{"id":4195,"date":"2019-02-28T16:51:17","date_gmt":"2019-02-28T23:51:17","guid":{"rendered":"http:\/\/blogs.pugetsound.edu\/econ\/?p=4195"},"modified":"2019-02-28T16:51:17","modified_gmt":"2019-02-28T23:51:17","slug":"the-economics-of-magoos","status":"publish","type":"post","link":"https:\/\/blogs.pugetsound.edu\/econ\/2019\/02\/28\/the-economics-of-magoos\/","title":{"rendered":"The Economics of Magoo’s"},"content":{"rendered":"

Recently I logged onto Facebook to be greeted with a new page named, \u201cBoycott Magoo\u2019s.\u201d \u00a0Magoo\u2019s is a local college bar, famous for five dollar pitchers of beer that University of Puget Sound students would flock to go buy on Thursday nights. \u00a0Recently however, Magoo\u2019s has decided to increase their prices by $1.50 so that a pitcher now costs a hefty $6.50. Students appalled by this stormed to social media to take action and posts followed such as the following which was found on the Facebook page by a fellow student, \u201cMagoos has begun what will be their long reign of tyranny if nobody takes a stand. No longer serving $5 pitchers, Magoos believes they can step all over us. We must unionize comrades!\u201d \u00a0Their plan now instead of Magoo\u2019s this Thursday, is to attend Dirty Oscar\u2019s Annex (DOA) another local bar that offers $2 well drinks. <\/span><\/p>\n

So why did Magoo\u2019s raise their prices? \u00a0Answering this question from an economic standpoint offers us two likely cases. \u00a0First is that the costs of production increased, this could be that the resources they are buying went up or more likely the cost of labor is rising. \u00a0When the cost of production rises, the supply curve shifts back leading to higher prices and less quantity being bought and sold.<\/span><\/p>\n

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There is another story that could be told as well. \u00a0This is that Magoo\u2019s is looking to increase their total revenue. \u00a0When a good is inelastic it means that a percentage change in price leads to a relatively small percentage in quantity demanded. \u00a0When a good is elastic, the same percentage change in price leads to a larger change in quantity demanded. Magoo\u2019s might have believed that their pitchers of beer were <\/span>inelastic<\/span><\/a>, so that they could charge a higher price and gain more revenue, selling at a higher price to more than offset the few customers lost. \u00a0Instead though, Puget Sound students seem to show that their good is in fact elastic, so that this higher price is overshadowed by the loss in customers. \u00a0\u00a0\u00a0<\/span><\/p>\n

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A good is often elastic if there are many substitutes. \u00a0In this case a pitcher of beer from Magoo\u2019s has many substitutes; as students pointed out, one convenient substitute are the $2 well drinks from DOA. \u00a0DOA, a Guy Fieri approved bar on Sixth Avenue, will now experience an increase in their demand for drinks. Since Magoo\u2019s pitchers are a substitute for DOA well drinks, as the price of pitchers goes up, demand for DOA drinks will shift up. \u00a0Students are now deciding to switch from pitchers to well drinks due to Magoo\u2019s price increase.<\/span><\/p>\n

The Facebook page encouraging other students to make the switch to DOA highlights the <\/span>network effect<\/span><\/a> that takes place in bars. \u00a0This effect explains the added values consumers get from others consuming the same good. \u00a0People go to bars not just for drinking, but for the social environment as well. So the network effect takes place since the more people who are in the bar, the higher the value of being at the bar. \u00a0The \u201cBoycott Magoo\u2019s\u201d page is aiming for more people to go DOA so that DOA becomes more fun for themselves. If enough people switch to DOA, then a \u201ccritical mass\u201d can be met. Once a critical mass is reached, DOA will be able to attract more customers based off of the value of their existing network. \u00a0\u00a0Let\u2019s see tonight how this will all play out as Puget Sound students head out for their Thursday activities. From the looks of it, DOA will enjoy an increase in demand, while Magoo\u2019s may find desolate. <\/span><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Recently I logged onto Facebook to be greeted with a new page named, \u201cBoycott Magoo\u2019s.\u201d \u00a0Magoo\u2019s is a local college bar, famous for five dollar pitchers of beer that University of Puget Sound students would flock to go buy on Thursday nights. \u00a0Recently however, Magoo\u2019s has decided to increase their prices by $1.50 so that a pitcher now costs a hefty $6.50. Students appalled by this stormed to social media to take action and posts followed such as the following which was found on the Facebook page by a fellow student, \u201cMagoos has begun what will be their long reign Continue reading The Economics of Magoo’s<\/span>→<\/span><\/a><\/p>\n","protected":false},"author":566,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-4195","post","type-post","status-publish","format-standard","hentry","category-economics"],"_links":{"self":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/4195","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/users\/566"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/comments?post=4195"}],"version-history":[{"count":1,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/4195\/revisions"}],"predecessor-version":[{"id":4198,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/posts\/4195\/revisions\/4198"}],"wp:attachment":[{"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/media?parent=4195"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/categories?post=4195"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.pugetsound.edu\/econ\/wp-json\/wp\/v2\/tags?post=4195"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}