In this clip from Parks and Recreation, newly elected city councilwoman Leslie Knope proposes a soda tax to combat the city’s rising obesity rates. Shocked by the absurdly large drink sizes sold in town, Leslie pushes for government intervention through taxation to promote healthier choices. Her proposal will eventually spark pushback from the beverage industry and some constituents.
This scene is a great way to introduce Pigouvian taxes, which are taxes designed to correct for negative externalities. Leslie’s soda tax targets the societal costs of obesity by attempting to reduce the consumption of unhealthy goods.
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.
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.
Beyonce does a great job discussing just how valuable she is as a partner (inelastic), but that her man isn’t all that special because “I could have another you in a minute” (elastic). These are good lines to talk about perfectly inelastic and perfectly elastic demand.
Cut your cell phone expenses in half and all of a sudden you feel a bit richer, but does that mean you think you should be driving a significantly more expensive car? When incomes increase, we tend to purchase more items, but luxury goods require a pretty substantial increase.
This clip has both the idea of an inelastic good and the idea of price discrimination. I suggest using it when teaching elasticity and then also using it when you teach price discrimination and talk about how they connect!
Homer forgets it’s Valentine’s Day so he has to rush off to the Kwik-E-Mart to pick up a last-minute gift. Seeing that Home is desperate, Apu takes the chance to raise the price of a box of chocolates to $100. Despite Homer’s annoyance, he pays the higher price because he knows he’ll be in trouble if he comes back empty-handed. After threatening never to shop there again, Apu offers him a discount on other products to keep him from shopping next door.
A few supermarkets in France decided to cut the price of Nutella (an extremely popular item throughout Europe) by 70% and customers responded in droves to scoop up the heavily discounted staple. Police were called to various markets as customers fought to get the remaining jars. Not only is this a great example for demand shifts, but it’s an even better topic of elasticity!
Charlie has been crabbing in the local river, which may or may not have waste runoff, to try and raise some money during the recession. Their logic is that food is depression-proof since people have to eat. They believe that people’s demand for food is inelastic and they just need to acquire food to sell in order to earn money.
This scene is from the movie Christmas with the Kranks involves a specific type of ham that has been sold out and Mrs. Krank needs one because it’s Christmas Eve and her daughter flew in for Christmas. She pays above the sticker price of the ham because it was the last one available in the store. Because there is only one ham left and it doesn’t matter how much the ham costs, Mrs. Krank will buy it. This means that Mrs. Krank’s elasticity for hickory honey ham is very inelastic.
Thanks to Salvatore Pollastro for the summary and the clip!