This scene takes place immediately following the Supreme Court decision that legalized gay marriage. In the marriage market, a law that prevents gay marriage is essentially a quota of 0 marriages, which leads to huge amounts of deadweight loss. At this extreme, the quantity demanded exceeds the quantity supplied, which can be seen in the second portion of the scene when the Jay and Manny arrive at the course house. There is a surprisingly deep conversation about the role of economics in same-sex marriage.
See more: demand, efficiency, inefficiency, markets, quotas, role of government, supply, transaction barriers
Lily’s lost a tooth and it’s up to Cam to play the role of the tooth fairy. Perhaps it was late at night, or maybe too much wine, but the Tooth Fairy leaves Lily $100 for her first tooth. While both are in shock, Mitch points out that the going rate must be $5 tops and that the Tooth Fairy must have made a mistake. Delta Dental tracks tooth prices through the Tooth Fairy Poll, and the market rate in the United States is about $3.70.
See More: demand, equilibrium, expectations, market price, prices, supply
Gloria wants to sell her family’s sauce to a larger company. Jay and Gloria each use a different tactic to make the product more appealing, in essence trying to drive up the demand for the sauce. Unfortunately, they don’t coordinate their strategies in advance and Jay blows the deal.
It turns out there’s a lot of information that Gloria has hidden from Jay. She has long had a surplus of sauce that she has been keeping in storage lockers across town. Gloria has likely paid a lot of money for all of the storage. When firms normally have a surplus, it means that the price for the product is above the equilibrium price.
This scene is also a good example of adverse selection in exchange. Gloria knows that her product is no good, but they are trying to signal not only that it’s good, but also that it’s special, almost magical.
See more: adverse selection, advertising, asymmetric information, demand, double coincidence of wants, information economics, marketing, preferences, product differentiation, profit, rationality, sunk cost, supply, tastes and preferences
Alex is hyper-aware of her future path into college and she knows playing an instrument will help her land in a prestigious college. Her parents had recommended she play the violin since it wasn’t as heavy, but Alex believes cellos are in demand in university orchestras, which should help her admission application. Part of the role of playing an instrument or sport (notice Alex’s lacrosse stick) is not necessarily that they are correlated with better students, but rather they serve as signal that students can maintain a rigorous academic load while also balancing extracurriculars.
See more: choices, college, demand, expectations, signaling, supply, tradeoffs
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