Investors Cheer Subprime Rescue

University of Phoenix

C-BSBM24R; ECO 365

Daniel F. Cleary

December 13, 2007

Article Analysis: Investors Cheer Subprime Rescue

The article, “Investors Cheer Subprime Rescue” caught my interest (pardon the pun). This is the season to be jolly. This short article was found on Course Web Links/Research Resources/ Internetnews.Com, written by Paul Shread on December 6, 2007 and details the announcement by President Bush of an agreement with mortgage firms to freeze interest rates for five years. A brief explanation noted the purpose of the freeze is an effort to help subprime borrowers facing steep increases in adjustable rate mortgages. It shows governmental or economic forces operating without society choosing this control.

Economics make me think of my children’s letters to Santa, when they ask for their dreams to come true. The first items are the most desired and often impossible to purchase with supply and demand limiting the access to popular items. Manufacturers attempt to supply sufficient quantities, although are often late due to unforeseen problems in underestimating timing constraints imposed. The new technology items are difficult to locate when being produced just in time for the holiday season and usually priced at a premium. Manufacturers bombard the advertising space in children’s programs with dream makers of items to ask for. A parent must watch the advertisements for details of purchasing from release dates, to stores participating, and to the pricing.

A child will watch their favorite television shows and be consumed with the commercials on products to be desired. The radio will include commercials on their favorite stations and even the newspapers include advertisements meant to peak their interest in products available today and in the near future. An adolescent will demand items of popularity or trend with their group discussions of what is the best items to obtain. Boys will demand the items tailored for them and girls demand equally in the same manner. Manufacturers group our desires by age, gender, trends and forecasts by surveys many people participate in.

Economics begins with our youth, as they become consumers asking for things of interest and demand certain items. The need will continue our entire life as manufacturers solicit us with a desire for what they have. Our youth tend to demand the items of popularity. Microeconomics is the study of individual choice and how that choice is influenced and grows to the population’s choice as a whole. Manufacturers solicit our choices on surveys designed to find out our current buying needs and desires. The information gives them insight into current and future products for manufacture, distribution and higher profit to earn without guessing, speculation or other costly means of investigation.

Adults desire luxury cars to purchase (including color and accessories), vacations to take, and the restaurants focused on, economics is information studied to supply us with glamorous brochures, menus to encourage us and pictures to prompt us to buy. It was never a question of which items the children wanted, and the choice was usually the higher priced item in the catalog or on the menu. The desire is no different as we grow older.

If the demand is high and the supply is low, the price may be more than we are willing to pay without other sacrifices. If the demand is low and the supply is high, the price is usually a bargain, of which many people wait for. The time of purchase may depend on many factors, including our income, our demand for the product and current supply availability, when all else is equal.

Many adults want much more than what they can afford and subsequently settle for less, unless gaining a better education, working more than one job or making other sacrifices. Economics is the study of buying habits throughout our lives and products are manufactured with our age, gender, nationality, race, buying habits and from the trends of the time.

Many factors influence changes in supply and demand as noted in the first paragraph. Political and legal forces are one of three forces which force the economic conditions to change. A change usually results in a change of pricing, or buying power for consumers in this case. Another is economic forces (known as the invisible hand), and third is social and cultural forces.

The law of demand is expressed, “Quantity demanded rises as price falls, other things constant. Or alternatively, quantity demanded falls as price rises, other things constant.” The rule is based on desire and how much an individual is willing to pay. “Other things constant” places a limitation if other things