Brainstorm common items that you think consumers pay too much for or that you think are overpriced

Brainstorm common items that you think consumers pay too much for or that you think are overpriced (i.e. movie theater popcorn, brand name items, souvenirs,, etc.). Now think of something more specific, either something that you or someone who know has purchased. For example, I know someone with a baby who was traveling and purchased a small pouch of baby food for $2.00, when even more baby food could have been purchased in a jar for around $0.50.
Write about your example, then use the principles you’ve learned about (like scarcity, opportunity cost, rationality, and marginal analysis) to explain why a person would make the decision to purchase that good.

Solutions

Expert Solution

My example would be the popsicles.

Explanation:

I can usually buy a decent popsicle for 0.4 cents. But people are paying a fortune to buy a Magnum popsicles for $2 to $4.

I do think that people buy it because it is limited. The popsicles are unique and contains a bunch of nuts with vanila coating. This makes it attractive for people. However, they are sold in limited number per batch. Therefore, there is scarcity. There are more people who wish to buy it than availabe supply of it. This is similar to concept of scarcity which says there are unlimited wants but limited supply.

As people purchase more of Magnum popsicles, they give up more of other snacks they can buy due to limited budget. This shows the concept of opportunity cost. The opportunity cost of more Magnum popsicles is the other snacks which were given up.

Rahul Sunny answered 1 year ago

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