1. Living with Economics

2. ５ th April,2005 Today is Mother's day. The time now is 9:00. Mrs. So and her daughter-Kate are still waiting for a bus.

3. Mum, we have waited for the bus since 8:15am. My dear, I know it.But be patient. The bus is coming soon. I think we should rather go by taxi now. Otherwise, we would be late. Also, we have spent so many time to wait for it, so the forgone value of time is cost for us!! So it is not worth for us to take by a taxi~ O~ My mum, don't you know the forgone value of time is a sunk cost. Daughter,What is sunk cost?? Okay, Let's me explain to you la!!

4. Historical Cost (sunk cost) Definition: Original cost at which firm acquired a factor Sunk Cost => Past Cost 1.It does not apply to present option 2.Past option are not presently available

5. Historical Cost (sunk cost) Definition: Original cost at which firm acquired a factor So Sunk cost Cost

6. After Mrs. So has listened to her daughter's explanation, they decided to take a taxi to join their grandmother. And when they leave the taxi, they meet Mrs. Lee and her son are waiting in line.

7. Hey~Mrs. Lee, nice to meet you! What are you lining for?? Nice to meet you too, Mrs. So.I am lining for getting the free gift. Oh, I wouldn't! I have date my mum. But I don't think you don`t have any cost for it! In case, we don't need to pay money is no cost for us. So, would you like to waiting in line also? Really?? Why?? Yes!! Let's me explain to you~ Sure!! Thank you~

8. Opportunity cost Definition: The highest valued option forgone So we can conclude that Mrs. Lee is also having a cost of wait in line, even if she no need to pay money. If Mrs. Lee don't wait in line at that time, she can do other things, like doing housework, doing revision with her son. And those non-chosen option is her cost of waiting in line. The concept of free = No cost

9. Also, queuing like Mrs. Lee would lead to….. Dissipation of rent Definition: The potential rent isn't captured in a partial model in which private property rights are absent. All form of non-price competition like queuing, rationing, ballot, first come, first serving, violence, etc will rise the dissipation of rent. In this case, Mrs. Lee queuing and do not provide any potential rent to society.

10. After Kate and her mum say goodbye to Mrs. Lee and her son, they walk to the restaurant where her grandmother is in there and wait for them. But before they reached the restaurant, they walk past the flower store. At this time, Kate have a question and ask her mum.

11. Mum, why do the price of flowers is much higher today?? My dear, today is mother's day, you don't know?? Mum, I know~ But I mean why the sellers have to set the price of flowers so high today than normal!! Ooh~ sorry !! It is because of the suddenly large amount of demand. Okay~ Let's me explain to you more detail~

12. Elasticity of demand Price Quantity S D1 Pe Qe D2 Q1 P1 In normal day Demand = D1 Supply = S (inelastic) In special day Demand↑ = D2 Supply unchanged As the result: Price ↑ sharply

13. After having lunch with Kate's grandmother, they walk around in the shopping mall. Suddenly, Kate stop at front of a computer store and ask her mother to buy a new printer.

14. Mum, it is very cheap, only cost $300~ BB~ Have u seen that there is some proviso( 附帶條件）？ P.S. If the buyer would like to buy the printer at $300, they must be also buy the scanner at $5000. But if the buyer want to buy only the printer, then they have to pay for it at $1000. Oh~ I see. It seem the scanner is sold at a very higher price in this case. Yes~ It is the case of tie-in sale ma!! Tie-in sale?? What's it?? You don't know~ Let's me explain to you!!

15. Tie-in sale Definition: Definition: A pricing tactic that creates an artificial link between the availability of two products. In the above case The printer must buy with the scanner, so that its price would be the lowest($300). In fact, it is the method for the seller to concrete all consumer surplus.

16. Cheung Sui Ling (4) Lee Ka Man, Carman (11) The End