Lecture Notes: Sept. 25

Econ. 103, Fall 2002, Prof. Nancy Folbre

"There is Power in a Union," 

There is power in a factory, power in the land
Power in the hand of the worker
But it all amounts to nothing if together we don't stand
There is power in a Union

Now the lessons of the past were all learned with worker's blood
The mistakes of the bosses we must pay for
From the cities and the farmlands to trenches full of mud
War has always been the bosses way sir.

The Union forever defending our rights
Down with the blackleg, all workers unite
With our brother and our sisters from many far-off lands
There is power in a Union.

Now I long for the morning that they realize
Brutality and unjust laws cannot defeat us
But who'll defend the workers who cannot organize
When the bosses send their lackeys out to cheat us?

Money speaks for money, the Devil for his own
Whoe comes to speak for the skin and the bone?
What a comfort to the widow, a light to the child
There is power in a Union

The Union forever, defending our rights
Down with the blackleg, all workers unite
With our brothers and our sisters together we will stand
There is power in a Union.

Billy Bragg, from Talking with the Taxman About Poetry

I chose this song because of a campus wide union rally today at Whitmore.

The campus unions bargained a new contract last year, but the Governor refused to sign it (although contracts for most other state workers were approved). This is a violation of both legal and moral principles and is likely to be a continuing source of conflict. Please take the opportunity to talk to union members on campus about this issue–you can learn a lot about an important issue, one that is likely to affect your experience at UMass this year.

The purpose of today's lecture is to finish up Chapter 4, focusing on shifts in supply and demand curves, which are distinct from movement along the curves. Shifts are brought about by factors other than price and quantity, factors which affect the relationship between price and quantity.

Some examples of factors that affect supply are technological change, change in the cost of an input, and weather. Some examples of factors that affect demand are a change in preferences, a change in income, or a change in the price of a substitute or a complement.

An increase in income usually leads to an increase in the quantity demanded of a good.

So, we call a good the demand for which goes up when income goes up a "normal" good.

But some goods you are going to buy the same amount of no matter what your income...

The brilliant example someone in class offered was, toilet paper.

Some goods you might buy less of as your income went up, because you are able to buy substitutes. For instance, you might buy fewer pinto beans because you start buying steak.

Or you might buy fewer t-shirts because you start wearing silk. We call a good the demand for which goes down when income goes up an "inferior" good.

It's really important that you be able to analyze, interpret, and graph shifts in supply and demand, so I want to focus on some particular figures in the text:

Figure 4.10. The Effect on the Skateboard Market of an Increase in the Price of Fiberglass

Figure 4.12. The Effect of Technical Change on the Market for Manuscript Revisions

Figure 4.13 The Effect on the Market for Tennis Balls of a Decline in Court Rental Fees

Figure 4.14. The Effect on the Market for Overnight Letter Delivery of a Decline in the Price of Internet Access

Figure 4.15 The Effect of a Federal Pay Raise on the Rent for Conveniently Located Apartments in Washington, D.C.

Figure 4.17 The Effects of Simultaneous Shifts in Supply and Demand

Don't try to memorize these graphs. Try to understand what's going on in them, so that you will be able to reason through the effects of a variety of changes on the relative position of these curves.