9/21/2011 Class9

Through years of development, what actually increases is our purchasing power.
Even with the same amount of money, we today can more stuff cheaply than old men did.

What's the application of the charts which show the increase and redistribution of income?
(1)Risk
The worst part of being poor is living on the edge.(Without security)
In the past, any marginal price increase in necessities would make people starve because they spent a highly amount of money just to survive. But now since we only spend a small proportion of money on necessities, we can cope with the price increase by decreasing leisure expenditure.
(2)Increase in other stuff
We can spend more money on other things. Health care, education, environmental spending all increase and take a significant proportion in GDP.
Elasticity: A general measure of responsiveness that can be used to quantify many different relationships.It's calculated by using percentages.If one variable A changes in response to variable B,elasticity is percentage change in A divided by percentage change in B.


Income elasticity of demand: ratio of percentage change in quantity demanded of a good to the percentage change in price of that good.

We now pay more tax and provide more public goods. As a result, department employees increase.
National defense increases.

Income seriously understates the extent and magnitude of the economic growth.(Purchasing power)
Example: Illuminating hours
What I really care is the services I get, so I just have to turn on the light almost freely, but in the past, workers had to work hard to get a candle.That's the reason why candles are precious.

Limit of human felicity.People in the past couldn't imagine what we achieve today.
Question:Are we better off than 1970?
Example: Cell phones. Not a merely trifling thing.
How does it change the world?
(1)People can cost less to communicate and get more valuable information, which can in return creates profit and wealth.
(2)Literacy increases.

Transition of income wealth: Increase in people who earn more and decrease in people who earn less
People work less and have more leisure time and more happy.

We are also better off due to the increased ability of political decision.
Anti-segregation is helped by commercial increase.
A good economy order can help build a good social order.