Tag: input costs

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.

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Hot Ones — Gordon Ramsey

 

On Hot Ones, celebrity guests are interviewed while eating progressively spicier wings. In Season 8, Episode 1, Gordon Ramsey discusses the makings of a $25 hamburger as well as the costs that are often “hidden” from the customer. This is a fun, and relevant way, to introduce concepts like labor and rent to students who are unfamiliar with the costs of running a business. Toward the end, Ramsey discusses the notion of excess capacity, whereby firms are not necessarily producing at minimum average total cost. If firms can fill the excess capacity (perhaps through price discrimination), they may become efficient.

A big thank you to my student, Abdullah Al Otaibi, for sending me this clip!

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CBS Early Show — Same Price, Smaller Product

One way that companies can reduce supply without customers realizing it is by changing the size of the packaging. This actually makes the per unit price higher, which matches with the theory of decreasing supply. This decrease in supply could come from changes in input prices or perhaps shifts in agricultural markets, like freezes in Florida and oranges.

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Newsies — Unionism & Profit-Maximization

When Mr. Pulitzer decides to raise prices in the distribution channel by forcing the newsies (the newspaper boys) to pay higher prices for a pack of 100 papers, the newsies decide to go on strike. Without raising the price to the final consumer, the price increase essentially just lowers the profits the newsies can collect. They decide to go on strike and create a newsies union to have more monopoly power in the process.

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How to Make Everything: A $1500 Sandwich in Only 6 Months

 

This is a great clip to talk about opportunity costs and gains from trade. The author goes through the process of making an entire chicken sandwich from scratch. I often open lecture asking students how much it would cost them if they did it themselves and then we watch this video.

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