The world's funniest economics stories

Chapter 18 Meeting Adam Smith in the Supermarket--Consumer Economics (2)
In fact, things that are scarce are not just diamonds, as long as people want to get them, but the supply is limited, all items are scarce.As mentioned in the previous story, maybe every girl has dreamed of Snow White, but in the face of the harsh reality that the legendary Prince Charming can’t wait, I can’t help but wonder why there is no Prince Charming for me?The answer is that Prince Charming is also scarce and cannot be owned by everyone.

It can be said that scarcity exists as long as people have desires.If something is valuable, then it must be as many as possible, so scarcity has become the norm.

The scarcity of resources is the fundamental reason for the existence of economics, and the goal of economics is to achieve the most efficient allocation of resources.Therefore, there must be scarcity in places related to economics.

Assuming that there is no scarcity of a certain commodity, it means that this commodity has the attribute of having as much as you want-there is only one possibility, that is, it has no cost.A commodity can be in infinite supply only if its cost is totally non-existent.However, then it is no longer a "commodity".Even air is not cost-free.There are oxygen bars in cities, and oxygen tanks are sold in mountains and seaside.The total amount of a thing is not enough to fully satisfy the desire of all mankind for it.

Image endorsement, conveying the brand's unique and distinctive personality proposition in the form of image endorsement, so that the product can establish a certain relationship with the target consumer group, smoothly enter the life and field of vision of consumers, achieve deep communication with their hearts, and be in their hearts. Establish a certain impression and status, so that the brand becomes a meaningful code with added value.Prince Charming is also a standard criterion for a girl to find a perfect husband.

5. Why are you willing to buy cigarettes downstairs - transaction costs
We have all heard the fable of Zheng Ren buying shoes.

In ancient times, there was a man in the state of Zheng who wanted to buy a pair of shoes in the market.Before leaving home in the morning, his wife specially measured the size of his feet, and put the measured size into the cloth bag he carried with him.Unexpectedly, before leaving the house, Zheng Ren suddenly decided to change his clothes.It is conceivable that when he hurried out of the house after changing his clothes, he forgot at home the cloth bag his wife had prepared for him.

Going to the market happily, Zheng Cai picked up the shoes he liked, only to realize that he had forgotten the size he had measured at home.So he greeted the shoe seller and ran home to get the size.However, when he returned to the market again, the market had already dispersed.

Zheng Ren returned home very depressed, and his wife asked him: "Why don't you try the shoes with your own feet to see if they fit?" At this time, Zheng Ren said: "I would rather trust the measured size than my own. foot."

The allegory of "Zhengren buys shoes" is intended to satirize those who are stubborn, stick to dogma, do not know how to adapt, and do not know how to take flexible countermeasures based on objective reality.

The story of Zheng people buying shoes is very ridiculous.But from an economic point of view, Zheng's approach seems more pedantic.We can see from the results of Mr. Zheng’s purchase of shoes. He wasted a lot of time and energy on going from home to the market, and then from the market to home. Taller.

Transaction costs, also known as transaction costs, were first put forward by the American economist Ronald Coase in the article "The Nature of the Enterprise". He believed that transaction costs are generated through the organization of the price mechanism, and the most obvious cost is the relative price of all discoveries. costs, negotiating and signing fees for every transaction that takes place in the market, and the costs of exploiting other aspects of the existence of the price mechanism.

Examples of transaction costs are common in life.For example, it is too late to have breakfast at home in the early morning, and you come to the station near the station in a hurry, and see a group of people waiting to buy breakfast at the breakfast stand.You stand at the end of the line, looking around and waiting anxiously.In order to fill your stomach, you also missed a bus that you could have easily taken.But unfortunately, when it's your turn to buy breakfast, the boss tells you that all breakfasts are sold out.Helpless, you leave the breakfast stand resentfully, and wait for the next bus to arrive again.

As a result, not only did you miss breakfast, but you were late for work because you missed the bus.Here, the time you spend queuing and the loss you suffer from being late are your transaction costs.

Transaction costs, that is, transaction costs are usually divided into broad transaction costs and narrow transaction costs.

Generalized transaction costs refer to the tangible and intangible costs needed to break through all obstacles and complete transactions.

Transaction costs in a narrow sense refer to market transaction costs, that is, exogenous transaction costs.Includes search costs, negotiation costs, and fulfillment costs.

In life, each of us has to pay transaction costs in different forms when realizing our own transaction behavior.People who like to smoke often encounter such a situation: You know that the price of cigarettes sold in the small shop downstairs is at least 5 cents more expensive than that in the mall, but you still choose to buy cigarettes in the small shop downstairs .Maybe you have never paid attention to the concept of transaction costs, but this behavior itself already includes transaction costs.

We will calculate this account: buying a pack of cigarettes in the small shop downstairs is 5 cents more expensive, but you only need to go downstairs to buy it, which saves time and effort, and is very convenient.Going to a shopping mall or supermarket to buy cigarettes, although you can save 5 cents, you have to walk a long way, and you even have to take a car to get there.The time and energy you spend in this is what you are not willing to pay.

Therefore, we will all choose the nearest store to buy cigarettes, because it is very cost-effective for us.Also, for smaller stores, they already factor in your transaction costs when pricing the item.When they set prices for commodities, according to different commodities, factors such as transportation and scarcity they consider are also transaction costs between them and suppliers.

Transaction costs are the necessary costs for transactions between people. For different people, their own transaction costs are also different.In the vegetable market, the retired old lady would enjoy haggling with small vendors for a few cents, because the old lady has a lot of time at her disposal.

Since these times do not create new wealth and value, buying cheaper vegetables lowers their cost of living.But for young people, the time of bargaining is saved, and they can do more valuable things.

Transaction cost economics is the only field in the new institutional economics that has been successfully empirically tested.Williamson has made outstanding contributions to the development of transaction cost economics, a novel fringe discipline that combines law, economics, and organization.They believe that the effectiveness of market operation and resource allocation depends on two factors: one is the degree of freedom of transactions; the other is the level of transaction costs.

6. Why do other people’s choices become one’s own choice—consumer conformity
Here's a story that touches on the herd mentality problem:
It is said that one day, an oilman died and ascended to heaven, but at this time the people in heaven had already lined up to the mouth of heaven.At this time, the gatekeeper said to him regretfully: "I know that you behaved decently and did many good deeds when you were alive, but I'm really sorry, but now the heaven is full and there is no room for people..." "It doesn't matter, I have my own Method".Before the janitor had finished speaking, the oilman said something with a firm smile.

When they came to the gate of heaven, the oil merchant tried his best and yelled inside: "Oil has been found in hell!" Rush to hell.Seeing everything in front of him, the gatekeeper was very surprised.After recovering, he said to the oilman: "Now you can enter heaven." Unexpectedly, at this time, the very proud oilman said: "I decided to go to hell. So many people have gone to hell, maybe the news It's true."

Conformity is a phenomenon in which people make social judgments and change attitudes consciously or unconsciously based on certain group norms or the opinions of the majority. Whatever you wear and do, you follow suit.In economics, herding behavior is also known as "herding behavior".

In response to this interesting phenomenon, scientists have done an experiment: put a wooden stick horizontally in front of a group of sheep, as long as the first sheep jumps over, the second and third will also jump over; Stick away.Although the stick was taken away, when the sheep behind came to this place, they would still jump up like the sheep in front.Therefore, scientists define this phenomenon as the "herd effect". "Herding" is a metaphor that people have a herd mentality.

Observing carefully, walking on the street, we can deeply feel the universality of this herd mentality almost all the time.Shawls are popular in early spring, so come and go, many girls wear a long shawl, although many of them seem to have a lot of shawls; this summer, sleeveless T-shirts, or T-shirts with skulls, Then people all over the street will wear this kind of clothes... There are many people, and this situation occurs every year and every season. It is no wonder that some people summarize the Chinese people's psychological stereotype as "pursuing commonality".

Herd mentality is a problem that the public is prone to make, and this problem is the most likely to lead to blind obedience, which will eventually lead to deception or failure.At the same time, many businesses also apply people's psychology just right.People like to visit crowded shops, enter crowded restaurants, and go to popular tourist cities. Therefore, in order to attract people, newly opened shops make a big splash, and the opening ceremony is as lively as a temple fair; To "customer first"; hot tourist cities do not hesitate to spend huge sums of money to attract people's attention.As a result, blind obedience eventually evolved into blind consumption.

In addition, because of a conventional concept among the masses that "the eyes of the masses are discerning", people are often the most likely to lose their basic judgment in the crowd.Seeing that many people were praising a product, I joined in, thinking that the opportunity was right, and quickly bought it with my pocket.In this way, many times, people will be fooled, and those who exaggerate the products are just "children" hired by the merchants.

However, although herd behavior has all kinds of adverse effects, economists analyze it from another angle, and it can also be regarded as a kind of expected rational behavior.If consumers can control their consumption behavior within a certain limit, then, under the conditions of information asymmetry or uncertain expectations, people can achieve their own expected results by imitating the behavior of "top sheep". good thing.For vulnerable groups, herd consumption has a certain protective effect on them.Of course, whether or not the herd behavior occurs and the extent of the herd behavior has a lot to do with each consumer's personality, characteristics, and knowledge.

Demonstration effect refers to the economic phenomenon induced by external factors to imitate excessively high consumption levels and consumption patterns regardless of productivity levels and economic conditions.

For example, if a person's income increases, the income of those around him also increases in the same proportion, and the proportion of his consumption to income will not change.And if other people's income and consumption increase, his income does not increase, but because of his relative status in society, he will also increase his own consumption level by swollen face and pretending to be fat.

7. Why fishermans should be small rather than big—consumption desire and demand

One day, a fisherman was fishing by the river. It seemed that his luck was very good. After a while, he caught one with a flash of silver light.However, it is very strange that whenever a big fish is caught, the fisherman will put them back into the water, and only small fish will be put into the fishing basket.The people who watched him fishing for a long time were puzzled, so they asked, "Why do you let go of the big fish and only keep the small ones?"

The fisherman replied: "I only have a small pot, so I can't cook big fish, and the taste of small fish is even fresher!"

In real life, there are two factors that constitute demand, one is the desire to buy, and the other is the purchasing power, both of which are indispensable.Consumers' personal preferences determine the desire to buy.And this hobby depends on consumers' material and spiritual needs, cultural accomplishment and other factors.

As we all know, if the total demand is less than the total supply, it will cause economic depression. Therefore, it is necessary to expand consumption and stimulate consumers' desire to buy. This can be said to be the only correct way and method to expand demand.But the question is how to expand consumer demand.Sometimes the expansion of consumer demand is subject to great subjective arbitrariness, without considering the structural conformity between microscopic effects and supply and demand, and without paying attention to the requirements of objective economic laws and market mechanisms. This is a serious flaw in theory.As a result, the effect of expanding demand is very poor, which directly causes the imbalance of supply and demand structure.For example, a surplus of commodity A increases the demand for commodity B, leading to a stagflation crisis.Without a grasp of economic laws, especially the laws of changes in consumer goods, it is difficult to correctly judge which commodities should increase demand and which commodities should reduce demand.Therefore, it is impossible to achieve a dynamic balance between demand and supply in terms of aggregate and structure.

What is the law of change in consumer goods?What does it contain?From the perspective of the life cycle of a single consumer product, it has gone through the following three stages.

The first is the initial development stage.The product has just been developed, the price is relatively expensive, and the output is relatively low, and most people cannot afford it.This stage is characterized by relatively slow growth in product output and relatively small demand.

The second is the stage of rapid development.The production technology of this product has matured and can be produced in large quantities, and the price has begun to drop. At the same time, people's income has increased, and the demand for it has also increased rapidly.This stage is characterized by rapid growth in product output and demand, and people's needs are quickly met.

The third is the stage of slow or even stagnant development.Because in the second stage, this kind of commodity has been produced on a large scale, which has basically met people's needs, and the demand has reached a saturated state, so it can only grow slowly with population growth. If there are substitutes, the Commodities will also die.The characteristic of this stage is that the growth of product demand is relatively slow, and the increase of output is correspondingly small, and it is in a state of relative stagnation or extinction.

Although there are many types of consumer products, and with the advancement of science and technology, new consumer products are constantly being invented and created, but for all consumer products [including services], they cannot be in the same development stage of the life cycle at the same time.

In a certain period, some commodities are in the first stage of the life cycle, and this type of commodity is called the first type of commodity; some commodities are in the second stage of the life cycle, and this type of commodity is called the second type of commodity; Commodities are in the third stage of the life cycle, and this type of commodity is called the third category of commodity.In this way, all consumer goods can be classified into the above three categories of goods.

With the development of production and the increase of supply, commodities in the first stage of life cycle will be transferred to the second stage, commodities in the second stage will be transferred to the third stage, and commodities in the third stage will be Gradually go into decline.At the same time, newly invented and newly created commodities are continuously supplemented into the first category of commodities.This is the basic law of the development and change of consumer goods.

Category demand intensity, which means market demand intensity or market capacity or space, can be expressed by the ratio of the population [target customers] who have demand for the category to the total population.According to the principle of brand economics, a category is a single point of interest for consumers to choose a brand product. Therefore, the coefficient of demand intensity of a category indicates the proportion of the number of consumers or target customers with a single point of interest in the total market capacity.

(End of this chapter)