Read economics in one breath: easily learn ten economic theories

 

Dong Diabolic and Huang Xiaoping, the authors of " Understanding Economics in One Breath ", used very simple examples to illustrate various theories of economics tuition. It turns out that understanding economics can be so simple!

1. Marginal utility

Marginal utility refers to the utility that a consumer gets when he consumes one more unit. For example, when someone eats an apple, he feels delicious at first, but he feels nothing when he eats the fifth one, which is the first one. The marginal utility of an apple is relatively high. As the number increases, the marginal utility will begin to diminish. If someone keeps eating apples and vomits, it means that the marginal utility has diminished to a negative value.

2. Sunk cost

Anything you have already paid, such as time, money, etc., can no longer be taken back. Once paid, it becomes a silent cost. For example, if you buy a movie ticket, and in the event that the ticket cannot be refunded, whether you go to the movie or not, you can no longer get the original money back. This is called "sunk cost."

3. Comparative advantage

For example, the cost of producing cotton in a certain factory A is lower than that in factory B, but the cost of producing rice in a certain factory B is lower than that of a certain factory A. At this time, it can be said that a certain factory A has a "comparative advantage" in producing cotton. There is a comparative advantage in the production of rice. The two factories can purchase each other's products with comparative advantages to achieve lower costs.

Fourth, economies of scale

Economies of scale mean that the more goods are produced, the lower the cost. Economies of scale pursue large quantities. Like a factory that operates 24 hours a day, if the factory is not in operation, there will be idle costs. If it is used to continue production at this time Commodities can save the cost of idle factories, so the more production, the unit cost will drop.

5. Matthew effect

The Matthew effect in economics refers to "the rich are richer, and the poor are poorer." It can also be explained as "the strong are stronger, and the weak are resources and lack the conditions to make themselves rich, so they become poorer.

If the original two monks go to fetch water and drink, and the third monk who comes at this time has nothing to do and has water to drink, the external effect at this time is positive. External effects can also be called "spillover effects."

6. Willingness to pay (willingness to pay)

It refers to the highest price that a consumer is willing to pay for a certain product. It is used to measure the buyer's evaluation of the product. For the same product, if someone is willing to pay a higher price, the willingness to pay is higher. Every consumer wants to buy goods at a price lower than their willingness to pay, but refuses to buy at a price that exceeds their willingness to pay.

Nine, price monopoly

Refers to the behaviour of monopolistic firms that rely on their monopoly position to manipulate their prices and output to set high prices in order to maximise their own interests. Through price monopoly, monopoly firms can make high profits.

7. Information asymmetry

Information asymmetry generally occurs in the secondary product market, which is also more "lemon market." "Lemon" means "substandard" or "unused thing" in American slang.

The lemon market means the secondary market. When the seller of the product has more information about the quality of the product than the buyer, the lemon market will appear, and low-quality products will continue to drive out high-quality products.