It is me, your favorite child! How are you? How is everyone else doing? I am doing great and university is going well, but it is hectic at times. I know that I usually text or Facetime you and share my daily highlights, but today I was feeling fancy and decided to go old school and write you a letter instead. You always tell me to try out new things and so here I am communicating to you with pen and paper. It sure is something new and different! So, mom, recently I have started reading this book for my online economics course called Cocktail Party Economics and it is amazing! I really enjoyed reading this book because it gives a good overview of the world of economics. The readings are easy to understand and helps new readers to easily engage in the concepts of economic and business events. Economics is all about the production, distribution, and consumption of goods and services. Consumers in this world need resources to fulfill their desires and wants.
While reading, there were three chapters that I really enjoyed. The first one was chapter 3, Exchange: Supply and Demand, Take One. It talks about our world’s supply and demand for the goods and services through scarcity. Now mom, you probably didn’t understand a single word that I have just said, but that’s alright cause I was once in that position, however, I’m here to tell you all about it. Scarcity is the economies problem of how we cannot have everything that we want to have. Our economy has insufficient resources to fulfill everyone’s wants and needs. That is why not everyone has the same necessities as others. We have to make decisions based on the costs and benefits of a product, for example, if you were to give me $10 so that I could buy things from the store, I come to a realization that those $10 would only support one item. So now, I have to decide on which item to choose from, would it be the shampoo or the body lotion? If I were to get the shampoo, then it will cost me the body lotion or if I get the body lotion, it will cost me the shampoo as well as how much the product will benefit me. It all depends on the cost and benefits of the products. This goes hand in hand with the supply and demand in the market. “When you give something up, you are supplying or selling it and when you get something, you are demanding or buying it” (pp 30). Something that is so interesting is that you might expect this to take place in the outside world however, this happens in our home as well! Remember that one time when Maria and I traded a pair of heels and a handbag with each other? I wanted the heels from her and she wanted the handbag from me. Well, that is basically the concept of supply and demand. Isn’t that so amazing?
Another chapter that was really interesting to read was chapter 7, Demanding Clients. What was so surprising was that many of the concepts and examples I read in this book were so similar to the things that you or I do on a daily basis. We are all demanding clients and thus, we look for prices that have been decreased when purchasing goods. When there is an increase in supply, the price of the good decreases and the quantity demanded also increases. Last week when dad and I went to the grocery store to get milk, I saw very few amounts of people purchasing milk bags. There was hardly anyone that touched it, however, couple days back I saw that same milk brand on sale and people were going crazy for it! They would take 3 to 4 bags and surprisingly even dad bought more bags. That is when I realized that because the price of the milk dropped, people bought more of it. The world’s strange right? Well, that’s what consumers look for and want. Also, mom, while reading I found out there are four categories that can cause a shift in consumer demand, which are; consumer preferences, consumer income, prices of related products and the number of buyers in the market. Consumer preferences would be based on an individual’s choice of a good or advertising can help draw their attention to goods that they didn’t once know about. Advertising sure is good at captivating consumer preferences. Demand also depends on a consumer’s income. When a consumer’s raise goes up, the demand for goods also goes up because they have the money to buy those fancy stuff like those unordinary things. However, when their income falls, the demand for these things also goes down. Lastly, it all depends on the number of buyers in the market. When there are many number of buyers in a market for certain goods and services, the demand also goes up. Mom, it is like we are wizards, controlling the economy with our magic wands!
Wow! I feel like you know much more about our world’s economy now, but I have one more concept to tell you about. This one is chapter 9 from the book, The Pursuit of Happiness: Efficiency and Equity. The main thing economists constantly ask about is “How can people be as happy as possible given that we live in a world of scarce resources?” (pp102). I sometimes wonder about that and I assume you are also, so here is how it works. Us consumers get enjoyment from the littlest things we do and get that is based on our preferences and this does not impact the preferences of others. It is like “you do you” sort of thing. Due to our preferences, the demand for these products is established in the market and produced at rates at which we are able to purchase them. “Supply is about the wise use of scarce resources, and demand tells about our collective happiness” (pp 104). When companies produce goods that have low production costs, markets are able to easily maximize the surplus efficiently, however it is not equitable. Efficiency and equity go hand in hand, but it might not always work like that because not everyone can be equal. For example, if we have a party, you try to be efficient by making large portion meals for everyone and when you serve your guests, you try to give them equal sized portions. As more and more people come to the portions start to vary per person because you have too much or too little food. This is also known as tradeoffs, as one thing increases the other one decreases.
Well, mom, that’s all I had to say about the Cocktail Party Economics. It sure was interesting to read and very insightful. What do you think of it? Talk to you soon.