Teaching Economics with Media
A new food truck sets up shop outside the donut store. The clip starts with the new owner coming by and asking how long the shop has been in business and what kind of customers stop by. She quickly realizes that she can setup shop and steal some of the existing customers. This clip does a really good job showing how monopolistically competitive markets function and that even though an imperfect substitute enters the market, the demand for one business decreases.
My students favorite clip when discussing product differentiation is this clip from MedicoreFilms where a guy offers Deluxe Hugs for $2 more. One of his opening lines best illustrates the concept of monopolistic competition:
Deluxe guy: How’s businesses?
Free guy: Mine are free, this isn’t a business.
Deluxe guy: Different people want different stuff, so it’s cool.
Businesses can differentiate their products by quality, style, location, etc. The guy offering deluxe hugs is trying to fill a portion of the market from people willing to pay more for “better” hugs.
Robin Williams stars as a defected Soviet living in the United States in Moscow on the Hudson. His shift from communist markets to American-style markets is a bit overwhelming as he visits a grocery store to find the coffee aisle. After realizing that there’s no line to buy coffee and that there are a dozen varieties of coffee, he passes out in the middle of the store.
Struggling children’s bookstore owner Kathleen Kelly (Meg Ryan) tries to remain positive as a big retail chain bookstore, Fox Books, opens around the corner. She outlines the differences between their products and services and notes how this could be a good thing for her business. When business try to differentiate their products, they are often operating in a monopolistically competitive environment. The one issue with the entrance of a new competitor in these markets is that it decreases demand for the other firms even if they are a little different. The accountant notes that their revenues are down compared to the same week last year.
How do you differentiate yourself from the other dogs in a dog shelter? You show off all your skills, of course! Harvey does a great job differentiating himself from his competitors in order to win their business.
I use this clip to introduce the concept of monopolistic competition in a market place and how demand shifts when close substitutes enter a market.
The team at Sterling Cooper Advertising Agency has to come up with a new way to sell cigarettes because the government has limited what companies can say about their products. The government has put a ban on advertising such that firms can’t say that their product is healthy. Instead, the men of Sterling Cooper talk about product differentiation and how to make Lucky Strike look special even though it’s the same product.
The Founder is based on the rise of Ray Kroc and the McDonald’s brothers. The opening scene of the movie can be used to talk about a variety of topics in producer theory. Michael Keaton plays entrepreneur Ray Kroc and the opening scene starts with Kroc explaining how fast food establishments can upgrade to a 5-spindle milkshake machine and boost the production of milkshakes at the restaurant. Keaton also goes describes themes that are used in monopolistic competition that focus on firms differentiating their products, perhaps by being able to focus on milkshakes.
Thanks for the submission Ryan Herzog!
Would you buy tap water if it was marketed by Rihanna? This comedy clip works as a great introduction to the idea of product differentiation and marketing. It can also be used to talk about why a celebrity would endorse a product and the signalling value of hiring those celebrities.
Credit: Michael Coon