Category: Microeconomics

Photo by Javier Allegue Barros on Unsplash

Opportunity Cost

Opportunity cost, to put it as simply as possible, is the price you have to pay in order to obtain something else. It is what you lose, to gain something else. Opportunity cost is a result of scarcity. We are not living in a fairy tale where everything is magically...

Information Asymmetry

Information asymmetry: The battle for data

One key element that affects how people behave in different situations is the information they have about the issue. But, generally speaking, people do not possess same levels of information. This difference in the amount of information between two parties is known as information asymmetry. In business transactions, this asymmetry...

The Lipstick Effect

The Lipstick Effect: what is it all about?

First brought into spotlight by Leonard Lauder, the chairman emeritus of The Estée Lauder Companies Inc., the Lipstick Effect states that during economic hardships and crises, consumers tend to buy more lipstick instead of expensive items such as jewelries, apparel or the like. Proponents of this theory refer to the...

Paradox of Value

Put forth by Adam Smith in “The Wealth of Nations”, the paradox of value tries to explain why luxuries such as diamonds are incredibly expensive, whereas goods such as water which are critical to the survival and existence of human being are so cheap. The real question here is that...