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The Well-Grounded Yuppie


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Wednesday, June 28, 2006

Globalization

The US economy is pretty good at adjusting itself out in most cases. Example, if it costs $5 to make something unpatented (after cost of overhead), and you sell it $10, somebody out there will sell it for $9 just to beat you and make a profit, and somebody else will sell it for cheaper and cheaper, until someone sells it for about $5.05, making just a nickel for each sale, but hoping to sell millions of them due to the low price to make a fair profit (Such as Wal-Mart).

One thing I never understood is glasses. I’m not talking about the eye checkup or the prescription, but the actual pair of glasses. The marginal cost of a pair of glasses is very low. The actual cost of a cheap frame and the lenses probably add up to about less than $10. Depending on how many pairs of glasses people sell, the overhead shouldn’t be that much in comparison either. But “professional eye places” sell glasses for $100-$250, and “discount places” such as Wal-Mart vision center sell them for about $70.

Why is that? How is a pair of glasses different from another consumer product? Do businesses think they can increase the price because the economic demand of a pair of glasses is inelastic? People need glasses and will buy them no matter how much they cost? How come nobody locally in every area tried to undercut the prices by selling glasses for $20 and still make a profit?

Well, through globalization and Internet businesses, people CAN do that, and consumers ARE offered more choices. I don’t need a good pair of glasses; I only wear them for about 15 minutes at night watching TV before going to sleep. I found a website that sells glasses for $20 after shipping.

This makes me think globalization is on its way, high tech products will still hold their prices until the “higher tech” products come out and replace them, and the prices of cheaply manufactured products will decrease.

2 Comments:

Blogger Thomas said...

Are you discussing globalization or principles of Economics?

7/07/2006 1:09 AM  
Blogger Paul Zhao said...

Both, especially when those two are merging into one topic nowadays. Just watch what happens 10 years from now.

7/09/2006 5:31 PM  

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