I'm back in 1990

Chapter 948: Giving a Lecture

While the family was in Yanjing watching the opening ceremony and sightseeing, Huang Xiaochuan returned to the University of Finance and Economics at the invitation of his senior, Hong Yongze, to give a lecture to students who intended to apply to the university.

He knew that his senior, Hong Yongze, had asked him to speak on his behalf, hoping to use his influence to encourage more students to apply to the University of Finance and Economics in the future.

He didn't give a long explanation, but instead shared some lesser-known facts about economics.

He started by posing a seemingly simple question: "Why is milk packaged in square cartons and soda in round bottles?"

This simple question stumped both the students and teachers in the audience, who felt that these things had always been the same!

Just when they were completely baffled, Huang Xiaochuan threw out a series of seemingly unrelated questions.

Why is water, which is so important, worthless?

Why are diamonds so expensive even though they can only be viewed as decorative objects?

Why are women's clothing buttons on the left side, while men's clothing buttons are on the right?

Why do some people pay twenty dollars for the same cup of coffee, while others pay five?

The vast majority of people in the audience looked completely bewildered.

After observing the students' reactions, Huang Xiaochuan smiled knowingly and continued, "Actually, these questions contain the underlying logic of economics. After I explain them to you, I believe your perspective on everything will change."

As soon as he said this, the students in the audience became interested and watched him intently. After all, this was a world-renowned economist! Moreover, he had applied his knowledge to become the richest man in Asia. His life story was legendary, so they naturally had to listen carefully to what he had to say.

"Now let's talk about the question we started with: why is milk in square boxes while soda is in round bottles? First of all, let me clarify that it's not because square boxes save more raw materials. In fact, everyone should know a simple fact: to hold the same volume of liquid, a cylinder uses less material than a cuboid."

So why are milk cartons still used? The answer lies in marginal cost. As we all know, milk needs refrigeration, so it must be placed in supermarket freezers. Freezer space is scarce, and refrigeration incurs additional costs. Square cartons make better use of the freezer space than round bottles.

Soft drinks generally do not require refrigeration and are mostly placed on regular shelves. Since regular shelves do not incur additional costs, the space on regular shelves is very cheap, so there is no need to give up the advantages of round bottles in order to save a little space.

What are the advantages? The advantage is that the round bottle is comfortable and convenient to hold. We can just hold the soda in our hand and drink it straight from the bottle; I think everyone here, including myself, has done that.”

A burst of laughter erupted from the audience, which quickly subsided as everyone's eyes remained fixed on Huang Xiaochuan on the podium.

"And how do we usually drink milk? Don't we pour it into a cup or bowl? We don't really care about the feel of the container, right? Now you've noticed, haven't you? Even though they are the same container for holding liquids, the optimal solution is different because of the different usage scenarios and different usage costs."

This is what economics refers to as the optimal solution under constraints; the key is not which is better, but which is more cost-effective. This way of thinking can explain the other issues I just mentioned.

Why are the buttons on women's clothing on the left side, while those on men's clothing are on the right?

Because in the era when buttons were invented, women from well-off families usually had maids to help them dress. When the maids were with their mistresses or young ladies, they would use their right hand to button their clothes, so the buttons were naturally designed to be on the left side of the clothes.

Men generally dress themselves and mostly button their clothes with their right hand, so naturally, the buttons were designed on the right side. Centuries have passed, and although technology has advanced, this habit has persisted. Why hasn't anyone changed it? The main reason is that no one wants to change the cost of a standard.

So this is basically how economists view the world: they don't ask why things are the way they are, but rather explore how to make things more cost-effective.

The next question we'll discuss is why the same cup of coffee can have different prices. This is what we mean by "different prices for the same item."

Why do some people pay 20 yuan for the same cup of coffee while others only pay 5 yuan? Let me tell you, it's not that they bought different coffees; on the contrary, they bought the same coffee from the same coffee shop.

However, there are student prices, member prices, and various coupons available during promotional periods. Sometimes there are even buy-one-get-one-free offers, which I'm sure you've all experienced, right?

Laughter erupted from the audience again.

"Some people might question whether this is fair. Well, let me tell you, it's very fair!"

I call this kind of situation "price discrimination." Although the term may sound like a derogatory term, I'm telling you that in economics, it's a neutral concept. Simply put, it means charging different prices to different people.

Because different people have different willingness to pay for the same product, an office worker in a hurry might be willing to pay 20 yuan for a cup of coffee, while you students might only be willing to pay 5 yuan. So if the coffee is only priced at 20 yuan, you will lose your customers. If it is priced at 5 yuan, you will not earn money from office workers. So the optimal strategy emerges.

The logic behind "price discrimination" is to set the highest price that each person is willing to pay.

Some might ask, how do merchants know who is willing to pay more or less? Asking directly is obviously not an option, so merchants have started to set up a screening system that allows potential customers with different payment intentions to automatically reveal their payment intentions.

Coupons are one such model. Their advantage is that they don't require a direct price reduction, but rather allow a subset of customers to obtain the coupon. Customers willing to spend time obtaining the coupon are price-sensitive and have a lower willingness to pay. Conversely, customers unwilling to spend time obtaining the coupon have more valuable time and a higher willingness to pay.

So you've all figured it out! The role of coupons here is actually a classifier; it accurately distinguishes consumer groups.

Therefore, "price discrimination" is not a bad thing. Instead, it maximizes social efficiency, allowing everyone to buy goods at a price they are willing to accept, and businesses also make money.

But this leads to another paradox: why are some things that are clearly useful but cheap, while others that are clearly useless are ridiculously expensive?

This is the diamond and water issue I mentioned earlier.

Cola Novels, your portable library, contains more than ten thousand volumes.