I find it that most students who are studying economics struggle with the basic understanding of its concepts because most lecturers don’t give practical or real-world examples. Recently I just had my mid-term exams on microeconomics, and I would like to share a few thoughts to combine economics and the subject that we all can’t stop talking about: love. So here goes.
- Good guys are a market failure. The demand is high but they are undersupplied (they are either gay, married, or vampires).
- Cosmetics are also a market failure. When used to attract the opposite sex, it creates information asymmetry.
- Marriage is a moral hazard. People are not exposed to the risk of their partner’s true behavior prior to the wedding.
- Low risk, low gain. High risk, high gain. Same principle when it comes to investing your heart.
- Thus, don’t put all your eggs in one basket – that’s why flings are encouraged.
- But don’t marry your flings. The marginal costs of adding one more spouse in a polygamy will exceed your marginal private benefit.
- And coase theorem does not work in real life – transaction costs always goes to your lawyer when you get a divorce
Feel free to add to the list.