Topic 10: Consumer Preference and Utility - Skechers

For Journal topic 10, watch the video "Skechers" and then answer the following questions:
*How does Skechers assess consumer preferences (utility) in their target market, ages 12-24?
*What advertising strategies does Skechers use to promote their product?
*What innovations in footwear have Skechers carried out that differentiates them from the competition?
*In monopolistic competition, firms differentiate themselves through location. What geographical locations did Skechers consider for their target market? Discuss reasons for choosing these geographic locations.
*Do you think the kind of strategies used by Skechers would work to influence your preferences (utility) for shoes, clothing, or other products? Why or why not?
*What products do you feel have a high utility for you? What makes them have that level of utility?
*Are there any products that seem to generally have a high level of utility among other people that you don't feel are valuable? In other words, what products seem to have an appeal to others that you just don't understand?

• Skechers asses consumer preferences (utility) in their target market through market research in houses, and also groups of their target market globally. They also gain information about their consumers when their consumers seek information: what type of information they seek, and where they seek it.
• There are four methods to promote products: personal selling (through salesman), sales promotion (temporary period of discounts), public relations (publicity), and advertising (through any media, etc.). Products are also promoted by focusing on a target market (a specific group of customers), which is done by market segmentation. It creates a message and a brand identity.
• The innovations in footwear in Skechers comes from the younger group of employees that participate in the lifestyle of their target group and are on top of the lifestyle trends. They are able to bring to Skechers first hand what is popular in the market and what type of products should they promote.
• The geographic locations that Skechers consider for their target markets includes in style, trendy areas such as downtown, where their target market, the younger population, can actually see the product and consider it. Skechers also have a presence in retailers in large cities all over the world to promote their product globally.
• Yes, I believe that the strategies Skechers uses will be able to influence my preferences because I like the image of a cool, trendy lifestyle.
• The products that have a high utility for me are products that I will actually use, such as stationary. Only a few, very eye catching luxury products will have a high utility for me because for me, even if I have these products, they aren't going to help me much in my life.
• Some products that seem to have an appeal to others that I just don't understand is coffee. Many people need coffee, either for its waking properties or its taste. However, I do not like the taste of coffee, and I usually have other methods for keeping myself awake.

Topic 9: The Myth of Outsourcing's Effect

Watch the economics video Myth: Outsourcing Is Bad for America, then write about how globalization and the economic concept of comparative advantage relate to the practice of outsourcing. In your entry, you should consider the following questions:

• What are globalization, comparative advantage and outsourcing?
• How do globalization and the economic concept of comparative advantage relate to the practice of outsourcing?
• What are the characteristics of an open economy?
• How do production and efficiency relate to outsourcing?
• How do production costs and pricing differ with and without the implementation of outsourcing?
• How does outsourcing relate to the concept of opportunity costs?
• What are the potential differences in the levels of marginal product of labor with and without outsourcing?

• Globalization, in the economic point of view, is the interdependent world economy. Comparative advantage is when one entity (individual or firm, etc.) is able to produce a product or service with less marginal cost compared to others. Outsourcing is any task, operation, job, or process that could be performed by employees within an organization, but is instead contracted to a third party that is usually significantly cheaper for a significant period of time.
• Because some countries have comparative advantage pertaining to labor (cheaper labor), many industries will want to get access to this group of labor. Combined with globalization, these industries are actually able to move their factories to these countries with comparative advantages, thus resulting in outsourcing.
• The characteristics of an open economy include economic activities between domestic community and outside people (and businesses), the ability of people to trade goods and services with other people and businesses in the international community, and the flowing of funds as investment across borders.
• Production and efficiency relate to outsourcing because they are the main reasons why companies and industries outsource: to increase production and maximize efficiency.
• Without the implementation of outsourcing, both the production cost and pricing of the good or service would be higher because of the higher cost of labor. With the implementation of outsourcing, production cost and pricing would both be reduced.
• Outsourcing has many opportunity costs, like any other act of decision, and one of the most controversial opportunity cost is the increase in unemployment within the country that is outsourcing.
• The potential differences in the levels of marginal product of labor with and without outsourcing is that without outsourcing, the marginal product of labor is lower than when there is outsourcing.

Topic 8: Debate on Globalization

Watch the video "Debate on Globalization" and answer the following questions:

1. Discuss how "catch-up" (convergence) ties in with globalization in China and India.
2. Define Globalization and discuss the benefits and costs of globalization.

In addition, write about how globalization has affected your life. How would your life be different in a world without globalization? How has Taiwan in particular been affected, and how has that changed your life and the lives of people you know?

• Advocates of globalization says that through increased employment and technological advances, many developing nations such as China and India have been able to catch-up with the developed nations much faster in terms of living standards and economic activity. For example, usually, it should have taken two generations for a developing nation to double its standard of living, but now, for China, it takes only years for living standards to double.
• Globalization in the economic point of view is the interdependent world economy. It is the process of different countries and people interacting with each other as sellers, buyers, or intermediates. The benefits of globalization, other than help developing nations catch-up, also allows technological advances, liberalization of policies, and increased consumer choices due to increased competitiveness. However, when one benefits and gains, it costs another person and this person loses. The costs of globalization includes the problems of using low cost employees without giving them a minimum standard of working conditions, the displacement of a nation's own workforce, and the interference of economy on politics and national sovereignty.
• Globalization affect my life by allowing me more choices, and provides me insight on which products have a higher marginal social benefit compared to its marginal social cost. Without globalization, I would loose access to products that are only available in other countries. Without globalization, Taiwan would not have a market to sell its specialized microchip products and cause its economy to slow down. On the other hand, globalization has provided Taiwan with a market.

Topic 7: Government Farm Subsidies

  After watching the video "Government Should Leave Farm Business," write down your thoughts about how government subsidies work. The producers of the video take a particular point-of-view about the issue. What is their point of view? Do you agree with it? What about other kinds of subsidies? Are there situations in which some kinds of businesses should be supported by taxpayer money, or should the market be left completely free and subject only to the laws of supply and demand? Can you think of any industry that needs to be supported? What about education? Most colleges and universities, including private ones, receive many benefits (not only money) from the government. Should those supports remain, or be removed? What about for elementary and high school? Should people who don't have school-aged children have to pay taxes to support schools?

• Government subsidies reduces the price of the farm products because the supply of the product increases now that the farms have received extra money. However, the video takes the practical side of the issue: the side of the poor. It points out the idea that these tax subsidies rarely every go to the poor people who need these subsidies in reality. And I do agree with it. The subsidies that were provided to prevent farmers from becoming poor ironically didn't benefit the poor, but only made the wealthy richer.
• I believe that businesses such as infrastructure should be supported by taxpayer money. Infrastructure is essential to a nation or to a society, and is used by the majority of the public, common people; therefore, this business should be supported by taxpayer money. This may apply to food products as well (not just limited to farm products). Other markets, such as clothes and technological appliances, should be left alone and controlled by the laws of supply and demand.
• I believe that education should be supported by the government. Currently, education is becoming more and more expensive, and many can't pay for it. Government subsidies will help these poor people who want or need to get a college education by taking away the burden of money. This also applies to elementary and high school, since they are obligations for the parents.

Topic 6: Opportunity Cost of a College Education

After watching the video “The Economics of Higher Education,” answer the following questions:

• What is marginal analysis and how is it used in making good decisions?

• What are the marginal costs and marginal benefits of one more year of higher education?

• Evaluate the argument that college graduates earn $1 million more in their working lives than non-graduates. Is this accurate? Why or why not?

• Using marginal analysis, explain why some students leave college after one year.

• How does the information in the video relate to what you have been told by parents and other about going to college? Did watching the video change your mind in any way about getting a college education? If so, how did your thinking change. If not, why do you think that is so?

• Marginal analysis is the idea that when consumers make decisions, they make decisions about the next unit of something. It is used in making good decisions because it helps you weigh the pros and cons, the cost and benefits, of an action or behavior. It helps us make rational decisions instead of rash decisions so that we can make sure that the marginal benefit exceeds the marginal cost and not the other way around.
• The marginal costs of one more year of higher education, the opportunity cost, includes money and time. To go to one more year or higher education, you have to pay the tuition fees and any other expense needed. Time is taken into account because you could have been using this time to do other things, such as working to earn money, instead of spending the time learning and not earning a solid income. On the other hand, the marginal benefits may be the social connections and pleasure time, as well as a likely increase in future job pay.
• The argument that college graduates earn $1 million more in their working lives than non-graduates is very misleading and inaccurate. The statistics of college graduate earnings have been skewed because of a few individuals who are "super earners" who earn a very large amount of money that exceeds that of the average population. Also, there has been research stating that these college graduates would have done as well as they had even if they didn't go to college, which is also known as the selection effect: those who self-select to go into college are already predicted to earn more money.
• Some student leave college after one year because, by using marginal analysis (may without thinking), these students decided that the marginal benefit of going to college is less than the marginal cost of going to college: the marginal cost outweighs the marginal benefit. Therefore, they drop out. Some of these marginal costs include the time wasted so that people couldn't get a job and start earning money, as well as the tuition fees that have been increasing exponentially through the centuries.
• The information in the video confirms what my parents and I believed in. We believed that it is not necessary to go to college, and instead, going to work would be more practical. Therefore, this video doesn't change my mind in anyway about getting a college education. After all, we go to college to get a decent job, so we now know that going to college can't get you a decent job, why go?

Topic 5: Ripple Effects and Elasticity

One of the fundamental economic ideas is that choices have secondary, or "ripple" effects. Imagine throwing a stone into a still pond. The primary effect is the splash it makes, but it also sends out ripples that spread out over the surface of the pond which bounce off of other objects making further ripples. The ripples going in different directions and bump into each other, creating patterns that are difficult to predict. For this journal entry, watch the video "The Ripple Effects of Oil Prices," then write about how the ripple effects of a change (up or down) in the price of oil affects the various markets that make up the economy. How does it affect you and your family? At first you might think, "Not at all," but when you think about it more deeply, it is clear that because of oil's importance in the production of every good and service that is produced, a change in its price effects everyone (albeit differently). What other goods and services can you think of that have such an inter-connectedness with other goods and services? How does the idea of elasticity affect the markets when prices change? For which goods and services is your own demand relatively elastic? Inelastic? Why?

• When the price of oil changes and either increases of decreases, products that use oil to work and processes such as manufacturing are effected. For the products that use oil to work, they are complements to oil, so if the price of oil increases, the price of these products will also increase.  Some examples of complements include vehicles such as cars and motorbikes. The total price of the processes such as manufacturing may also increase because many small parts in manufacturing require oil.
• My family and I are effected by the change in oil price because we must pay more for oil, meaning that our transportation fees and costs will increase. This may lower our demand for oil and force us to choose other means of transportation that either doesn't need oil, or could lower the oil expenses of the family.
• Another good and service that may effect others so much may be wood. Many products, such as paper and materials for construction, are made from wood. Even though we have other substitutes for paper and materials for construction, these are still the primary form of material used (paper for books and posters and newspapers, etc.).
• Elasticity affects the marketing by describing the changes of quantity in ratio to price. Inelastic means that no matter what the price is for a product, the demand is the same. An example of this may be medication. No matter the price of medication, if I'm sick, then I will definitely get medicine to make myself recover. Elastic means that no matter what the quantity is for a product, the demand is the same. I do not have any demand for totally elastic goods in real life. Even though this is possible in theory, it's hard to find totally elastic goods in real life.

Topic 4: Where Choices Lead

A number of very specific choices have led you to be in this particular class in this particular school. Each choice represents not only what was gained, but what was foregone in order to get you here. What was forgone is defined as the opportunity cost of what was gained. In your opinion, what have been some of the opportunity costs of getting you into PAS in general and this class in particular? Keep in mind that money is only one kind of cost--there are many more things that make up opportunity cost, both tangible and intangible. Considering that you most likely had little control over many of the decisions that got you here, do you think the decisions that were made were rational? In other words, if you analyze the costs and benefits, do the benefits outweigh the costs? Why or why not? If you had been in total control of your life, would you have made the same decisions? Explain.

• Some of the opportunity costs of getting myself into PAS in general include me giving up the choice of other schools (which may or may not be local schools), the money that was spent so that I can enroll in this school, and the time that I must give up in order to go to PAS (this one can also apply to when I go to other schools). Some of the opportunity costs of getting myself into AP Microeconomics class may be other classes that I could have taken, or the time that I have to spent to go to this class (I could be doing my work in a study hall period).
• I believe that the decisions I made were rational, because these decisions are the best in my opinion and preference. Coming to PAS, though it's very expensive, will be able to help me get into a good college and help my future better. The benefits exceed the cost because I will be able to earn the money spent back if I have a higher degree of education. Taking AP Microeconomics is also a rational choice because even though I must give up another class, this subject is the one that will mostly likely help me the most in the future, both in college and in the work environment. If I had been in total control of my life, I would most likely make the same decisions; I will make the decision to come to PAS because it opens up opportunities, and taking AP Microeconomics was my own choice in the first place.