MARTA Monopoly

University discounted MARTA pass for students costs $61 per month, if you pay before the 15th of the previous month. If you pay after the 15th, then you have to pay $68 in the MARTA station kiosk, which usually does not work properly or works in such a way that your credit card gets blocked immediately. MARTA allows me to get to school from home in about an hour and a half, if there are no “emergencies.” Trains run in a 15-minutes intervals in the morning and 20-minute intervals at night, which, presumably, are supposed to follow a strict published schedule. Usually trains deviate from that schedule for about five minutes. In addition, there are: “extraordinary” emergencies and delays … which happen everyday; people listening to music … without headphones; homeless people … who, sorry, stink, such that you can’t sit in the same train car! In addition, when I started my undergraduate, I paid $40 per month and that was already expensive for me — full-time student with a part-time job with a recently immigrated family. MARTA kept raising their fees, but I have been buying the pass during past three and a half years. Why?

For the sake of comparison, I want to mention that I quit buying Starbucks coffee as soon as they raised the price to $11 per bag, while it used to be $8 in the nearby store. Important to note is that my day HAS to start with coffee. Otherwise, well… I haven’t had a day without coffee. 🙂 But I did go through troubles to find another coffee, which would be less expensive and the same quality as what I’m used to. And, again, why?

Why does my consumer behavior is different in these two situations? Well, everyone (who haven’t taken economics class before) would notice that, most likely, I was able to find a better coffee deal, because there was an alternative product. While in the MARTA case — there was not. Speaking the language of economics, it is easy to notice that Starbucks is far not the only coffee producer in Georgia, while MARTA is the only public transportation system, that would get me from Gwinnett county to downtown Atlanta.

Speaking in economics terms, we have a clear monopoly case, when the producer can raise their price and consumers would still keep buying their production. Again, why do we all do that? Because, there is no other substitute for MARTA — there is no other public transportation system. The demand for MARTA is inelastic. MARTA got the market power.

However, it is very important to note that the  MARTA is still limited in a sense that we will stop buying the pass, as soon as we will no longer be able to afford it. Monopoly is actually limited — by how much we can spend. If the price is high such that I can’t afford it — I will probably quit traveling to school everyday. Actually, now I consider buying a smaller car, so I can drive to school. I have a feeling that I will happily say “Bye” to MARTA as soon as I can save just a little bit more money, so I can get  a more efficient car.

After all this … I really hate MARTA.

Payoff Matrix — Economics Meme 3

http://imgflip.com/i/5tek

Payoff matrix is a term used in game theory, which refers to how the payoff to each of the participants in a two-player game depends on the actions of both. The most famous example a so called “prisoners’ dilemma”, where two prisoners are given a choice, the consequences of which would depend on the choice of another. Real world application of prisoner’s dilemma is oligopoly. Two outcomes follow from prisoners’ dilemma: each player has an incentive to cheat (make themselves better off in the expense of another) and if both players cheat then both of them end up being worse off rather than if neither cheated.

This “Payoff Matrix” meme intended to remind the audience about the movie “Matrix”, which actually had deep philosophical, sociological, and economical meaning. Interestingly, in the beginning of the plot, the main character, Neo, was offered a choice by Morpheus, character depicted in the meme. Payoff matrix intended to be a play of words, which would remind the audience about the payoff that Neo had to pay for being in the “real world.”

Music assignment 3

“Allentown” by Billy Joel

•   Assignment question: If coal and water access for easy shipping brought people flooding to the area upon its initial discovery, why don’t people leave as quickly as they came once the coal is gone?

This question is more philosophical rather than economical. As Billy Joel suggests his parents and all his past is tied to Allentown and as a result he happened to live there all his life:

“Our fathers fought in the Second World War/ Spent their weekends on the Jersey Shore/ Met our mothers at the USO/ Danced with them slow/ And we’re living here in Allentown.”

Another point Joel is making regarding his school education and upbringing:

“For the promises our teachers gave/ If we worked hard/ If we behaved.”

The author, and apparently his generation as a whole, was told that they can make their Allentown to become a big profitable town if they worked hard enough and if they did morally right things. As we all unfortunately know, general moral guidelines sometimes do not go well together with successful business. That explains why people don’t leave even though it would be logical to stay in a declining town.

•   Assignment question: Which do you think will decline faster: population or housing prices?

I believe housing prices will decline faster, because people who already leave in the generally don’t need additional housing, so main housing demand is due to people currently living in other regions but who want to come into town. However, since the city is declining, the number of people who want to move in to town will decrease and the number of people who want to sell houses will increase. At the same time, other proliferating towns will supply substitute products – houses in more profitable regions, which will lower the housing prices faster compared to the decrease in population size.

•     Assignment question: Based on your answer, can it be utility maximizing to stay in a declining city?

If my response to the previous question is correct, then it is not utility maximizing to live in a declining city from economical point of view. However, utility distribution is different for different people and probably some people value their past and places where they come from much higher than financial opportunities. Thus, for people like those it might be utility maximizing to keep living in a declining city.

http://divisionoflabour.com/music/2007/03/allentown.php

About econ 2106: Likes (and dislikes)

This Econ 2106 is a pilot hybrid course, which means that this course format is new and it is developing as we go. So far, we have had only a small number of assignees, but I already know what I like the most about it —  the flexibility. I am an adult and I can manage my time well enough, so that I can let myself work on things at my own pace. For example, I like to sleep in on weekends. I’m not talking about sleeping in a couple of hours later than usual, but sleeping until noon and past noon, which happens quite often. Also, I rarely do work on Saturdays, so I ended up working on my first econ portal assignment from 1:00 to 3:00 AM. And, believe it or not I loved it! I had the work done, I met the deadline, and I could spend as much time as I wanted.

Also, the Online Readiness Assignment was quite useful. As I already commented in the survey, the test results were somewhat surprising: my worst parts were reading and typing, compared to national average.  It was like taking a free practice GRE. Now, I know that should study much more before I register for the real exam. Also, I must learn to type fast. I already started my typing tutorials that the ORA suggested.

Good luck!

Hello world!

Hello Everyone!

This is Econ 2106 blog that is going to reflect my activity in class. I’m taking economics class in Fall 2012 at Georgia State University with Dr. Shelby Frost.