i am totally impressed.
chanced across this blog entry by my friend's friend.
very interesting. and the most amazing thing is, it makes economics so "defeatable".
Economics and Relationships
Economics is all about demand and supply, that’s really all to it.
Let me explain about demand and supply first. Price in this case is just the price of a something (let’s say PlayStation 3 or PS3) and quantity (qty) is the quantity that exists in the market (in this case a gamestore). It is basic common sense that the higher the price a PS3 commands, the more quantity that the seller will want to sell and hence increase his stocks in the shop. Hence the red line determines the seller’s behaviour (supply curve).
Conversely, the higher the price of a PS3, the less willing customers are willing to buy and hence the quantity that they demand decreases. Hence, the blue line shows the buyer’s behaviour (demand curve).
Naturally, the intersection point is the equilibrium point at which buyer and seller will trade PS3 and money. This is the basic principle on how a price and quantity sold is determined for a commodity in a free market (i.e. without any external forces).
If for any case (and it happens in some ‘forced’ cases), the price is set above (below) the natural equilibrium, there exists a excess (shortage) of PS3 in the market. In both cases, a ‘black market’ could exist to help balance out the effects.
Also, please be careful to take note that every individual’s demand curve is different as we respond differently to price changes. Hence, some person’s demand curve could be gentler or steeper than others. Now let’s take a look at relationships. Typically, everyone wants to be loved. Thus the more love we are able to give, the more people we would be able to attract (supply). Of course, there is an assumption here that true love exists and nothing else matters. Sounds impossible right? But damn everything works on assumptions and exceptions.
The demand side is a bit more complicated. Another assumption has to be made here and to me, it sounds rather logical. For someone who gives high love, he/she tends to be more committed and loyal to his/her partner. Hence, at high love, the number of partners he demands is low. Conversely, at low love, he/she can be seen as a flirt and hence number of partners demanded is high.
As explained above, without any external factors, the natural equilibrium will be reached and of course 1 partner will be good (and is the case for most people).
Now let’s look at something interesting. What happens if the level of love lies below the equilibrium?
As can be seen, the number of partners demanded goes greater than 1 and hence this person will tend to flirt and flings or ONS, could happen. But as you can see, there is a shortage of supply of partners. So how does one go around it? Through the ‘black market’ of course (i.e. Geylang).
Now what happens if the level of love is above the equilibrium? Then this would be moments of glory for the individual but nightmare for the partner. At this level, the number of potential partners are high because they are attracted to his/her high level of affection. Hence, they would get many more suitors and admirers and this would be a worrying sight for their partner. But luckily, from my assumption, their tendency to defect is low.
Another term known as elasticity is also an important factor for determining the number of partners an individual will have.
Elasticity of demand is defined as the degree of change in demand to a change in price (or love). Yes, elasticity of supply also exists. Just change the appropriate words, duh.
Say for example, guy A currently can only afford to give X amount of love. And he and his girlfriend are happily in the equilibrium position. Guy A is also a very love-sensitive guy (meaning that he gets moved easily by others) or as we say love (price) - elastic.
Guy A then suddenly picks up guitar lessons and this causes the amount of love (or romantic-ness) increases tremendously. As expected, the supply of girls interested in him increases and if they show lots of interest in him, guy A will tend to stray (because he is sensitive). Hence, the number of partners he has will increase to 2 or 3. The degree of increase depends on his elasticity. The more love-elastic he is, the more his partners he will have.
So we have looked at how an individual chooses the number of partners he has, their tendency to visit Geylang and how attractive they can be.
Now, let us look at how people choose their partner and why people stick to the same partners.
We can look at an important economic concept here: opportunity cost..
The very important term ‘opportunity cost’ is defined as the next best alternative which could be forgone that can be obtained by the same resource, ceteris paribus. Ceteris paribus means ‘everything else remains constant’.
It is also essential to note that opportunity cost arises only when there is scarcity of resources.
Let’s take guy A for example who can only afford a certain amount of love. This amount of love is able to attract girl A and girl B. Guy A (who in this case is a scarce resource for the girls since he’s the only one around) only wants to be with 1 girl and has to decide which girl he wants to be with. Hence, guy A has to apply opportunity cost theory in his decision making. Will he be happy if he let go girl A for girl B or is it the other way round? The one which he decides is worth letting go for the other will be given up.
Luckily for the girls (and some guys), scarcity of resources is a very important tool in making your partner do what you want and to keep being romantic. As you are a ‘scarce resource’ yourself, your partner will do many things to keep you happy and keep the relationship going. Unless of course, the opportunity cost in doing so is so high that he/she cannot manage and decide to let you go.
All the talk about reaching equilibrium and finding that elusive partner has many assumptions and if all of them hold, then everyone will be attached and be happy about it. This is to say that optimal allocation of resources has been achieved. This means that you cannot make someone better off without making another person worse off.
To illustrate this long sentence is very simple. In an ideal world, there are equal number of guys and girls and every guy is attached to a different girl. There isn’t any further way to make someone better off right? Because assuming if guy A wants to break off with girl A to be with girl B (but girl B is with guy B), guy A will have to sacrifice the unhappiness of girl A and guy B to be with girl B.
But of course, the real world is much more complex than the ideal world and therefore is often termed an imperfect market.
Thus to ensure optimal allocation of resources, some external parties must come into play to help distribute the resources more efficiently.
And so the government steps in to help solve the problems of increasing singles by setting up the SDU. Many singles are probably shy and have few friends and thus have difficulty in finding someone to strike an equilibrium with. Hence, with the SDU, the government aims to solve this problem by providing singles with sufficient information to find their partners. With this additional information and making of new friends, singles will be able to find that equilibrium more easily. As such, allocation of resources are being optimized.
As I have mentioned a few times before, there is a market known as the ‘free market’ but there is also the other extreme known as the monopoly. There is also one halfway which is known as the ‘competitive market’.
We shall look at the monopoly first. For this case, we should focus more on the supply side as they are the ones who are in control for this case. As you know, monopoly occurs when there is only 1 player (the supplier) in the market and they are the one who are the price-setters.
So imagine girl A as being a super-sexy, super pretty, super nice girl and she has LOTS of guys going after her. But because of her super appeal, she can afford to be choosy and naturally choose the best for her. Hence, her standards could tend to be high. These high standards are what we call barriers to entry. Ok some of you might be thinking dirty. Stop it.
With her high barriers, she can afford to raise the love (romantic) level to a certain amount before letting a guy hold her hand. And mind you, this certain level is usually too high for a normal average guy to reach. So how do we get this girl’s heart? There are basically 2 ways.
One is to get more information just like in the case of the SDU. By getting more information about the girl, like her likes and dislikes, you will be putting yourself at an advantage because you know the way to approach the girl. Thus, this will reduce your chances of irritating the girl and putting her off.
The second way is by ‘government intervention’. Or just intervention in this case. It could be by the ‘government’ (i.e. her parents) but intervention by friends would be a more better solution. As long as you can get her friends (if possible together with her parents) to support you, then I think you stand a much better chance of lowering the barriers to entry. They help by providing subsidies (putting in good words) for you every now and then or in the parent’s case, tax (scold) her to put her into her senses.
Next, let us have a look at the competitive market. One of the most important properties of this type of market is their ability to have economies of scale. Economies of scale refers to the phenomenon that for every extra unit that you produce, you require lesser cost and hence gives you price advantage eventually.
Economies of scale can be seen in action every February 14th. Often people would say that Valentine’s day is the best day to get attached because the girl will seldom say no. Why is that so? Economies of scale is probably at work. Let’s imagine that in a restaurant, there are 10 couples. 7 are attached and 3 are not. The three are guys A, B, C and girls A, B, C. Looking at the 7 lovey-dovey couples around them, guy A decided that this was the time to ask girl A to be his girlfriend. So he gives her flowers and pops the question. The girl says yes. Everyone starts clapping and cheering for them. Then guy B suddenly pops the question too and girl B, still in the happy mood, agrees. Then guy C follows and girl C, still in her dreamy and romantic state also agrees. And so out of the restaurant will walk 10 attached couples by the end of the day. Ok it sounds far-fetched but hope you catch the gist.
Now let’s look at an extreme case of love-setting and why a guy is willing to go all the way to win that girls heart. Actually there are 2 more extreme cases but I can only remember this one.
In economics, we have something called a snob value. Imagine guy A is after a very very beautiful girl and he so very want to make her his girlfriend so that he can boast to his friends and show off his super chio girlfriend. And as we all know, super beautiful girls sets high barriers to entry and hence guy A has to dig deep and throw all his love to the girl (and maybe top it up with some monetary gifts as well). And the moment he gets his beautiful girl, he becomes snobbish. Hence, snob value is the amount of love (or money) a guy has to put in before getting his prize.
I’m getting brain-drained now, so let’s look at the last few parts.
Externalities is defined as the costs or benefits of a market actually borne by a third party. There is a limit in which the third party can bear any externalities, especially costs. For example, guy A and girl A are quarreling loudly in public. The noise produced is a nuisance or a ‘negative externality’ to the surrounding people. These people would be able to bear it to a certain level. However, once that level is breached, someone will intervene and stop the externality. Thus, intervention is a necessary step in stopping any externalities which are going on. Certain types of intervention include cold-hard-staring or scolding (taxing) or calling the police (regulation) if things get out of hand.
Lastly, let me try to introduce macroeconomics to you all.
As we all know, girls like presents and surprises. Thus, guys like to pamper girls with presents be it cheap or expensive. However, there actually is a limit to how many presents a guy can give to a girl in a period of time.
One interesting macroeconomics term is the multiplier effect. It is defined as an increase in spending results in increase in incomes in economics. Or in other words, whatever you put in will give you an increase in output. Thus, imagine guy A buys girl A a flower every day. She will be happy and treat the guy well for the first few weeks but as time goes by, she expects something more or different. So the guy buys the girl 3 flowers everyday. The girl loves him more and more and this cycle continues. However, there is definitely a breaking point. And this will happen when the girl demands so much that the guy cannot keep up with. Hence, inflation takes place. Inflation is defined as the a very fast increase in prices and output (or in this case the demands of the girl). Hence, the great depression occurs.
And to end it, I would like to comment that girls (especially) are like business cycles. There is a trend of peaks and troughs due to the ever-changing demands (and moods).
Ok I shall stop before I get flamed by my girlfriend.
Disclaimer: This entry is purely for killing my boredom and for your pleasure reading. Whatever I wrote is based on what I remembered from my A levels Econs. So not everything might be correct. Pls pardon me for any stupid mistakes.
Note: I have also failed to explain marginal costs because I can’t think of any ways to do so. Anyone has a nice analogy can tell me =)
