Thursday, February 14, 2008

Utility and the Substitution Principle

While checking out other blogs today, I ran across an interesting link provided by Alex Tabarrok on Marginal Revolution. I don't think it would work with my wife, either. Although it offers an interesting way to discuss both substitutes, and form utility as they pertain to value of goods. (Heck, scarcity might even fit in there someplace.) And that would provide a segue into the diamonds vs. water paradox on value and price.

Anyone have any thoughts out there? I would think two pieces of cardboard with "season tickets to (insert favorite team here)" might be an appropriate counter.

3 comments:

Mike Fladlien said...

I would never joke like that with my girlfriend...I wouldn't even buy cubic zyconia (sp)....I don't think those necklaces are a substitute good but they are a complementary good...They complement a husband who's a joker and signals a lot about the relationship....

Lauren T. said...

They're not substitutes. The value of an emerald is far greater than that of one of these necklaces. As a girl, I would laugh, but I'd want the emerald for sure. Depending on the pair, sure they could be complements...but don't expect Lindsay Lohan to accept one of those instead of a diamond.

Tim Schilling said...

lauren t.

Welcome to the blog. I'm glad you see the humor in the post. Substitutes, as you've probably learned, are determined by the perceived value (utility) of the user. As you properly perceived, the featured items lack the proper form utility.

Thanks for joining the comments.