Monday, March 12, 2007

Interesting Cell Phone Pricing

1. Cost of a replacement battery for a 2-year old cell phone with no camera: $40

2. Cost a new Nokia cell phone with battery and camera: $29.95

3. Cost of an automotive charging cord for the new cell phone: $25

If options #1 and #3 seem overpriced and #2 seems underpriced, it's because demand is very inelastic for #1 and #3 (no substitutes), and very elastic for #2 (lots of substitutes).

BTW, GMU economist and super-blogger Tyler Cowen ( explains in this EconTalk podcast with GMU economist Russ Roberts why the subject of economics, compared to other disciplines, is so well-suited to blogs - because there are so many daily examples to apply economic thinking that have appeal to the general public (like cell phone pricing). Russ Roberts calls this the "Golden Era of Economic Education" because of blogs. Tyler predicts that more students will go to graduate school for economics because of blogs.


At 3/16/2007 1:34 PM, Anonymous Anonymous said...

Is option #2 with a new contract? If so then is your argument still valid?


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