Seasonalities Greetings

To all the "Why I Would Never Read an Economics Blog" fans, our time together is coming to an end. Perhaps it was the curious title of this blog or maybe your passionate interest in the field of economics that lead you to this temple of knowledge and excitement. At any rate, we must get on with these final economic words of wisdom. 

A beach. Photo

As summer approaches, most of us can't help but think about the warm beach days and times spent drinking a refreshing smoothie of some sort. Or maybe you're an avid boardwalk-goer who dreams of playing the impossible games and fried Oreos. Whatever your ideal summer looks like, chances are you will spend time at the beach and inevitably consume various goods. 

The simple fact is that without the thousands of businesses in every shore town, we wouldn't have our fried Oreos or mango pineapple smoothies. And as the summer season approaches, these businesses are doing everything they can to ensure the maximum amount of revenue for the crucial months when the coastal population swells. 

These businesses ultimately understand the concept of seasonality, which Investopedia defines as "the periodic fluctuations in certain brines areas that occur regularly based on a particular season," such as summer. This means that businesses will have to shut down for part of the year because they are not able to cover their variable costs. 

Yum. Photo

One of my favorite places to go when I was lifeguard at the beach was Sam's Pizza in Wildwood, NJ. Many claim to have the "best pizza in the world," but this unassuming establishment may actually take the title. Anyway, out of curiosity I looked up how much revenue they take in during their peak months of operation, and I found that number to be approximately $730,000. They also had around 15 employees. Pretty crazy to think about. 

During the winter, Sam's and many other business are forced to close. But the money they make in the summer must enough to cover the fixed costs of renting or paying for their property. 

This concept of seasonality also applies to businesses like Wal-Mart and Best Buy, as Investopedia points out, who may hire tens of thousands of temporary workers in response to the increased demand. And I bet the stores need all the help they can get to deal with the borderline roots that occur on days like Black Friday. This is just extra proof of how influential seasonality is on the labor market. Fun stuff!!!

Ahhh, so that's why they need extra workers. Photo

If you're a normal person, chances are as you're sitting on the beach this summer you won't be thinking of seasonality. But maybe when you buy your smoothie you'll think, "Hey, this reminds me of seasonality." Wow. That was cringe-worthy, so I'm going to end the blog here. Happy summer. 

Planet Economics

Being at Penn State, we are surrounded by everything we need—and it's in a very close proximity to us. Just the other day I was thinking how lucky we are to have the all these nice, shiny facilities, including the gyms. And then I thought about the fact that Penn State students have to pay for the gym and this got me thinking. I wondered if a Penn State campus gym needs money when there are thousand of students already paying thousands in tuition, then how does a gym that charges $10 per month stay open?

When you don't skip the gym. Photo

After only a few minutes of research I came up with an interesting article explaining how these "cheap" gyms, like Planet Fitness, really don't want you to go to the gym. What these gyms really want is for people to keep paying the monthly fee, while not actually going to the gym. If you're not convinced by this claim, understand that the average Planet Fitness has around 6,000 members, but the facilities can only accommodate around 300 at a time. If the gym is taking on this many people, it is clear that they expect many people not to go. 

This reminds me of when I first started going to the gym and how I went on a inconsistent basis. I actually didn't go for a few months after I signed up. For the gym, this was ideal. They did not have to provide me with any services, while I continued to pay money. Additionally, the low cost of the membership, $10, made me think I wasn't wasting too much money. But after realizing how the gym was basically cold-heartedly stealing my money, I decided to change my course of action. Perhaps I'm just cheap, though. 

I remember when I first started. Photo 

And since this is an economics blog, there has to be some sort of actual economic speak included right? Right. Well, this per month payment plan is a lucrative model used by almost every gym. According to Entrepreneur.com, "the consistency in revenue allows subscription-based companies to easily calculate the lifetime value of a customer, manage inventory, and offer simple pricing." In this way, Planet Fitness is able to draw people in with an easily-digestible rate of $10 per month. 

This upsets me because after I decided to leave Planet Fitness and I joined another gym, I continued to pay their membership fee for a few months. Why? Because I was lazy and didn't feel like going going to deactivate my account. And $10 isn't so bad right? WRONG. Don't fall into this fallacy. If you have a gym membership, then use it! 

Scientists Create Intelligent Goldfish

Did my title grab your attention? I try.

The other day I was working on math homework and I went on YouTube to look up a concept. I was focused on the task at hand until I saw a suggested video. I had to click on it. I knew it was wrong, but I couldn't help myself. 

A superior species. Photo

In another instance, I was doing some good research until I saw an advertisement for a shoe I had looked up a few days prior. I was immediately stopped in my tracks and had to click on it. 

All of this made me mad at myself, but it also made me wonder why us humans can't pay attention to anything. 

Well I did some quick research and found that we have a shorter attention span than a goldfish. Apparently, a goldfish has an attention span of 9 seconds (I'm not sure how this was determined). Since 2000, humans' attention span has dropped from 12 seconds to a mere 8 seconds. We can thank our love for technology for making us inferior to the humble goldfish. 

This relates to economics because the ability to capture attention is paramount for advertisers, businesses, or a salespeople. Remember how I said I just "had" to click on the advertisement of the shoe? Well, in that case, the advertisers got me by creating desire—one of the 7 proven ways to capture attention. 

Further analysis reveals that breaking expectations, or "disruption," is a great way to get people's attention. Classic examples of this are the links posted on the bottom of websites that say something completely outlandish or even outright fictional in an attempt to get you to click. Funny story: I actually clicked on one of these links as I was gathering some information for this post (see left). 

How do they keep getting me? Well, maybe because this specific link used another, potent way of attracting attention: "mystery," or leaving things incomplete. I didn't begin my day wondering if I came from royal blood, but hey, now I need to know!

Look! Photo

This is part of the reason that fake news is so prominent in our society. People produce fictional stories with attention grabbing, expectation-breaking titles, and they reap the monetary benefits of the mass web traffic their page receives. 

For anyone trying to expand their business or generate clicks on their webpage, the ability to capture someone's attention is crucial. But are you any good at his art? Even if you aren't skilled, what are some ways you try to get people's attention? Does it work? Let those comments flood in!

The Rise of the Internet

Most of our days here on Earth are spent looking at a screen. We are either watching TV, writing papers on our laptops, or taking the perfect selfies. I sound like a broken record when I say our lives seem to be almost completely digital. But beyond our selfies and mobile profile picture uploads, the internet has proven to be truly beneficial entity for economies around the world.

A shopper. Photo

Think about it: when you want a material object, where do you go? You don't pack up shop and take drive down a dusty road to the general store; you take out your phone and look it up. If you value the product more than the money in your bank (MB>MC), you can purchase the item with a couple clicks and sit back until it arrives at our doorstep or in your local commons building.

This is beneficial to small businesses because it increases visibility. This means a company with relatively small market influence can use a third party online retailers like Amazon.com, or by using their own websites and marketing to attract more people. And with over 3.5 billion internet users (click the link for a cool live count) and counting, the internet will only become more useful in the future.

One of many internet users. Photo

In fact, in a report conducted by the Internet Association, it was found that the internet sector was responsible for $966.2 billion, or 6%, of U.S. real GDP in 2014. If you're not familiar, GDP stands for "gross domestic product" and is a measure of all the goods and services in a country. This shows just how important the internet is to our economy. And we can only expect its influence to increase!

Infamous Snap Filter. Photo

The prevalence of the internet, including social media, is so prevalent, that a Forbes article explains how one business visionary sees our lives taking on a "blended reality." Forbes mentions how this could even contribute to a boom in the Selfie Economy. The article explains how "selfies will eventually form a part of an energized soup of connectivity of media intelligence." To me, that just sounds like fancy language for my Instagram feed is going to be clogged with selfies. I just hope our society moves past the Snapchat dog filter.

 Who knows, maybe one day we will be able to monetize our selfies in this so-called Selfie Economy that Forbes speaks of. What do you think? Is this possible? Would you drop everything and become a selfie-peneur, or would you delete all of your social media?

From a Humble Masseuse

I used to sell back massages. I would offer the "best" back massages that money could buy. I would use different techniques—my favorite of which was the "karate chop" method. I was a mere middle schooler, probably around 10 or 11 years of age, but I was practicing an integral part of our economy–entrepreneurship. 

Entrepreneurs at work. Photo

An entrepreneur is a person who assumes the risks and rewards of undertaking a new business idea. The entrepreneur is seen as an innovator of new ideas. In fact, as you might expect, our economy depends on the development of new businesses that come as a result of people taking risks. 

A classic example of entrepreneurship can be found in the humble lemonade stand. In this instance, the entrepreneur assumes the risk of initiating a new idea. He or she may have a take out a loan to fund the creation of their stand (they might have to ask their parents for funds to buy lemons etc.). They may also put in sweat equity, a contribution to a project of sweat and toil. Instead of hiring a worker, they can make their own stand and their own lemonade, thereby decreasing their expenses. If their business succeeds and their revenue exceeds their cost, they will reap the rewards of the venture. However, the entrepreneur must also accept the risk of not being profitable.

But what happens when entrepreneurship decreases? And what could possibly make that happen? 

Uncertainty is dangerous. Photo

Uncertainty in the market is one of the biggest hinderances when it comes to the creation of new business. If people can't accurate predict the future and can't trust the economy, then they are less willing to take on the risk of a new business. This eventually slows economic growth and leaves consumers without new products and services. Lemonade will be scarce and a good back massage will be few and far between. Doesn't sound very good to me!

You might be an entrepreneur if you draw stuff on walls. Photo

In today's day, a pertinent example of entrepreneurship on a grand scale is the "entrepreneurial ecosystem" of Silicon Valley. It is full of talent and is supported by government and non-governmental organizations that foster its innovations in technology. You may not realize it, but that new app that you just downloaded is playing a large part in keeping our economy functioning properly! It all stems from an entrepreneur who took an initial risk. After his or her company gains traction, he or she can even hire employees! 

Have you ever started your own business like my back massaging venture? Maybe you even operated your own lemonade stand for some time. Have you ever had or heard of any really stupid business ideas? Comment below I want to hear your stories about entrepreneurship!

Healthonomics

As I sat down to eat my double cheeseburger with a side of chicken tenders, I wondered what made me purchase a meal I would have almost never bought before college. Sure, the meal was delicious, but after I consumed the pile of meat I knew I had to look into this matter.

Sometimes I want this on Saturday! Photo

My thought process was simple: this was the easiest, most time efficient, and cost effective meal there was. For some reason, Penn State doesn't think East Halls residents want pasta or salad on the weekend—they only want it during the work week. Hm. Well, this leaves us soulless freshman to choose between a fast food style dinner at Flipps, an outrageously expensive microwavable "healthy" meal, or a long, often cold, walk to the more sensible Redifer Commons.

Having blown my meal points last semester (I practically had to live off granola bars that I had in my room),  I ponder the costs and benefits of every purchase on my meal plan.  But why was a double cheeseburger and chicken tenders my cheapest choice? Why does it seem like eating healthy in America is so difficult?

Is my love for donuts the governments fault? Photo

As you may discover if you ever take a macroeconomics course, the government plays a large part in daily processes that we may not even notice. The New York Times explains how the government subsidizes important farm foods and crops, such as corn, soybeans, wheat, rice, sorghum, milk and meat—some of which are found grain-based desserts like cookies and granola bars, which make up a large portion of America's calorie intake. 


Economics Online defines a subsidy as "an amount of money given directly to firms by the government to encourage production and consumption." Subsidies provide both the producer and consumer with added benefits. The producer gets more money and the consumer gets cheaper goods. By this definition we can see how the government can have a direct effect on our eating habits as a country. While cheap and abundant food can be a blessing, our over consumption of unhealthy foods is not. 

The effects of a subsidy. Photo

According to the The Journal of Nutrition, the comparative low cost of cheap foods has turned obesity into a socioeconomic issue. This is a problem that I personally could experience on a small scale with my meal points. I would much prefer to eat a healthy meal, but when the cost of a healthy option is 50-100% more money, I have economic incentive to choose the cheaper option.

What are your thoughts? Should the government change its policies? Or is it not the governments fault, but our own fault? I want to hear your thoughts!

Dog vs. Benjamin

When I was around 10 years old, I begged my parents for a dog. All I could think of was how fun it would be to have a little creature running around the house. I couldn't think of why anyone that loved dogs who would be hesitant to get one. They're just too fluffy.

How can you not love pugs? Photo: vetstreet.com

Of course, this is how I thought before I evolved into a more intelligent being, capable of weighing economic benefit. As you should now know, economics basically refers to how we will distribute and use scarce resources. Money is scarce because none of us really have an infinite supply of it. And yes, pets cost money. Lots of money.

Let me assure you all that I absolutely love animals. I specifically like pugs so much that I've been known to tear up at pictures of them. Still, I didn't let my love of pugs and dogs in general get in the way of my research. After some looking, I found that dogs, on average, cost their owners anywhere from $2600 to $3200 in the first year of ownership alone. Even more surprising is that it's estimated the average lifetime cost of a dog is over $20,000!

You can't put a value on something this cute. Photo: buzzfeed.com

There may also be negative externalities associated with dog ownership. A negative externality is a term used for a negative effects suffered by a third party, as a result of an economic transaction. One such externality could be your dog eating your friend's scone. Your friend doesn't own the dog, but he is negative impacted by your decision to buy the pup. If you add up these hidden costs and negative externalities, you find the true cost of owning a pet.

But here's what I say: who cares?! A dog's worth (especially a pug's) can't be totally quantified. As I previously mentioned, consumers will purchase goods whose benefits outweigh the costs. A dog, at least for me, gives plenty of utility (pleasure). I can still remember the last time I pet a pug and how  it looked up at me and snorted.

French Bulldog. Photo

I think I speak for most of us, when I say that we all appreciate the love, friendship, and fluffiness that canines offer. Even at Penn State you can witness people smiling at the service dogs in training, desperately trying to hold themselves back from petting the little creature. In fact, science proves how beneficial pets are to our health. According to psychologytoday.com, "the likelihood that the non-pet owners would end up being diagnosed as clinically depressed was four times higher that that found in the pet owning people of the same age." They also found that pet ownership helped to decrease high blood pressure for people who experience chronic stress.These extra benefits that dogs have, like when you get happy after seeing a service dog on campus, are examples of positive externalities, or a benefit that a third party receives from an economic decision. And they still don't let us have dogs in the dorms? What a shame. 

Overall, I feel my research shows that the benefits of dog ownership far outweigh the costs. Nothing compares to unconditional love and extreme fluffiness of a dog. 

Liftonomics

Gainz. In this day and age it seems everybody wants them. Increasingly, more people are hopping aboard the "gain train" and finding a new active lifestyle. And no, this isn't some arbitrary guess, the numbers support it! So, sit back and crack open a protein shake and enjoy this blog.

Did you know there's over 34,000 fitness clubs in the U.S. with a total revenue of $24.2 billion in 2014. When you look at the industry on a global scale, the revenue is a over $80 billion!

When I speak of revenue, I am referring to a simple economic concept: revenue is simply the amount of money that firms receive. Do not get this confused with profit! Profit (denoted as π in economics) is the difference between revenue and costs. Revenue minus costs = profit. 

Will we all look like this soon? Photo: daimanuel.com

But let's take a less broad view and look at Penn State. According to the National Collegiate Fitness Index (CFI), PSU ranked number 1 for active lifestyles among large universities. According to Josh Davis, strength and fitness program manager in Campus Recreation, “Campus Recreation offerings together with kinesiology classes provide numerous opportunities for our student body to become involved." And it's true—the amount of opportunities at Penn State from IM sports to the advanced fitness centers make an active lifestyle more accessible. The fact that sports and other activities are more convenient for people to join means more people will join.

An increase in the participation of sports is an example of a key economic driver for an increase in activity levels. What's an economic driver you might ask? It's simply something that might affect a company's revenue or stock price. Other drivers for the fitness industry and specifically Penn State gyms could be the age of the population. Greater numbers of young people are more likely to work out and at college there's not shortage of youthful energy. 

Oh, how we love you PSU. Photo: new.psu.edu

The age of Penn State students might be one reason why our gyms received almost 40,000 visits per week, but as budding economists we want to ask what other factors may be at play.

It's believed that it's us, me and you, who are changing the fitness industry. Millennials have taken a keen liking to "athleisure" brands like LuLuLemon. This clothes which can be used inn the gym or for casual dress make working out more convenient. In fact, the U.S. activewear market grew a staggering 8% in 2013, with $35.1 billion in sales.

LuLuLemon has inspired younger generations to get active. Photo: huffingtonpost.com

This new trend in clothing as well as the use of social media is motivating people to hit the gym. Millennials especially love to partake in communal exercises and then brag about it on social media afterwards. Think about it. When was the last time someone did a Color Run or Tough Mudder and didn't post it somewhere? 

Thinking like an economist helps us explain hard questions like "why are more working out?" and gives a more in depth understanding of the world around us. Thanks for reading and go make some gainz!

Trump's Trade Grenade

Whether you like it or not, Donald Trump is our president and for those of us who know anything about economics, his being our most powerful leader means he has a "YUGE" affect on our economy.

If you've been watching the news lately you might have noticed that President Trump is talking a lot of smack. Just recently, he called for a 20% import tax on Mexican goods. To the layman, this may sound like a good idea. More tax on their goods means more money for the U.S. Right? 

Wrong.

:/

If President Trump actually follows through (who knows what we can believe, but let's just suppose he did) there would be losers. Namely, the biggest loser would be you and me, the consumer. This is because firms would have to pay extra for goods coming from Mexico. To stay profitable, these firms will have no choice but to raise their prices. This means that if you want a Mexican-made good (major car brands for example make many of their cars in Mexico) you will have to pay more money!  Not only that, but when the price of a good increases, consumers will often respond by demanding less of the product (this is represented as a movement along the demand curve, graphically). Consequently, in the simplest terms, everyone from the consumer to the firms is sad. 

When price goes up (to P2), demand goes down (to Q2). Photo via sanandres.esc.edu.ar

Economically speaking, President Trump's audacious tax plans are just not a good idea, and history has proved this to us. You may have heard of the terms "mercantilism" and "laissez-faire." Well, if I were to explain this in a way that won't put you or me to sleep, I would say this: mercantilism is policy where a country exports more than it imports in order to grow its economy. Some European countries tried this from the 16th to 18th centuries. Eventually, they realized it was bad. Then these countries instituted laissez-faire, in which countries can freely trade and it worked! Mr. Trump, however, his spouting ideas that are dangerously mercantilist. 

Let's all wish for his success as our POTUS. Photo via: storypick.com

Let's hope that we don't see these random import taxes come to fruition. I don't know about you, but I wasn't given a small loan of million dollars from my parents. Actually, my parents won't even give me a small loan of 0.000001% of that. So, I don't want my goods to increase in price. I like have as much disposable income (economic term) as possible so I can have as much purchasing power as possible! It's simple economics! 

A Cookie Too Far

You're probably wondering why you clicked on this blog. Who wants to learn about Econ in English class? Well, being an Econ major, I thought it would fun to apply some economic principles to every day life at Penn State.

Let me ask, have you ever been to a buffet and thought you would get your money's worth by eating as much as possible, only to ultimately feel sick as you left? In this case, you most likely had poor marginal analysis and, frankly, overall poor knowledge of economics. 

As an avid Penn State buffet-goer myself, I've had plenty of opportunity to analyze my experiences. For starters, as anyone who has taken an intro economics class knows, sunk costs are—sunk. There's nothing you can do to get your money back. So when I, or anyone else, swipes their ID card in  dining hall, there is a cost incurred that can't be undone.Whether you eat nothing or eat enough to feed an army, you will still have lost that $5.00 that was just swiped away. 

This meme isn't funny, but it is courtesy of imgflip.com

Me being the analytical human being that I am, decided I would test yet another economic principle: the law of diminishing marginal utility. After eating my normal dinner in the buffet I decided to conduct the test with cookies. The soft, warm cookies of the Redifer dining halls are always so enticing. 

I initially grab two cookies. The first cookie is amazing. Its flavors are an overwhelming ambrosia and, for a brief moment, I feel like I'm floating (I know my foodies can relate). I estimate my total utility (an economic term for pleasure) to be 20 utils (an economic term that quantifies utility). The second cookie is good, but its sweetness is a little much. I gain 15 utils. By the the fifth cookie, I am begging for mercy. The sweet treats are now ravaging my innards. 0 utils. Still, for the purposes of the experiment, I force yet another circle of death down my throat. 

Graphic representation of my diminishing utility. Utility on Y-axis, cookies on X-axis. 

But this was it. Like some twisted scientist, I had gone too far. Eating the sixth cookie was so painful that it gave me negative utils, a situation so grave that I couldn't graphically represent it. 

In review, I can't stress enough the importance of the law of diminishing marginal utility. Whether you're eating cookies at a buffet or consuming any other good, edible or non-edible, there will come a point where consuming just one more unit of that good, will not be an economically smart decision for you. 

Even though you may not be interested in economics, knowing some economic rules may help you find your optimal of, say, cookies!