Obamarama

GOBAMA! As I'm sure most of the world is now aware, America has made the right (fingers crossed) decision and re-elected Obama as President of the United States of America.. I had to write it out in full as it just sounds so cool. As a citizen of the US myself I have to say I'm disappointed with the lack of votes I received ahh well there's always next time Pinches/Fryer 2016..

Back to reality, I can honestly say I don't know what the economic future holds but there is one definite, hope. The re-election of Obama has provided many with hope for further change and even the idea of a prosperous America at the forefront of the world again. As my last post mentions I believe Romney's economic policies would benefit America giving the upper class the freedom to make America great again; however, in a time where the political tension in the world remains high, a likable, diplomatic character like Obama is who we really needed.. I can't promise Obama will bring you all out of debt and make you rich again but I can promise he makes the world a safer place to live in..

I consider myself to be a democrat despite only truly liking one democratic president, John F. Kennedy.. I don't know why but Kennedy remains, to me at least, one of the most inspirational president's the country has ever had. I feel for many, Obama is that same guy, someone who many are inspired by despite their particular political allegiance. Although there are many disgruntled republicans, I believe Obama will unite America and let everyone's voice be heard..

Whether like me you believe Obama deserved to be re-elected but don't discredit Romney's ideas and beliefs or you are a die hard Obama fan and are planning on rubbing your victory into the sad downtrodden faces of the republicans; most will agree Obama's popularity as President is unrivalled and will go down in history.

In light of the unemployment rate in America I have found a presidential meme (it's hard to describe just bare with me) however, it is all in jest so if you are squeamish about unemployment look away now..

President who now?

After three heated debates which were hard fought between Mitt Romney and Barack Obama it seems Obama has come out on top, winning two of the three.
The last debate was held in the great state of Florida where I am from and was based on foreign policy. As a Floridian myself (REPRESENT) it's nice to hear that we were at the forefront of politics.
Forgive me if I'm being offensive as I am currently living abroad in sunny England so my view may be off, but Obama does seem to be the best bet for ruler of the free world. Personally, Mitt Romney scares me, he is inexperienced and his foreign policy seems very backward. Also, what were his parents thinking when they called him Mitt? What kind of name is Mitt? What's it short for?.. Mitthew? I have been informed his 'real' name is Willard... I prefer Mitt to be honest.
I digress, as this is an economics blog I reckon it would be relevant to compare the two's economic policies from an unbiased stand point. I'm sure both are very long and tediously worded so I am going to try and summarise them to the best of my abilities.

Obama wants to repeal all tax cuts introduced by Bush which lower taxes for households earning more than $250 000 (about £157 000) whereas Romney plans on making those same tax cuts permanent.
Obama wishes to lower taxes on the manufacturing industry and Romney plans on lowering corporate tax across the board to 25%.
Obama has the short term goal of stimulus spending and tax cuts to grow the economy and the long term goal to cut spending and raise taxes on the wealthy.
Romney wants to cut taxes and regulations in order to encourage businesses and cut non-security government spending by 5% in order to reduce the deficit.
I'm sure deficit is a word which has been used a lot over the past few years and will be continued to be used. Basically a deficit is an over expenditure in relationship to income, this means the government is spending more money than it has.

To me, their views on the economy, with the exception of taxing the rich seem to be relatively similar. I'm not going to pretend to be some economic guru and offer a better way to solve the economic crisis nor am I able to truly predict which policies will be the best for America. In honesty, in spite of his name, good ol' Mitthew seems to have the better views on economic policy as a businessman himself.

Joking aside there are worse names.. Watching a game of the best sport in the world (American Football) I came to the realisation of a whole world of names far worse than Mitt or even Willard..

Elasticity

....... And I'm not talking rubber bands.. Okay, I am a bit.
In a lesson which I spent the better part of playing with rubber bands (and or stealing them, nothing that you can prove) we learned about price elasticity of demand or, PED.
Whilst the relevance of playing with elastic bands has to economic elasticity was lost on me, I'm sure there was a method to our teacher's madness. (And playing with a rubber band will always be fun)
I'm going to try and explain the true meaning of elasticity minus the rubber bands..
I'll try and keep this as short as possible but much like the elastic band this topic stretches out..

What exactly is elasticity?
The idea of elasticity basically comes from the effect changing one variable like, price of a good or personal income, has on another variable, usually quantity demanded.
Yes, I am aware this sounds like a demand schedule but economics just isn't that easy. (Check here for more information on demand schedules.. You're welcome Katy)
It is very similar to the idea of a demand schedule (all economics concepts are relatively similar) but it is not portrayed in a graph but rather the actual concept put into practice.


for those of you that hate maths (although why would you be on an economics blog) you may want to look away now as I'm about to go all mathematical.. 

What is the formula for elasticity?
Put in words the formula for elasticity is percentage change of quantity demanded divided by percentage change in price.
(Percentage change is new amount subtract original amount divided by original amount)
 When the answer is 0, the example is called perfectly inelastic this is almost impossible, but if it were to happen, then the revenue would go down as demand would stay the same when price was decreasing. 
If the answer is between 0 and -1, then this is called price inelastic demand, and revenue would go down a very small amount as prices fall but demand increases at a smaller rate than the price drop. 
If the answer is -1, then it's called unitary price of elasticity of demand (who?) this means that there is very little or no change to revenue as the change in price is proportionate to the change in demand. 
Finally, if the answer is bigger than -1, then revenue increases, and it's called price elastic demand as the demand changes by a higher amount than price change.

What affects elasticity?
This, my friends, brings us onto the controversial topic of tax which I feel (much like my friend Katy) should be avoided at all legal costs.. (please don't arrest me) 
Legality and offshore bank accounts aside, in elasticity there are two forms of tax, shifted tax and unshifted tax.. (Yes, I am aware this still sounds dodgy from a gangster stand point)
Shifted tax tax that a firm has to pay but offload the cost onto the consumer by increasing the price of the good and unshifted tax is the tax imposed on a firm which they have to pay off themselves, because for one reason or another they are unable to rise the price of the good or service. On a relatively elastic curve, one with a smaller gradient, there is generally less shifted tax, and more unshifted, price doesn't go up dramatically due to taxes. However, on a graph for a product with inelastic demand, then shifted tax is generally higher than unshifted, meaning that the price of the good is likely to rise to accommodate for the extra tax imposed but this is because consumers are willing to pay more.

Income elasticity of demand is a derivative of elasticity and involves the responsiveness of a good to a change in income. Income elasticity often greatly depends on whether a person earns a large or small amount of money. For example:
 Ellie earns £20 000 (making her a low earner) and has a positive income elasticity and spends £30 on ASDA groceries a week. Her income increases to £25 000 and she will be able to spend £40 a week on ASDA groceries. (Disclaimer: I am not intending any harm on the ASDA company label or those earning less than £30 000.. I love ASDA)
Dylan earns £60 000 (making him a big earner) (I'm not big headed at all) and has a negative income elasticity and so spends £5 on ASDA a week, preferring to spend his money on the luxury good of Waitrose groceries. His income increases to £65 000 and so no longer spends any money on the inferior good, ASDA groceries choosing to only buy luxury goods such as Waitrose groceries.

This is certainly one case where having the name Dylan (or Katy) and being negative (income elasticity) gets you places..

Meanwhile in Russia...

Friendly Russian banter.

Market Economies

Down with communism!    (Insert conservative title about markets here)   

There are command economies such as North Korea and Soviet Russia, mixed economies such as Sweden and (brace yourself) the USA and although there is no such thing as a true free market economies; some do come close such as Hong Kong. Now it may be hard to believe that the 'home of the free and the land of the brave' ranks behind economies such as New Zealand and Singapore on the 'free market' scale but apparently us Americans aren't as free as we'd like you to believe. Saying that, a mixed economy is often viewed as the most stable and reliant option for a nation to have. Despite the recession the mixed economies of the USA and UK have shown a fair amount of resilience compared to their free market counterparts. Of course the command markets of communist countries fair better but I'm certainly not queueing up to move to North Korea..

Free market economies are economies in which the government plays no role in the market whatsoever and it is entirely in the hands of consumers and their whims, however free market economies eliminate the risk of government failure, *cough* George Osborne *cough* Mixed market economies can have any mix of government and consumer involvement varying from country to country, these types of economies allow the government indirect control over some sections of the market in order to prevent economic downturn. Which has obviously worked really well if you look at the state of the current economy...  Command market economies are economies in which the government has entire control over the market making everyone and everything equal and in doing so hoping to prevent any economic problems that could arise from the freedom of market.

Economics Epiphany

The rate of inflation in the UK stands at 2.6% having fallen from 2.8% in the previous months. To put this into perspective the record high for inflation was set in April 1991 at 8.5% and the record low was set in May of 2000 at 0.5% ... When complaining about inflation remember the poor citizens in 1991 and think how lucky we truly are.. Although for the inflation rate to increase as dramatically as it has in just 12 years is somewhat worrying. Who's fault is this? Is it the fellow consumer's fault or the government's? Well I don't actually know the answer which defeats the word 'epiphany' used in the title but I am sure it is somewhere inbetween the two...I hope to reach this epipahny one way or another and I will be sure to write some sort of strongly worded letter to George Osborne on the matter.. whether he takes the advice of a sixteen year old ameteur economist has yet to be seen.. I can hope..

First Post

I could tell you how this blog will change your life and you'll earn the pennies the title promises but I would be lying. This blog will contain my musings on the economy, the posts will sometimes be witty and interesting but could be boring. DON'T turn away now though stick with me and we'll go through a journey exploring the economy... It will be more fun than it sounds.. I think.. I'm rambling.. This will probably happen a lot.. So, here's my first post and I reckon they will get more relevant to economics.. eventually..