Initial Questions:

Question #1

Supply and demand is used extensively in Chapter 4.To be sure that everyone has a full understanding of how to solve supply and demand problems, our first discussion will be a supply and demand problem.

First review the attachments, then provide a step by step solution to the following problem (see the attachments for the steps):

Assume that the case is one of the machine tool industry in a closed economy.The market begins in equilibrium.The government imposes 10% VAT tax on all producers of machine tools.

Provide a step-by-step explanation of the changes in the machine tool market as a result of the tax.

Remember that the order of events is important.Also use correct terminology (see attachments),

Supply and Demand Guide

Supply and Demand Presentation

Question #2.

Another important measure of how an economy is performing is the unemployment rate.But there is more to the unemployment rate than just the headline rate reported on the news.

In particular we are going to look at the U3 rate (the Headline rate), the U6 rate and the labor force participation rate.

Go to theBureau of Labor Statistics

On their home page from the menu on the top of the page click on "Economic Releases", choose "Latest Releases", click on "Employment Situation", and than on " Employment Situation Summary".Read the report.Then using the tables linked from the bottom of the report find:

The U3 rate;

The U6 rate; and,

The labor force participation rate.

What are the differences among these measures?Note the percentages of each, what each measure includes and then express your views on what factors may be causing the U6 rate to be roughly twice the U3 rate and what may be causing the decline in the labor participation rate?Is the headline rate used by the most news report misleading?

My Reply

Discussion #1

The machine tool industry being in a closed economy seems to be unnecessary information for this discussion.A closed economy means that a country does not import or export goods and services internationally (Market Business News, 2020).The country believes that it is very self-sufficient and can produce everything needed for its citizens to suffice.

In the case scenario provided the machine tool market begins in equilibrium. Market Equilibrium is determent by where the supply curve meets with the demand curve and shows the match between the amount buyers are willing to by vs. the amount the sellers want to sell (Saylor Foundation, 2012). The government then imposes a 10 % Value-Added Tax (VAT) on all producers of machine tools.

1) The VAT tax puts a strain on the producers making it cost more for them to produce machine tools.This makes the cost of production to increase.

2) When production costs more, this means that there will be a decrease in the supply forcing the supply curve to shift left showing lower quantities that can be brought to market because of higher prices.

3) The increase in production cost will cause an increase in prices to the buyers of the machine tools being made. This makes the buyer purchase less quantity. This is known as the law of demand. The law of demand is simplified by saying:

1. If the price of goods or services go up, then the quantity of purchases go down.
2. If the price of goods or services go down, then the quantity of purchase go up.

4) After bouncing around for a little while after the new tax, Eventually the two economic force of the supply cure and demand curve will settle and the prices will balance out where the variables remain unchanged and the equilibrium price will settle.

Discussion #2

https://www.bls.gov/news.release/empsit.toc.htm

While looking on the website of the Bureau of Labor Statistics I found that the U-3 (Unemployment Rate) and the (U-6 Unemployment Rate) were both under table A-15.Alternative measures of labor under-utilization.According to the "U.S. Bureau of Labor Statistics" (n,d,) website, for July 2020 the numbers were (Employment Situation):

U-3: Not seasonally adjusted, 10.5% & Seasonally adjusted, 10.2%

U-6: Not seasonally adjusted, 16.8% & Seasonally adjusted, 16.5%

The labor force participation rate: 61.4%

The U-3 is the official unemployment rate where it measures the number of people who are jobless but ill actively seeking employment (Investopedia, 2020).The U-6 unemployment rate is unlike the U-3 because it includes a much larger bundle of unemployed people.It is considered by many to give a more precise much truer to natural, understanding of what the definition of unemployed is.The U-6 is 6.3% higher than the U-3 because according to Investopedia (2020) website, "it accounts for anyone who has been seeking employment for at least 12 months but left discouraged without being able to secure a job" (U-6 Unemployment Rate). That is not the only people the U-6 accounts for.People that have become disabled, are going back to school, or working part-time due to being underemployed are also calculated in the U-6.

While searching different headlines and different news reports on the unemployment rate I have found that it seems as all use the U-3.From this week's readings I find that these number are not true.Also, from being unemployed now and answering weekly questions on the MD unemployment website I do not even believe that I would be counted on the U-3.Each week I must answer around 10 questions to try to get unemployment insurance payments and one of those question asks me if I am attending school. Does this mean that I am only counted on the U-6?

Instructors Reply:

Your analysis in Part 1 is good, but you should always end with a summary of the final equilibrium price and quantity compared to the initial values.In this case, both quantity produced and price are expected to change.Which do you think would change first in this case and why?

In Part 2, you did not explain why the labor force participation rate has been declining over time (years not months in this case).Please add that explanation to your response to this post.

Question for tutor:

Part 1 I assume that the price would change first because it would cost more to supply the same product do to the increase in VAT tax. However, does this have anything to do with surplus and/or shortage? What is a good detailed explanation?

Part 2 I could not find the labor force participation rate on the from table A-15. I googled it and the results were shown in my response. How do I find this and why would it be declining over years?