Category: Supply and Demand

Christmas Vacation: Expected Future Earnings

Clark is hoping to get a big Christmas bonus, but his boss sends him a gift for a jelly subscription instead. Consumption is one of the components of aggregate demand, and future income can influence present consumption. Clark was planning to spend this income on a new swimming pool for the family and already spent some money on the deposit for the pool assuming he would get this bonus. He even notes that there isn’t enough money in the bank account to cover the check he wrote. His current consumption was based on an expectation of future income.

Thanks to Mandy Mandzik for the clip recommendation. Check out her working paper, All I Want for Christmas is an A on My Econ Final: A Holiday-Themed Review Class, for more Christmas-themed economics examples.

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Christmas with the Kranks — Christmas Tree Demand

The Kranks are (initially) planning to skip Christmas this year, which means their demand for Christmas trees decreases. When their daughter announces that she’ll be back home for Christmas, the Kranks scramble to try and find a tree. Unfortunately for Luther, there aren’t many trees available because it’s so close to the holidays and he ends up paying full price (instead of a discounted price) for a pathetic tree. When decision-makers don’t have much time to make a purchase (like Luther right before Christmas), their demand is fairly inelastic.

Thanks to Mandy Mandzik for the clip recommendation. Check out her working paper, All I Want for Christmas is an A on My Econ Final: A Holiday-Themed Review Class, for more Christmas-themed economics examples.

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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!

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Futurama — A Can of Old Fish

The gang heads to get some pizza and Fry wants his friends to experience anchovies, a type of small, salted fish. It turns out that these small fish were overfished and the population collapsed. Zoidberg even mentions how sorry he was that his people kept consuming them because they didn’t realize they were a common resource, subject to the tragedy of the commons.

Fry is incredibly rich, and wishes he could bring them back. He at first notes that even incredibly wealthy people aren’t able to purchase everything. At an auction, he finds that there is exactly one can left in the known universe and decides to bid all of his money for the “can of old fish”

While we normally wouldn’t pass judgement on someone’s preferences, it’s hard not to believe that this could a good example of a winner’s curse. Fry’s willingness to pay for the can of fish may not be $50 million, but the utility from winning the auction could be worth that.

Thanks to Jessica Pritchard for the clip suggestion!

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Schitt’s Creek — Christmas Demand & Price Discrimination

The Roses are trying to buy a last-minute Christmas tree, but they’ve come to realize their options are limited. The shop owner knows demand has recently been higher because there aren’t a lot of trees available in the store. Raymond finds that the prices are higher than he was expecting and decides to leave.

The shop owner takes a few creative approaches to selling trees, including bundling air fresheners with purchase and offering a discount if people buy two trees. Price discrimination is a popular tool to increase output for a firm and sell products to people across the demand curve.

Thanks to James Tierney for the submission:

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The Pajama Game — 7 1/2 Cents

Asking for a raise is tough, but even a modest raise in wages can have a huge impact on worker salaries. In this scene from The Pajama Game, we see how a 7.5 cent raise can impact a worker’s wage. The cast goes through the calculations of what they could earn with additional income, including an automatic washing machine, a year supply of gasoline, and a vacuum cleaner.

Assessment idea: This is a neat opportunity to calculate real wages and see what 7.5 cents would be worth today versus 1953. The BLS has a calculator so you don’t have to wait!

Looking for more: Do you want to see more economics in Broadway shows? Check out BroadwayEconomics.com

Thanks to Mark Sammons from the University of Arizona for sending this clip in!

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Adam Ruins Funerals

When a loved one dies, and we are in a state of grief, we often aren’t making the most informed decisions. Funeral homes know this and use this fact to charge higher prices. They can do so because our price elasticity of demand for end life services is high. There are few reasons for this. First, there is not enough time to “shop around” for better pricing on the goods and services provided as a funeral is often expected to take place quickly after a person’s death. Second, there is high asymmetric information about exactly what is actually necessity and what is more a luxury (the clip pokes fun of this with the casket featuring WiFi). Last, there are no close substitutes for end of life services – you only have two options: burial or cremation. For these reasons, we are less sensitive to price when shopping for end of life services for our loved ones and will pay a higher prices consequently.’

Thanks to Erin Yetter for the submission and description! Follow her on Twitter!

Adam Ruins Everything is a half-hour informational comedy were host, Adam Conover, debunks popular myths. Each episode is divided into 3 segments with some common theme. In the Spring of 2018, James Tierney and I sat down to go through all three seasons of Adam Ruins Everything to pick out examples in each episode that could be used in an economics course. If you’re curious about the paper, you can read about it here.

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Le Trèfle Paper — Emma

The digital revolution can replace a lot of items that traditional paper was used for, liking color pages, sticky notes, books, or puzzles, but it can’t replace toilet paper. Substitute goods are at the discretion of the consumers with some items being “perfect substitutes” and others being some gradient of substitutes. Digital toilet paper isn’t a very good substitute for the real stuff.

Thanks to Dr. Michele Pickett for the clip!

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Popeyes — Quantity vs Quality

Popeye’s argues that economics can’t explain why their chicken tastes so good. The professor looks at the inverse relationship between quality and quantity, so maybe this is actually a marketing class?

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