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“Nom Nom Nom” is said to have originated with the Cookie Monster. *nom nom nom* It has become a preferred way to express voracious eating. Today the meme has spread to everyday conversation.
Jen – “How’s that sandwich?”
Mark – “Nom nom nom!”
Jen – “I need to get some more noms.”
It is almost certain that the word economics was coined without *nom nom nom* in mind. But if it was not intentional, it was foresighted to put NOM right in the middle of “economics,” as the concept of noming is so central to economics.
One starting point for understanding economics is that everybody wants stuff. Economists study consumption, or noming.
Our first character, Gustav von Om Nom, loves noms. If you do not love cookies as much as Gustav, there must be something you really want. *iPhonomnomnom*
Gustav loves cookies, but first few cookies are really good and after too many cookies they become a bit less appealing. See Decreasing Marginal Utility Graph.
Gustav can buy more cookies if the price of cookies is lower. If the price of a cookie is too high, it’s not worth it. He could use his limited amount of lunch money to buy other things (ex. cheesecake).
At any moment in time, there is a limited amount of cookies in existence. Economists study what to do given the fact that there is a finite amount of noms to go around. Many of the problems humans face can be explained in terms of “scarce resources.”
There will always be a finite amount of stuff, but in the last 150 years the total size of the human economy has grown. Pretty incredible ->
GDP per capita is a rough measure of how much stuff the average person is producing (and therefore consuming) in a year.
The “economic pie” is a term for how much stuff there is to go around in a society. The economic pie has grown significantly in the past few centuries. So a lot of people have more healthcare, shoes, and most importantly cookies.
Chef Kitteh bakes cookies, but she can’t do it for free. She has to buy inputs like flour and sugar and invest in capital like ovens and baking pans.
Gustav can communicate to Chef Kitteh how many cookies to make using price signals. When we overlay the supply and demand curves, they cross at a certain point. The price at the point where they cross is important because consumers will demand the same amount that producers will supply at that price.
If Chef Kitteh can sell a cookie for $1 but it only cost her 50 cents to make, she makes a profit of 50 cents. If Gustav values a cookie at $2 but only has to pay $1, he benefits by a dollar. Surplus was generated and now everyone is better off.
The surplus in the graph to the right is the triangle space above the supply curve and below the demand curve.
Stay tuned for more economnomnomics. Contact us to let us know what you think and what you might want to see more of.