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I have an article and I have summarized the facts. Please help me to relate these facts to economic concepts.

I need to understand which economic ideas are relevant to the article and how, and I need to be able to understand them enough so that I can build on them for the rest of the project. I also need the necessary graphs or equations explained in terms I can understand as well.

Question:
Relate the article to economic theory, explaining if the two are consistent or explain how they may differ. If they differ, try to explain why. Then explain the story using algebraic or graphic methods.

What the article says: Though investors continue to purchase commodities (such as oil and gold), weak demand in the US is reflected in falling wholesale prices. The Labor Department reports the Producer Price Index fell 0.6% in September, after rising 1.7% the month before. So although the dollar is weakening, inflation is not yet a concern since Americans are still recovering from a deep recession. Allen Sinai, president of Decision Economics states: "In a weak economy where consumer spending is weak, businesses have been slashing left and right. This surprisingly deflationary result reflects that."

The financial crisis has resulted in lower prices all around (4.8% down this September from last, with prices paid by consumers 1.3% lower than last year) and resulted in the deflation of the commodities bubble, which both raised gas prices to the extreme ($4 a gallon) and lowered the value of the dollar. From August to September, consumer prices rose 0.2% due to small increases in energy prices, but prices for crude goods fell 2.1 percent, showing that there was little inflation further down the ladder of production. Core producer prices, which exclude volatile food and energy costs, fell for the third time this year by 0.1% in September.

What economic theory says:

What the article says: Some economists say that wholesale prices will increase in October as the government's data collectors captured the rising prices of gasoline and crude oil. In September, gasoline prices at the producer level fell by 5.4%, or nearly 80% of the overall decline. Since then, crude oil prices have increased over 10% as the value of the dollar is at the lowest point of the year. This has led to gas prices at the pump increasing by 10 cents, with a nationwide average of $2.58 a gallon, according to AAA.

On the other hand, policy makers at the Federal Reserve say that inflation will not occur in the upcoming months. 15 million people are out of work, so consumer demand is "shaky," and businesses are operating at a reduced capacity- so there is slack in the economy. "The biggest factor for inflation will be the level of slack," said James F. O'Sullivan, chief economist at MF Global. "That's going to keep downward pressure on inflation."

What economic theory says:

What the article says The housing market is making a tentative recovery, as the construction of new homes rose by 0.5% in September to a seasonally adjusted annual rate of 590,000. This is due to lower prices and government tax credits for first time buyers. Despite this seeming stability, potential buyers are still hesitant to buy, and many builders cannot get the financing to build.

The number of housing starts is 28% lower than last year, and new building permits fell by 1.2% from August to September, to a seasonally adjusted 580,000. The number of building permits issued in September was almost 30% lower than last year.

"Gains from here on will probably be much more difficult to achieve, as poor labor market conditions, tight credit, overly leveraged household balance sheets, and still considerable inventory of new and existing homes all exert downside pressures," Joshua Shapiro, chief United States economist at MFR, wrote in a research note.

What economic theory says:

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Solution Summary

Relate the article to economic theory, explaining if the two are consistent or explain how they may differ. If they differ, try to explain why. Then explain the story using algebraic or graphic methods.

Solution Preview

Relate the article to economic theory, explaining if the two are consistent or explain how they may differ. If they differ, try to explain why. Then explain the story using algebraic or graphic methods.

(See attached for images).

What the article says: Though investors continue to purchase commodities (such as oil and gold), weak demand in the US is reflected in falling wholesale prices. The Labor Department reports the Producer Price Index fell 0.6% in September, after rising 1.7% the month before. So although the dollar is weakening, inflation is not yet a concern since Americans are still recovering from a deep recession. Allen Sinai, president of Decision Economics states: "In a weak economy where consumer spending is weak, businesses have been slashing left and right. This surprisingly deflationary result reflects that."

The financial crisis has resulted in lower prices all around (4.8% down this September from last, with prices paid by consumers 1.3% lower than last year) and resulted in the deflation of the commodities bubble, which both raised gas prices to the extreme ($4 a gallon) and lowered the value of the dollar. From August to September, consumer prices rose 0.2% due to small increases in energy prices, but prices for crude goods fell 2.1 percent, showing that there was little inflation further down the ladder of production. Core producer prices, which exclude volatile food and energy costs, fell for the third time this year by 0.1% in September.

What economic theory says: There are a number of things that these paragraphs present. The first is the idea that investors are purchasing commodities such as oil and gold even when US wholesale prices are falling. The prime reason for this is that both oil and gold offer a kind of protection, in ...

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