It’s Phil’s 50th birthday and Jay decides to try and sneak a gift to Phill that Cam had given him before. What Jay doesn’t realize is that Cam had inscribed the front cover and as Phil begins to red the inscription, Cam recognizes it is the same book that he gave Jay before. Giving gifts can be seen as wasteful if the giver doesn’t fully know the recipients preferences and willingness to pay. The entire family tends to give each other gifts that the others don’t always want, but this time Jay didn’t even take the time to open the book in the first place.
See more: deadweight loss, exchange, gift giving, inefficiency, irrationality, self interest, subjective value
Cam is talking to a lady at Lily’s play class about movies to make small talk, and they have very different opinions on how talented Meryl Streep is. Cam loved her performance in Sophie’s Choice and has a hard time thinking about having to choose between Lily and Mitchell. The first concept in the opening scene covers subjective preferences of individuals. Cam believes Meryl Streep is the best actress, implying he’s able to rank performers, a necessary condition of utility theory.
The ending scene ties back with the movie, Sophie’s Choice, where Streep must chose between her child or her spouse. Cam weighs the same issues and realizes he would struggle having to decide between saving family members. While most tradeoffs are not as serious, each decision we make includes opportunity costs, which must be considered in the decision making process.
See more: choices, preferences, ranking, opportunity cost, subjective value, tradeoffs, transitivity, utility
Phil has a pair of slippers that Claire isn’t too fond of. While they bring private benefits to Phil in the form of comfort and easy jokes, it imposes a cost on Claire. Under the Coase Theorem, we’d suspect that Claire could pay Phil to stop wearing them or Phil could pay Claire to let him keep wearing them, but Claire has instead opted for a creative (and often illegal…) way to dispose of Phil’s possessions that she does not like.
See more: external costs, externalities, negative externalities, subjective value, tastes and preferences
Luke discovers that used women’s shoes command a higher price when he sells to people with very specific tastes. He and Alex join forces to supply goods to this niche market. By differentiating their product from just reselling shoes, the two can earn big profits.
See more: demand, monopolistic competition, outputs, product differentiation, profit, revenue, subjective value, supply, tastes and preferences
Mitchell grew up on a farm wanting to be part of a lake family. He laments that anyone can visit the lake, but only wealthy families can sleep on a lake, implying that lake life if a luxury good. Now that he and Mitch have a bit more income, they get to experience the allure of sleeping on a boat.
Mitch, on the other hand, has discovered they own the same lamps that are on their boat and he isn’t too happy that they are “boat people.” Mitch likes the lamps a bit less after the discovery, but Cam likes them more. He sees the lamps as a display of wealth.
See more: demand, luxury goods, normal goods, positional good, subjective value, tastes and preferences
Gloria is sick and Cam tries to help around the house. Gloria’s family remedy for colds is a bit smelly and Cam accidentally uses Joe’s cape in the process. Gloria immediately recognizes this will be and issue and points out that Joe has a strict ranking set when it comes to that cape. Joe loves the cape so much more that he even places the cape above his own father. Part of utility theory requires transitivity, which is the ranking requirement of consumption.
See more: preferences, ranking, subjective value, transitivity, utility
Cam and Mitch went on vacation to celebrate their Honeymoon and brought back gifts to the family. For Jay, they brought a cheesy golfing frog statue, but also with an illness. Jay views the frog statue so poorly that considers it possible the illness is a better gift. Economists like to discuss irrationality of gift giving because we often spend money on gifts for people at a higher value than they would spend on themselves. A second concept at play in the clip is that Cam & Mitch’s trip to Mexico added additional costs on the family through the spread of an illness. Had Mitchell known he would have gotten the family sick, he may not have left.
See more: exchange, externalities, gift giving, inefficiency, irrationality, negative externalities, subjective value
It’s time for Jay and Gloria to exchange gifts and Jay is anxious about his gift from his wife. He struggles finding the right gift because it always seems like a competition. If the two didn’t exchange gifts then the extra psychic costs wouldn’t exist. It turns out that Gloria actually really loves Jay’s gift, but Jay really wanted that watch.
See more: gift giving, inefficiency, irrationality, psychic costs, subjective value