５ th April,2005

1. ５th April,2005 Today is Mother's day. The time now is 9:00. Mrs. So and her daughter-Kate are still waiting for a bus.

2. So it is not worth for us to take by a taxi~ O~ My mum, don't you know the forgone value of time is a sunk cost. My dear, I know it.But be patient. The bus is coming soon. Daughter,What is sunk cost?? I think we should rather go by taxi now. Otherwise, we would be late. Mum, we have waited for the bus since 8:15am. Okay, Let's me explain to you la!! Also, we have spent so many time to wait for it, so the forgone value of time is cost for us!!

3. Historical Cost (sunk cost) Definition: Original cost at which firm acquired a factor Sunk Cost => Past Cost 1.It does not apply to present option 2.Past option are not presently available

4. Historical Cost (sunk cost) Definition: Original cost at which firm acquired a factor So Sunk cost Cost

5. After Mrs. So has listened to her daughter's explanation, they decided to take a taxi to join their grandmother. And when they leave the taxi, they meet Mrs. Lee and her son are waiting in line.

6. In case, we don't need to pay money is no cost for us. So, would you like to waiting in line also? Nice to meet you too, Mrs. So.I am lining for getting the free gift. Oh, I wouldn't! I have date my mum. But I don't think you don`t have any cost for it! Really?? Why?? Sure!! Thank you~ Hey~Mrs. Lee, nice to meet you! What are you lining for?? Yes!! Let's me explain to you~

7. Opportunity cost The concept of free = No cost Definition: The highest valued option forgone If Mrs. Lee don't wait in line at that time, she can do other things, like doing housework, doing revision with her son. And those non-chosen option is her cost of waiting in line. So we can conclude that Mrs. Lee is alsohaving a costof wait in line, even ifshe no need to pay money.

8. Dissipation of rent Definition: The potential rent isn't captured in a partial model in which private property rights are absent. All form of non-price competition like queuing, rationing, ballot, first come, first serving, violence, etc will rise the dissipation of rent. Also, queuing like Mrs. Lee would lead to….. In this case, Mrs. Lee queuing and do not provide any potential rent to society.

9. After Kate and her mum say goodbye to Mrs. Lee and her son, they walk to the restaurant where her grandmother is in there and wait for them. But before they reached the restaurant, they walk past the flower store. At this time, Kate have a question and ask her mum.

10. Ooh~ sorry !! It is because of the suddenly large amount of demand. My dear, today is mother's day, you don't know?? Okay~ Let's me explain to you more detail~ Mum, I know~ But I mean why the sellers have to set the price of flowers so high today than normal!! Mum, why do the price of flowers is much higher today??

11. Elasticity of demand D1 Pe P1 D2 Price S Qe Q1 Quantity As the result: Price ↑ sharply In special day Demand↑ = D2 Supply unchanged In normal day Demand = D1 Supply = S (inelastic)

12. After having lunch with Kate's grandmother, they walk around in the shopping mall. Suddenly, Kate stop at front of a computer store and ask her mother to buy a new printer.

13. Big sale $300 P.S. If the buyer would like to buy the printer at $300, they must be also buy the scanner at $5000. But if the buyer want to buy only the printer, then they have to pay for it at $1000. Yes~ It is the case of tie-in sale ma!! BB~ Have u seen that there is some proviso(附帶條件）？ You don't know~ Let's me explain to you!! Oh~ I see. It seem the scanner is sold at a very higher price in this case. Tie-in sale?? What's it?? Mum, it is very cheap, only cost $300~

14. Tie-in sale Definition: A pricing tactic that creates an artificial link between the availability of two products. In fact, it is the method for the seller to concrete all consumer surplus. In the above case The printer must buy with the scanner, so that its price would be the lowest($300).

15. Cheung Sui Ling (4) Lee Ka Man, Carman (11) The End