Oct 22 2007
SAS Economists Podcast #3: Competition in the Baked Goods Market at SAS
Published by Jason Welker at 11:04 am under Competition,Elasticity,Market structure
By Nicole Wong and Katherine Yang
Podcast number 3 investigates the competitive market among groups selling baked goods here at Shanghai American School. The annual Relay for Life requires teams to raise 5,000 RMB (equal to about $650) in order to enter in the Relay. The most popular method of raising this entry fee is through bakes sales. This means that the month or so before Relay for Life SAS enters its “bake sale season” when countless teams try and push their products on teachers and students alike.
This podcast will explore the nature of the market for baked goods at SAS, determine the elasticity of demand for baked goods, and explore the prospects for increasing profits among teams hoping to make an easy kuai in the month leading up to the Relay for Life.
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About the author: Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course.
Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author
Related posts:
- SAS Economists Podcast #10: Perfect competition and comparative advantage in… the World of Warcraft!
- SAS Economists Podcast #6: The oligopolistic nature of the video game console market
- SAS Economists Podcast #8 – Shanghai’s fake DVD market
- SAS Economists Podcast #5 – What does the Caramel Frappuchino mean to Starbucks?
- SAS Economists Podcast #1: Demand for Eurest cafeteria food at SAS
I'm guest starring in this podcast!
Anyways, I agree that selling baked goods over 5 kuai is a difficult task. So far, with my own experience, I know that people would probably only pay up to 10 kuai, but only if the piece that they are getting is quite big. The ingredients in making the baked goods cost about 30 kuai all together, but that isn't the total price; there is still the price of gas that you used to go to Carrefour or another place to buy all the ingredients (for me, it's a place with mix which is only in select stores in Shanghai), the time to bake the yummy treats, and the time used to sell them. All those implicit costs.
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I agree; baked goods really do not reap much economic profit, if any at all. The costs of taking a taxi to/from a store, baking the goods, possibly burning yourself, and expending effort trying to sell the goods in such a competitive market far outweigh whatever profit you make.. even if you calculate it using accounting profits, the money it cost to taxi to/fro and buy the ingredients (quite expensive in Shanghai), you may end up with a negative number.
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While only havikng one group of people would count as a monopoly, even then i dont think that people would be able to raise their prices by much. As you can see by the prices people are willing to pay, everything is around 5 rmb. So it seems like a monopoly in our school really wouldnt do much for the group because people already have a set price in mind.
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My question is, does 30 kuai represent the total cost or the average total cost of producing brownies? How many brownies can you make for 30 kuai? Also, as Rebecca says, there are implicit costs involved as well. The time you took to go get the ingredients and baking the brownies may have been better spent brainstorming ways to raise money that wouldn't force you to lower your prices to the level of your costs, eliminating economic profits!
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