Topic: Module 9 - Discussion: Market Efficiency and Market Failures

Module 9 Market Efkciency and Market Failures 29 74 Discussion Select & Explore Can you believe we are in our final summit session? This final summit revolves around the concept of elasticity of demand and its affect on consumers (you)! For this discussion, please investigate an industry market failure that has occurred within the last 10- years in the U.S. Identify the events that led to the market failure. Discuss steps that should have been taken to self- correct the market failure and steps that are being taken to eliminate the need of another government bailout in the future. Is your chosen industry currently operating efficiently? Locate a recent article or event (published within the last year) that highlights your relevant microeconomics topic. Use the Hunt Library, newspapers, new stations, or other credible sources to discuss how your topic aligns with microeconomics. Include the following in your discussion: State the article or event you selected. Identify the microeconomic concept(s). Describe your findings. Analyze the relevance to real-life applications. Summarize your findings using at least 250 words and provide a minimum of one reference. Use current APA formatting to document your sources.  Post & Respond Post your findings by the third day of the module week. Return by the sixth day of the module week to review your classmates' posts. Respond to at least two of your peers. Your response should be at least one paragraph, two to three sentences in length, and include the following. Whether you agree or disagree with the findings and why A probing question that facilitates further discussion of the topic Review the Discussion Rubric for detailed grading instructions. Search entries or author Unread   Subscribed  Reply Kevin Anderson  ( Monday With our culture on the brink of panic with the Coronavirus outbreak, consumers may find bare shelves when they head out to the store to pick up normal cleaning products. This is due to the stockpiling of consumers for goods like bleach wipes, alcohol pads, toilet paper, bottled water, etc. Likewise, Amazon is finding the need to stockpile some items that they would not normally keep the same high quantities on hand. This is being kept "on the down low" by the company, however, consumers and readers can read between the lines and find that there is a looming market failure for many goods coming out of China. Much like consumers feel the need to stockpile cleaning and hygienic products, Amazon is stockpiling Chinese made goods as they can see no end in sight to the supply chain disruption initially thought to be relatively short lived. As of February 14th, workers had not returned to the factories one week later than expected from Chinese New Year's initial leave. This news had Amazon reaching out to additional suppliers in an effort to have the goods that are demanded from the online retailer at the normal level without disrupting their own business. After all, most items people buy from Amazon, they can get from the store if they would just get out of their pajamas... but what if the brick and mortar stores are out of stock as well? Stay tuned, as this looming market failure is still developing. Amazon is doing their best to avoid the potential supply chain disaster that they face, but will it be enough? - Kev References Nishimura, K. (2020). Coronavirus concerns have amazon stockpiling china-made goods. Retrieved from  Reply (http Kimble Peterson  ( Tuesday Hello Kevin, this is a very eye-opening post you have here. I didn’t really think along these lines which allowed me to dig a little further, here, check this out. One of the clearest effects of the COVID-19 virus is its disruption in global supply chain markets. China is shutting down factories and companies in affected areas attempting to limit the spread of the virus. The virus has moved from China and has spread very rapidly into global markets. Workers and consumers around the world have now become more reluctant to wander out to buy supplies or spend money to avoid gathering in places where some may be affected and could possibly spread it to them. Companies here in the US will feel the impact of Chinas’ attempt at containing this virus rather quickly due to the country shutting down some of their factories in those areas affected by this virus. (Andres Vinelli, 2020). Reference, Andres Vinelli, C. E. (2020, March 9). The Economic Impact of Coronavirus in the U.S. and Possible Economic Policy Responses. Retrieved from  Reply (http Kevin Anderson  ( Tuesday Kimble, Hopefully the virus can be relatively contained by the time polling comes around or people in highly populated areas will likely feel less safe to go out and vote. Furthermore on an economic standpoint, Black Friday will be affected as well. Think about the movie Contagion with Matt Damen (I think). This is a very similar beginning story to the virus in that movie. Originates in Asia from an infected animal, spreads throughout the world... If I remember that movie correctly, after the outbreak is "contained" he goes to a mall and people have arm bands or something to show they've been vaccinated and can go shopping but the stores are still relatively empty. This could have a huge macro and micro economic effect. Stay tuned... - Kev  Reply (http Jon Lu  ( Tuesday Kevin, Way to start of this week's session! To tell you the truth, with all of the hype that is going on with the Coronavirus spreading, I really do not think anyone has really thought of that. Amazon keeping the items they know they probably cannot get for awhile from China and stockpiling them. They may even try to sell these items at a higher price. You are correct, this has created a market failure. Very interesting post. Jon  Reply (http Evonne Hawkins  ( Yesterday Very interesting Kevin, I headed out to the stores Friday evening and I found bare shelves, especially cleaning products, toilet paper, paper towels, and the meat sections were empty. I also checked on Amazon for a few products and some were unavailable and prices on other products were triple to the normal price. Hopefully, in a few days, the store's shelves will get replenished. I will have to read this article. Thanks for the post.  Reply (http Matthew Aubuchon  ( 4:14am Kevin, This is a valid concern, not just for the convenience of consumers but for the overall state of world trade. If this pandemic and hysteria continue the market has the potential to crash worse than seen before. Do you think that this situation is over stressed and that the Chinese industry will recover? I believe that the affects from this will continue to show its head for the foreseeable future.  Reply Michael Lawrence  ( Monday Class, I chose to highlight the National Defense industry as an example of a market failure. National Defense is a public good which means that it is a service that is produced and the producer cannot limit the consumption to paying customers and the consumption by one individual does not limit the consumption by others (Chappelow, 2019). Public good are a common item that create market failures because come consumers may not pay for the service or benefit but still use the good. National Defense is one of these goods. Because of the possibility of not everyone paying their taxes, everyone is still going to receive the same amount of protection or service from this public good. National Defense is also an industry that is very difficult to privately produce at an optimal amount. These reasons plus the fact that governments cannot competitively price National Defense leaves this industry as an example of a market failure. I do not think that this industry is one that can be self-corrected. While they do not receive government bailout, they are funded by the government through tax payer contributions and government allocations. The industry is operating as efficiently as it can as well. When talking about a public good, there is a large reliance on outside influence in order to operate. The National Defense industry is used by everyone in the United States and whether or not they pay for its use, they are going to receive the same benefit as everyone else. Chappelow, J. (2020, January 29). Market Failure Definition. Retrieved from  Reply (http Lyndon Burnham ( Tuesday Michael, Question: What question is the price elasticity of demand designed to answer? Lyndon  Reply  (http Michael Lawrence ( Tuesday Dr. Burnham, I believe the question it is designed to answer is how quantity demanded responds to changes in the price of a good. Thanks for the question, Mike  Reply  (http Lyndon Burnham ( Wednesday  Mike, Thanks! The price elasticity of demand is designed to answer the question, How responsive is quantity demanded to changes in the price of a good? Lyndon  Reply (http Kimble Peterson  ( Tuesday Hey Michael, this is a great post for this week. I never thought of the national defense as a public good, but after reading your post and doing a bit of research, I can assert that it clearly is. In my reading I found a good example to add to your post concerning public goods. Public goods “have two distinct aspects: nonexcludability and nonrivalrous consumption. “Nonexcludability” means that the cost of keeping nonpayers from enjoying the benefits of the good or service is prohibitive. If an entrepreneur stages a firework show, for example, people can watch the show from their windows or backyards. Because the entrepreneur cannot charge a fee for consumption, the fireworks show may go unproduced, even if demand for the show is strong. (Cowens, 2020). Another example of a public good Tyler Cowen used was national defense. To the extent one person in a geographic area is defended from foreign attack or invasion, other people in that same area are likely to be defended as well. This makes it hard to charge people for defense, which means that defense faces the classic free-rider problem. Indeed, almost all economists are convinced that the only way to provide a sufficient level of defense is to have government do it and fund defense with taxes. (Cowens, 2020). Reference, Cowens, T. (2020, March 9). Public Goods. Retrieved from  Reply Kimble Peterson  ( Tuesday Hello professor and classmates, I can’t believe we are already in module 9 of this semester. It has been very challenging to say the least, but I have learned how to write better and STILL learning, thanks to professor Burnham. During this semester we’ve visited many summits throughout this course and we’ve discussed several markets. "Price Elasticity of Demand is a measure of the responsiveness of quantity demanded to changes in price." (Arnold, 2019). Market failure is, "A situation in which the market does not provide the ideal or optimal amount of a good" (Arnold, 2019). A real time example of this is what me and my wife are going through right now. We are looking to purchase a home in northern Florida, or southern Georgia with a few acres. Just two weeks ago, there were several houses available on the market, but when the Fed dropped the interest rates last week, there are far less homes available, and many are under “Pending” contracts. The more people are looking to buy homes, the less there are available which causes a sellers’ market where you see the prices of homes increase dramatically. We are experiencing this firsthand. Home prices typically remain low because there aren’t too many buyers at any given time unless there is volatility in the economy. Home purchases have a high elasticity of demand because it’s one the largest purchases people will probably make in their lifetimes. (Kokemuller, 2019). In 2008, the US experienced a housing market crash. This occurred because banks were lending money to borrowers that didn’t really qualify under “normal” lending practices to purchase a home. Mortgages that were not affordable were sold to investors and false security statements were given to investors as well. The economic fallout of this crash to our economy during this period was immense. Over $8 trillion was lost in the value of homes. During this housing crisis, several banks were left holding mortgages many borrowers could not afford. This occurrence flooded the housing market with an abundance of home availability. The economy lost nearly 8 million jobs during the housing market crash and slower economic growth cost the U.S. economy an estimated $648 billion. (Lusk, 2020) References, Arnold, R. (2019). Economics (13th ed.). Boston: Cengage Learning. Hasbini, M. A. (2017). The great recession of 2007 and the housing market crash: Why did so many builders fail? lessons for the local homebuilding industry By Neil Kokemuller & Reviewed By Ashley Donohoe, M. (2019, February 12). How Does Price Elasticity Affect the Housing Industry? Retrieved from Lusk, V. (2020, March 9). The Market Crash of 2008 Explained. Retrieved from