A puzzle. My nephew has switched to making art glass full-time, and I think his work is gorgeous. His problem, though, is figuring out what price to charge. Among other things, he blows gorgeous candlesticks, which he thought of selling for $70 a pair. I say he should charge $250 a pair. He says no, because he thinks he can sell many more at the lower price.
He assumes it takes one hour of his time to blow a pair after he’s done the first pair, and incurred the fixed cost. So I guess his decision depends on the opportunity cost of his time and the elasticity of demand for his product. Clearly, there is a set of combinations of the cost of his time and the expected change in quantity sold that would make him indifferent between the high and low prices, with a higher opportunity cost requiring a higher demand elasticity if the price is lower.
Given the two prices, what is this set? And what do you think the demand elasticity actually is in this case? (HT to SEH)
Earlier this month, people waited four days and three nights to register for low-income housing in the central city of Xian, while admission to a certain Beijing kindergarten in Changping last year required a week-long, round-the-clock queue, for which people set up camp beds along the pavement.
A half-day wait at the bank is also apparently not unusual. It’s all led to this:
For the past two years, Li Qicai, 28, has made a career out of waiting in line. What’s more, he now outsources the waiting to others. He employs four full-time queuers and a host of freelancers, who, for a cost of about $3 an hour, will do the waiting for you.
“I’m just selling my time for money,” says Li. “You don’t need any skills, except the ability to suffer. For some jobs, you need to look good. If you want to buy things for rich people, you can’t look like a farmer or they’ll think you’re a scalper.”
The Chinese media pins the phenomenon on an economy driven by laziness, where low labor costs fuel China’s “convenience culture.”
One more point: if it takes a week to wait in line to sign up for kindergarten now, what happens if China’s most populous-province gets its wish, and the country’s one-child policy is overturned?
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