Easily Integrate These Wall Street Journal Articles in Your Class
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Did you know that you can use these Weekly Review articles to easily assess your students' comprehension of course concepts and current events?

With our new WSJ Assessment Tool, they'll complete the online quizzes based on the articles and you'll have immediate access to their results.

You can learn more at WSJ.com/assessment.
THIS WEEK'S ARTICLES
Cheaper Gasoline Fuels Retail Hopes
How Crude Oil's Global Collapse Unfolded
Numbers. How Do Americans Spend Their Energy Savings? On More Energy
Apple Heads to Court Monday in E-Book Appeal
Hotel Industry Groups Sue Los Angeles Over Minimum Wage Law

Cheaper Gasoline Fuels Retail Hopes
by: Josh Mitchell and Suzanne Kapner
Dec 12, 2014
Click here to view the full article on WSJ.com

TOPICS: Consumption

SUMMARY: American retailers are getting a gift just in time for the holidays: a sharp drop in gasoline prices that is delivering a welcome boost to the pocketbooks of U.S. consumers.

CLASSROOM APPLICATION: Students can examine the effect of decreases in gasoline prices on the demand for other goods and services. Intermediate microeconomics students can use the consumer choice model to examine the issue and to partition changes in demand into income and substitution effects. One interesting issue is whether the effect of decreases in gasoline prices on current demand for goods and services is decreasing in income (i.e., whether the second cross-partial derivate is negative).

QUESTIONS: 
1. (Introductory) What is the effect of a decrease in gasoline prices on the demand for automobiles? What is the effect on the demand for clothing?

2. (Advanced) With a decrease in the price of gasoline, is the substitution effect negative (i.e., holding purchasing power constant, with a decrease in the price of gasoline, the quantity demanded of gasoline increases)?

3. (Advanced) Describe the effect of a decrease in the price of gasoline on the purchasing power of income. What is the income effect associated with a decrease in the price of gasoline on automobile sales?

Reviewed By: James Dearden, Lehigh University


How Crude Oil's Global Collapse Unfolded
by: Russell Gold
Dec 13, 2014
Click here to view the full article on WSJ.com

TOPICS: Cartels, Oil Markets

SUMMARY: The plunge in crude oil prices from over $100 a barrel to under $65 has been portrayed as a showdown between Saudi Arabia and the U.S., two of the biggest oil producers. But the reality is more complex, going back to 2008.

CLASSROOM APPLICATION: With the article's interesting recent history of events in the oil markets, students can analyze the causes of the recent fall in crude oil prices. Key events include shale oil drilling in the U.S., a change in U.S. policy about oil exports, the effect of the U.S. events on the competition among OPEC members to sell oil in Asia, and Saudi Arabia's unwillingness to cut oil production. Advanced students can analyze Saudi Arabia's decision in the context of the Cournot model.

QUESTIONS: 
1. (Introductory) What role has Nigeria played in the recent decline in oil prices? Discuss how its role relates to U.S. policy decisions and Saudi Arabia's interest in maintaining its sales in Asia.

2. (Advanced) What is the effect of a U.S. ban on the export of oil on the U.S. price of oil? Are U.S. consumers made better off by relaxing the ban?

3. (Advanced) The Saudi Arabian oil minister was asked whether OPEC would soon act to cut exports. "Why should we cut production?" he asked. "Why?" Why would Saudi Arabia be better off with a cut in the world supply of oil while the country maintains its oil supply? Advanced students can use the Cournot model to answer the question.

Reviewed By: James Dearden, Lehigh University


Numbers. How Do Americans Spend Their Energy Savings? On More Energy
by: Jo Craven McGinty
Dec 13, 2014
Click here to view the full article on WSJ.com

TOPICS: Consumption, Energy

SUMMARY: Energy use in U.S. homes has hovered at the same level for three decades despite efforts to reduce consumption-in part because we chug savings generated by energy-efficient homes and appliances.

CLASSROOM APPLICATION: Students can discuss whether three effects are at work in explaining the relationship between the improved efficiency of homes and appliances and the consumption of energy. First, with a decrease in the price of operating appliances, the demand for appliances increases. Second, with improved energy efficiency of homes, the price of operating homes is reduced. If energy is a normal good, then the income effect associated with this price decline implies an increased demand for energy. Third, technological innovation has introduced new and better electronic products. With the introduction of these products, households have substituted away from products that require less energy (e.g., board games) and toward ones that require more energy (e.g., video games).

QUESTIONS: 
1. (Advanced) What is the effect of improved energy efficiency of homes and appliances on the purchasing power of a household's income? What is the effect of a change in purchasing power on the demand for energy?

2. (Introductory) What is the effect of the improved energy efficiency of homes on the demand for larger homes?

3. (Advanced) Are the attempts to reduce the consumption of energy by regulating the energy efficiency of appliances confounded by the behavioral response to the increased efficiency of appliances?

4. (Advanced) "Falling oil prices may encourage some residents to turn up the heat or drive more rather than pocket the savings." Reinterpret this statement in terms of the law of demand.

Reviewed By: James Dearden, Lehigh University


Apple Heads to Court Monday in E-Book Appeal
by: Joe Palazzolo
Dec 15, 2014
Click here to view the full article on WSJ.com

TOPICS: Antitrust, Price Wars

SUMMARY: On Monday, an appeals court is scheduled to consider whether Apple's pricing agreements with e-book publishers amounted to a deft market maneuver or an illegal conspiracy. "Apple's agreements ceded the power to set prices to the [five major] publishers.... A key provision of the contracts required the publishers to give Apple's store the best deal that they gave anyone on e-books. That assured the publishers would force Amazon to change its business model, otherwise they would suffer heavy losses matching Amazon's discounted prices-$9.99 for most best sellers-in Apple's e-book store, prosecutors said. Prices on many e-books increased immediately." Related article: Justice Department lawyers faced aggressive questioning from judges reviewing a finding that Apple conspired with book publishers to raise the price of electronic books in 2010.

CLASSROOM APPLICATION: Students can evaluate whether "most-favored nation" clauses in contracts result in higher or lower prices. "So-called most favored-nation clauses are common in industries ranging from health care to television to financial services. Such clauses, like those in the Apple agreements, guarantee the recipient the lowest prices or rates charged to any buyer. In theory, such arrangements encourage competition and lower prices for consumers, but in practice they sometimes establish a minimum price, according to antitrust lawyers and government officials."

QUESTIONS: 
1. (Introductory) What are "most-favored nation" requirements? What are possible motivations by Apple to place most-favored national clauses in their contracts with book publishers?

2. (Advanced) What are the potential effects on competition among manufacturers of most-favored nation requirements between retailers and manufacturers?

3. (Advanced) What are the potential effects on retail prices of most-favored nation requirements between retailers and manufacturers?

Reviewed By: James Dearden, Lehigh University

RELATED ARTICLES: 
Justice Department Faces Tough Questioning in E-Books Case
by Joe Palazzolo
Dec 16, 2014
Page: B3


Hotel Industry Groups Sue Los Angeles Over Minimum Wage Law
by: Erica E. Phillips, Eric Morath and Craig Karmin
Dec 17, 2014
Click here to view the full article on WSJ.com

TOPICS: Labor Economics, Law and Economics

SUMMARY: Two national hotel-industry groups are suing Los Angeles, arguing a recent minimum-wage increase unfairly targets the hospitality business and that certain provisions interfere with federal labor law.

CLASSROOM APPLICATION: While instructors can use the article to introduce the usual economics analysis of the effect of an increase in minimum wage on employment levels and retail prices, the article lends itself to another issue particular to this hotel-employee case. "The industry groups said their lawsuit wasn't about the wage increase, but about a provision of the act that allows any part of the law to be waived at hotels covered by a collective-bargaining agreement. The industry groups believe the law allows unions to potentially pressure nonunionized hotels to organize. The suit also argues that the ordinance violates state and federal equal-protection clauses by unfairly targeting a single industry."

QUESTIONS: 
1. (Advanced) Why does the new minimum wage law covering Los Angeles hotel workers allow unions to potentially pressure nonunionized hotels to organize?

2. (Introductory) Why does the new minimum wage law covering Los Angeles hotel workers allow unions to potentially pressure nonunionized hotels to organize?

3. (Advanced) What would be the effect of the Los Angeles minimum wage legislation on hotel occupancy rates in the city? What is the effect on occupancy rates on hotels in neighboring markets?

Reviewed By: James Dearden, Lehigh University


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