Intermediate Word Formatting

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Introduction Economics is the science that deals the allocation of scarce resources for the purpose of fulfilling a society's needs and wants. There exists n the U.S. an economic mechanism that does this job. The broadest description of this is that the U.S. operates under an economic framework called capitalism. Understanding the U.S. economy, how it works, how it came to be and how to live with it in the most effective manner requires some careful study. There is no way to escape the effects of the economy without cutting oneself off from the country itself. Most people want prosperity for themselves and their family; an understanding of the economy can help one get just that. Basic Economic Concepts To examine a topic as broad as the U.S. economy there do many aspects that need to be mastered to come to a thorough understand. Some concepts that one must master include: supply and demand, elasticity, unemployment, inflation, GNP, business cycles, types of markets, and competition. Grasping these concepts will allow the reader to comprehend the impact of events discussed in later sections of this paper. Suply, Demand and Equilibrium A good place to start an understanding of the economy would be to understand the basic concepts of supply and demand. Let us accept the following definitions: Supply is the amount of goods and services that businesses are willing to supply at a given price, and demand is the amount of goods and services that consumers are willing and able to buy at a given price. Similarly the law of supply states that the amount of goods supplied varies directly with the price and the law of demand states that the amount of goods demanded varies inversely with the price. These definitions of law of demand and demand allow us to understand the behavior of consumers. These ideas seem intuitive to most people because of the fact that they play the role of consumer quite often. Quite simply, consumers will buy more when prices are low and buy less when prices are high. When prices are low consumers who normally buy the product will buy more and consumers who don't normally buy the product will buy some too, thus increasing quantity demanded. Since supply is the amount of goods offered in the market a given price and this amount varies directly with price, we find that firms will offer more goods as the price goes higher. On the surface this seems to make sense: a firm will want to offer more goods for sale at a higher price and less for sale at a lower price. One source of misunderstanding is at lower prices firms will offer less for sale. Some might think it sensible to offer more, not less, so that the firm can realize greater total receipts. The misunderstanding is in that when prices fall and the quantity supplied decreases, it's not just that each firm supplies less, but rather that some less efficient firms will drop out of the market completely. When prices rise and quantity supplied rises, it's not just the fact that each firm supplies more, but rather that each firm supplies more and new firms will enter the market, thus increasing quantity supplied. The ideal situation occurs when consumers' quantity demanded and firms' quantity supplied are the same number. At this point we have the equilibrium price and quantity. At a price above the equilibrium a surplus condition would occur because consumers would demand a lower quantity than firms would be willing to supply. At a price below the equilibrium a shortage condition would exist because consumers would demand a higher quantity than firms offered for sale. In a shortage situation prices would tend to rise due the consumer competition for a limited quantity supplied. Laissez-faire and Pricing In the United State's economy the notion of equilibrium price is a very important one indeed. This type of idea goes back a very long ways indeed. In Adam Smith's Wealth of Nations, he proposes the famous idea of an "invisible hand" that will guide that economy, and put things the way they should be. This "invisible hand" is an idea that seems closely linked to the philosophy of laissez-faire, or "let it be", in other words, "government should be non-involved in the economy. Laissez-faire is a concept that has deep roots in the United States, both politically and economically. (However this is not to say that the American's conception of laissez-faire hasn't changed in the last two hundred years.) In a nutshell the idea is that in a market where there is no outside interference, there exists an "invisible hand" that will guide the establishment of equilibrium prices. Historically it seems that most Americans feel that the government should not become involved in economic matters. In a free market situation indeed there does seem to be an invisible hand that does lead to an equilibrium price. When the price of an item is too high there exists a surplus situation as noted earlier; when there exists a surplus we understand intuitively that firms will lower the price or put the goods on sale to rid themselves of quantities are not in demand at higher price levels. When a shortage situation exists firms will sell out of a product and will likely raise the price of the item. Logically, firms would raise prices as long as they can still keep increasing total receipts. In this scenario, firms should be able to increase total receipts up until the point that they cannot sell all of their goods--the equilibrium price and quantity. Elasticity Elasticity is an important concept to master when considering analyzing supply and demand and pricing decisions.. Elasticity is most often examined in a discussion of demand. Demand elasticity is the responsiveness of quantity demanded to a change in price. Some consumer goods are considered to have a high degree of elasticity of demand and others a low degree of elasticity of demand. An example of a product with a high degree of demand elasticity would be soft drinks like Coke and Pepsi. A small decrease in the price can result in a large increase in the quantity demanded. On the other hand it is likely that the quantity of vanilla extract demanded would not be very responsive to even a large change in price. There are several factors that contribute to a good's elasticity. It is important for citizens to have an understanding of elasticity in the arena of taxation. Government officials usually have a very good understanding of demand elasticity. If government wants to raise revenues by taxing a good or service, it is of course wise to tax a good that has relatively inelastic demand. In a situation like this, when the tax is imposed, the quantity demanded of this good or service won't fall drastically. If a tax was imposed on a good that had elastic demand, the tax would likely not earn as much revenue as on a good with inelastic demand, because the increase in price (ie. the tax added on) would result in a drop in quantity demanded. It should also have become evident that firms must have some sense of demand elasticity in order to make sensible pricing decisions. Firms usually want to increase their total receipts. They can do this by raising the price on goods with inelastic demand and lowering the price of goods with elastic demand. This type of behavior helps to understand why stores typically have at least one brand of soda on sale each week. Soda is often "on sale" at a quite small percent off from the everyday price, but the storeowner's understanding of elasticity explains why they have the sale. When the soda is slightly lower in price than the other brands (ie. sale) the quantity demanded by consumers will increase greatly. Thus both storeowners and soda manufacturers may realize greater total receipts. Types of Markets There are four basic types of markets based on amount of competition: monopoly, oligopoly, monopolistic competition and pure competition. The first type of market, monopoly, is characterized by the lack of competition. There is no competition in this market because there are insurmountable barriers to entry; that is, it is impossible to enter this market. Patents and government sponsorship (natural monopoly) are two common barriers to entry. Monopoly is a market in which there is only one seller of a good or service. Examples of monopolies usually include: local telephone service, T. V. cable service, electricity and instant pictures (Polaroid). It can be seen that products in this market are unique. For instance, if one wants electricity in a particular city, there is only one, unique source. The oligopoly market structure in similar in nature to monopoly. A few sellers that provide the majority of the supply characterize oligopoly. There are substantial barriers to entry into an oligopoly, but they are not insurmountable. Common entry barriers are patents and economies of scale. Examples of oligopolies include the breakfast cereal industry, OPEC, domestic automobile manufacturing, and steel. Monopolistic competition is the most common type of market in the United States. This market is characterized by a large number of firms with little barrier to entry. The products offered in this market are differentiated but they all serve as substitutes for one another (although they're not perfect substitutes). Restaurants would be an example of monopolistic competition. In a medium size city there may be several hundred restaurants each supplying a relatively small part of the entire supply; if one restaurant closes, it will not substantially effect the overall supply. Finally, the last type of market is pure competition. This market is characterized by a large number of firms, with easy entry into the market, that offer identical products. Price is the only differentiating characteristic between products; that is, consumers in this market will choose a seller based only on price. The main example of pure competition is agricultural products. In the example of corn, Farmer A would not expect to sell his corn for a price higher than the market price because his product is exactly the same as all of the others. If Farmer A goes out of business the aggregate supply won't change enough to result in a change in price because Farmer A supplies such a small part of the whole. Now with a little background into some of the different concepts operating in this capitalistic economy in the United States, let us take a look at some of the recent history of this economy. We saw that the structure of many of the markets changed from monopolistic competition or oligopoly into monopolies. We saw that monopolistic competitions developed into oligopolies. The direction of many markets was that output became consolidated in the hands of fewer and fewer firms. Competition was snuffed in many instances, and the mechanisms of supply and demand were not allowed to set prices in these markets, but rather the owners of firms were allowed to do so, because they could. Industrialization, technology and The Transformation of the Economy Textbooks usually assert that the Industrial Revolution occurred in the 1700s and 1800s. Although an industrial revolution began in the 1700s with improved technology that allowed increased food production, better transportation, and the growth of manufacturing, the Industrial Revolution didn't really begin until the late 1800s. Industrialization began largely due to Henry Bessemer's cheap method of making steel which brought fantastic changes in this country in the last several decades of the 19th century. "The Bessemer process did more than revolutionize the making of steel. As costs fell, steel became the basic building material of a host of other industries." (Heilbroner, 1977, p.90) Railroad executives wanted to replace their iron rails with rails of steel to handle the heavier loads they were expected to carry. Prior to Bessemer's process for making cheap steel, steel rails were too expensive to be feasible. Thus, rails were one of the very first uses for Bessemer's steel, but the uses would soon multiply. Andrew Carnegie's imagination supplied more uses for steel. "Carnegie soon saw the versatile possibilities of steel and converted another mill from steel to structural shapes." (Heilbroner, 1977, p.90) This ushered in the era of steel bridges and buildings with steel frameworks that could reach higher and higher into the changing skyline. However, as Heilbroner notes, it was not just steel that changed the face of America. Power, communication, and raw materials were needed to sate the growing industrial giant.(p. 91) Industrialization brought changes not only on the surface of what things physically looked like, but also changed the nature of business firms themselves. The economic concept of economies of scale was put into use in a variety of ways that had never been possible in previous eras. In manufacturing, and "enterprise came to mean not a single modest building but a multiacre complex of structures; machinery grew in size from assemblies that fitted comfortably into a room to constructions that required immense sheds; he work force swelled from troops or companies to regiments and divisions that thronged the streets as they entered or left the factory gate. From one industry to the next, this increase in size varied according to the technology of the product or process, but when we look at the country as a whole, and especially at its industrial core, we cannot mistake the phenomenon of business growth. (Heilbroner, 1977, p. 94) Businesses began to become larger and larger and their growth often followed typical patterns. "Standard Oil began in 1870 as a refining company. Shortly thereafter it expanded 'backward' into the actual drilling for oil, an it was also extended 'forward' as a direct seller of products such as kerosene to the consumer." (Heilbroner, 1977, p. 94) With this increase in size of businesses came a change in the way of doing business: cut-throat competition. This cut-throat competition was not mean-spiritedness, but simple survival. As companies became giants, they incurred large fixed costs that helped stimulate their aggressive behavior. Competition changed as business firms were forced to skirmish for their share of the market--or die. (Heilbroner, 1977, pp.97-98). The firms that survived this cut-throat competition wanted to find a arrangement under which they could prosper. Cut-throat competition was good for consumers in the form of low prices, but the outcome for the firms was obvious. Firms tried some different things to reduce competition within an industry and the result was the consolidations and mergers of the 1880s and 1890s. U.S. Steel was the epitome of these. "The aim of consolidation was to remove the threat of the unrestricted price competition that proved so dangerous for a world of large-scale enterprises." (Heilbroner,1977, p. 113-4). Of course all of this change in the makeup of the business world had its costs. In the face of these industrial giants which began to seem like the proverbial 'immovable object', people wanted something to be done. In the beginning some states tried to sue the trusts for 'restraining trade', but this was chiefly unsuccessful. "It was the failure to achieve control over the trust at the state level that brought pressure on Congress to intervene at the federal level." (Heilbroner, 1977, p. 117) The Interstate Commerce Commission was established in 1887 as its title makes clear to regulate trade between the states. These first federal powers of regulation were followed by the Sherman Act which further strengthened government's power to regulate business firms. "In retrospect what seems most significant about the Sherman Act or the ICC ...is the expression of a new concern on the part of the nation government." (Heilbroner, 1977. p. 122) It was the presidency of Theodore Roosevelt that the first efforts were made to really enforce antitrust legislation. Woodrow Wilson said "If monopoly persists, monopoly will always sit at the helm of government. I do not expect monopoly to restrain itself. If there are men in this country big enough to own the government of the United States, they are going to own it." (quoted in Heilbroner, 1977, p. 123) Thus it is evident that attitudes towards the notion of laissez-faire changed rapidly in a rather short period of time. Technology was the culprit that introduced a set of circumstances that had never been in place before and led to situations that had never previously been experienced. People's attitude towards the economy had changed. With the appearance of trusts and huge corporations, people did not want the government to simply "let it be", they wanted some basic protections. This would soon lead to beliefs that the government has some responsibility for making the economy the best it can possibly be. Before a discussion of what the government should do, let us take a brief look at some of the criteria upon which our United States economy is most frequently assessed Measuring the Economy Measuring the economy is an important task indeed. If we expect to have any control over the economy it is important to have some ways in which to measure the economy to tell when it is necessary to make changes and what kinds of changes will be helpful. It is essential that there are some measures that we can take and make an objective decision that some course of action is essential in order to make a correction. One important way in which we may evaluate the economy of a nation is by looking at its gross national product (GNP). The GNP is a very important measure because it is the total of all goods and services produced by the economy of a nation in a year. Thus GNP allows us to know the value of everything produced in a year. If one knows this value then it is possible to determine if the economy is producing more than it had previously. Usually one will say "the economy is growing" if GNP is increasing, or one might say "we're in a recession" if the GNP is decreasing. The GNP is very closely related to the economic health of a nation. One common way to measure a nation's standard of living is to divide its total output (GNP) by its population. This quotient would be the average income per person, and it should be obvious to see why if the quotient is higher we might say that

2) Change to a standard font for a report:  12 point size, Arial.

3)  Make the titles stand out.  There are eight titles throughout this document:

• Introduction
• Basic Economic Concepts
• Supply, Demand and Equilibrium
• Laissez-faire and Pricing
• Elasticity
• Types of Markets
• IndustrializationTechnology and The Transformation of the Economy
• Measuring the Economy

Here's How:

(a) Make the titles all uppercase. To do this select the word, then choose Format, Text, Capitilization, UPPERCASE.
(b) Make the titles bold too.
(c) Choose Arial, 16 point.
(d) I'd recommend using the format painter.

4) Double space the entire document.  Change the line spacing on the whole document to double. The long quote you just indented should remain single spaced.

5) Indent the long quote on both sides.  There's a long quote that begins with "In manufacturing..." and ends with "...p. 94)."

Here's How:

(a) Use Edit>Find and type In manu

(b) Select the text from "In manufacturing..." to "p. 94)"

Make sure the ruler is turned on. View, Show Ruler is checkmarked.

Move the blue markers on the ruler a 1/2" inwards on each side.

6) Make the margins Top/Bottom 1.5", Right/Left 1"

7)  Add an image to the middle of the first paragraph with wrapping. 

Here's How:

(a) Find a picture about economics and paste it into the first paragraph.

(b) Click the picture and choose wrapping.

8).  Add a watermarked clipart to the second page

Here's How:

• Find a pic to paste in and size it quite large.
• Image options
  • Adjust brightness, contrast and transparency to make it washed out
  • Put it behind the text.

9) Add page numbers at the bottom of the pages, in the center.

Here's How:

(a) Format, Page numbers
(b) Select footer.
(c) Go to the footer and add the word Page in front of the number. All pages should have "Page 4" at the bottom (the 4 will be the actual page number)

10) Add a header to the top right that contains your first and last name (on each page)

Here's How:

(a) Format, Headers and Footers
(b) Type your name in the Header. Aligh to the right.