Economics eductor. Follow me @Wootenomics
Pawnee is hosting Baraguá, Venezuela as their sister city and Leslie warns the group to make sure they understand how poor Venezuela is. The Parks Department quickly finds out that the group is much more affluent than they previous considered.
See more: comparative systems, globalization, inequality, quality of life
Andy goes to the hospital for a broken nose, but it turns into a rant session for Ben. It turns out the roommate situation between Ben, April, and Andy hasn’t been ideal because Andy and April continue to use his things without his permission. Andy and Ben negotiate for ways to remedy the externality on their own. If property rights are well established (Ben does own his stuff!) then two parties can work out externalities without government intervention.
See more: bargaining, Coase Theorem, common resources, externalities, negative externalities, private costs, private goods, public goods, social benefits, social costs, transaction costs, types of goods
Entertainment 7Twenty is bankrupt, but Tom doesn’t understand how his company has gotten this far. Tom took the phrase “spend money to make money” a bit too literally and spent all of the money that was invested in the company, including a limousine with a hot tub in it. Unfortunately for Tom, the revenue didn’t follow.
See more: costs, input costs, profit, revenue, variable costs
Ben is getting a little tired of Pawnee, but he’s only two stamps away from his “free” meatball sub. Unfortunately, his card is expired. He’s a bit sad about it, but those stamps are essentially a sunk cost. The card itself is a good example of ways that firms price discriminate and offer discounts to bulk shoppers.
See more: free lunch,NSTAFL, opportunity costs, price discrimination, second degree price discrimination, sunk costs
Donna and Tom take Ben on a “Treat Yo Self” day to help him relax, but he just buys socks, which he feels like he needs. Donna and Tom challenge him to think about what he would buy for himself if he could get anything he wanted. Ben decides he wants a Batman costume.
See more: elasticity, income effect, income elastic, luxury goods, necessities, normal goods, preferences, subjective value, utility
Tom recognizes that he can be successful by standing behind successful people and taking partial credit. Free riders often disrupt the efficiency of markets because they receive the benefits without putting in the same level of costs. This rent seeking behavior is apparent in a variety of examples from public service to group projects.
See more: free rider problem, private goods, rent seeking, types of goods
When the NBA goes on strike, Entertainment 7Twenty (Tom and Jean-Ralphio’s company) hires Indiana Pacer Roy Hibbert to play one-on-one basketball at the office for 75% of his salary. When worker’s aren’t able to go to work, their next best alternative is lower than their original wage. This allows interested firms to get labor a discount.
See more: labor, next best alternative, opportunity costs, reservation wage, strikes, unions
Ron is getting audited, so the Parks Department helps him look through receipts to help him. Ron doesn’t believe in banks, so he potentially stores his money around town in the form of gold buried around town.
See more: banks, gold, gold standard, liquidity, medium of exchange, money, money leakages, money supply, store of value
Ben has been asked to help Entertainment 7Twenty manage their finances because their costs are way higher than their revenues. His first suggestion is a downsizing of the building and keeping better financials. Unless the firm starts generating revenue, they only have enough cash for another month of operation.
See more:break even, capital, diseconomies of scale, economies of scale, fixed costs, profit, revenue, variable costs
Ben has been invited to help Entertainment 7Twenty evaluate their financial situation. When Ben asks how the Tom and Jean-Ralphio are making money (generating revenue), the two show him the printing press where they create fake money with their logos on it. This money is only good at their parties and the two are attempting to create a small internal economy.
See more: counterfeit money, Federal Reserve, medium of exchange, money, money supply, printing money, store of value
Economics of Parks & Recreation 