No that represents a market failure caused by imperfect information. However, one must also factor in the positive externality of the whimsy I created in walking backwards across the great court, bent double, trying not to get mango juice on my jacket. This must properly be considered a public good. Aggie saw me, and laughed at my comically ridiculous predicament, but the benefit she gained from this must be offset by the cost of my humiliation, so there is no potential Pareto improvement to be had there. In fact, that sub-transaction represents a zero sum game.
Geoff the cost of messing up the beard would be lower than the marginal benefit that Sam got when eating the mango. Otherwise he would have through it away to protect the beard. And since Sam had bought the mango before he remembered how messy it was eating mango, the $4 is sunk cost. And we do not count sunk cost.
And you seem to mess up the concept of utility and cost. Utility represents only BENEFIT, not cost. What Sam gains from eating the mango is called Net benefit (or net utility).
I think it is quite difficult to compare the net benefit that Aggie gained by seeing Sam eating mango, and the net cost of Sam looking ridiculous. We don't know the demand for laugh (of Aggie) and the marginal cost for humilation (of Sam) to determined if the quantity of the portrait of Sam eathing mango indeed creates an equilibrium or shortage (surplus) situation.
Also, messy with eating mango can create both negative and positive externalities and as such, the direction of net externalities is undetermined.
Kim, you are HOT when you talk economics. It makes me wonder why I have been bothering with mathematicians. And I really feel you should have put a "Snap!!" on the end of that post.
7 comments:
You spent $4 on a mango?
Yes. I calculated that the consumer utility accruing to me from eating a mango would be greater than $4. Thus, in buying a mango, I enriched myself.
Did that calculation of consumer utility include the cost of messing up your beard?
No that represents a market failure caused by imperfect information. However, one must also factor in the positive externality of the whimsy I created in walking backwards across the great court, bent double, trying not to get mango juice on my jacket. This must properly be considered a public good.
Aggie saw me, and laughed at my comically ridiculous predicament, but the benefit she gained from this must be offset by the cost of my humiliation, so there is no potential Pareto improvement to be had there. In fact, that sub-transaction represents a zero sum game.
Geoff the cost of messing up the beard would be lower than the marginal benefit that Sam got when eating the mango. Otherwise he would have through it away to protect the beard. And since Sam had bought the mango before he remembered how messy it was eating mango, the $4 is sunk cost. And we do not count sunk cost.
And you seem to mess up the concept of utility and cost. Utility represents only BENEFIT, not cost. What Sam gains from eating the mango is called Net benefit (or net utility).
I think it is quite difficult to compare the net benefit that Aggie gained by seeing Sam eating mango, and the net cost of Sam looking ridiculous. We don't know the demand for laugh (of Aggie) and the marginal cost for humilation (of Sam) to determined if the quantity of the portrait of Sam eathing mango indeed creates an equilibrium or shortage (surplus) situation.
Also, messy with eating mango can create both negative and positive externalities and as such, the direction of net externalities is undetermined.
Cheers.
Ladyconomist
Kim, you are HOT when you talk economics. It makes me wonder why I have been bothering with mathematicians. And I really feel you should have put a "Snap!!" on the end of that post.
Also, comments deleted are such a tease.
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