Scott Adams' Secret to Success: Failure

Too many people expect success to come instantaneously and this article perfectly explains why it's exactly those people that are always quick to fail. Passion and 'spirit' has been romanticized by the media for far too long as being the only way to achieve true success in a business. Being suddenly filled with determination over some self-perceived interest in a field only brings you higher into the sky until you fall. While failure is almost never a pretty sight, it almost always holds the reason for your failure and being able to unearth said reason can over time allow any entrepreneur to piece together the puzzle of success.

Chapter V

While everything we learned in previous chapters still holds true, chapter V introduces elasticity where the price of a product and its quantity demanded is not always in a 1:1 ratio and negligible changes in price can lead to devastating falls in quantity demanded. 

The elasticity of a good is determined by the consumers need for it and the prices and quality of its substitutes. Plentiful products such as applesauce have a high elasticity and if one supplier decides to increase the price for its applesauce, then the revenue will fall due to a decrease in quantity demanded and an increase in demand for other brands of applesauce. Necessary goods such as medicine tend to be inelastic because of a lack of suppliers and when a specific kind of medicine is needed, then a consumer will be willing yet reluctant to pay high prices if necessary to attain this medicine.

Knowing how influential a products elasticity is on its pricing, equations have been introduced to give some perception into how changing the price of a good will affect the revenue. 

The total revenue of a good is how much money is received by the sellers after selling their goods. Sellers tend to want to maximize their income so they must find the price which guarantees the highest possible revenue which may be tricky as any change can possibly lead to a huge loss in profits.

Chapter Four

The market is dictated by a changing demand that under normal circumstances cannot be easily predicted but yet the price of any and all goods must be set to a price that meets the demands of most people while allowing for the most profit.
Supply however can also play a role in demand which then affects the pricing. Competition is a well known method of keeping the price of goods at a reasonable price because when one producer's price aren't low enough for a consumer, that consumer can simply walk away and buy a cheaper and possibly better product from another producer. If this happens too often then a producer must lower their prices to match with their competitors in order to stay relevant in that market.
Without competition and a producer being the only one to make a certain good, it gives them free reign over their pricing and demand curve does not matter if it is needed by most consumers. This usually leads to gross overpricing and usually does not end until the government steps in to say no.
Lower prices however generally lead to an increase in demand simply because consumers can afford more of it. For example, if one hot dog stand sold their hot dogs for $1.50 and another for $2.50, you would probably buy two hot dogs from the one that sells it for $1.50 simply because it's cheaper.
However, when supply runs low then the cost of a product must go up to make up for its increased cost to produce and will generally lead to a decrease in command because consumers can't afford as much of it anymore.
Personal preferences also determines how consumers buy, and because almost everyone is different, the changes in demand in this aspect can never or rarely be predicted accurately. In extreme cases however, such as addiction, pricing is of little matter other than the fact that the amount of the good that is bought depends on when the consumer runs out of money. This is usually where the government steps in but only if the consumer wants help.

Chapter 3

The world is dependant on one another to provide goods such as clothing, electronics, and food. This helpful to establish and maintain relationships between countries and  improve economies. Trade is usually only done when it is beneficial to both parties but it is also unpredictable due to the fact that it is a result of human behavior. When one party has an advantage over the  other in terms of production cost and efficiency then this is known as absolute advantage. When trading however, if the agreement can reduced the opportunity cost of both parties then it is a beneficial trade. This kind of agreement allows countries to specialize in certain types of jobs. Even when a trade is beneficial for a country, it can still make individuals worse off due to an increase of goods they lack interest in and a decrease in the one's that they do want.

Chapter 2 Summary

Economist function as a scientist and policy makers while alternating between the two. However their role as a scientist is limited as experiments are either incredibly difficult to do or they must rely on data they gather from what has already occurred. In terms of policy they must make an assumption of what they think will occur but this assumption can only really be based off of previous unpredictable behavior. To get the data for their assumptions they make use of various tools.

The Circular-Flow Diagram is a simple model used to explain the very basis of the economy. The firms will create goods that are then shipped to the markets which is in turn bought by the people who then give money in which is used to buy products from firms that hire people to create their products. This can be seen in any market.

The Production Possibilities Frontier is a chart used to determine the trade-offs made in the production of products. To create more of one product one must make less of another and the frontier line represents the maximum possible output which cannot be exceeded unless the means of production are altered.

Positive and Normative statements are essentially the facts and opinions of the market. Positive statements are usually derived from the observation of data and can be easily defended. Normative statements are usually one's opinion on what should be done to change the economy and while it can be defended, it can also be attacked.

Different perceptions of the economy also tends to come from how one perceives its current state to be. If the speaker is ignorant of its gritty reality then they will probably make illogical statements on it. An economist that lives in or witnesses conditions that are largely ignored will be able to make more realistic suggestions.

Overall this chapter has taught me more about the market and that changing the market is not always a simple black and white answer.