eflection-ray (ahaha PIG LATIN)

Haha. Okay so I lied. One more little bit about what I learned through this wonderful blogging experience...

As a bit of background information, this blog was assigned to me as part of my summer school economics class (hence the whole economics&music shtuff). This blog was designed to connect the economic concepts of the course to a certain interest of ours. Through this connection, we were able to better understand economics through the application to something we know and love.

By applying the given economic terms and principles to one of my favorite things (music), I was able to learn in a way that was different than just copying and memorizing and quizzing and repetitively drilling the terms into my poor, unfocused mind that kicked into summer mode around June 25th only to recalibrate around September 7th or so. This was a totally new experience for me and yeah, I'll admit it, I was skeptical at first. To be quite honest, I've become so accustomed to the "old skool" way of learning through the textbook and lectures, taking tests, and writing essays, that it's just how I learn the easiest. It's all I've known. How is this blogging thing gonna really help me? How am I even gonna know what to do? What does my teacher expect from me and how will I be able to meet those expectations? That was the main question right there. I've found that I learn in a way that requires a lot of structure. Someone tells me what to do and how they want it done and, like the mindless little nerd-monkey that I am, I do it. But by using this blog, I've been exposed to a new way of thinking and learning which has really been of benefit to myself. I've learned to think outside of the box and learn how I want to learn. I'm no expert, but it's safe to say that I know quite a bit about music. At the beginning of this course, it was most definitely safe to say that I knew a heck of a lot more about music than economics. By using this knowledge and my interest in music, I was able to learn the topics in this course in a way that was convenient and understandable for me. While everyone else is able to learn by tapping into their interests such as reading and storytelling and computers and libraries and whatever, here I am, sitting at this computer in the sometimes 90 degree heat learning in my own way through something I'm interested in. How cool is that?

This is definitely a tool for learning that I hope that teachers will use and further develop in the future. As far as grading certain assignments through the blog...that's where it might get tricky. I'm not a teacher, so I can't say I quite understand how it's done. But I'm guessing that this might be an area to focus on developing. With every student working on a different topic and learning in their own way, is it possible to use the same grading system to fit each and every blog? I dunno...just a thought. But overall, this seems like something that would be of benefit to someone who doesn't learn well through the traditional textbook/lecture/notes learning style. How can you expect everyone to learn the same way when each and every person is so different? The phrase "deal with it" first came to mind when I was presented with this idea. But the more I got into this, the more I understood how this could help someone if they really wanted to learn and put the work into it. That's the key there...they have to want to learn and have to want to put the work into this. It would definitely be a whole lot easier to just sit here and take notes and memorize them for a test every week. But this assignment took some thought. And while it is a lot more laid-back and open, it still requires a lot of work. For someone who doesn't learn well in the traditional setting, this may be even more of a challenge for them. But in the end, I think it would be worth it. Instead of just setting the whole class free to blog about a given set of terms every day (which can get a tad monotonous...not gonna lie), I think engaging the students in a discussion about each other's blog (rather than just the "hey great job!" comments being left on a friend's blog) would be more productive and would really get the students to understand how they learn as well as how others are learning. Coming into a class, sitting down at a computer, and typing for an hour isn't really my idea of a class. I could do that at home. But it's what we do in class as a class that will tie this whole thing together.

So yay. That's my feedback/reflection/constructive comment/whatever. Hopefully this will inspire someone to get out there and start their own blog. It doesn't necessarily have to be for school or about economics. Just do whatever is of greatest interest to you. Who knows who you'll have commenting? But let's not be naive...no one may even comment at all. Think about how big the internet is and where your tiny itty bitty little blog fits into the big picture. The key is to get the word out...tell your friends! Get them to comment. You may not have some uber-genius-expert commenting on your topic of discussion, but maybe you'll have a few good friends offering their advice.

That is all :]

Labor, Employment, and Wages

Just as there is a supply and demand for goods, the same concept exists as a supply and demand for labor. Those who demand labor are known as employers while those who supply it are employees. Simple enough, right? Or so we thought (*Twilight Zone theme, please*). So here we go. Wages and labor and such in the music industry....

The wage rate is, basically, the price of labor. Employers are willing and able to hire more people at lower wages. Obviously, the head honcho of a music group would be willing to hire more representatives if the wage rate at about $8 an hour than if it was $10 an hour. But at the same time, more people would be willing to work as representatives for the music group at higher wages than lowers wages. This creates the equilibirum wage rate (similar to the equilibrium price. Refer back to the "The Basics: Supply and Demand" entry to refresh your memory), which occurs when the quantity demanded of labor equals the quantity supplied. Let's say that a music group is offering 10 new representative positions for their company. 100 people respond with an interest in the position. Since the quantity of labor supplied is greater than the quantity of labor demanded, there will be a surplus of labor. This surplus will cause the wage rate for this position to decrease. Now if there were 50 representative positions available and only 20 people are willing to fill them, this creates a shortage of labor and the wage rate for that position would then increase.

The demand for labor is dependent on the demand for the good or service. So if all of sudden, for some reason unknown to us, (*cue Twilight Zone theme*) record companies and music groups were not as demanded by artists, then the group or company would not need to hire as many workers to produce their services. The demand for labor is referred to as a derived demand. A derived demand is a demand that is the result of some other demand. In this case, the demand for labor is a result of the demand for the services of the music group or record company. In order to prevent wages from dipping too low, the US Government passed the minimum wage law. This law sets a level below hourly wages are not allowed to for. As of now (August 2006), the minimum wage in New York state is $6.75 an hour (as a bit of a side note, this is what I'm working for at my current job). A raise of minimum wage to $7.15 will be effective January 1st, 2007 (YAY!). Of course, minimum wage varies from state to state.

The labor unions in the workforce aim to obtain higher pay for its members as well as better working conditions. The American Federation of Musicians of the United States and the American Federation of Television and Radio artists are some examples of these labor organizations. These organizations are comprised of the musicians, vocalists, writers, actors and directors who create and perform in American sound recordings and films. Members of these groups may launch advertising campaigns to promote their products or services so that a possible increase in its demand, which would result in an increase in labor demand, would occur. Labor unions also work to decrease supply. Lowering the supply of artists and musicians would therefore increase their wage rates. Some unions supported closed shops which are organizations that hire only union members. Through closed shops, the unions would work to keep the suplpy of workers low. Now, through the Taft-Hartley Act passed in 1947, these closed shops are illegal. But union shops are still legal today. These shops do not hire only union members, but require employees to join the union with a certain period of time after being hired. This makes the unions happy because they would have more influence. For example, the more people that join and support the American Federation of Musicians of the United States, then the easier it would be for them to form a strike if they aren't satisfied with their working conditions. Today, many states have passed the right-to-work laws which make it illegal to require union memberships for employment purposes.


And that's it, folks. Or...well...at least for now. But seeing as my economics class ends in two days and there's still 3 weeks until REAL school starts, I'm thinking that's not likely. Haha. But who knows, right? Comments are still appreciated. Ideas for future entries (if any) would be helpful as well if one of you is DYING to hear my expert (ha) opinion on economics and the music industry and such. So yeah. That's all for now :]

Competition and Markets

The different market structures of an economy are defined and categorized by their certain characteristics (number of sellers in the market, the product produced and sold, etc). I will be discussing each of the four market structures (perfectly competitive, monopolistic, monopolistic competitive, and oligopolistic), how they compare to one another, and how they can be applied to the music industry (if possible). I can tell you're totally pumped, so without further ado...

The perfectly competitive market. In this kind of market, there are many buyers and sellers. Well take a look at the US alone. We're a pretty big country with a great variety in our music-loving population. But as of right now, the world music market is dominated by four main music groups (business groups consisting of music related companies, typically owned by an international conglomerate holding company): Universal Music Group, Sony BMG Music Entertainment, EMI Group, and Warner Music Group. So in theory, there are only but a few sellers. Also, in a perfectly competitive market, all business firms sell identical goods. I think this is somewhat debatable. While it's true that all CDs are certainly not of the same artist, it would be impossible to tell the difference between a Red Hot Chili Peppers album sold at Wal-Mart and another of the same artist sold at FYE. There are, obviously, many different albums from many different artists sold to suit the heterogeneous tastes of the public. But the ones that are of the same artist are identical. Buyers and sellers do have relevant information about prices, the quality of the music or CDs, the sources of supply, etc. And lastly, firms have easy entry into and exit out of them market. As shown by the "indie" labels of today, artists can easily establish their own record label and company. And it's quite possibly even easier to open your own music store. So as you can see, the music industry shows many of the characteristics of a perfectly competitive market. The sellers and producers in this market become price takers. This means that they can only sell their goods at the equilibrium price (hmmm. ringing any bells?). An online music provider could not sell a song or album to be downloaded at any price higher than the equilibrium price. They would would have no need to sell at a lower price that the equilibrium price since no other providers and sell their music at a price higher than the equilibrium.

Next, the monopolistic market. This market consists of one seller. There, of course, is not just one seller in the music industry. Don't believe me? Check this out. Also, in a monopolistic market, the seller sells a product that had no close substitutes. The question here would be "how do you define 'close'?". Online music downloading could be a considered a substitute for album purchasing, but how close are the two? And finally, the barriers to entry into this market are high. Some legal barriers to entry include public franchises, patents, and copyrights (all of which are rather hard to obtain). Rather than being price takers, the sellers in this market are price searchers, meaning that they can sell some of its product at various prices. In some industries, business firms have an average total cost that is so low that no other firm can compete with it. These firms can lower their prices by a lot and still make a profit. These firms are called natural monopolies. To preserve and promote competition between firms and control monopoly power, the government establishes antitrust laws. The principles of a monopolistic market are hard to relate to the music industry since the characteristics of this market do not match up with those of the music market.

Between the two extremes of the perfect competition market and the monopolistic market exist the monopolistic competitive and oligopolistic markets. In a monopolistic competitive market there exists many buyers and many sellers (see the bit above about the perfect competition market and the many buyers and sellers of music). The business firms of the monopolistic competitive market produce and sell slightly differentiated products. Within the music industry, all CDs by the same artist are, or course, the same. But there are many different artists and record labels working together to produce their albums. Some better examples of slightly differentiated products would be the devices used to listen to music (such as stereos, CD players, mp3 players, etc.). While all of these products are used for the same purpose, they all differ slightly in style and some features. Also like the perfectly competitive market, the monopolistic market makes it easy for firms to enter into and exit out of the market.

In an oligopolistic market, there are few sellers. This holds true in the music industry with the presence of the "Big Four record labels" (see the bit above about the perfectly competitive market). Also, in this market, firms produce and sell either identical goods or slightly differentiated goods. This could possibly be the case with the goods produced in the music market if focusing on goods that slightly differ from one another. Finally, the barriers to entry into this market are difficult. While it may be difficult to establish a well-known and successful music group, this is not the case when considering how easy it is for artists to start their own record labels and for individuals to open music stores. Since there are few sellers in the an oligopolistic market, it is easy for them to meet together to discuss the issues that arise due to the competition between their firms. The CEOs of these firms (such as the "Big Four record labels") may come together and enter into a cartel agreement which specifies how they will act in a coordinated way to reduce competition among them. Price discrimination may also occur in this market. This is where a seller charges different prices to different buyers and the price differences do not reflect cost differences.

In conclusion, to make it easier to understand the differences between the markets through all of my babbling, I've created this handy-dandy, user friendly CHART. (*TA DAAAAAA*)






(I am SO getting the hang of this...)

Topic Numero Tres: Cost and Revenue

It is agreed that all businesses have costs. Yes, all of them. Which, as you can probably tell, will lead to me explaining the costs of businesses in the music industry. Some costs for these companies, such as record companies and record stores, include rent for facilities, taxes, etc. These are examples of fixed costs. These costs or expenses are the same no matter how many CDs or albums are sold. Costs that vary with the number of units of a good sold are called variable costs. An example of a variable cost expense for record companies is the royalty paid to the artist that is signed with the company. A royalty is the percentage paid to the artist for each album sold. This obviously fluctuates with record sales. These variable costs added to the fixed costs of the company produce its total costs.

Let's scale this concept down to a smaller level and use a record store as an example (Mind you, these numbers may not be entirely accurate. But for the sake of me being able to explain this better, let's pretend, shall we?).

In a given year, the fixed costs for this record store amount to $750,000 while its variable costs come to $100,000.

Total Costs= Fixed Costs + Variable Costs
Total Costs= &750,000 + $100,000
Total Costs= $850,000

The average total cost is determined by dividing the total cost by the quantity of output. So lets say this record store produced 100,000 CDs in the given year.

Average Total Cost (ATC)= TC/Q
ATC= $850,000/100,000
ATC= $8.50

By producing an additional unit of a good, the total cost will increase. This change that results is called the marginal cost. It describes a change in one thing (total cost) caused by a change in another (quantity of output). Getting back to our example...

Let's say this record store decides to produce 125,000 CDs rather than 100,000. As a result, the total cost increases to $900,000. To determine the marginal cost...

Marginal Cost (MC)= change in TC/change in Q
MC= $50,000/25,000
MC= $2

Now hopefully, to support the costs, there should be some revenue being brought in. If not, there might be a slight problem and you should probably reconsider running a business of any sort. Anyway...the total revenue is defined as the price of a good times the quantity sold. Just as there is a marginal cost, there is a marginal revenue. It is similarly determined by dividing the change in total revenue by the change in quantity of output sold. Going back to our good old record store, assuming CDs are $16 each and 75,000 are sold...

Total Revenue= Price of a good x quantity sold
Total Revenue= $16 x 75000
Total Revenue= $1,200,000

Now let's say the number of CDs sold increases from 75,000 to 90,000. This means that the change in total revenue is $240, 000.

Marginal Revenue (MR)= change in TR/change in Q
MR= $240,000/15
MR= $16,000

Of course when running a business firm, there are many things to be considered. First of all, the firm must consider how much they will produce. Generally, as long as your incoming revenue marginal revenue is greater than your outgoing marginal cost, you should be doing pretty well. No matter how small the difference, as long as the marginal revenue is greater, the firm should continue to produce their good. An economic law that should be considered is the law of diminishing marginal returns. This law states that if additional units of a resource (ex. labor) is added to another resource (capital) that is in fixed supply, the additional output produced (as a result of hiring another worker) will decrease. Let's return to our music store example. As more workers are hired at the store, the output of CDs will increase. But at a certain point, after a certain amount of workers are hired, the output will decrease. Therefore, employees should be hired at this store as long as the additional output produced by the additional worker multiplied by the price of the good is greater than the wage paid to the worker.

Next Topic: Business Operations

In the music industry, like any other market, there exists many forms of business firms. A team of workers come together to work to produce certain goods and services. An example of a major business firm in the music industry would be a record company. A record label is a brand or trademark associated with the marketing of sound recordings and music videos (according to Wikipedia). Behind this label is a company that manages brands and trademarks; coordinates and oversees production, manufactures, distribution, promotion, and enforcement of copyright protection of sound recordings and music videos; and maintains contracts with recording artists and their managers. Some examples of major record labels today are Jive, MCA Records, Island Records, Epic Records, and Arista. Of course there are many independent ("indie") labels that are typically artist-owned and are not as well known. They are especially common in the punk rock scene as the DIY ethic encourages musicians and artists to self-publish and self-distribute. In a major record company, an individual who is shirking will be a hindrance to the success of the company. Everyone has to contribute and do their very best. It may sound cliche, but for a company that so involved in the different aspects of music production, it is especially true.

A sole proprietorship is a business owned by one individual who makes all the business decisions, receives all profits or takes on losses, and is responsible for the debts of the business. A music store that sells CDs, records, and other music related items would be an example of a sole proprietorship. A single owner could run and manage the store and its profits (if any). A music store such as this one could similarly be run by a partnership in which it would be owned by two or more co-owners. Specialization would be a benefit for this business firm if all of the owners worked and applied their skills to different jobs necessary for the success of the business. For example, one partner would be in charge of advertising while another would focus on which CDs to order and how much of each to order (Again, back to that supply curve stuff). But at the same time, the decision making in a partnership could be difficult if the partners do not agree on certain things.

One of the most successful corporations of the online music industry (as well as the computer market) industry today is the Apple Corporation (aka. the founder of iTunes and the creator of the ever-so-coveted iPod). As a corporation, Apple can conduct business in its own name, just as an individual does, while being owned by stockholders who buy shares of stock. by buying these shares, stockholders stake a claim on the assets of the Apple Corporation, or anything of value to which the firm has legal claim. The owners (or stockholders) of the Apple Corporation are not personally liable for the debts of the corporation, as opposed to if their firm was a sole proprietorship or a partnership). These stockholders have limited liability, which prevents them from being sued if the corporation fails to pay its debts. This limited liability is what keeps people willing to invest in a corporation. Of course, if the corporation is doing relatively well in sales and production, like Apple is, than people as more willing to invest in shares of that corporation. Other business firms do not provide such liability. A corporation exists as a legal entity, meaning that it will continues to exist even after one or more of the owners sells their shares or dies. As owners of the corporation, the stockholders of Apple can annually elect members for its board of directors by casting as many votes as he or she has shares of stock. This board of directors serves as the decision-making body of the corporation. The board of directors for Apple may determine what products to produce and sell (computers, iPods, etc.) as well as what percentage of the profits will go to stockholders and which percentage will go for modernization and expansion.

A person or group could choose to use the name of a franchise and sell its goods and services. This person or group must make payments to the firm that contracts the franchise and meet certain requirements. Continuing with the example of the Apple Corporation, an example of a franchise would be the Apple Store. The corporation behind this franchise (Apple Corp.) would be the franchiser. The person or group that would buy the franchise is know as the franchisee.

The Basics: Supply and Demand

Music and economics. Broad, I know. But I was really stuck for an idea. My dearest friend Amanda suggested it. I'd been considering it for a while, but dismissed the idea because it seemed too general. But hey, I'll give it a shot...


First of all, let's start with the music industry today. Everybody's different, right? Not everybody has the same taste in music. Because of this, we get the different styles, types, and genres of music today. And so exists the market of music. These different tastes all add up to the collaborative demand of music for the listening pleasure of the public. The public is willing to buy the music, as long as it's what they like. The ability to buy music depends on the price at which the music is supplied to the public. For example, we now have music downloading services such as iTunes and Napster that offer individual songs as well as entire albums at cheaper prices. These are quickly replacing the traditional idea of going out to the store and buying your favorite musician's album.

Online downloading can be seen as a substitute for album sales, which creates an elastic demand. A complement product to album sales and online downloads would be stereos, CD players, mp3 players, etc. If the price of CDs go up, the public will then turn to online music providers. Of course this can be reversed. If the prices of music being sold and downloaded on the internet increases, then the public would turn to the "old-school" CDs. An inelastic demand would be the demand of music itself, regardless of how its provided. No matter how prices change, there will always be a demand for music. The elasticity of demand would occur within the different ways that the public can buy and listen to music. This is where competition occurs. The law of demand is present here. If the price of music goes down, then the quantity demanded will go up, as people want to pay the cheapest price possible. A example of a demand schedule would occur as follows.



Applied in graphic terms, this becomes a demand curve. This curve can experience shifts to the left and right as the demand changes. For most people, music is a normal good. If their income increases, then they will buy more music, whether they choose to purchase albums or individual songs online. But when it comes to buying either albums or online downloads, albums would probably be an inferior good as ones income increases.
Like other goods, the Law of Supply is present in the music market. As the price of music increases, then the number of cds, songs, etc. that is offered at a certain price increases. A supply schedule would map out the quantity supplied while the supply curve would map out the same numbers as a graph. Similar to its demand curve, the supply curve of the music market also experiences shifts that are based on changes in the supply of music. The supply of albums would be inelastic if the price increases by a greater percent than than the number of CDs being supplied. The elastic supply would most likely be of online song downloads, since there are so many songs available and so many will continue to be available even after a change in the price of a song.

Nowadays, there would most likey be a surplus in CDs supplied as the public turns toward online downloads and more modern ways of enjoying music. Of course there are still those who choose to go out and buy CDs, due to the fact that they don't have a computer or that they are just remaining faithful to their favorite artists or music stores. If quantity supplied of CDs were to go down, then it may be considered a shortage. A study conducted by researchers at Harvard and the University of North Carolina shows that online music sharing does not affect CD sales as much as people tend to believe. Of course, this issue is a topic of debate today as others believe that free online downloading and file sharing is hurting CD sales. The market of CDs is definitely not in equilibrium as the online music downloading market. The demand of songs is easily met by the online music providers. The equilibrium quantity is hard to determine in such a market where the songs are so easily and frequently accessed through online file sharing, but the equilibrium price of such providers usually remains around $1 per song.



So there you have it. My first little bit about music in relation to economics. As you can see, I mostly discussed the music industry. That seems to be the easiest to relate economic terms to. But of course there is lots more to it than just the buying and selling and supply and demand of music. It's just so broad a topic that it's hard to cover everything. Really, it's all based on the many different interests of the public.

"and this is just the prologue..."

Cool. Welcome. This is my blog. I'm really not sure what to type here, but for starters, I guess I'll go with my interests. First of all, I LOVE music. I myself am a musician (I sing, play the violin, and I know a little guitar too.) and I love listening to music. All kinds. Mostly alternative/emo/punk/whatever rock. Country, 80s, showtunes, pop, acoustic too. Bottom line: if I like it, I'll listen to it regardless of genre. I enjoy acting and performing too. I've been in my school's drama club since 6th grade. There is nothing in the entire world like the feeling of performing onstage. It's like a natural high. It's seriously the best. My friends and I are pretty much drama geeks. I enjoy photography too. I just got a digital camera for my birthday and I hope to take some courses or something and learn more about it. And probably just like any other teenager, I just like having fun with my friends. We're a pretty crazy bunch of kids. Haha.

Soooo yeah. Hopefully I can zero in on one of these topics to "blog" about. But for now I'm kinda undecided.

That's it for now.