Tag: supply

Posted in History & Literature

Halitosis

Posted on by Jinavie

There is a technical word for everything in medicine. A great example is halitosis. In the late 19th century, Dr. Joseph Lawrence and Jordan Wheat Lambert developed a new surgical antiseptic. Finding that the target market was too small, they distilled the new product and advertised it as a floor cleaner and also a cure for gonorrhoea. But sales were still not great and they came up with a brilliant marketing scheme. Their company Listerine began advertising the dangers of “chronic halitosis” as a serious health problem in the 1920s. People were unfamiliar with this condition and instantly associated it with some form of major illness. They were desperate to prevent themselves from getting it, or to treat it if they already had it. Lucky for them, Listerine came to the rescue with their product that treated chronic halitosis.

Of course, halitosis is simply the medical term for bad breath. Although bad breath is not an actual disease, Listerine was extremely successful in convincing the population that it was a problem and was able to market their product this way. Listerine’s campaign was so successful that bad breath is still considered extremely offensive and socially unacceptable, making mouthwash almost a “necessity”. To quote advertising scholar James B. Twitchell, “Listerine did not make mouthwash as much as it made halitosis”. They had successfully invented a problem that their product could solve – creating not only supply for the product, but also the demand. This strategy has since been employed by countless advertising schemes to help sell products.

Posted in History & Literature

Demand And Supply

Posted on by Jinavie

How does the economy function? On the surface, economics seems extremely complex and intricate, changing dynamically due to what appear to be insignificant factors. For example, one can predict a recession from the increasing attractiveness of waitresses. But economics relies largely on two simple laws: the law of demand and the law of supply.

The law of demand states that as the price of a good goes up, people demand less quantities of that good. This makes logical sense as (rational) consumers want to spend the least amount of money possible for something. When plotted on a graph with price (P) as the y-axis and quantity (Q) as the x-asis, we can show that demand (D) is a downward-sloping curve.

The law of supply states that as the price of a good goes up, people supply more quantities of that good. This makes logical sense as (rational) producers want to sell something for as much money as they can. When plotted on a graph with price (P) as the y-axis and quantity (Q) as the x-asis, we can show that demand (S) is a upward-sloping curve.

When we superimpose these two laws on the same graph, we get a nice X-shape as the two lines cross over. The point where they cross is called the market equilibrium and this is where the consumers demand exactly the right amount of goods that the producers are willing to supply at a given price. If a good is being sold at a price higher than the equilibrium price, consumers demand less of the good and producers are left with an excess. If the price is lower, then there is a shortage as demand exceeds supply. Over time, the price is pushed towards the market equilibrium. Thus, thanks to the laws of supply and demand, the market automatically adjusts to the price to accurately reflect the value of the good.

Adam Smith, the father of economics, called this the invisible hand – a force driven by the individual ambitions of consumers and producers to balance the market. This force is not found in centrally planned economies of communist states, as the price and quantity supplied is fixed by the government. A pure free market is only driven by the invisible hand. Most modern countries’ economies are mixed economies, usually in the form of free markets with some government intervention.

Although economics appears complicated, it essentially boils down to the laws of supply and demand. By understanding the principles of demand and supply, one can begin to understand more complicated economic theories such as aggregate demand and supply, elasticity, foreign currency exchange and trade. Real economic situations such as oil cartels, trade embargos and taxation can be broken down and modelled using PQ-diagrams (depicting the demand and supply curves).

The laws of supply and demand are two crucial laws of economics that everyone should have some understanding of, as it can be extremely useful in everyday life. Not only do they apply in obvious situations such as running a store or a business, or understanding how the economy works, but it can be applied to negotiating too. One of the fundamental principles of negotiating is finding the balance between what one person wants (demand) and what the other person is willing to do (supply). It is amazing how useful knowing that simply being slightly flexible is in negotiations.

Posted in Psychology & Medicine

Monkeynomics

Posted on by Jinavie

Money is without a doubt a human invention. There are no recorded cases of any animal using an inanimate object to standardise the value of items and establish a non-bartering economy. Since childhood we learn of the value of money and how it can be used to purchase goods and services. In fact, money can be considered one of the fundamental pillars of human society that makes the world go round.

However, scientists have discovered that a currency system may not be such a novel system after all. In an experiment, a group of capuchin monkeys were given silver disks and were shown how they could use the disks as payment for a treat. Within a few months time, the monkeys realised that the disks had inherent value and began acting just like humans with money.

For example, they did not act in the standard way of operant conditioning (i.e. performing an action results in a reward), but responded to market forces in an accurate manner. If the “price” rose, their demand for treats would fall (i.e. buy less) and vice versa – following the law of demand that modern economics is based on. They even learnt to save the “money” to afford treats.
In a similar experiment with chimpanzees, it was found that chimps were even quicker in learning the concept of money and even learnt how to use smaller denominations of currency. 

Things started to get interesting when a certain monkey sneaked into the chamber storing the “coins” and threw it into the communal cage, quickly escaping before the researchers came back. This was the first recorded case of a monkey bank robbery. 
While this was happening, it was also observed that one male monkey was giving a female monkey a coin. The researchers wondered if this was an act of altruism or wooing, but soon discovered that the female monkey would receive the coin then have sex with the male, then later use the coin to buy food. The introduction of money immediately led to the invention of prostitution.