Real World Examples Flashcards
Demand shift
Avocados
- Avocados are a sacred fruit in Central America
- 1982 oversupply in the US lead to a fall in price and wanting to sell avocados and dog food
- When distinction between good and bad fats occurred, avocado pricing returned to normal
Supply shift
UK drought
- Summer 2018
- Potato crops decreased 1/3
- Potato crisps prices increased
Rule of thumb
- Children tend to order the same meal at McDonalds
- People often go into ‘autopilot’, driving the same particular way to/from their workplace
Anchoring bias
- 2009
- NY credit card suggested tips; either 20,25,30%
- People thought 20% was the lowest possible tip when really they could have not tipped at all
YED inelastic
Inferior goods: 2nd hand clothing, house brand goods, margarine
YED elastic
Normal: most foods consumed in the house are -0.2 YED
Luxury: Premium cars, boats, jewelery
YED applications
2010-2016: demand for agricultural commodities was 2.8%
2017-2018: falls to 1.8%
This is due to a economic growth, hence consumers switched from agricultural commodities such as rice and wheat to high protein and fat content food
PES elastic
Taxi services, pens, smartphones
PES inelastic
Nuclear reactors, fresh produce, gold, housing
Price ceiling
India 2017
Bare metal stents used to sell at 650$, now capped to 100$
Price floor
India
Wheat=1,840 rupees/quintal
Barley=1,440 rupees/quintal
Minimum wage
California 1 January 2021
14$ hour for employers with 26 employees or more
13$ hour for employers with 25 employees or less
Excise/sin tax
2012 France
20% tax on alc
2.8 billion euro gvt revenue
Indirect tax on all goods
Singapore GST (good services tax) of 7% on all goods
Subsidy
US agricultural subsidy of 20 billion USD a year
- Ensures steady domestic food supply
- Economic stability to farmers
- More international competitiveness
