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= = = = //Valentines day. White day. Pepero day. black day. parents day. teachers day. If you’ve lived in Korea for a while, you know these all to be very commercial holidays. On their given days, you wont be able to walk into a 7/11 or GS25 without seeing huge frilly pink banners, declaring outrageous bargains for a bulk package of chocolate. Or maybe youre walking on the street, when you’re suddenly accosted by men wielding drooping bunches of “freshly picked” carnations for parent’s day. Whatever the situation, these ‘artificial’ holidays hold a lot of weight in Korea, and are responsible for a large portion of sales for the gift-products of their holiday. This project will explore the effects of such holidays on the demand for particular products, and how these changes in demand affect the marginal utility gained from consumption and the opportunity cost of consumption. //



 A market graph (for convenience’s sake, we will use the perfect competition market), consists of a supply curve and a demand curve that intersect at the equilibrium point. The supply curve is the total sum of all individual supplies of the product, in the market. The demand curve is the total sum of all individual demands for the product, in the market. Thus, when a large number of individuals’ demand changes the market demand curve will also shift accordingly.

===**Individual demand affect market demand through many factors: income, price of related goods, tastes, expectations, and number of buyers.** ===

 1. Income: For a normal good, when the income of an individual decreases, you can generally expect them to want your product less, since they have less money to spend. When the income of an individual increases, you can generally expect them to want more of your product, since they now have more freedom to spend. (If the opposite of these 2 scenarios occurs, the product is an inferior good). This means that decreases and increases in income correspond with decreases and increases in the individual demand for a normal good, which means that these changes in individual demand correspond with changes in market demand.

2. Price of related goods: If you were given a choice between 2 substitutes (A and B), but product A was cheaper than product B, you would obviously buy more of product A. In other words, your demand for product A would increase. If there was an increase in the price of good A, a complement to good B, this would mean you were less likely to buy more of good B, reducing the demand for good B. Depending on the relationship between the goods, a change in the price of one good will positively or negatively affect individual demand for the product, leading to a corresponding change in the market demand.

3. Tastes: This category is simple. Your demand for a good you like will be higher than your demand for a good you dont like. Since each individual has different tastes, their demand curves will reflect this. When each of these individual demand curves are added up they will show the market demand for the good.

4. Expectations: As human beings are capable of forethought, our expectations of the future will also determine our demand for goods in the present. If you believe that prices in the future will be cheaper than they are at present, you may stop buying in the present to save your money for later. Your present demand will decrease, meaning the present market demand will decrease.

5. Number of buyers: Since the market demand is derived by adding all the individual demands, the number of buyers in the market significantly effects the market demand. Even though the individual demand for each person may be the same, the quantity demanded by 3 people will be greater than the quantity demanded by 2 people at every price- meaning that the demand of 3 people will be higher than the demand of 2 people. The more people in the market, the higher the market demand will be, because you have added more individual demands together.

**So, how does this relate to commercial holidays?**  By getting people to believe that it is necessary for them to buy large quantities of pepero or chocolate in order to display their affection for loved ones, the companies that produce those products are increasing the number of buyers in the market (because people who do not buy their products on a normal basis are now doing so for the sake of the 'hallmark holiday'). Thus, the quantity of individual demands increases, resulting in an overall increase in the market demands.



**What consequences does this change have?**  The market demand curve will shift upwards (to the right), dragging the equilibrium point higher. Equilibrium quantity and price will both increase, meaning that companies will charge more for their product while still increasing their revenue (and profit). Clearly this is a win-win situation for the companies, who encourage the continuation of such consumerist/artificial holidays. It also explains why the price of a ghana chocolate bar seems to rise just when February rolls around :(



The property of diminishing marginal utility or marginal utility can be seen in the byproducts of these consumption oriented holidays. Along with increased purchases of gifts such as chocolate, candy, and peppero come increased consumption of these gifts. As more of each product is consumed, the less satisfaction (or utility) we get from each additional unit of product consumed. This is the definition of ‘diminishing marginal utility’- when the marginal utility of a good increases at a decreasing rate. We can see the effects of this most easily when there are larger quantities of a good consumed at once, such as on these holidays (when large quantities of these goods are available).

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In short: every additional stick of pepero you eat becomes less appetizing, and towards the last few you become sick of pepero and never want to eat another one again (or until next year’s pepero day...).





The opportunity cost of something is a measure of how much you have to give up in order to gain it. The opportunity cost includes not only the explicit cost of a good but also the value of the next-best opportunity that is forgone (the cost of missed opportunities). Anytime you make a decision to purchase something, you should first weigh the opportunity cost of making that decision.

The idea of opportunity cost is particularly relevant to the issue of ‘Hallmark holidays’ because the opportunity cost of these purchases is usually pretty high. On a normal basis, you buy pepero in smaller quantities. This means that the explicit cost of such a purchase is only around 1000 won. Since there is very little else you could also by with 1000 won (perhaps a canned drink), the value of the foregone opportunity is also relatively low. However when November 11th (Pepero day) approaches, people will purchase more than their usual amount. This increases the explicit costs, proportionate to the increase in the quantity of peperos bought. However the difference in opportunity cost lies in the value of the foregone opportunities. There is much more that you could do with 10,000 won than with 1000 won. The alternative uses of 10,000 also outweigh the value of the missed opportunities of 1000 won- could buy a book with 10,000 won and the utility you gain from this may be greater than the utility you gain from a soft drinks. Basically, the opportunity costs of buying gifts for commercial-holidays is much greater than the opportunity costs of buying those same items in the regular small quantities you may do on a normal basis. This difference originates from the implicit cost (cost of foregone opportunities)- the larger the purchase, the more you could have done with the same amount of money, instead of buying chocolates/candies/peperos/etc.. The implicit cost of this larger ‘bulk’ purchase would definitely overwhelm the combined implicit cost of purchasing the same amount of the good in smaller quantities. (ex: the loss you feel from not buying a house is probably greater than the loss you feel from not buying 1000 softdrinks).



What we should remember about commercial holidays is that they've usually been marketed by companies as an effective way of making a huge profit. Not only do they sell larger quantities of the product, but because the demand for their products increases, they can even charge higher prices. In essence, this means that the consumers have a disadvantage on these holidays. In addition, the opportunity costs that come with buying the products of these holidays, as well as negative change in the total utility from the consumption of goods is much higher than it would be on an average day. The economic lesson: if youre going to get your loved ones a present for valentines day/white day/pepero day: do your shopping in advance, and dont buy in bulk. (and dont eat all your gifts at once. this also applies to Halloween candy.)