Microeconomics Discussion Questions - Coursework Example

Topic:  Microeconomics Discussion Questions Michael Jordan and others like him command extraordinary salaries for a number of reasons. They happen to have a bundle of talents that is exceedingly rare and in the world of advertising, they inspire loyalty and envy in the minds of a number of potential buyers of merchandise. Whether snowboarding or the National Basketball Association (NBA), the superstars of these sports deliver big revenue streams to their respective advertisers and franchisees.

In most cases, it is the efficient market solution because the relative profits realized match or far exceed the salaries of the players. The dispersed sponsorship of many interested parties also expands the costs of the advertising and revenues over a larger pool of potential recipients. In the end, the provision of these seemingly enormous salaries is craftily calculated to ensure that the highest bidder gets to retain Jordon’s talents for maximum return. Economic rent is “any excess payment for a service, good or property above and beyond the minimum amount at which the person receiving payment would still have agreed to the deal.

” It refers to the money above and beyond the minimum amount to employ a given resource or employee in this case. There is certainly what some would refer to as inflated salaries in professional sports where about 60% of the revenue goes to a few employees in the company. At the other end of the spectrum, one can visit any number of fast food restaurants and discover that all the employees are making more than minimum wage because the rents are required to attract service staff. Whether a college student, entrepreneur or salaried employee, companies and entities have to offer salaries above and beyond what will satisfy simply keeping the lights on.

The "greater fool theory" posits that some investors will buy questionable securities in the hope that sometime in the future someone even less savvy than themselves will buy it at a profit from them. This can certainly be an explanation for the behavior of investors in the dot-com bubble in the late 1990s where the Internet age was starting to come into its own. The investors were quite literally speculating on blue sky propositions of profitability that defied the common means to value stock ventures.

The stock market swings are not unusual and a casual glance at over a hundred years of stock behavior show the pendulum shifts quite common for commodities and service that respond to different variations in the both the investor climate and what is happening in the world at large. The stock market is most likely led by economic conditions as evidenced by the boom and bust cycles and the differences in investment behavior during recessions when compared to boom times. Stock price changes come down to investor perception of the worth of the stock.

This would be synchronized with the supply and demand conditions for the stock. If more people wanted the stock, supply would dwindle and price pressure would increase upward. The reverse would be true for people fleeing a stock instrument. Other factor would include changing regulatory environments and the effects of inflation. WORKS CITED Lister, John. (2011, January 11). What is Economic Rent?. Wise Geek