LIFE AROUND ECONOMICS
Life for me has been constantly business related as the son of two highly successful and self taught business owners, its what I have lived and breathed for the last 17 years. Life in my eyes has never been about the destination but rather the journey and for my parents its been anything but easy, wether it was leaving Ireland because of the war, or not having the opportunity to go to school, My dad and Mom have always prevailed. My parents have lived and breathed Motorcycles for the past 30+ years owning multiple dealerships. Janine (Mom) graduated with a realtor degree but eventually fell back into her fathers stores, though still using her knowledge to own multiple properties currently. Fenton (Dad) was born into a tough life of little schooling and brutal farm work he was a Millionaire by 27 and Bankrupt by 30. My family has seen every side of business and have made a life built around it, allowing it to be engraved into me.
This has driven me to pursue a career in business and to attend school to hopefully study Economics as investing is a thrilling passion. Though not confident enough to invest my own money using simulators (RBC) I have been able to gain 4% returns constantly. This will hopefully grow throughout my schooling and I am looking forward to understanding more.
Branch of Economics where human behaviour in a consumer and seller/supplier aspect is studied. This allows us to understand the factors that influence buyers and sellers, generally focusing on supply and demand and the changes that occur.
“Judge your success by what you had to give up in order to get it”-Dalia Lama
Opportunity cost is the cost of an alternative in order to pursue another option. This relates to almost every aspect of life as it allows for endless scenarios.
Scarcity is the biggest Economic problem as humans have unlimited wants and needs while we have a fixed number of resources. All decisions in life revolve around scarcity as people constantly use this to make decisions, as we make sacrifices to gain what we want/need. Scarcity is the basis of opportunity cost because if there were unlimited resources we could have everything we want/need and would give up nothing in return.
Opportunity cost using ppc
We have learned that opportunity cost is the basis that choosing one option will sacrifice another. This PPC graph is discussing calculus grade versus Economics grade. This graph is assuming we are using 100% of our efforts and there is no possible way to increase productivity. Using the example of moving from point B to C the opportunity cost will be losing out on 20% of your calculus grade for the benefit of 15% on Economics grade. This is a tradeoff where we are sacrificing our Calculus grade in return for a better economic grade, thus known as opportunity cost. Opportunity cost can be used in any situation where we decide between two or more options.
Law of increasing relative costs
A term explaining the result of gaining more of one product and losing more of another in return.
This PPC graph displays the greater opportunity cost when wanting to produce more Cotton. Each additional shift loses more wheat as resources are being allocated to Cotton. The shift from A too B shows the loss of 40 units of wheat for a gain of 100 units of cotton, while B too c shows a loss of 80 units of wheat for a smaller gain of 80 units of Cotton. In order for an Economy or producer to be efficient they must find a sufficient way to produce both or rather focus on one product to create an optimal output. This is why companies generally only produce one or multiple similar products to keep efficiency as high as possible.
This image displays one of the many conflicts when deciding what to do at College/University as its nearly impossible to get all three. I think this will be a big part of my next four years, for me the choice is obvious (pass exams, social life), sleep is replaceable while the social aspect/memories will be with me forever. Opportunity cost is an instinct people do not realize they are doing, every human and even animals use opportunity cost to some degree; it is one of the most applicable economic theories to the real world and is one I will never forget.
R E F L E C T I O N
Opportunity Cost is an instinct that people don’t even realize they’re doing, its in every decision you have ever made. People are constantly weighing pros and cons of one decision versus another as we want the optimal benefit for the least amount of effort.
For the past year I have been constantly weighing pros and cons on a particular subject that haunts high school graduates. University VS Working is a tough decision for anyone nevertheless; though for me I have the option of running a company with no degree or going to school. I am privileged to have both these options and i’m constantly confronted with advice like “you would be an idiot not to take over” or “why not, think of the easy money”. My parents company (traction motorcycles) has been recognized multiple times and would be a blessing to take over. Though going to school and the experiences I would gain from it are something I cannot ignore.
Option 1- Working for my parents and continue onward with managing different aspect of the business. Currently I manage the accessories department I would slowly transfer from departments to learn all aspects. Eventually after 4–7 years my parents would begin the transition out slowly by only coming once a week etc. This would eventually leave me with two stores and properties to manage. Benefits would include easy transition out of high school, good salary, while also staying close with my parents.
Option 2- Attending university has always been a desire of mine and with solid grades and a passion for business I am able to attend UBC. This will include four years of painful studying that will hopefully pay off in the real world. I will be living on campus and hopefully enjoying student life and experiences that I would otherwise miss out on. Eventually I want to pursue a masters degree as well but this will be a lengthly time of studying.
I decided to pursue a degree in Business while attending UBC and then hopefully moving onto London school of business to obtain a masters degree. The decisions were based on multiple reasons but mainly because my parents support me and it yields the lowest opportunity cost when comparing to work. It also allows me to develop and be semi independent compared to living at home while working.
Life experience and enjoyment:
University will allow me to branch out and be more independent in comparison with working and living at home this was a big factor for me. The opportunity of moving out and making my own decisions is very appealing. The main benefit I would gain from working would be real world skills and knowledge, this would obviously be more helpful in relation to my parents business; though at this point I have no desire to follow in their footsteps. These factors lead me to the answer of university being the obvious choice.
Costs of Working VS UBC
UBC is a prestigious school that has a high tuition even though its subsidized for Canadian citizens. UBC would roughly cost me $20,000–25,000 per year (September to April) this includes all costs of living. Pursuing my masters degree in London will cost 42,o00 GBP ($78,000 CAD). The total cost would be $168,000 CAD. With a British masters degree in finance/economics I could potentially have a yearly salary of 140,000–200,000 GBP, meaning the cost of going to school and obtaining my certifications would be a year or two of working. Though I will not be taking out student loans as I am fortunate enough to have my parents cover the cost of schooling, I am still weary of the costs and would not pursue this path if I didn't think it would pay off.
Working would essentially cost me nothing but hard work and dedication to the business. My parents would not allow me to be an absentee owner so this would be my full time career. Potentially making more than I would with my masters is extremely tempting. With hard work and passion I could easily turn six figure profits allowing me to live comfortably.
UBC will allow me to make global connections that I will hopefully use to gain a career. Using UBCs co-op and other resources I will be able to obtain experience before graduating. Hopefully my personal skills will be able to stand out and convince employers to hire me. While working directly for my parents out of high school doesn't require me to find a job, I may eventually want to switch careers. Owning and operating a business is a highly prestigious skill that would potentially outweigh any UBC experience in terms of hiring potential.
Independence VS Mentorship:
Moving out and becoming independent is always something I have looked forward to, thus leading to inevitable obstacles I will have to surpass like cleaning, cooking, and organizing. Attending UBC will ease me into tons of tasks that I would otherwise fail. Being close to home will also allow me to come home when needed. The next four years of living with friends could be some of the most memorable years of my life, and I plan to take full advantage. Working would involve living at home for significantly longer and potentially not moving out till I can afford a place, missing out on this opportunity was a big con for me. Though working would also allow my parents to mentor me and show me the practical side of business. Gaining these valuable experience could educate me about general and complex business practices that are not taught in a classroom.
Extra curricular activities:
Not attending UBC would prevent me from joining any activities or clubs at UBC. Also missing out on UBC’S business seminars that are said to be world class and extremely insightful. UBC’s dorms also allow for lots of activities within students that live together. Another huge aspect is partying and night life at UBC this is an aspect that parents hate but it is a reality and I believe every aspect is beneficial.
UBC offers many opportunities to network and branch outwards allowing for deep connections in business. Using seminars and co-op programs to work and volunteer with companies that would potentially hire me after finishing my degree. Networking through my parents would be much easier as there is already a foundation, it would only require me to introduce myself and build trust. This would bypass all the struggles of getting my name out there and gaining valuable partners.
Happiness and fulfillment:
Choosing to work over attending UBC would potentially have me live life regretting my decision, while attending UBC doesn't affect taking over my parents business; if anything it allows me to be a more educated candidate. UBC will offer me unique experience that I wouldn't be able to get anywhere else!
The obvious decision for me was to attend UBC this fall! I am extremely excited and dedicated to this decision, it yielded the lowest opportunity cost while also obtaining the most satisfaction. The money I am sacrificing is nothing compared to the experiences I will gain.
Elasticity VS Inelasticity
Elasticity measures the responsiveness of a particular goods demand or supply when several different events occur. It judges the changes made on the supply and demand line and the severeness of each change determining wether its elastic or inelastic.
Elasticity is one of the most influential economic theories because of its affect on consumers. Elasticity depicts what a product will be priced at allowing sellers, government, and producers to make optimal profit. When producers have an inelastic good it allows them to increase the price dramatically because consumers will still buy it, because theres no substitute. While if a producer has an elastic good they will have to price it competitively, otherwise consumers will not purchase their product and in return they will be forced to sell at a cheaper price. This also relates to the theory consumer is king.
Types of Elasticities
Elastic-When Demand or supply will change drastically compared to price
Inelastic-Demand or supply will change minimally compared to price
Unitary Elastic-1:1 ratio where both are perfectly responsive to each other
Perfect Elasticity-Horizontal demand line and if the price is changed at all then Demand/Supply will be zero.
Perfect Inelasticity-Demand or Supply is unaffected by any price only happens when buyers have no choice in the consumption (very few items in the world)
Elasticity within Demand
Goods with elastic demands will have to monitor prices of competitor ands total revenue in order to make the most profit. It is not ideal to have an elastic demand because they will have to keep prices low in order to persuade buyers to purchase the product. Many goods such as Coke, Nike shoes, and houses are elastic because they can be substituted for other goods; this is one of the five ways that makes a good elastic.
SPLAT Within Elasticity
Elastic goods will have lots of substitutes to compete with and will have to keep prices low in order to sell product
Proportion of income
Goods that are elastic will generally have a large proportion of someones income as they are more willing to search for substitutes compared to say a shoelace.
Luxury Vs necessity
Elastic goods will generally be a Luxury as we do not need the good and may realize the cost of the product is not worth it
Elastic goods will not be addictive and people will be fine without them
If prices remain high with an elastic good people will learn to live without or find a substitute that will satisfy their needs
Inelasticity within demand
Goods that have Inelastic demand will tend to be a necessity and could lead to government intervention; if the government feels its needed to live and is priced unfairly they will set a price ceiling accordingly. In Canada there are several things that have ceilings on them such as Insulin and healthcare. Our government has introduced several safety nets like rent control or quotas to keep the market from pricing a good unfairly for consumers or producers.
SPLAT Within Inelasticity
Inelastic goods will have very few if any substitutes forcing consumers to buy it
Proportion of income
Generally small proportion of someones income such as shoe laces where people will still buy the product even if the price goes up
Luxury VS necessity
Inelastic goods will be a necessity such as health care or medication where people are willing to pay a high price for the good
Goods that are addictive like coffee, alcohol, and cigarettes will be inelastic because consumers will continue to buy them no matter what the price is. generally government will tax these items heavily
Even if prices remain high consumers will still be forced to buy the good as its a necessity
Elasticities affect on revenue
Total revenue from a good or service will be effected by elasticity in different ways. When a product is elastic and the price goes down total revenue will increase, and vice versa. While when a product is inelastic and the price goes down the total revenue will decrease, and vice versa. The elasticity determines what people will do in given scenarios due to price. Elastic goods are extremely easy to find such as buying lunch or a specific brand of clothing. While buying gas or insurance is inelastic as we do not have a choice in prices because its our only option and its a necessity if we wish to drive. Different items will become necessities or addictive for different people, my necessities may not be the same as someone who is substantially wealthier then me.
Supply Elasticity and inelasticity
Companies will generally want a product that has an elastic supply and an inelastic demand. This will allow the supply to be changed when ever it is needed and can be done quickly. If a company has an inelastic supply and suddenly sees a price increase they will have a hard time taking advantage of it because they cant increase production quickly. There are only three ways of determining a supplies elasticity.
Time to make the product and how efficiently workers can produce more or less. If a product takes a long time to make EX. Fresh produce then the supply will be inelastic because they cannot increase production rapidly
Storage of elastic goods are easy and allows companies to wait for a price increase or a seasonal sale, while inelastic goods cannot be stored like fresh produce or cars as they would be extremely expensive to store
Cost to produce will weigh heavily on wether a product is inelastic or elastic because big ticket items like cars, boats, and planes have a high cost to produce. These items will be inelastic because it will require a significant amount of money to increase production and potentially a new factory
R E F L E C T I O N
Elasticity Within my life as a child:
Elasticity has been used throughout my child hood within sports and hobbies. Choosing sports is inelastic while a specific sport is elastic; as a child I played Soccer, hockey, lacrosse, and rugby these choices were all elastic while sports in general wasn't.
Elasticity and inelasticity currently:
Currently many things I buy and have bought are elastic such as a car, bike, or snowboard. These things all affect my life differently and I chose to purchase each item wether they were elastic or not.
Obtaining my license was a big deal in my life as it allowed me to be independent and I no longer needed to rely on the bus or my parents to drive me somewhere. Having a car has allowed me to experience numerous opportunities in my senior year I otherwise would have missed out on. While purchasing a car was elastic as I had many options to chose from, originally the options I was deciding between were a Audi Q5 or a Mini Cooper s.
The decision to buy a car itself was inelastic because nothing could replace it while both my decisions were elastic. Currently I now have to live with the inelastic responsibilities that come with a car like Gas and insurance which is inelastic because I have no other choice. While I also have to live with paying the high prices for OEM parts because I am not willing to replace parts with cheap after market ones. Though the Inelastic responsibilities next year will no longer be mine as I will not be bringing my car to UBC in order to save money; The parking at UBC for me was elastic and I felt the price was not worth it so I will learn to live without.
Currently I am deeply involved with Snowboarding and Mountain biking both are elastic but have inelastic responsibilities. Mountain biking is by far more costly and has many more inelastic goods such as tires, brake pads, and maintenance all three of these things have to be taken care of regularly, and if I wish to continue riding my bike I will have to pay what ever price is needed.
Riding my bike also costs money as people may think my Whistler seasons pass is Elastic I actually cannot substitute it for another pass. Whistler bike park is #1 in the world and is the only local park close by. I have no choice because I cannot substitute it and its addictive to not have to push my bike up, because of these aspects I have come to the realization that what ever the price is I will continue to pay.
While Snowboarding has less expenses in comparison I still have inelastic responsibilities like maintenance, wax, and a physical mountain with snow. I choose to ride Whistler even though I could ride at closer and less expensive Mountains. Currently this year I have put in 18 days on my seasons pass this outweighs the cost of it by double. Things like gear for riding is elastic because I am able to shop around and find different brands offering similar stuff and a cheaper price point.
Elasticity for University:
Choosing to Attend UBC is not a cheap option and the desire to go to university was Elastic. UBC will cost roughly 20–25k a year in living, tuition, and food costs it was the highest cost for university in BC for me. Attending an online University or even a local one (SFU) would have been more cost effective for my parents and would have resulted in the same outcome (bachelors degree). Though I chose UBC for the experience, my parents and I came to the consensus that I should take advantage of this opportunity.
Elasticity during the rest of my life:
Elasticity and inelasticity will affect all minor and major aspects of my life in the future. Many will be drastic like buying a house or buying medicare. Whatever I decide to do after university I will be faced with many inelastic and elastic decisions when purchasing goods.
Purchasing a place to live
After University I will most likely want to move out eventually and begin a life independent to my parents. This will involve deciding on a property which is elastic because I will have many to choose from. While the responsibilities that come with it could be inelastic because they are necessities.
Renting an apartment may be a better option for me as I can shop around and find cheaper apartments that are affordable; also many apartments these days include amenities that I would other wise pay for. When looking at apartments there are many that include Internet, hydro, and cable which are now seen as essential in our daily lives. These inelastic goods would be covered and would allow me to spend money else where. This would also result in me having extremely close neighbors and a smaller place to live.
While purchasing a house could be a possibility it is unrealistic because of Vancouver's housing market, even though the house will be elastic it will still be extremely expensive. When buying a house I will also have to worry about the inelastic necessities that I will need. Things like hydro, yard maintenance, and wifi/cable these items could all rise in price though I will still have to purchase them regardless. Having the responsibility to supply all necessities when owning a house or just some when renting an apartment is a huge downfall; These items will begin to add up quickly thus leading to the conclusion that living in an apartment may be a better option for me after school.
The End of Micro-Economics