Econ 202: Principles of Microeconomics How Americas talent wars are reshaping business – the labour shortages are forcing firms to get creative S

Econ 202: Principles of Microeconomics

Spring 2022

Instructor: Mona Ray

Topics for Term Paper

Paper Due: April 25th, 2022, Monday

Pick any one topic for your paper. This term paper covers 15% of your course

grade.

The paper should be 6 pages long (including Title page, bibliography, graphs,

tables etc.). It should be typed double-spaced in Times New Roman, font size 12

following the APA style with 1-inch margin on all sides. Don’t forget to include a

title page at the beginning and a bibliography at the end of your paper. Discuss the

issue in your paper as an economist. Upload your paper as MS Word document on

Blackboard.

Grading Rubric:

Title 5 points

Page numbering 5 points

Correct labeling of Figures, Tables

(Including source) 5 points

Content 20 points

Bibliography 5 points

APA style: https://apastyle.apa.org/style-grammar-guidelines/paper-format

Topic 1: How America’s talent wars are reshaping business – the labour shortages are forcing firms to get creative

The Economist | Feb 5, 2022, edition

Summary: Dcl logistics, like so many American firms, had a problem last year. Its

business, fulfilling orders of goods sold online, faced surging demand. But competition

for warehouse workers was fierce, wages were rising and staff turnover was high. So Dcl

made two changes. It bought robots to pick items off shelves and place them in boxes.

And it reduced its reliance on part-time workers by hiring more full-time staff. “What we

save in having temp employees, we lose in productivity,” explains Dave Tu, Dcl’s

president. Full-time payroll has doubled in the past year, to 280. Paycheques of

everyone from McDonald’s burger-flippers to Citi group bankers are growing fatter. This

goes some way to explaining why profit margins in the S & P 500 index of large

companies, which have defied gravity in the pandemic, are starting to decline.

Explain how this tug-of-war between the employers and employees is affecting the US

labor market in terms of elasticity of supply and demand of skilled labors and their

wages and changing the way of doing business in this country. Are we seeing similar

trends in the European, Asian or South American labor markets?

Topic 2: Oil Tops $130 a Barrel as Russian Attacks Escalate

WSJ | By Ryan Dezember | March 6, 2022

Summary: The biggest premiums on record are being paid for barrels of oil to be

delivered now rather than later. Prices for April delivery of crude oil have shot up since

Ukraine was invaded by Russia and buyers began to shun Russian oil exports. The main

U.S. crude oil price recently exceeded $110 a barrel for the first time in more than a

decade.

Because the supply for many products is relatively inelastic in the short run, an increase

in demand will result in a greater increase in price and a lower increase in quantity than

over a longer time period. Holding other factors constant, the demand for a product will

be more inelastic when there are no good substitutes for the product. With this simple

theory in hand, discuss how consumer behavior, labor market, and the inflation in the

US will be affected due to the escalating Russia-Ukraine war.

Topic 3: The New Sticker Shock

WSJ | By Mike Colias Nora Eckert | February 26, 2022

Summary: As supply chain problems prolong a shortage of new automobiles for a

second year, customers face near-empty dealer lots, high prices and long waits to buy

new cars. Although automobile manufacturers discourage dealers from charging more

than their cars’ sticker prices, many dealers say they have to be realistic about what the

market will bear. In extreme cases, dealerships have charged as much as $40,000 above

the manufacturer’s suggested retail price (MSRP) for some luxury cars.

Product shortages cause prices to rise and product surpluses cause prices to fall in the

free market. Under the current scenario of supply-chain crisis in the US, discuss the

general production and consumption opportunity cost (highest-valued alternative given

up to engage in an activity) likely to have an impact on the US GDP for the coming years.

Topic 4: Shoppers Are Caught Off Guard as Prices Change More Often

WSJ | By Charity L. Scott | February 4, 2022

Summary: More everyday items are being priced like airline tickets where sticker prices

are changed within hours or days. Retailers say this is a reaction to changes in costs and

continuing product shortages caused by the Covid-19 pandemic. The changes occur

online as well as offline.

Menu costs are costs firms incur when they change their prices. Menu costs may cause

some prices to be “sticky.” In the article Brian Elliott, a partner at the management

consulting firm McKinsey & Co. stated: “As a retailer, what I really care about is

loyalty…If the customer feels ripped off, they’re not going to come back to my store.”

Briefly explain why a market shortage may be allowed to persist because a retailer places

a priority on maintaining the loyalty of its customers. Which would benefit consumers

more: (a) a retailer allows a product shortage to persist, or (b) the retailer increases the

price of a product to eliminate the shortage? Discuss how rising prices are hurting the

consumers' purse and cost of living.

Topic 5: Taking stock as America moves into a new phase of the pandemic The Economist | March 12th 2022 edition

Summary: Two years ago on March 11th, the World Health Organization declared

covid-19 a pandemic. Americans are eager to leave the wretchedness behind them. Polls

suggest concern about covid is declining. Mask-wearing has waned. On March 26th,

Hawaii will become the final state to drop its indoor mask mandate, and the Centres for

Disease Control and Prevention (cdc) now recommends masks only for the 7% of

Americans living in high-risk counties.

The introduction of vaccines and now booster shots is reviving the economic activities in

every country. Which industries will thrive, and which ones are likely to perish under

the new norm of doing business in the post-pandemic era?