Frozen Yogurt stores are everywhere in my neighborhood.  YoBerry, Berry Moon, Yogurtland, Forever Yogurt, Red Mango — the list goes on.  This is somewhat of a peculiar trend on the surface, but there several reasonable explanations for why it might be taking place.

The large number of yogurt stores in my neighborhood is likely due to a high demand for the product.  People in my neighborhood love frozen yogurt, so there is room for plenty of stores in the area.  Assuming it is a perfectly competitive market, new frozen yogurt firms will continue to enter the market until supply reaches demand.  Since demand seems to be relatively high, there are a correspondingly high number of frozen yogurt stores.

But why is demand so high for frozen yogurt?  One reason is because of a great product design.  At frozen yogurt stores, people get to make their own yogurt creation.  The stores are self-serve, meaning that customers pick the exact quantity, flavor, and assortment of toppings.  Everyone that comes to these stores has ideal combinations of quantity, flavor, and toppings they would like to choose.  This can be seen as their indifference curves for frozen yogurt.  Each point on their indifference curve represents some combination of quantity, flavor and, toppings that they are equally happy with.  If the yogurt stores had preset menus, customers might be forced to pick a combination that does not fall on their indifference curve and would not maximize their utility.  However, at these yogurt stores, customers are able to purchase one of their ideal combinations and maximize their utility.  Frozen yogurt stores in my neighborhood are popular in part because a great product design allows people to pick what makes them happiest.

Another reason for the high demand of frozen yogurt is a change in consumer preference during the summer months.  Frozen yogurt stores are especially popular when it gets warm out and people want a cold, refreshing snack. Though the stores are popular year round, there is an especially high demand for them in the summer.

In addition to high demand, business owners also open a lot of frozen yogurt stores in my neighborhood because they are able to charge high prices and a make profit.  My neighborhood is made up of an affluent population who can afford to pay a relatively large amount for frozen yogurt.  As a result, the stores are able to charge a pretty high price for yogurt — usually about 5 or 6 dollars per cup — without a dramatic decrease in demand. This suggests that the price elasticity for yogurt in my neighborhood is relatively low.  If, however, these yogurt stores tried to charge 5 or 6 dollars for their product in a poorer neighborhood, they likely would not see the same results. Yogurt is a luxury good, not a necessity, so people running low on a money would probably not be willing to a pay a high price for this product.  In this scenario, the price elasticity for frozen yogurt is higher.  Fortunately for the owners of frozen yogurt stores, there are neighborhoods like mine where they can charge high prices for yogurt without seeing a dramatic decrease in demand.  This allows them to make more of a profit and increase their total revenue.

On the whole, there appear to be numerous reasons why there are so many frozen yogurt stores in my neighborhood.  The demand for these stores is high due to great product design and a change in preference during summer months.  Moreover, business owners have the incentive to open frozen yogurt stores because they can charge high prices and make a profit.  The number of frozen yogurt stores in my neighborhood may seem odd at first, but there rational economic explanations for why there are so many of them.

I am a barista. This means that I am unashamedly pretentious about my coffee. I prefer dark roast to light, cappuccinos to lattés, and I know what a macchiato is (it isn’t the same as the sweet caramel treat at Starbucks). As warmer weather approaches, nothing hits the spot quite like an iced coffee. I’m not talking about an iced latté, or an iced Americano, but good ole cold press iced coffee. A trip to Sayles seems to be sufficient to satisfy this craving. However, as many will attest, the coffee and espresso drinks at Sayles leave much to be desired.

One day, I was standing in line waiting to order some French fries. The woman in front of me ordered what she hoped to be a refreshing iced coffee. I was shocked when I saw the barista put ice in a cup and pour hot drip-brew coffee over it! I had heard of this happening before, but I thought that it must have been an error on the part of a new staff member. After seeing it with my own eyes, I wondered why Sayles always made its iced coffee incorrectly.

To get at an answer, let me first explain how iced coffee is supposed to be made. One must first grind up coffee beans, and then let them steep in a bath of ice and cold water, preferably over night. This process produces a coffee that has a smoother flavor and is less acidic than traditional drip-brew coffee (the stuff you make every morning with a paper filter).

While there are other coffee shops in town, that do make ice coffee correctly, Sayles has an advantage in its central position on campus. This in effect creates a monopoly. Sure a student could go to Goodbye Blue Monday, but at the cost of a half hour round trip.

Time is a finite resource. Just as students often do not want to give up half an hour just for a solid cup of iced coffee, Sayles does not want to spend sixteen hours steeping its iced coffee. If someone comes in to order an iced coffee, but the cold press hasn’t finished steeping, Sayles risks losing a sale. Because they know that faculty, staff, and students will come to them first, they are content to continue serving bad iced coffee.

Why, then, does Goodbye Blue Monday or Caribou Coffee make cold press correctly? Both are in monopolistic competition vying for the business of the people of Northfield. Each knows that if they produce a low quality iced coffee, they will lose the business of Northfield residents to the shop with a higher quality coffee. Each has an incentive to make good iced coffee.

The opportunity cost of producing quality iced coffee is too high for Sayles, which because of its location acts as a monopoly. Were Sayles in monopolistic competition with the other coffee shops in Northfield, it would have to make iced coffee the correct way, lest the residents of Northfield find some other coffeehouse to quench their thirst.

America is known for being a country filled with immigrants and there has been patterns of immigrants of the same cultural groups settling in the same areas. I am going to economically analyze Hmong immigrants in Minnesota and why they chose to stay as a community in Minnesota. According to the 2010 U.S. Census report by Hmong National Development there is a population of 66,181 Hmong immigrants in Minnesota, the second highest population following the 91,224 immigrants in California. Why are there the highest concentrations of Hmong immigrants only in particular areas of the United States specifically Minnesota? One reasonable answer could be that the people who has sponsored for the Hmong immigrants to come to America all live in Minnesota, but realistically this is not true. Christian missionaries and other sponsors have lived in Chicago, New York, etc and although these places have been the first places Hmong immigrants have landed in the United States they have converged into a community in Minnesota.

There are different generations of Hmong immigrants in the United States. Older waves of Hmong immigrants have had the opportunity to get an education and establish businesses and firms. Because the population of Hmong people in Minnesota is so large, this area is an attraction for firms directed towards Hmong people. An example is the Como flea market that have a local Hmong famer’s grocery section and an imported Asian goods sections. The flea market as a whole firm, earns zero profits because they earn only as much as the total number of vendors’ fixed costs to maintain a booth. These obtained fixed costs from the vendors are used to pay the flea market establishment’s own fixed costs; thus you never see a bankrupt vendor store for a long period of time as that will result in a loss. On a smaller scale, the vendors in these markets are earning profit though as they are monopolistically competitive. We know this because more vendors are still constantly buying space to sell their products. The total revenue of the small shops exceeds the total costs. Thus; there has been an increased in smaller firms entering the market by opening a new shop. These types of firms are selective about where they establish because their customers and laborers are primarily the Hmong people. And because Hmong people find these firms directed towards them as familiar, safe, and important to the Hmong culture, Hmong immigrants find themselves gathering into groups and living in communities such as the one in Minnesota.

For younger waves of Hmong immigrants to the United States the benefits of living in Minnesota is also higher as well as implicit costs of living in Minnesota is also much less compared to other states for new Hmong immigrants. Most Hmong people from Laos are uneducated and trained only in subsistence farming. The geography of Minnesota provides a good incentive for living in Minnesota as there are farms. Also because there is such a huge population of Hmong people living in Minnesota already, there is an established community for the Hmong immigrants. Thus, if a new generation of Hmong immigrants were to come to the United States they will prefer to settle in Minnesota because they may have family already residing there as well as a helping Hmong Community. Their marginal utility increases as their marginal rate of substitution for living in Minnesota is inelastic meaning they are less willing to be indifferent to living elsewhere.

Newer immigrants also like how Minnesota’s low-income aid programs are extremely well enforced through government subsidies such as Section 8 of the Housing Act of 1937 which provides free public housing for families of American veterans. Minnesota especially has a comparative advantage in services for low-income immigrants. Inaddition to the public housing, there is also EBT available for low-income households which is a form of a food assistance program. This comparative advantage compared to many other states gives Minnesota the lower explicit costs for immigrants as the government will provide subsidies for food and shelter. The public housing subsidy creates deadweight loss for the housing market though as the demand curve of the consumers are shifted to the right and the quantity is increased. This subsidy benefits the immigrants because their demand curve is more inelastic than the supply curve. Who wouldn’t want free money?

From looking at the opportunities in Minnesota given to old and young waves of Hmong immigrants in the United States, Minnesota provides a subsidy programs that benefit the low-income Hmong immigrants, as well as incentives and thresholds for older Hmong immigrants to establish efficient markets for the Hmong community. This incentive to living in Minnesota has created a flowing effect of Hmong immigrants.

During the fall of 2013, I took MATH 215: Introduction to Statistics.  At the end of the term, two other teammates and I did our final project evaluating where the best place would be to buy your textbook: the Carleton Bookstore, Amazon, or eBay.  To do this, we obtained the list of available textbooks in the Carleton Bookstore and randomly chose a select number of books to then cross-reference prices in these three specific retailers.  Besides these booksellers, we looked at the difference between new and old books as well as the difference between hard science and mathematics textbooks, and humanities and social science books.  We can say with 95% confidence that the Carleton Bookstore is more expensive than Amazon and eBay both in the new and used market and eBay is more expensive than Amazon in the used market. As for science and mathematics textbooks, we can say with 95% confidence that in all retailers, both new and used, science and mathematics textbooks are overwhelmingly and significantly more expensive than humanities and social science textbooks.

Given on our statistical conclusion based solely on prices, I was interested to look at this information through an economic lens, specifically in terms of opportunity costs for the buyer.  When buying through the Carleton Bookstore, the buyer may find it easier to buy their books at the bookstore because the bookstore has a good quantity of books (supply) and they are located at the heart of campus.  This means that the implicit costs of time and energy are lower whereas, according to my final project, for both the new and used books, the Carleton Bookstore overcharges, meaning higher explicit costs.  In contrast, with buying books online in general, it could be argued that there are more implicit costs with searching for a long time to find the book online as well as the waiting time before the book arrives.  With this, there are lower explicit costs as the new and used books are cheaper (lower explicit costs).  That being said and the Carleton Bookstore aside, when comparing online purchases of used books, eBay has higher explicit costs than Amazon.  Additionally, in terms of the condition of the books themselves, the Carleton Bookstore would have a higher quality of books whereas the quality of books from vendors online is more questionable; this could add to the implicit costs of buying on either Amazon or eBay.

So, what conclusion do we draw from this?  Based only on explicit costs, the buyer would be better off to buy books from Amazon and eBay, but, based on the opportunity costs (implicit costs), it would be perhaps better to buy books from the Carleton Bookstore.  I think it is difficult to determine which option is better because it really depends on how the buyer weighs the importance of the implicit and explicit costs.  So, when you need to buy a Shakespearean play or an Organic Chemistry textbook for this classes this fall, be sure to think about not only the explicit costs, but also the implicit costs that come with buying books from the Carleton Bookstore, Amazon, eBay, or anywhere else.

Economics is all about making rational choices. According to my opportunity cost is it better to spend time studying for my test tomorrow or surf the web a few more minutes? Will I get more marginal utility per price out of going to Starbucks or Subway? Looking at my budget constraint, is it better for me to buy 4 boxes of Nature Valley bars or 3 boxes of Quaker’s Chewy bars? We are constantly asked which option is the best, which is the most rational. However, many of the choices we make are irrational. One of the most common irrational choice I make on a daily bases is procrastination. Over the weekend I was trying to get a start on this assignment, but there were numerous other activities that I was keener on doing instead, such as sleeping, watching some Grey’s Anatomy, or listening to music. The thought of “I can do this Monday or Tuesday night” and “It would be so much more fun to watch a TV show right now instead of working on this essay” kept invading my mind. But, it would have made sense for me to work on this essay, according to my cost-benefit analysis. I would have had time during the week to do those other things and I would have felt accomplished once I had finished the assignment. There were endless reasons for me to do the assignment, however I just couldn’t get myself to do it. So, now I’m sitting at my desk wondering why I didn’t finish this assignment earlier.

Why do we do this to ourselves? We build up pressure and make the time to complete the task even scarcer for what? Satisfaction? It surely can’t be enjoyable to cram for a test the night before. It all just doesn’t make sense. But, I believe that procrastination is something we humans naturally do. We like to be impulsive and live in the moment. It is easier to experience the feeling of satisfaction in the present verses thinking about obtaining the feeling in the future. This is the same idea with present value. If I were to receive $1,000 today it is worth more to me than $1,000 in 4 years. I think our motivation changes as the long term turns into the short term. Writing an essay doesn’t seem as bad when I imagine myself doing it tomorrow compared to if were to do it today. What I am implying is that I don’t see working on the essay now worthy of my time and that is why I put it off for another time. The idea of procrastination relates to the idea of present value such that the longer time you have to complete an assignment the less value it has for you. Yet, the closer the deadline the higher value it has and the more urgency you feel complete it.

The level of difficulty that people have with procrastination depends on how much they value the long term benefits. With studying, students with higher GPA may have fewer problems with procrastination, because to them it is more costly to procrastinate. Students with lower GPAs might find studying more costly and less beneficial, thus have more problems with studying. This idea also ties in with the opportunity cost of procrastination. You can either spend all 5 hours studying for an exam or spend just 2 hours studying and the other 3 hanging out with your friends. The opportunity cost of receiving a better grade by studying for 5 hours is time with your friends and the opportunity cost of spending more time with your friends is earning a higher grade on your exam. Of course, this is all dependent upon what is higher up on your priority list or what you get the most utility out of.

Many people have tried to change our impulse to procrastinate with incentives. Incentives are another concept that drives economics. For example, the supply and demand curves. The theory behind the curves predicts that the market will tend to move towards the equilibrium price because everyone is driven by an incentive. By decreasing the price sellers can attract buyers and make more profit. By increasing the price buyers are able to get more of the good or service that they want. However, incentives do not always work. My incentive for writing this essay was that I would have more time during the week to working on other assignments or that someone might have this same idea for a topic and post it on the site before me. There were plenty incentives for me to write this essay, but I always found an excuse to put it off.

Everything about procrastination seems uneconomical, except for the price that comes along when you do procrastinate. For example, depending on the professor you have, turning in a paper late can come with a hefty price. Procrastination can also come with more explicit costs, such as paying late fees at a library. The behavior of procrastination becomes more costly as the stakes are heightened, for example a government can lose profit by procrastinating to implement a tax or policy that will benefit them in the long term. Nevertheless, even a looming cost, implicit or explicit, can’t motivate us humans to get the job done.

The reasoning behind why we procrastinate seems irrational, under economic terms. However, many economic concepts tie into procrastination when we look at the bigger picture. We value the present time more than the future, that is why we might chose to do things that are more enjoyable to us at that very moment. Furthermore, procrastination is something very humane and is therefore subjective to every person. Depending on what the person values more, we can look at the opportunity cost of procrastination. Until someone discovers a method to overcome procrastination we humans will just have to accept the fact that procrastination is something we do.

How does Family Video charge such unbelievably low prices?

I hold a seasonal position as a sales clerk at Family Video when I’m not studying here at Carleton. For those who might be unfamiliar with Family Video—it’s a chain movie rental store like Blockbuster or Hollywood Video, though you rarely see those around anymore. Unbelievably, there are currently over 755 Family Video stores in the United States and Canada, which seems like a size disproportionate to what I would estimate as people’s demand to rent movies outside of more convenient options like Netflix or On Demand. Nevertheless, Family Video is popular because it charges unbelievably low prices. People often come in and rent a stack of 16 movies for just $8 for five nights. I’m not sure what it costs to rent a movie from your television at home, but $8 would probably only get you two to three movie rentals at best. I’ve worked at Family Video seasonally for over a year now, and their profit margin still continues to baffle me, but maybe there are more tricks to the trade than I realize.

So when I said people could rent 16 movies for $8, I wasn’t lying, but there is a catch. You can only rent non-new release movies so cheaply, but even so the “2 For $1” section of older movies spans for aisles and includes thousands of movie rental options. But how does Family Video make money? My guess is that they make their real profit in renting out new release movies and not older movies. New release movies cost (this depends on the location, but I’ll just give you Waukegan, IL store prices since that’s where I work) $2.60 per night for the first two weeks. After those first two weeks there is an option to rent for five nights for $3.10, and two weeks after that, all month-old new releases cost a steady price of $2.60 for five nights for the remainder of their stay on the new release wall. $2.60 is a considerable mark-up from the $0.50 movies I mentioned earlier. Plus movies don’t have a brief stay on the new release wall. Some movies are considered new releases even six to nine months after their DVD release date.

Based on my research, the cost of buying a newly released DVD is about $19.99. I’m not sure what Family Video pays per movie because they buy in bulk, which brings costs down, but on average I’d say Family Video buys about 50 copies (give or take) of any given new movie for maybe $15 each. To cover this variable cost alone, each individual copy of this particular new release needs to rent out at least six times. All together for a movie Family Video purchases 50 copies of, 300 movies need to rent out to meet variable costs alone. This leads to the part I don’t really know. I’m not sure how many people rent out the really popular movies, but I would estimate somewhere between 500 and 700 rentals for really popular new releases, so Family Video makes revenue that way. Yet, you also have to consider the movies that tank. There are times when brand new new releases sit on the wall for weeks on end, and in those cases the extra revenue brought in on the popular movies only barely makes up for those that don’t rent very well at all.

So, again, where’s the profit? How does Family Video meet not only its variable and fixed costs, but make money as well? Based on my reasoning above, the money Family Video makes on new release rentals only meets the variable cost of the price of the movies themselves. So a new hypothesis is in order: Family Video meets its other costs and makes profit primarily on overdue movie fines. The dreaded fines! Yes, of course! I have, and again I would never lie to you, seen time and again upwards of $200 worth of fines on any given account. But again, there’s a catch. Family Video’s policy states that no amount of the fine needs to be paid to rent out new movies. Yes, that is correct. People with $200 fines often come in and rent movies without paying a cent in overdue charges, but they’re in the minority. The majority of people take responsibility for their late charges—even if they have to pay between $10 and $20 of late fees each time they rent. Now part of the reason late fees exist is purely logistical—there can be a steep opportunity cost to not having that movie up on the racks, particularly if it is popular. On a popular movie that is three days late, it makes sense to charge $7.80 ($2.60 fee each night for three nights) in late fees, because it may well have rented out to three different customers on those nights it wasn’t sitting on the shelf. On the other hand, some new releases might have sat on the shelves collecting dust in the store rather than sit in someone’s house for three days. This means that all the late fees coming in for that late movie are pure profit, or at least revenue above the variable cost, of that movie for Family Video. Under the assumption that these late fees are charged on what is probably every other customer, it begins to make sense how Family Video makes money.

Family Video’s late fees must be the reason I have a job, because they’re the only way the store revenue really surpasses its total costs to make a profit. And when you think about it, it makes sense: your TV can’t charge you late fees when you rent a movie for 24 hours on On Demand. After 24 hours, you just simply can no longer access the movie. In this sense, you pay more to rent for the convenience of renting on your TV because On Demand can’t make profit by you failing to turn the movie in on time. On the surface, Family Video seems so much cheaper. $2.60 for a new release for a night is undoubtedly an excellent price, but only if you return the movie on time. If you do, then great, you have rented a movie at a discounted price. The majority of people, though, lead crazy and forgetful lives, and when they rack up overdue rental fees, the “cheap” price they pay to rent at Family Video ends up costing just as much if not more than the expensive On Demand rental option. This system in which more diligent and responsible customers pay less than those who aren’t so timely is representative of price discrimination. This price discrimination actually works really well for people; those who can’t afford the fees might go out of their way to turn movies in on time and pay a cheaper price than those who can spare a few dollars in late fees. People pay at the price they are willing to pay based on the amount of late fees they accrue, which maximizes Family Video’s profits and keeps market prices down for those seeking the cheapest rental options. Ultimately, though, we’re all human, and most people are bound to pay some late fees. And, lo and behold, Family Video collects enough of those fees to put me to work for the summer! At least now I can rest easy and say that all 755+ Family Video stores out there in the world somehow make a profit. This is good news to me. Also, go rent movies!

I have always had an obsession with taking unnaturally long showers. Now that my parents aren’t here to cut of my water supply, I often fall asleep while showering or stare at the wall for what seems a couple seconds but is actually a good 20minutes. However, with the ability to time my own showers has come another price, that of shampoo. I just recently made a trip to Econofoods and I decided to try a different shampoo product, L’Oreal’s’ Kérastase. I’ve taken a couple showers thus far with the Kérastase Resistance Reinforcing And Refinishing Shampoo and I have to say I’m pleasantly surprised, my hair feels silky and doesn’t look as grey as usual. The retail price is $32 per bottle plus tax, which in Northfield works out to roughly $35. Presuming this shampoo is good for 9 uses, as it contains 8.5 ounces of liquid, the cost per wash is $3.89. However, since this expense is not tax deductible and I am paying for it from my dining hall paychecks, it would require me to earn probably $40 pre-tax to buy the shampoo, so the real cost would be $4.44 per wash.

As a relatively well-informed customer, I can analyze my choices through my opportunity cost. Previously, I was buying shampoo at $14 a bottle. This bottle, “Head & Shoulders 2 In 1 Dry Scalp Care Shampoo” is also significantly larger, 23.7 ounces to be exact. This would allow me to take 24 showers before having to refill or buy a new item. This means that my personal cost per wash for a bottle of Head and Shoulders is  $0.58 or $16 for a bottle after tax and thus, actually $0.67 per use.

So, based on my own personal opportunity cost for these two products, the Kerastase is 663% more expensive than its alternative Head and Shoulders brand, both of which clean my hair in a similar fashion and do not have any main significance, which sets them apart. I must thus ask myself, do I enjoy the Kérastase shampoo 6 times more than the Head and Shoulders shampoo?  I personally think they are equally as good so I have to conclude that the price difference does not compensate for the almost non-existent difference in performance of both products.

Next weekend, I should then naturally go back to buying Head and Shoulders, but I know won’t. Despite this economic reasoning to which I have subjected myself and the fact that the Kérastase has eaten up more than 50% of my weekly income, my indifference curve for French products is unbelievably biased. I am emotionally attached and put trust into the L’Oreal shampoo for the only reason that the writing on the bottle is in French as I find security and comfort in buying a French product. I have also somehow convinced myself to believe that the high price grants this shampoo properties, which the other brand does not have. Even though L’Oreal may just be using its marketing skills to trick me into making this exact decision, my indifference curve puts me at the point where the y-axis (with units of quantity of L’Oreal shampoo) intersects my budget constraint. I will thus go to Econo this weekend again, to once again purchase my over-priced shampoo.

In this post from Tyler Cowen and Alex Tabarrok’s blog Marginal Revolution, Cowen reports that in Shanghai it is common to find establishments that advertise and offer both foot massages and “other kinds of massages” (prostitution). Cowen refers to the dual offering of foot massages and prostitution as an economy of scope. While an economy of scale is an industry in which the average cost per unit decreases as the scale of the production increases, an economy of scope is an industry in which the average cost per unit decreases when the firm produces two or more products. Cowen explains that a business that offered prostitution and wonder bread would probably not have much success. Not only are these two products unrelated, it is likely that the presence of prostitution would stigmatize the business and discourage consumers who are only looking to buy Wonder Bread. Instead Cowen posits that another economy of scope could be prostitution and cocaine. This illicit economy of scope would likely be the result of an agreement between the business and local law enforcement officials.

Identifying potential economies of scale requires attention to both the  supply and demand of the products being offered together. In terms of demand, the products should have overlapping, but not identical target demographics. In the case of the Shanghai massage parlors, the clientele for both services tends to be male. Most importantly, the products being produced should have overlapping production costs. For example, Ice Cream Sandwiches and Popsicles both require refrigeration, a fixed (refrigerator) and variable (electricity) cost. In contrast Popsicles and French Fries would probably not form an economy of scope, since there is almost no overlap between their production costs. The seller would have to pay both for refrigeration and frying equipment. Cowen notes that the Shanghai massage parlors limit their joint supply costs due to the fact that the same people who are supplying the foot massages are also supplying the prostitution. It seems like the perfect products for economies of scope are complementary goods that do not have entirely distinct supply costs.

Before the 20th century, when a majority of Americans relied on agricultural as their primary economic resource, having a 3 month period where a family’s children could work in the fields during the summer then get an education for the remaining 9 months of the year made quite a great deal of sense.Now, though, in the 21st century with a vastly different economy and set of standard occupations, the reasons to have summer vacation are few. While they do allow families to spend more time together, many young people end up spending most of time in summer on fruitless leisure. This is most likely because the opportunity cost of leisure is so low; in my mind, there is little expectation that this time be used productively, thus, this lack of expectation means both a limited supply and demand of productive activities. I know that I’ve thrown away countless hours in summer and gotten very little utility out of them. Now though, I’ve reached the age where the opportunity cost of leisure is high enough and the utility gained from leisure is so low that finding a job becomes almost necessary.

This then raises demand for activity that has a higher utility and lower opportunity cost. For me, these activities have included volunteer work, a summer program at Carleton, and accounting work for my father’s small business. The last probably had the highest utility, as I was earning a wage and making money of my own, which gave me a lot of utility in the form of self-sufficiency and materials. As I think towards this coming summer, I am finding the supply in the job market not up to demand. The 3 month vacation lowers the supply of jobs, as businesses are hesitant to make short-term investments in employees, thus making it inefficient for both students and businesses. While there is a certain amount elasticity, as I have a few options that I am considering, their utility varies. My goal was to get hired by the Vista Fleet in my hometown of Duluth as a tour guide entertainer. Not only does it offer a decent fixed wage but also the possibility of earning tips, along with the opportunity to practice my public speaking and theater skills. While I already have experience in accounting, the value gained from starting a new job with a higher utility makes the change very worth it. I have yet to hear from them, which likely means that supply for that position is low, while the job supply at my father’s small business, despite being higher than my demand, is available.

These two represent the job options in Duluth, which are fairly inelastic. However, elasticity is higher outside of my hometown, as I have the option to work here at Carleton, at a vineyard in Washington, or in a hotel along the North Shore. These options, though, carry a very high opportunity cost involved with travel, room, board, and living away from family. They do offer a variety of new experiences, but whether the subsequent utility gained is worth the price is up for debate. Breakdown of the top three highest utility options:

Tour Entertainer: Living in Duluth (+utility, +room&board), wage ($10/hr + x tips), experience

Accounting : Living in Duluth (+ utility, +room&board), wage ( $10/hr)

Hotel: Outside of Duluth (-utility, -room&board), far from family (+travel cost), wage

As I’ve been attempting to think more economically in my decision-making, I’ve started to analyze the opportunity costs and prospective utility for each of my options. Whereas beforehand, I might have taken the options of highest availability and least resistance, now the effort in seeking new time investments is of higher value to me.

A Huffington Post article written by Drew Guarini (click here for the link) suggests that from 2011 to 2012, the aggregate purchase of music, including both physical and digital music, rose by 3.1%, while the purchase “physical music,” as this articles puts it, such as CDs fell by 12.8%. Because the purchase of CDs fell while there was an increase in the total consumption of albums, we can conclude from this statistics that consumers have become more willing to consume music digitally than physically. Expectedly, the articles mentions online stores such as iTunes and Amazon as the factors that have contributed to the trend described above. For this blog post, however, I want to analyze deeper about this issue using economics tools that I have learned in this class so far.

Obviously, many people prefer digital music to physical music for conveniency. In this 21st century, people carry music everywhere, whether they go on a hike or shop groceries. With the invention of the substitute goods of CD players such as portable music player devices or iPhone, which even has built-in MP3 players, carrying an additional round CD player has now become a burden. A wallet on one pocket and an iPhone on the other, there is simply no more room for people to carry the device around in our daily life. Everything becomes so easy when you just purchase songs on iTunes and put them directly into your iPhone playlist. Digital music is even more attractive because you don’t have to worry about your property being stolen or lost. Even if you somehow lose your digital songs, you can always go back and re-download them for free.

Another economic concept that can explain why people prefer to shop music online is because of the opportunity cost of buying a physical CD. For example, let’s say that I am drinking a cup of coffee at Starbucks when the Beatles’s two hit songs, Let it Be and Sergeant Pepper’s Lonely Hearts Club Band, are being played through the radio. These songs are phenomenal, so I want to purchase them right away. Fortunately, with my iPhone that contains an iTunes application, I can instantly download these songs within less than a minute. Thus the opportunity cost here is nearly zero excluding the price I have paid to purchase the songs. If there were no online purchase of music, however, I would have to make a trip to a store to buy these songs, which takes time and the cost of gasoline (as I will most likely be driving there) that could have been spent differently yet more meaningfully, such as studying for my test or exercising. Thus, the opportunity cost of physically going to a store to purchase music has a higher opportunity cost than the opportunity cost of instantly downloading them through online.

Continuing with the Beatles example above, utility is another factor that can affect people to purchase online music instead of physical music. Let’s assume that a Beatles album costs around $15 (as is on Amazon) and that I only have $25 in my wallet. Unfortunately, if purchase of physical album is the only way for me to get the album, it is impossible for me to acquire both songs that I want because they are from two different albums. Ultimately, I would have to give up one song to purchase the other because if I want to purchase a song from a physical album, I have to buy the whole album. I can’t just buy a part of the album that contains the song that I want. On the contrary, I can make a single song purchase on iTunes for a little bit over $1. Using iTunes, I would be able to get the two songs that I wanted without having to buy the full albums. In the end, I will have maximum utility and approximately extra $23 ($25 – $2) that I can happily spend on other goods. This will allow me to more accurately and selectively allocate my resources.