarily weak (as "big" is not necessarily strong.). Also, from the enterprise competition's logic, can grow into a big enterprise of small enterprise is minority after all.

Zhejiang enterprises have been through a start-up phase. The growth process from small to large enterprises, is a process of constantly cultivate their competitiveness through competition.

Chinese economy has entered a residential, automotive, electronic communications, city infrastructure industries as the leading iron and steel, machinery, building materials, drives, petrochemical, energy and other industries rapid growth stage. In these industries, many with strong economies of scale, that is to say, to large projects investment.

The biggest challenge is not easy, enterprises from scratch, from small to large and more difficult. If the first stage success probability is fifty percent, the probability of success of the second stage may be less than one percent.

 

The fifth chapter   Cost theory

 

Case 1: a phenomenon of Peking University Campus

A hand at the university campus, students diligent than boys, by the fact that, almost every class to sit in the front rows are girls, but guys in the back rows, so the boys said was not convinced, and for a few days early seat, seat is accounted for, but the negative effect brought by the many: sleep late, get up in the morning, class nature bad, vicious spiral for several days, the boys began to occupy the phenomenon has not, the first few rows or a girl holds the vast majority of seats, in fact, this is an opportunity cost, accounting for a dominant male opportunity cost is in advance an hour to get up, but the implicit opportunity cost is a state of mind is not good, by contrast, girls' opportunity cost will be much smaller. Therefore, the inevitable result of a storm is the opportunity cost of relatively small wins.

 

Case 2: the difference between the economic profit and accounting profit

 To illustrate this problem we assume that a case. If Mr. Wang with their bank deposit 300000 bought a small business, if you do not receive these 300000 yuan of money, in the market interest in 5% of the cases every year he can earn 15000 yuan of interest. Mr. Wang in order to have their own factories, annual giving up interest income of 15000 yuan. The 1.5 element is Mr. Wang opened the opportunity cost of enterprise. Economists and accountants in different ways to look at cost. Economists call Mr. Wang gave up 15000 as his business costs, although this is a hidden cost. But accountants don't take this 15000 yuan as a cost, because in the accounting book and no money out of the enterprise to pay.

In order to further the difference between economists and accountants, we change a point of view, Mr. Wang is not 300000 yuan to buy the factory, but with their own savings of 100000 yuan, and 5% interest from the bank lent 200000 yuan. Mr. Wang's accountants measure only the dominant cost, will put 10000 yuan annual interest payment for bank loans as a cost, because this is the amount of money from the enterprise out of the. By contrast, in accordance with the views of economists, have the opportunity cost is still 15000 yuan.

Now we go back to the enterprise's goal -- profit. Because economists and accountants use different methods to measure the cost of enterprises, they will also measure the profit by different methods. Economists measure a firm's economic profit, is the enterprise total revenue minus all chance of producing the sales of goods and services cost. Accountants measure the accounting profits, i.e. total earnings by the dominant enterprise cost.

 

The sixth chapter  Perfect competition market

 

Case study: why large-scale farms run by the government failure

In twentieth Century 80, some city residents in order to ensure the food basket, funded by the government to do a large chicken farm, but less success, many farm finally culminate in bankruptcy. The reason is in many aspects, the important point is that egg market is a fully competitive market.

In the egg on the market, producers in the short term egg may have excess profits (such as the plague, for less than seeking, high price), may also have a loss (such as producers into too much, beg for be more than, the price is low.). But in the long run is the price equals average cost producers, the economic profit is zero. Producers earn is brought about by the opportunity cost accounting profit, such as producers of non payment of wages to their cost accounting, do not have one, but this is the opportunity cost.

In the long-run equilibrium price is equal to the average cost, but the average cost is the industry average cost. If a producer with new technology, the average cost is lower than the industry average cost, can gain profit. Producers in order to obtain this profit, to adopt new technology, and reduce the cost of. When all the producers are doing so, the average cost of the entire industry also fell, prices also fell. This is the cruel competition perfect competition market. If the producer average cost is higher than the industry average cost, he would not be in this industry to survive, but to quit or bankruptcy.

Large chicken farm set up by the government in the complete competitive market does not have what advantage, its scale is insufficient to control the market, products are not special. It should be equal to the capacity and raising chickens or specialized households scattered chicken farmers competition as a sideline. But the large farm cost is higher than the industry average cost, because these farm fixed cost is much higher than that of farmers, that is higher than the industry average cost. These large farms and farmers in no competition advantage, bankruptcy is inevitable.

 

The seventh chapter  Imperfect competition market

 

Case 1: a monopoly market -- price discrimination

Us students can spend 10 yuan of money to see Jackie Chan's new movie "myth", but watch the same movies in the cinema is to spend 30-50 yuan. Near the Haidian Book City restaurants, if someone after 3 pm for dinner to enjoy 6-8 discount price to pay the price at the same meal. Many large shopping malls to promote sales, often a buy 100 get 50 yuan in cash (or vouchers) or buy 200 get 100 yuan in cash (or vouchers) advertising. In Guangzhou is very easy to 750 yuan price bought from Guangzhou to economy class air tickets in Ji'nan, but in Ji'nan can only buy 1420 yuan from Ji'nan to Guangzhou economy class air tickets, by the same airline aircraft, and even in the same plane, the same unit, the same time mileage although the price is so great. In short, these same goods to different people for different price approach called price discrimination. It implies the existence of monopoly power, so it is economically inefficient, and often illegal. However social price discrimination not only common, but also social hidden, unintended redistribution of consumer goods important methods, in most cases, from the rich to the poor distribution

 

Case 2: a monopoly market of non price competition

Product differentiation is a common phenomenon in monopolistic competition market, more or less there is substitution effect between different enterprises in the production of products, but there are differences between them, are not perfect substitutes. The product difference of monopolistic competitors including the difference of the product itself and man-made, which includes a range of differences, differences between service, packaging, marketing difference and so on, companies often want to stimulate the demand for the product by product differentiation.

1 products of raw materials -- Pantene shampoo that contains 70% is used for cosmetics, so that people can not believe that the hair nutrition nursing efficacy. Shu Lei is now promoting "wheat protein" shampoo is also trying to through the raw ingredients to enhance the value of products.

2 hand -- TCL electrician tell you "feel good" by Michele Lee, because feel good and consumers to determine their own simple but important quality standard switch.

3 the product color -- ordinary toothpaste is usually white, however, when there is a transparent color or green toothpaste, we feel that this toothpaste will better. Colgate has a three efficacy of toothpaste, paste consists of three colors, to give consumers the intuitive feelings: white on white my teeth, fresh green in my tone, blue in the removal of oral bacteria.

4 the taste of toothpaste products -- general are sweet, but LG toothpaste but is salty, we feel that some good toothpaste. So, if there is a bitter taste of toothpaste? You'll feel good, this is the difference of power.

Modeling -- V70 mobile phone Motorola design 5 products, rotary clamshell unique to become its biggest selling point.

Creative methods 6 product function combination -- combination method is the most commonly used. Many inventions are accordingly and to. Combined oxygen bar air-conditioning Haier in creative is the common air conditioning and oxygen bar. Separation and combination of white and black is also a function of the function concept, simple but created a market miracle.

7 product structure -- "a good battery at the bottom of a ring", "Nanfu battery through the bottom ring" to give consumers a simple method of identification, so that consumers see the ring with the high performance battery. Haier "wave" microwave oven "disc does not turn wave" is in by emphasizing the differences in the structure of products to improve the sense of value.

8 new category concept -- the establishment of a new product category concept. The most classic is the "HEDY" non Cola concept, here no longer say.

The concept of - 9 metaphor a Rising antivirus software with the lion to represent the brand, to show its powerful "kill"; orchid through conceptual metaphor "Diamond purity" to strengthen the value of their products; use the fly, to feel fresh, free brand feeling Baisha cigarettes.

The 10 event concept -- believe that all people know Haier "smashing refrigerator" incident, until many years later, Haier still not to mind taking the trouble to keep out the call several voice, the event is Haier "sincere forever" made distinctions won in battle, visible event dissemination of the concept is powerful. The event marketing should pay attention to grasp the opportunity, if can with the society's hot topic, the link, will play a multiplier effect. A hot 2003 is of course the Shenzhou flying, "Mengniu" timely "docking success", effectively enhance the brand image, is the outstanding events in recent years rare marketing case.

11 advertising creative concept -- "the farmer orchard shake", "Le Baishi 27 purify", "golden 1:1:1" belong to this type of.

The 12 major concepts -- professional sense is one of the main sources of trust, the main method is the establishment of "first" advantage. Many brands in shaping the professional sense is often called experts: FOTILE -- kitchen experts; Hualong -- noodle experts -- China Mobile mobile communication experts.

13 to establish the concept of "old" -- a long time to give people a sense of trust, therefore, the concept of demand time is a kind of effective method. Moreover, the concept of time feel older and better, such as Yutang -- began in Kangxi 52 years, Tsingtao Brewery -- began in 1992.

Origin characteristics of 14 origin concept -- there are many products with the forefront, such as Beijing, Shandong Erguotou Roasted Duck, peanut, Xinjiang grapes, and we often say that the Sichuan liquor Yunyan etc.. Abstract the geographical characteristics of strong products of geographical concept obviously is a very effective method. Such as Yunfeng wine "Xiaohutuxian", "small confused God", "small winebibber" are in the "Maotai Town ancient wine". "Luhua" peanut oil said "Shandong selected high quality peanut" etc..

15 specific digital concept -- the more specific the trust is stronger. Therefore, specific methods of digital mining product or brand is also commonly used. "Le Baishi 27 purify", "Viceroy cigarettes, 20 000 filter particle filter" is the application of the method.

16 service concept -- the same service, but if you have a good idea is to strengthen the brand impression. For example Haier proposed "five star service" for his "sincere forever" made many contributions; in addition to "24 hours", "diamonds are a good service" service concept, plays a role can not be ignored in the aspects of strengthening brand reputation

 

Case 3: oligopoly market -- Chinese color TV industry

In 2000 June, Konka, SKYWORTH, Xoceco, TCL, Hisense, Leroy, panda, Venus, West Lake and other nine color TV manufacturers held a "summit of the color TV", the conference announced a limited production, released at the same time, the lowest price. Changhong did not participate in the summit. After second days the price and the alliance members suffer setbacks, then the State Development Planning Commission Office prices then announced that the 9 companies reached a price alliance against the suspected monopoly price law "". Color TV giant price alliance soon in oppugning sound collapse.

In early June 1996, in China several news media, such as "Economic Daily", "Chinese electronic newspaper" and other periodicals and published a Shenzhen Konka Electronics Group's "Declaration", "said Konka to leading domestic, catching up with the world," said "who rise, who is the sun". At the same time, Konka Group announced: from June 6th onwards, Konka color TV from 37cm (14 inches) to 74cm (29 inches) of all varieties are cut, Rangli rate reached 20%, the highest profits amounted to 1200 yuan / Taiwan (2910A). One stone arouses 1000 billow, Konka it made in 1996 the restless color TV market situation again, since Changhong announced the first price cut again after the price trend. 　

In March 26, 1996, China largest television manufacturer Sichuan Changhong electric Limited by Share Ltd announced greatly reduce its leading products, color TV sales prices, specifications from 43 ~ 74cm of 76 varieties, prices range from 8% to 18%, the amount of reduction by 100 ~ 850 yuan, which triggered the since 1989 color TV market again depreciate agitation. If it is said that since the last time the price after the words, color TV, color TV market competition is more refined and cultured for several years now, the Changhong first large-scale price reduction, the competition becomes superficial, white hot. 　

Although Changhong said the move is a significant step in April 1st, greatly reduce import tariffs and make however, people have not yet seen the imported color TV react, but other domestic color TV enterprises go into action without delay -- TCL TV announced: to embrace the spring. From April to the end of the Olympic Games during the reduction of 5%; Konka is to meet the Olympic rings awards consumers return as the slogan, all product promotions: there are also such as Beijing Peony Electronics Group said to stabilize the original market share with its quality and perfect after sale service, rather than cut prices for means of sales promotion. In view of this, Changhong this price, with 1989 prices are similar to Wang Miao -- that is the color TV industry will face a time of asset reorganization and structural adjustment, which means that a part of the disadvantage of the domestic color TV enterprises will face once again be eliminated test, and resist the imported color TV "intrusion" role now in the second. Be obvious to people is the fact that the imported color TV, not because of tariff reduction and greatly reduce the retail price, in addition to South Korea's Samsung Electronics "name brand" 7277P because the price is low and has certain advantages in sales and other imported brands are in the flat pin state. The fact has proved this point. The data shown in a month after the price of Changhong, Beijing TV market of the domestic color TV sales pattern changes, like Changhong, Konka, TCL ace, actively participate in market sales have greatly in Beijing, the price trend of enterprises to improve, especially Changhong sales topped many times, those in the scale of production, technical level, financial strength has some shortcomings are significantly affected. 　

Out of the frying pan into the fire. Following the Changhong price, Konka Group followed, set off a wave of price cuts more large-scale. According to Konka Group spokesman said, the prices of objective: one is to return to society, return to two consumers, is teaming up with Changhong, together to resist the foreign color TV industry to Chinese national TV industry impact.

 

Case 4: OPEC Organization of Petroleum Exporting Countries (OPEC)

In 1960 the establishment of the organization of Petroleum Exporting Countries cartel (OPEC), which is composed of Saudi Arabia, Iran, Venezuela, Libya, Nigeria and other 12 major oil producing countries. As a whole, OPEC in proven oil reserves has play a decisive role or position in the supply of the international oil market. They colluded to limit oil yield, to determine the price of oil, in twentieth Century 70's success. But in twentieth Century, after 80 years, OPEC, though still once every two years, but as a each bosom idea interests polymer, OPEC is difficult to reach agreement through or to control the output and price.

According to the above content, answer the following questions:

The 1 appeal case is what type of market? The market what are the characteristics?

The 2 appeal case problem in economics is called what? The final result of this kind of phenomenon is usually how?

3 use the game theory to explain the above phenomena, and puts forward the strategies to solve the problem.

 

Case 5: USA American Airlines and Branimir J Airlines by the prosecution

In 1983, USA American Airlines and Branimir J Airlines was charged in the case, a telephone recording between two company president Robert Crandall and Howard Putnam became the most powerful evidence.

Crandall: it's horrible....... If we fight each other, all be dead. Our two if you are going to stay here, "delta" should open. Because, hey, I couldn't see what reason to let the two of us.

Putnam: what do you recommend?

Crandall: Yes, I have a suggestion. To increase your damn fare of 20%, I will do so tomorrow morning....... Then you and I can make a lot of money.

   According to the above content, answer the following questions:

The 1 appeal case is what type of market? The market what are the characteristics?

2 if the Putnam took Crandall's advice, so the appeal case problem in economics is called what? The final result of this kind of phenomenon is usually how?

3 use the game theory to explain the above phenomena, and puts forward the strategies to solve the problem.

 

Eighth, the nine chapter  Factor price decision

 

Case 1: Star income and Economics

Star of this kind of factor of production of high price and high income is determined by the relationship between supply and demand. In this kind of factor supply is extremely short, main factors deciding the star price or the public and enterprise pay the desire and ability to pay. A factor of production price (or the factor owners income) is reasonable depends on its decision mechanism. If this high income by artificial government decided, no matter how many are not reasonable (such as government give money to Peking University, Tsinghua Professor wage increase is unreasonable); high income is market determined if this, no matter how many are reasonable. This is our judge whether a reasonable standard of income.

High income star justice? Justice is the equal right to participate in the competition. If every one who want to be a star can be engaged in the entertainment industry, and participation and other star dream of human competition, the results only a handful of people into the high income star, not what injustice. If the social use various means to restrict people entered the entertainment industry, between the star dream did not equal competition rights, will not just. Market economy is the competition out of the stars, they succeeded, it was the realization of justice.

High income star is conducive to efficiency? As a kind of incentive system, the high income star did stimulate the efficiency of performing arts industry. The efficiency of the entertainment industry is to make full use of resources, provide more and better performance for the society. High income caused by the efficient cause is: first, the more people want to become a star, there must be a success. Star will increase career prosperity; second, star by the high income incentive, everywhere to show. This will bring more enjoyment to the public, enterprises to bring more income; third, in the competition, we produce a high level of star, the star of the show to continuously improve the level of. These are prosperous career. This is to improve the efficiency of the.

High income star is also beneficial to the society. They not only bring more higher art to enjoy, but also to promote economic growth. A great sports show or film, how many people will bring employment opportunities? A lot of growth will pull the relevant departments? The performing arts sector activity is called the entertainment economy, its output value has become an important part of GDP . No stars, entertainment economic prosperity? Stars are high income, but also make a contribution to society, what is not reasonable?

To tell you the truth, when I see a night Star income higher than ten years learning bitter, many times, also is not balanced "sour grapes" feeling. But from the economic rationality of view, high income of stars is determined by the market. The market determines the high income is worth.

 

Case 2: monopsony power baseball player market

In USA, baseball association is not restricted by anti trust law, this is not the application of antitrust law to the labour market's Supreme Court and Congress policy results. The baseball team owners exemption from the antitrust law ( 1975 years ago) can manipulate a monopoly buyer Cattell. Like all other cartel, the cartel also rely on between the owner of the agreement. It includes members of the annual selection and a reservation clause, the clause effectively make life limit players in a team, thus eliminating the need for players most team. In this clause, once a player is a team pick, he would not be for another team, unless sold the rights to the team. The results, baseball owner has monopoly power only choice -- players do not sign the agreement is to give up the game in their new contract negotiations with players, or to America outside to play.

In the early 60's and 70 's, baseball player wages significantly less than their marginal product market value (the value of partially caused by better pitcher increasing focus, for example, the decision) in 1969 , players get salary is about $42000, but if the market competition, they will get a salary of $300 000 .

For the players and the lucky owner unfortunately, 1972 , in a player (St. Lewis Kadinasi team Curt Fred) procedure after the strike, and the labor management agreement an arbitration. A process that ultimately in 1975 years to reach an agreement, it makes the baseball players become free agents after six years as a team. The reserve clause is no longer valid, a highly monopsony labor market becomes more competitive.

This result is interesting to test the economics of labor market. In 1975, 1980 years, baseball player market to adjust to a new equilibrium after the reserve clause. Before 1975, spending on players contract accounted for all the teams about $25% in spending, to 1980 years, these expenditures increased to 40%. Moreover, average real wages players doubled. By 1992, the average income of $1014 baseball players as 942 , compared with 60 in the late 1990s the monopsony wage, is unbelievable growth. (for example, in 1969, the average wage of baseball is about 42 $000 . Adjusted for inflation, the salary was $160000 in 1992)

 

The tenth chapter General equilibrium theory and welfare economics

 

Case: America farm price support policy

USA government in order to improve the farmers income, long-term since the implementation of agricultural price support policy. The problem is, producer of agricultural products obtained from this kind of program of the income is greater than the agricultural product consumer losses? How big is the loss of consumers? In the absence of price support, consumer surplus will be equal to the diagram below the demand curve and PeE (i.e. the area above the equilibrium price). In the price support, consumer surplus is equal to just below the demand curve and above the price of P support? (P? K) part of the area, consumer surplus is reduced by A and B area. Price support caused by the producer surplus is the A, B and C three block area and, thus, it seems producers benefit more than the loss of consumers. However, there is a part of the expenses not included in the calculation. In support of the price, the market demand for agricultural products is reduced to Q2, the supply of agricultural products is up to Q1, in order to support prices, the government must buy Q2 Q1 quantity of agricultural products, this is not a small expenditure. Look at it this way, the total surplus is falling.

However, this is not the whole problem. Further analysis should be such: Q2 Q1NK rectangle area subtraction B and C part of the area is net income support price system, called area Z. The problem is for the remaining area W and area Z Q2 Q1 quantity of agricultural products of the benefits of B and C deducted by producers surplus than one big one small. In the area of W are not reflected in the figure, because it is difficult to determine the marginal utility and demand price. If the grain is used to aid the poor family, so, from the social point of view, regardless of how it's area, it should be to improve social welfare contributions, compared with a net loss of social welfare of consumers because of the size of the loss caused by Z. This two volume cannot be directly compared, because each part of the social welfare function in utility for social welfare weights are difficult to be determined. If the contact area of W on behalf of the poor families because of increased food relief income welfare, then the support of the agricultural price policy, is rational and feasible from the perspective of social welfare. It is for this reason, although some economists have repeatedly criticized the agricultural products price support policy, but the policy still in some country, however, in the above analysis, the government tax process and the implementation of the policy process is also costly, the effectiveness of the policy must be based on the effective operation of the government the relevant departments of the.

 

The eleventh chapter Market failure and government economic policy

 

Case 1: the relationship between government and market

Known to all, no one can and Monalisa Qingli, all over the world who come to Paris to see her people even damage the threshold, however, Monalisa beauty, only appeared in the distance of two or three meters to oil painting, if close to the point of view, only more than a heap of crumpled, cluttered paint; ranks the first of the five sacred mountains of Taishan, the majestic momentum to foreign from the mountain, really into the mountains, the stone, the tree, and other mountains not what fundamentally different; Eiffel Tower, seen from a distance, of great momentum magnificent, can be approached to see, but a pile of rusting steel and rivet. Why? Distance produces beauty.

The government and the market, also need to distance. As Madison said: "if men were angels, no government would be necessary. If angels rule, there is no need to the government any external or internal control." basically completed governance work, do the market does not harm, is a government minimum transaction in economic management program (for some governments, perhaps is the highest goal); this is the core of the market to the government, legitimate, rational. Granted, especially in power since the responsible for the case, too enthusiastic participation is often caused by the ambiguous target. When the local government to get more power in the new political pattern in this region, race seems to have spread further warming signs. When the market competition main body is set, fuzzy figure, the charm of the contest has been lost.

The current chaotic land market order, in part because the government out of the market too close. The circle motion, some local government departments can not shirk its responsibility. One of the participants in the five ministries joint groups of inspectors of land officials said, the inspection found operating land, "Dr. shoot up" sold have not achieved full coverage, a province still half of the city, county did not establish a "Dr. shoot up system"; illegal examination and approval, ultra vires approval of land has not been fundamentally curbed, such as individual the local government in violation of planning, arbitrarily large agricultural land into construction land, expansion of land for infrastructure investment comprehensive compensation scope, the sale price of land, approval of the debt paid use fees of land price and land arbitrarily; some cities and counties in investment in one low price, vicious competition to attract investors; individual areas of land management tender auction listing is not normative, use agreement transferring land. Market economy objectively requires the government to the function positioning in the development of land market rules, maintain the market order, and create a market environment, through legal means and economic means to regulate and control the market, reduce direct intervention in the market, in order to protect the land market is stable, fair, safe operation. To solve these problems, first of all is to begin to gradually standardize government behavior, rather than the other way around in the present mechanism to strengthen the intervention of government departments to market economic activities.

Of course, distance is not far, otherwise, there is no beauty. The government and the market to maintain an appropriate distance when the economy, society, efficiency is the highest. The government and the market from the distance, appeared the malpractice. In twentieth Century 80 time end to the round of the enclosure movement in the early 90's, in part because the policies and regulations are not perfect, the government macro-control caused by not enough. In 1989 March, the National People's Congress amended the constitution, added the "land use rights can be transferred according to law" a word, but no supporting measures, not to regulate the land market transactions, also did not establish the macroeconomic regulation and control mechanism. The rules of the game there are loopholes, the lack of macro-control, some speculators saw a good opportunity, as long as the relations to get the land, one hand can obtain several times and even several times of profits, therefore, the phenomenon of rent-seeking swarming, "enclosure movement" with vigour and vitality to carried out. In the round of "enclosure movement", in some areas, trading power for money is almost open. Gang up with real people and real estate developers, to the symbolic very low price large encirclements within them, and to transfer profits. There is more domestic and foreign businessmen often more grassroots administrative units, directly to the province, city, county leading group, a fortune away. Improvement in the rules of the game today, that kind of crazy property behavior of the last century will be gone for ever, however, the lessons we remember.

However, even though our government has learned to respect the market, but if the government does not know where the boundaries, still at risk of destruction of market rules. We need to get rid of those who appear wrong argument, and the boundaries of government to government legal constraints. Today, like many of our beautiful garden in the city, people have formed the habit of not trample on grass habit; our administration in the market can border on the feet to stop?

 

Case 2: the Siteqs case

In "Siteqs v. Bree mystery" lawsuit, the defendant candy manufacturer in Wigmore Street opened a candy factory. Later, as the case the plaintiff doctor moved to nearby houses, in the first eight years, candy manufacturers use the machine did not cause damage to the doctor. But then the doctor at the end of the garden next to the stove at the manufacturer made a clinic, he found that the noise candy maker made by the machine and motion make it difficult to use his new office, "especially noise interfere with his stethoscope examination of patients with lung diseases. He also found that this can not be any need to think and concentrate on work."

According to the above content, readers may try to answer the following questions:

The 1 appeal case problem in economics is called what? How this kind of phenomenon distorts the allocation of resources? Usually can use what method to solve this problem?

2 if the doctor due to noise candy factory suffer the loss of 800 pounds, and the businessman close candy factory or the factory relocated elsewhere price was 1000 pounds. If the court will "enjoy the quiet working and living environment" power to the doctor, and the doctor and confectioner reach an agreement through negotiations and maintain protocol costs were 0, then, candy companies will eventually have to close his factory or leave the Wigmore street? Why?

3 if the courts will "use the quiet environment rights" to candy, candy maker has the right to release the noise, the outcome will be how?

Tip: according to Kos's theorem, solve afore-mentioned problems with clear property rights approach.