Frozen: Let It Go

Frozen is the story of two princesses, Anna and Elsa. Elsa has magical powers that she is forced to hide her entire life until her coronation ceremony. Elsa flees to the cold, remote mountains and sings “Let it Go” after finally accepting her magical powers and letting go of the pressure to hold back her true self. When she sings “the past is in the past”, it’s a reminder of the role of sunk costs in the decision-making process. Sunk costs should be ignored because that time/energy/money cannot be recovered in the present.

Thanks to Matt Rousu for the clip.

Kitchen Nightmares – Marginal Touches

Chef Ramsey stops at a Scottish restaurant to help a struggling chef. What he finds is a restaurant where each employee makes a marginal change to the dish before it is sent on its way. A single dish may be modified by 7 different people, but it isn’t clear exactly how much of a contribution each is making. While each may add some benefit with their labor, the additional cost of waiting to send the dish out (and the cost of such a large staff) is part of the reason Chef Ramsey is there to help. The labor costs of the restaurant are $4,500 each week, but they aren’t even breaking even.

Thanks to Alex Marsella for the clip suggestion!

The Simpsons — Grease Business

When Homer finds out from Apu that there is a local business buying old grease, Homer sets out to be rich. He buys $30 worth of bacon, feeding it to the dog, in order to harvest the extra grease and sell it. He spends hours frying up bacon only to earn 68 cents. He doesn’t seem bothered by his losses since his wife (Marge) paid for it. There’s one problem Homer hasn’t realized yet; Marge gets her money from Homer.

Thanks to Alex Marsella for the clip suggestion and summary!

Kim’s Convenience — Driving vs. Baking

Appa has made a collection of baked goods but his wife thinks she could do it better. In an earlier scene, Umma damages a friend’s car and made offered to pay for half the cost of repairing the damage. Her husband is disappointed because he feels he could have saved them a lot of money. Umma lets him know that’s why she isn’t a millionaire, but at least she’s a better baker.

Thanks to John Kruggel for the clip submission.

60 Minutes — Changing Preferences

One of the common shifters of demand is changing tastes/preferences, but that is often taught as something beyond the control of firms. It’s often associated with fads or maybe new research, but firms can also adjust the tastes of their products to induce new preferences. This 60 Minutes segment looks at how companies are changing demand for their products by directly changing the product, or at least the perception of their product.

Thanks to John Kruggle for the submission!

Community — Market Price

Troy and Abed are sitting at dinner in a fancy restaurant when the bill arrives at the end. Troy initially offers to pay for dinner because it was Abed’s birthday, but is shocked by the final total since so many things on the menu must have been listed as “market price.”

Restaurants often list menu items as “market price” because they may include item (like lobster or fish) that have a constantly fluctuating price. Instead of printing new menus to account for changing prices, restaurants will just list it at “market price.”

Thanks to Luke Starkey for the clip submission.

Old Spice — Smellcome to Magic

Individuals often make decisions that are in their own best interest, and often disregard the impact they may have on other people. Whenever this happens, individuals are creating an externality. Someone else either benefits or is harmed by that outcome. In the case of someone putting on deodorant, that could have spillover benefits from people getting to smell a “fresh scent.” If too much is applied, it could annoy others are turn to a negative externality.

Volkswagen — Buying a Used Car

Asymmetric information is a condition in which one party to a transaction has information that isn’t known to the other side of the party. This can disrupt the market for used goods because the buyer may not know the full extent of what they’re purchasing. In this Volkswagen ad, the father and son duo are unaware of the older lady’s past experiences with the cars. This is a great segue to Akerlof’s Market for Lemons, which is based on the the used car market.

Turkish Airways — Flying Everywhere

This Turkish Airways ad shows the value of network externalities to a market. A network effect occurs when the value of a product or service depends on the number of users. Network effects are typically positive, such that the more people using the product, the more valuable the product becomes. Airlines are an example of network effects, as the ad points out, because the more places they fly, the more valuable the flights are to the people purchasing the tickets.

Friends — Joey Loses His Insurance

Joey finds out that he hasn’t been working enough lately, so the Screen Actors Guild is canceling his insurance. He’s quick to point out the moral hazard involved in insurance because now he has to be more careful!

Later in the episode, he comes down with a hernia after working out. Since his insurance has lapsed, he doesn’t have enough money to go to the doctor to get it looked out. Luckily, Joey is able to find a part as “dying man” and he ends up getting his health insurance back.

Thanks to Isabel Ruiz for the clip suggestion!

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