Supply

1. A fixed cost is the cost that a company has to pay no matter what such as rent or cost of ingredients for a restaurant and it is independent of the output. A variable cost is dependent of output. the variable cost are expenses that change with the proportion  of what the business sells.

2. Describe a supply factor that could lead to more expensive prices for taco villa
If the input costs go up for the ingredients of the restaurant. For example, if the cost of lettuce goes up because there is less lettuce being grown, the cost of the taco will be higher because the ingredients will cost more for the restaurant. This connects to the first question that states that variable costs are dependent of output.

Demand

1. Bernie sells more hamburgers when they are sold at $1 than $5 because according to human behavior, if a price is lower they will buy more of it because they don' have to spend as much from their income. This connects to elasticity of demand because the hamburgers are price sensitive and the price affects their buying habits.

2. Bernie sells more hamburgers than Sally sells salads when they are at the same price because it has to do with preferences and tastes of the consumers. In this case the preferences of the consumer are hamburgers.

3. A demand factor that would increase sales for both Bernie's and Sally's could be if there were expectations with the consumers that the economy will improve, therefore they would buy more products from both businesses.

Extra Credit:

A raise in price could affect the total revenue of the business because when the price increases, human behavior tells us that people will buy less of that product. Also, the related goods that may be compliments to that product will also not be bought as much since the demand of the main product went down. All in all, the revenue of the business would drop. One factor that could affect elasticity is necessities because they are inelastic and people will buy their necessities no matter what the price is. Moreover, these necessities such as water are not price sensitive.

Fiscal Cliff

1.   The ‘Fiscal cliff’ is used to describe the problem that the U.S. government will face at the end of 2012, which will result in tax increases for workers, the end of some tax cuts for businesses, and the beginning of taxes related to Obama care. This will have a great impact on the U.S. economy. This has been an ongoing battle between the right and the left of this country

2.   The impact on the economy could be dramatic. While the combination of higher taxes and spending cuts would reduce the deficit by an estimated $560 billion, the CBO estimates that the policies set to go into effect would cut gross domestic product (GDP) by four percentage points in 2013, sending the economy into a recession. At the same time, it predicts unemployment would rise with a loss of about two million jobs. In all, the tax increases and spending cuts make up about 3.5% of GDP, with the Bush tax cuts making up about half of that, according to the J.P. Morgan report. The CBO anticipates that this will cause households and businesses to begin changing their spending. Because of the loss of jobs, tax increases, and the bad economy, this will cause businesses to change their spending and hiring behaviors. Many people may start to buy less products or buy cheaper items since they want to save money. Small businesses will probably start hiring less people and may fire some people since they aren’t getting enough business and their taxes are going up.

3. In dealing with the fiscal cliff, U.S. lawmakers have a choice of how to deal with the fiscal cliff:

a. They can let the current policy scheduled for the beginning of 2013 and do nothing which will have a many of tax increases and spending cuts that are expected to worsen economic growth and drive the economy back into a recession. The plus side of this that the deficit would be cut in half.

b. They can also cancel all of the scheduled tax increases and spending cuts, but have the president’s policy of raising taxes on people earning $250,000 or more. This could cause businesses to hire less as well since they are the ones getting taxed. America’s debt will continue to grow.

Economic Inequality

1.     Yes, economic inequality exists in the United States.  In fact, according to inequality.org, the upper class had an average of $1,300,000 after tax. While the middle class had less than $200,000.  Nick Hanauer states that the income for the wealthy has tripled since the 80’s. At the same time, taxes have gone down by 50%. Hanauer also argues that as the wealthy are getting wealthier from these tax cuts, the poor have gotten even poorer, while prices have gone up tremendously. According to the statistics at inequality.org, the gap between the wealthy and the middle and lower classes has been increasing at a fast rate. According to a graph of real median household income, the median income for American families in 2009 was $47,777. Half of the American families in this graph had a greater income than that amount and the rest owned less money. While middle and low class household's income have been decreasing, the upper class incomes have been increasing. According to data from the CEO income, salaries have gone up eight times the amount of the average CEO income in the mid 20th century. The increase in the upper class after tax income rose 281% while the middle class income grew 25%. There is clearly economic inequality in America and it should be solved.

2.     There are consequences of economic inequality. People will start at different points for success. For example according to Nick Holton, if a person at the lower income bracket is competing with a person at a higher income bracket, the rich will have a better chance because of the better quality education. It also causes the rich to get richer and the poor to get poorer as time goes on. However, this can also be seen as an incentive to work so people can get ahead and be successful. It can also be a reason for entrepreneurs to take risks and be competitive in the free market. Another factor is in crime and robbery. Many people commit crimes and riots today based on their poverty and their unfair opportunities in jobs. The power of the wealthy over the poor also arises in cases of what wages to give and the power of employing or firing people.

3.     Economic inequality can be addressed in two ways. The first way is to have the wealthy pay higher taxes to benefit the least well off and to achieve some sort of material equality. Warren Buffets states that it is unfair for the rich to not pay more and in some cases pay less than their secretaries in taxes. The wealthy are beig benefited by having lower taxes. According to Buffet, they should be paying higher taxes for some sense of fairness. The tax system in America is too “flat” and it should be more of a progressive tax system. The second approach is to keep government out of the way of small businesses to create jobs. That means have lower taxes for everyone, including small businesses and corporations because they are job creators and they can hire more people if they are taxed less. Instead of redistributing wealth, you can create more. If the taxes are higher, people can hire less.  According to Paul Ryan, 80% of these corporations that Warren Buffet says should be taxed more, pay their taxes as individuals. They should be taxed at a lower rate to create jobs and improve the economy.