Assessing the elasticity of demand for stamps

Web Activities

Go to the U.S. Postal Service’s “About” page ( and click on “Postal History” under “Who We Are.” Then click on “Postage Rates and Historical Statistics.”

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Using the data available on this page, fill in the table below. (Lately, the USPS has changed stamp prices in May — after Mother’s Day. Just use the simple average of the pre-May price and the post-May price for the average price in a given year. The 2007 price is done for you; it was 39 cents until May 14 and then 41 cents after, so the average price is approximately 40 cents.) After you have recorded the data for the first two rows, calculate the approximate revenue from mail-handling for each of the three years. (The price is given per ounce, but most pieces of mail weigh less than an ounce and still contain one stamp.)




Average Stamp Price

(price per ounce of mail)




Pieces of Mail Handled

(in millions)




Revenue from Mail-Handling

(in millions)




b. What do the results from part a reveal about the elasticity of demand for stamps?

The results suggest that there is some elasticity in the demand for stamps; as stamp prices increased, the number of pieces of mail handled decreased, which resulted in an overall reduction in revenue from mail-handling. However, given the downward trends surrounding the mail usage may or may not be linked to stamp price; it is important to keep in mind that, at this same time, there was a tremendous increase in internet communications, which may have been driving down the demand for stamps.

Chapter 5

1. Visit the Labor Productivity and Costs section of the Bureau of Labor Statistics website ( On the right-hand side of the page, you will see some very frequently used statistics, along with a link to historical data (the picture of the dinosaur). Use this historical data to answer the questions below.

a.Record the growth rate of labor productivity (output per hour) in the U.S. Manufacturing Sector for the past 10 years. Graph this data.























b.What has happened to the production functions in U.S. manufacturing over this ten-year period?

The production functions in manufacturing have shown a significant overall increase over this ten-year period. To understand the magnitude of the increase, one cannot simply add together the percentage of change, because each percentage refers to a change from the previous year, so that the 1.8% experienced in year 2012 would be significantly larger than a 1.8% change in year 2003. However, what the numbers reflect is an overall growth trend in manufacturing during this period. There was a contraction in 2008, which is not surprising given that the country was experiencing a recession during that time period, but there was marginal growth in 2009, and enough growth in 2010 to more than overcome the retraction that occurred in 2009. While the growth has not hit the same rates it had prior to the recession, there does appear to be continuing growth.

c. What does your answer to part b suggest would have happened to the Average Total Cost (ATC) curves in U.S. manufacturing in this same time period if nothing else had changed.

Generally, the ATC curve initially declines as fixed costs are spread over a larger number of units, but then increases diminishing returns lead to an increase in marginal costs. However, I find it impossible to extrapolate from that general rule to a blanket statement about ATC curves in manufacturing at that time. Without knowing the shape of the curve at the start of the process, it is difficult to predict when diminishing returns would have impacted the shape. Moreover, knowing that recession impacted demand and manufacturing capability means that it is impossible to assess this information strictly by examining the amount of overall manufacturing. The question would be more meaningful if it examined manufacturing in a single segment of the market. However, simply looking at the units produced in those years, one would expect to see an ATC decline from the years 2003-2007, followed by an increase in 2008.

Chapter 6

1. Visit the National Agricultural Statistics Service at the United States Department of Agriculture website ( On the menu at the left, click on “Livestock and Animals” and then choose the group “Specialty Livestock” and the commodity “catfish.” Click the “Search,” open the monthly Catfish Processing report and answer the questions below.

How many pounds of farm-raised catfish were processed in the most recent month? What about in the same month last year? What was the average price per pound of farm-raised catfish in the same two months?

The most recently released catfish processing report was dated March 2013, with a pending release coming later in November. Furthermore, it was not located at the above-described location at that website; only bison came up as an option under specialty livestock when the search was conducted. However, a Boolean search of the website yielded catfish production reports and the information that the newest report would be released in November. Whether this was an anomaly at the time that the website was examined for this project or a problem with the directions is not clear. Therefore, to clarify, the information used to answer this question was found at the following website:, not at the website specified in the instructions.

In February 2013 (the most recent year on the report), there were 29,959 pounds of catfish processed compared to 26,950 pounds in February 2012. The price per pound of catfish in February 2013 was .822 compared to 1.229 in February 2012.

2.Go to Yahoo! Finance ( and click on “Industries” under the “Investing” tab. Find the tool called the “Industry Browser” on the bottom left.

c. Assuming that opportunity costs do not differ across these industry sectors, into which sector(s) would new businesses most want to enter? Do you think this will happen? Why or why not?

The website does not have an “Investing” tab located anywhere on the screen, and none of the tabs that were on the screen had the options of selecting Industries / Investing / or an Industry Browser. However, this site on yahoo did provide an industry summary that contained information about the net profit margin: Using that website, I was able to ascertain that the industries with the highest net profit margin were Closed End Fund- Debt, REIT- Residential, and Broadcasting-TV. Therefore, because they have the highest net profit margins, one would assume that most new businesses would want to enter those markets. That will not occur because there are substantial differences in opportunity costs for those markets. In addition, many of those businesses require specialized skills, increasing the barriers to entry. owHowH

Chapter 7

1.Go to the website of your school’s bookstore (or to the bookstore itself if there isn’t a website) and look up two items: one new textbook and one other “general merchandise” item. Record the prices. Then, search for the exact same item (use ISBNs for textbooks and model/serial numbers for other products if possible) on Amazon ( or Google Product Search ( and record the prices you find there.

a. What are the items, and what are the two prices you found for each?

The two items that I selected were a textbook called Exploring Psychology by Kasschau with the ISBN 2815050023415 and a Cross Beverly Ballpoint Pen in Pearlescent. Although both Amazon and the bookstore sold used textbooks, I only looked at new prices so that I could compare exact items.

The textbook was $114.30 for a new book on the bookstore’s website. It was $495.30 for new and $166.60 used on the Amazon website. The pen was $29.95 at the bookstore and $27.91 on Amazon. (I am an Amazon Prime member, and the prices shown at Amazon were Prime prices, if that makes any difference).

b. For each item, who charged the higher price? How significant is the price difference? Is this what you expected to find?

For the book, Amazon charged a significantly higher price. The difference was more than four times the price of the same book at the University bookstore. I expected to find that book for a much lower price at Amazon because Amazon sells in bulk. However, the bookstore is not independent; it is a Barnes and Noble bookstore, and Barnes and Noble has a buying power that is similar to Amazons and may be superior to Amazon’s for textbooks. I was not surprised to find the pen at a marginally lower price on Amazon- a savings of slightly more than 10%.

Chapter 8

1. Go to website of the Bureau of Labor Statistics (BLS) to view the Current Population Survey (CPS) data ( Click on “CPS Tables” and then “Employment status of the population.” Answer the questions below.

a. In general, what has happened to the labor force (labor supply) since 2000? The labor force has grown by about 12,000,000 since 2000.

b. During the same time period, what has happened to the number of unemployed since 2000? The number of unemployed has grown by about 18,000,000 since then.

c. Based only on your answers to a and b, what could you guess about the unemployment rate during since 2000? Do your guesses match the data?

I would expect an increase in the unemployment rate since 2000 since the increase in the number of unemployed people has been greater than the increase in the number of people in the labor supply. My guess does match the data, although the available data on unemployment also takes other factors into account, like long-term unemployment numbers, so that the percentage of people considered unemployed does not exactly match the percentages one would get just from using the labor force and unemployed statistics.

Chapter 9

2. Go to the Department of Justice’s webpage for its Competition and Real Estate Antitrust Division at Use the information on this page — and the information contained in the links on this page — to answer the following questions.

a. What barriers to entry are there in the real estate market? How do they differ across the country? Are there any specific requirements for conducting business in the real estate market in your state that act as barriers to entry?

Probably the most significant barrier to entry in the real estate market is that, in most states, real estate brokers have to take some type of courses and obtain a license or other form of permission to engage in transactions as a real estate professional. However, those are not the only barriers to entry. For example, when marketing a home, a real estate professional has access to a system called the multiple listing service (MLS), which may not be available to individuals who are selling their home. However, the advent of fee-for-service brokerage models allows consumers to select from a variety of broker-provided services, rather than the entire traditional broker model, which lowers some of the barriers to entry. Furthermore, some states have very specific laws governing how brokers can represent their clients, which can act as entry barriers as well as acting as barriers that reduce competition. These include laws forbidding brokers from rebating part of the commission to the buyer, laws requiring consumers to buy services in a bundle, rather than a pay per service. My state does have some laws restricting rights; the law contains minimum service provisions for brokers, but it does allow sellers to limit those provisions. I am not aware of how that law actually functions and what percentage of sellers is actually aware that they can limit the provisions.


Amazon. (2013). Cross Beverly, Pearlescent White Lacquer, Ballpoint Pen. Retrieved

November 13, 2013 from Amazon website:

Amazon. (2013). Psychology: Exploring Behavior. Retrieved November 13, 2013 from Amazon website:

Bureau of Labor Statistics. (2013). Labor productivity and costs. Retrieved November 13,

2013 from BLS website:

Bureau of Labor Statistics. (2013). Labor force statistics from current population survey.

Retrieved November 13, 2013 from BLS website:

USDA. (2013, March 20). Catfish processing. Retrieved November 13, 2013 from Cornell

University Library website:

United States Department of Justice. (2013). Competition and real estate. Retrieved November

13, 2013 from DOJ website:

United States Postal Service. (2013). Rates for domestic letters since 1863. Retrieved

November 13, 2013 from USPS website:

Yahoo. (2013, November 12). Industry summary. Retrieved November 13, 2013 from Yahoo


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