Sellers often design beautiful and fashionable frames and styles to attract customers and take the opportunity to raise prices. Sometimes they deliberately raise the plateau price first and then lower the price for promotion, which makes consumers mistakenly believe that they are getting a discount. In addition, some sellers also use brand effects to stimulate consumers to buy their glasses at high prices, and they make a fortune from it.
Demand elasticity; marginal utility; tax effect; economies of scale
Microeconomics is a course that is both theoretical and practical. Many phenomena in life can be explained by knowledge of microeconomics. Ever since I learned microeconomics, I have started to look at what happened in life with a more professional perspective and try to apply the knowledge learned in class to real life. Therefore, I referred to some materials and studied various economic tuition phenomena that actually existed in society, and tried to use the knowledge of microeconomics to give a rough explanation.
1. THE HUGE PROFITS OF THE GLASSES INDUSTRY
With the development of the times and the acceleration of the pace of life, people are under increasing pressure in the study, work, and life. The rate of myopia among students is getting higher year by year, and more and more middle-aged people begin to have presbyopia, so people’s demand for glasses is increasing year by year, which brings huge profits to manufacturers in the glasses industry.
The glasses we are talking about here refer to glasses that need to be worn according to individual circumstances as auxiliary vision tools, such as near-sighted glasses, far-sighted glasses, etc., excluding sunglasses and other decorative glasses and sunglasses and other general-purpose functional glasses. There are three main reasons for the huge profits of the glasses industry:
THE PRICE ELASTICITY OF DEMAND FOR GLASSES IS SMALL
First of all, the use of glasses is specific and cannot be used for other purposes. Therefore, when the price of glasses increases, consumers have no way to abandon the secondary use and choose the most important use, and they can only passively accept the price. Secondly, glasses occupy an important position in consumers’ lives.
For people who suffer from myopia or hyperopia, glasses are essential in their lives, and the lack of glasses will bring a lot of inconvenience to their lives. In addition, the proportion of glasses in the total budget expenditure of consumers is also small, and buying glasses will not have much impact on their living expenses. Finally, the interchangeability of glasses is weak. Although laser surgery can cure myopia, many people still choose to wear glasses to correct their vision without taking risks.
For hyperopia, there is no mature technology that can be cured, and it can only be corrected by glasses. Therefore, when the price of glasses increases, the reduction in demand for glasses will not be obvious. Because and the manufacturer’s sales revenue formula shows that manufacturers can take the opportunity to significantly raise prices P, and Q will reduce consumer demand for small amplitude, manufacturers can increase sales revenue TR.
The marginal utility level of glasses is higher. For those with moderate or higher myopia and hyperopia, whether or not to wear glasses has a big difference in their lives. With glasses, life can be much more convenient, and the utility is greatly increased than without glasses.
In other words, the marginal utility of glasses is great. As a result, consumers are very dependent on glasses. According to the theory of cardinal utility point of view, when the consumer reaches an equilibrium ratio of marginal utility and price equal to the marginal utility of money, that is a constant.
Because the marginal utility of glasses is great, the price P of glasses must also be great to maintain unchanged. Therefore, in the case of satisfying the maximum utility of consumers, manufacturers can increase prices to make huge profits.
MARKET INFORMATION ASYMMETRY IS SERIOUS
The glasses market is an imperfectly competitive market, so the information that buyers and sellers can obtain is incomplete and asymmetric. The seller is very aware of the cost and performance of the glasses, but the buyer is not very familiar with the cost and pros and cons of the glasses.
Therefore, sellers often design beautiful and fashionable frames and styles to attract customers and take the opportunity to raise prices. Sometimes they deliberately raise the plateau price first and then lower the price for promotion, which makes consumers mistakenly believe that they are getting a discount. In addition, some sellers also use brand effects to stimulate consumers to buy their glasses at high prices, and they make a fortune from it.
2. EFFECTIVENESS OF TOBACCO TAX
With the increase in the number of smokers, the probability of people suffering from lung cancer has also increased year by year, so the government decided to adopt the method of charging more tobacco taxes to curb consumer purchases and manufacturers’ supply. Let us analyze the effects of this government policy.
More tips learn about Besteconstuition
The government can levy tobacco taxes on consumers or manufacturers, but the taxation effects of these two methods are the same.