Naked Economics Chapter 4 Summary

The chapter starts by giving the example of how the head of Coca-Cola Europe decided to give away Coke to East Germans as the Berlin Wall was falling in 1989. This gamble, which began as a loss, eventually paid off for Coca-Cola. Six years later, the former East Germany had matched West Germany in the consumption of Coke, an excellent example of the power of markets. The author gives a simplistic explanation of the communist economy. There is no law of supply and demand. The price of an item is the same regardless of where one buys it. This is due to the fact that every business is paid the same by the government for selling a specific item regardless of the amount sold. Our economy is a market economy and economists make two important assumptions.

Author Wheelan writes, "Life is about trade-offs, and so is economics." Indeed, so is Naked Economics. This book promises to be a good introduction to economics for the layman. Throughout the book, the author uses easy-to-understand language and vivid examples to illustrate his points in strategic places maintaining a sense of lightness with the readers in reading the material. Here is a summary of each of the 12 Chapters of the book Naked Economics: Undressing the Dismal Science by Charles Wheelan.

Charles states as his number one point that economics is really unpredictable. He uses the Coca-Cola Company as a fine example for this. That company starts of turning out to be loss and failure but within 10 years since it started it turned out to be very profitable. Charles also states that markets are extreme powerhouses over individual’s daily lives. Markets are also self-correcting because they use prices to allocate their resources. Individuals all work for their own self-interest so they can be better off in the society. One very good example the author provides is the Soviet’s socialist economy and how it failed because the bureaucracy controlled the economy, or basically he’s saying that

One example of a public good is national defense, which provides protection for everyone in the country. “It is considered impractical for individuals to defend themselves more than partially because aggressors may bring superior force to bear, thus making it necessary for the defender, too, to secure the help of others.” (Cooley) Because of this, the government provides defence as a public good. In the United States, for example, we have many sections of national defence. There is the army, marine corps, navy, air force, national guard, and coast guard, which all play vital roles in protecting our country. Another important public good is providing basic medical research. The United States funds research for many diseases and disorders, such as cancer research, and immunization research, and works to make them readily available to all those who need them. These are two of the many public goods the governments

The economy of Brazil is in the top ten largest economies along with the United States. It is the biggest in Latin America. Actually it is the seventh largest in the world. Brazil has used its newly found economic mechanism to syndicate its outcome in South America and show more of a role in the Global Businesses. The Obama Administration’s National Security Strategy recognizes Brazil as a developing center of effect, and greets the management of the country’s joint and global issues. The United States and Brazil associations mostly have been good in the recent years. But Brazil has other strengthening relations with neighboring countries and expanding ties with nontraditional partners in the South that’s developing.

Imagine that you have decided to open a small ice cream stand on campus called "Ice-Campusades." You are very excited because you love ice cream (delicious!) and this is a fun way for you to apply your business and economics skills! Here is the first month's scenario--you order the same number (and the same variety) of ice creams each day from the ice cream suppliers, and your ice creams are always marked at $1.50 each. However, you notice that there are days when ice creams remain unsold but other days when there are not enough ice creams for the number of customers.

Chapter 8: A question that has stuck with Wheelan for years, asked by one of his peers was, “If people know so much about public policy, then why is everything so messed up” (175)? The reason for that is because it leads to something far more significant: Even when economists reach consensus on policies that would be to our advantage, they frequently run into political opposition. And when it comes to interest groups in politics, it pays to be small because the tail can wag the dog. This can have a huge impact on the economy. They are usually the most successful because the consequence of requests they receive are spread over a large, disunified group of people. Wheelan states that small problems begin to distort the simplest jobs of a market

When I first looked into finding this book I didn’t think much of it as I just thought it was just another type of text book or some sort. I was thinking that this would be some kind of auto biography or something I would not be interested in. In fact after reading this book I was stunned by the different views and aspects of economics that was explain and I would had never thought about them in that sort of way. This book covers a lot about we discussed in class. This book explains different examples of economic concepts that may be used in our daily lives. They

The book begins by saying that economics has more incorrect arguments than any other study. The two critical reasons for this are: People don’t care about the long term health of the public, as much as the care about the short term gain in their private lives. Special interest groups create or reuse correct-sounding fallacies to promote their viewpoint. Economics consists in looking at more than the immediate policy; It includes seeing the problems of the policy for not just one group but for all groups. The misconception that government spending boosts the Economy, is a result of a system of misconceptions. The fact that, we don’t address deficit spending and inflation and assume that public spending will be covered in taxes, is a delusional dream.

One of the basic tools that economists use is elasticity and how the concept relates to health care funding. Generally elasticity can show the similarities and differences in a demand for a good or service. Elasticity provides a way to measure how sensitive supply and demand are the change in price. Economists can use this tool to predict what will happen to health care spending when prices shift.

READ: Naked Economics: Undressing the Dismal Science, Charles Wheeland, W.W. Norton, 2003. Completely- cover to cover.

National defence is one of the best examples of a public good and is considered non rival as one person’s consumption of the good does not reduce the amount available for someone else to consume, however like all public goods, it has the free rider problem. This is because people benefit whether or not they contribute towards defence, also, because a free rider’s consumption does not reduce the amount of defence available for others to consume, even those who pay have little incentive to prevent free riding by others. By imposing taxes on all individuals and then providing collective goods, government, in principle, can eliminate free-rider behaviour and produce the “correct” amount of national defence and other collective goods. Indeed, almost

Public goods are considered as impure when their consumption by an individual lessens but do not eradicate the advantages received by other people from the intake of similar products. It implies that the goods are partially rival as well as partially excludable. Local public goods are the commonly known forms of impure public goods, specifically the local common pool resources (Arriagada and Charles, p.801). On a global scale, biodiversity conservation is a good example of an impure public good. This is because, if there are numerous potential providers, each will improve local

This paper was prepared for ECN 150, Introduction to Microeconomics, Module 2 Homework Assignment taught by Nikki Follis.

2. Public goods are goods that are neither excludable nor rival in consumption. A tornado siren in a small town is a public good.