Saturday, September 11, 2010

"Buy one, Get One Free" Or "Half-Off"--I can't decide which is better!!

It is difficult to not be manipulated by clever marketing, or unclever marketing for that matter (You believe when an item is advertised as "half-off" that it was ACTUALLY sold at the original price at one time, don't you??).  I can explain this to students all day long, but I am sure when they go to the store they are lured by the "sale".  Sellers engage in a concept called relative pricing.  If I have an item I want to sell for $50 and advertise it at that price I will NOT get the same response if I instead put a "manufacturers suggested retail price" of $100.00 and offered it for sale at $50.00, half-off.   Same price outcome but not the same sales response.  the first instance I did not give you are basis for comparison, the second I did...
""Behaviorial economist Richard Thaler has noted that consumers are really bad at making decisions about value and constantly need "reference prices" for comparison. A dress costs $80. Is that too much? Not if it's marked down 50 percent from $160. The trick is, that artificial $160 reference price may not really exist.""How Apple plays the pricing game
 I can cleverly do this with multiple items that are similar but steer you to the one I really want you to buy. Apple (and others) do this very well, but Apple may be the best at this "relative pricing" game...
""...Decoys explain why Apple often sells each gadget in a pricing series, such as the new iPod Touch's $229, $299, and $399 price points for different storage capacities. You may gladly spend $229 to get a hot media player, thinking it's a deal compared with the highest-priced version and not blink that you could instead buy an iPhone 4 at the lower price of $199 with more features.
The $399 "decoy" has clouded your judgment. Apple wins the best of both worlds - stoking demand for products that look like bargains and for all the decoys it sells at much higher prices. Yes, some people will spend $399 for a music player with slightly better technology - and Apple makes even fatter margins...."
If after reading this you still get fooled, well, at LEAST you are an educated fool...Ummm, that did not come our right, did it??? :)

How compromise choices can make you money

Thursday, September 9, 2010

Need a current event article for Economics? This one is short and discusses more concepts than any other article I have seen a carpet bombing of econ concepts!!

Short article chocked full of supply and demand problems thoughout a supply chain, illustrates structural unemployment, changes in the labor force for trucking, the pitfalls of extending unemployment benefits...seems unending...if you need a source for AP Economics or a college economics class, this is one stop shopping...
Shortages of trucks and truck drivers stall product deliveries

Nice graph showing the Natural Rate of Unemployment vs Actual Unemployment overtime...Yes, it IS important!!

Below you will find a graph showing the Natural Rate of Unemployment vs the Actual Rate of Unemployment over time.  The Natural Rate of Unemployment (aka NRU) is the sum or Frictional Unemployment and Structural Unemployment the economy.  These two categories of unemployment are always present and the goal is to minimize them, especially Structural.  Structural unemployment is serious and poses many problems. Workers are unemployed because their skills have been rendered obsolete, primarily through advancements in technology and production process.  These workers tend to be unemployed for longer periods of time and need to undergo re-training to acquire relevant skills.  It is feared that the Natural Rate of Unemployment is going to increase because of an increase in the number of workers who fall into the Structurally unemployed category.  This could describe between 2 and 3 million people!! How do we solve THAT problem?? Ideas?
Cleveland Federal Reserve

Wednesday, September 8, 2010

Are Americans selfish and not charitable? Nice graphic enclosed that shows who is naughty and who is nice

A bit of good news, but I did not have to be told this...Americans ARE generous...(Click on image to make bigger OR click on link to go to source).
Americans Are More Caring Than 99% Of The World

Here's a rare bit of information to make Americans feel good about themselves.
A UK-based think tank rated Americans fifth in the world in a composite index of charitable activity, including giving money, volunteering, and helping a stranger. Only Canada, Ireland, Australia, and New Zealand ranked higher.  Charity-wise, Americans do better than the British, French, Chinese, and the rest of the world.

Liar, Liar, pants on fire! Well, not on fire, but they may be larger than they appear...

I KNEW IT!!  Not all pant sizes are created equal.  The graphic below shows the variations in ACTUAL size of select pants relative to the size stated on the label.  The label in the pants says "36 inches". However, when measured you can see the ACTUAL size of the pants is not as advertised.  The pants are considerably larger, in some cases.  Is this dishonest advertising OR do we WANT to be duped in this manner? Just to be safe, I am NOT going to measure MY pants...I am SURE they are really "38's" as labeled!
Are Your Pants Lying to You? An Investigation

POP! That is sound of the"bubble" about to burst in the market for Higher Education...Can colleges escape the laws of supply and demand? I think not...

There has been lots of talk about how to control over-spending in the housing and healthcare markets.  Major legislation has been passed and political capital has been expend to address these problems. How about the potential "bubble" in higher education? Is this issue important to college students?? Well, yes.  Has it been seriously addressed? Well, you decide for yourself as you write checks to pay for your college expenses...

The first graph pulls out the price of College Tuition  (Dark Red Line) over time and compares it to prices as a whole (CPI-Blue Line) and the price of housing ( Bright Red Line)

The second graph pulls out the price of College Textbooks (Blue Line) and compare it to prices as a whole (CPI-Dark Red Line) and the price of housing (Bright Red Line)
Graphs courtesy of Carpe Diem

Sunday, September 5, 2010

Ok, the deep fried thing at the State Fair has gone one product too far....

I don't drink at all, so this does not affect me personally. The creativity and trial and error that stems from this innovation is what fascinates me.  The economics is interesting too: is this food item the result of demand-side or supply-side economics?  Did people demand this good and the entrepreneur then go about producing it, or did the entrepreneur anticipate that if he/she supplied it people would want it? Sorry, this is how I think about everything---the "economic way of thinking" controls my life!! :)

Texas State Fair's culinary contenders fry everything from Pop-Tarts to beer
""If Big Tex looks a little glassy-eyed this fall, blame it on the Fried Beer. Or the Deep Fried Frozen Margarita.
Booze is generating a buzz for the State Fair of Texas, as fried-alcohol dishes made the list of top new fair foods announced Wednesday.
Eight imaginative contenders are vying for the Sixth Annual Big Tex Choice Awards, with the winners getting plenty of publicity – and long lines of eager fairgoers willing to gobble up the fried goodness.
But have your ID handy for the Fried Beer and Deep Fried Frozen Margarita – you must be 21 or older to partake....Fried Beer is a beer-filled pretzel-like dough pocket that's shaped like ravioli. Take a bite and the beer pours out.""
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