Archives for substitution



Sex and Chocolate: Complements or Substitutes?

The attached picture is a display at the local CVS in Ann Arbor, Mich. My thought was that this shelf display is a great example of complements: Enjoy a chocolate bar together, and who knows what nice things might follow?  My son thought that it depicted  substitutes — no luck in love, so drown your sorrows by eating chocolate.  I don’t know who is correct, but the example illustrates well the fact the complementarity/substitutability can depend on the specific situation being examined.



The Substitution Effect: How Reality TV Killed the Soap Opera

The Wall Street Journal has a story about all the long-running soap operas that are going off the air. A cohort of die-hard fans is protesting the move, arguing that the shows are more popular than their ratings suggest, and even threatening to sue ABC’s parent company Disney for causing them “mental distress” by canceling the shows. But the fact remains that their viewership is down, and sponsors have been pulling out, making the shows unprofitable for the television stations even in non-prime-time slots. One might think it is because of rising female labor-force participation–but the increase has been quite slow for the past 20 years. The reason is competition for viewers with a new, cheaper product—“reality TV.”

Apparently soaps and reality shows attract similar viewers—they appear to be substitutes for the average consumer. As with any new product that is hot, its substitutes suffer when it enters the market. As the World Turns and Guiding Light have given way to such pathetic substitutes as The Apprentice and Let’s Make a Deal.



Do Paid Chores Pay for Themselves?

My son now travels three days a week, and my daughter-in-law has knee problems. What to do about such tasks as gardening, lawn mowing, leaf raking, etc.? They could hire a gardener; but their kids, now teenagers, are confronting scarcity: Their allowances no longer cover the things they want to buy—they have become economic people.

To solve both parental and offspring problems, the kids have offered to engage in household production in return for extra pay. The garden now looks better, leaves are raked more quickly and the lawn is mowed on time—and the kids have more spending money. I have no doubt that paying the kids is cheaper than hiring a gardener—cheaper than the market solution. Of course, my son could order the kids to do the tasks, but paying them is a nice way to give them spending money. I wonder, though: Does their pay of, say $10, represent a $10 increase in income? Or does my son cut back on the things he used to pay for and now makes the kids pay for themselves? If so, do teenagers understand this kind of fiscal substitution?