Economics of Everyday Life

“Why do brides spend so much money on a wedding dress? Why do bridegrooms rent a tuxedo at a reasonable price?” asked a student on a report submitted to the author who is a professor of the Johnson School at Cornell University.

The student also offered his answers: “Wedding dress rental companies should prepare a mind-boggling variety of dresses to meet brides’ needs for fashion. As the rental demand would be no more than four or five times a year, rental fees could be higher than purchasing prices. On the other hand, as bridegrooms are satisfied with a basic style, rental firms can enter the market with a few styles for each size. Therefore, rental fees for bridegrooms will be much lower than purchasing prices. ”

The author gave his students the assignment of explaining what happens in everyday life with economic principles. He published a book by compiling interesting reports. As there is no correct answer to the assignments, what matters is the creativity of identifying a question and the logic of explaining the reason. The author calls such a way of thinking, “economic thinking.”

Take another report. “Why are jewelry-studded million-dollar bras made?” The student explained in response, “There is no one who buys a 6.5-million-dollar bra and the manufacturer does not expect it to be sold. But the product raises the standard of purchase for those who want to buy a splendid present. Moreover, as jewelry can be reused, the manufacturer does not suffer a loss.” That is, if a husband visits the shop to buy his wife’s birthday present and sees the bra, he could be more easily persuaded to buy a several-hundred-dollar present.

There is an economic explanation to romantic relationships, too. “Why do those who already have a partner tend to get another one?” The answer is, “Women are well aware that attractive women are popular with men. Therefore, if an attractive woman gets intimate with a man, other women see that as a sign that he is an attractive man. Hence, the rich get richer and the poor get poorer.”

The book contains dozens of examples, including, “Why do electronics goods companies sell their product after intentionally making a scratch on them?” and “Why do public officials like defensive expressions?” The book helps readers easily understand “supply and demand,” “tricks of discounted prices” and “economics of romantic relationships.” It is recommendable not only to adults, but to teenagers as well.

heo@donga.com