Economic Wisdom to Apply in Your Twenties

Chapter 20

Chapter 3 In your twenties, rational consumption is not confused
Economists have always believed in the truth that "there is no such thing as a free lunch".Merchants are not philanthropists who don't expect anything in return, what they pursue is to maximize profits, so why should they provide you with a free lunch?
But in real life, we believe such things again and again.What is the reason?Because although each of us is an economic man and also pursues the maximization of our own interests, the rationality of economic man is limited, and it is easier to lose rationality in the face of interests, especially those that can be easily obtained.

Section 1 Free Stuff Costs Us More Money
Lily bought a new mobile phone during a mobile phone promotion and received a coupon for a famous photo studio.The coupon said a lot of promotions, including a 20-inch photo album, an enlarged personal poster, three free makeup styles, and [-] free photos...

It looks very tempting.So, Lily went, the result?

Makeup is free, but a powder puff is 10 yuan, and a pair of false eyelashes is 20 yuan; styling is free, and the clothes you can choose are worse than those at the roadside stalls, and you can wear better clothes for 30 yuan; after the photos are washed out, I will give you first Look at the small photos washed into one inch. If you want these small photos, they cost 5 yuan each.From it, you choose the photo you want to enlarge, and it costs 25 yuan to develop one. If you just send it, those low-quality ladies will tell you that they are too busy with business, and you can pick it up in a month if you want it.In the end, Lily spent nearly 500 yuan on this trip, but she still didn't get the negatives back.

Economists have always believed in the truth that "there is no such thing as a free lunch".Merchants are not philanthropists who don't expect anything in return, what they pursue is to maximize profits, so why should they provide you with a free lunch?
But in real life, we believe such things again and again.What is the reason?Because although each of us is an economic man and also pursues the maximization of our own interests, the rationality of economic man is limited, and it is easier to lose rationality in the face of interests, especially those that can be easily obtained.

You may still be puzzled. Merchants and consumers, who are both rational economic people, are each pursuing the maximization of their own interests. Why are consumers always "injured" in the end?
Information economics can give us the answer.The reason why consumers are at a disadvantage is mainly due to the asymmetry of information between the two parties.The so-called information asymmetry refers to the difference in the amount and depth of information that the two parties have about the commodity.Information economics believes that information asymmetry has caused an imbalance in the interests of both parties in market transactions, affecting social fairness, the principle of justice, and the efficiency of market allocation of resources.In the information that merchants and consumers know about commodities, merchants always have much more information than consumers. What consumers know is only the appearance characteristics of commodities such as style, color, size, etc., and they have no idea about the actual situation. The understanding is accurate, but can only be understood through the propaganda of the merchants.

In addition, the value of information economics does not lie in revealing information asymmetry, but in explaining that information, like capital and land, is a factor of production that requires economic accounting.Therefore, if you want to get more information, you have to pay more.The two sides of the transaction are actually engaged in an endless information game.As the saying goes, "interlacing is like a mountain", this mountain is actually information asymmetry, and to obtain this information is to pay a cost (price).

The advantage of merchants lies in the possession of product information and marketing strategies, and the amount of information possession should be as much as possible greater than that of consumers. Only in this way can they ensure profits in each transaction.The so-called "buying is not as good as selling", at the beginning of the game between consumers and merchants, the inferior position of consumers in possession of information is doomed to the failure of this contest.Of course, smart merchants will let consumers be fooled willingly without realizing it; but merchants who make consumers realize that they have been cheated are definitely not smart, and their customers will be fewer and fewer.

In the case of information asymmetry between the two parties, the party at an information disadvantage will always be at a disadvantage in the game.And we often attribute this to the victim, saying that it is caused by being greedy for petty gains and losing reason in the face of interests.But this cannot be said in economics, because anyone will be tempted in the face of interests. A rational person in economics will never lose his rationality, that is, he will always make choices in a direction that is beneficial to him. To what extent, he will make a choice consistent with the information he has.If you fall in love with a beautiful woman at first sight, you are impressed by the beauty's superficial information (beautiful and moving), but after you get married, you find out that she is lazy and unreasonable. If you knew her information early, you would definitely not marry her of.

It can be seen that in real life, when we don't know enough information about the other party, we must pay special attention to everything that is particularly beautiful, touching, and sacred!
Wisdom Pieces: Overcoming the Hidden Consumption Trap

The hidden consumption trap refers to the fact that merchants sell or sell goods that consumers do not need through some invisible means when selling goods.There are many types of invisible consumption traps, such as discount traps by merchants, "return coupon" traps, and "gift-giving" traps. The purpose of these tactics is to make consumers spend more.The way to deal with these traps is actually very simple. One is to restrain consumption, and consumers should buy what they need;

(End of this chapter)