5 Cute Ways Relationships relate to Economics (Seriously)


1. Demand and Supply

Supply-and-Demand-Graph

The entire dating scene is actually a huge Demand-and-Supply Graph. Think about it.

There will always be a high demand for ‘Attractive’ people (in terms of looks, status, personality traits, wealth etc.)

But everyone knows that not everyone in this world is classified as attractive. There’s only a small supply of ‘Attractive’ people that fit into your tastes.

This actually makes Attractive people very expensive. For the sake of this article we won’t use price literally in terms of dollars, but when I mean expensive, it means that it takes a lot of effort and hard work to win attractive people over. High demand and low supply pushes the curves in a way that the ‘price’ of attractive people goes up.

If you couldn’t reach for attractive people, then you have to settle for less attractive people which is at equilibrium, which, in economical concepts, is not the optimal choice. (Settler-Reacher Theory in How I Met Your Mother)

But hey! when you’re attracted to someone, they’re at 10/10 to you despite all the imperfections.

2. Law of Diminishing Returns

Law-of-Diminishing-Returns

For those who don’t take economics, the law of diminishing returns means that every time you do something (input), you will receive lesser satisfaction the more you do it. And then you hit a point where you get negative satisfaction.

Think of this as eating that juicy looking, orange, glistening sashimi when you’re hungry. It feels damn awesome at first – Hell, it melts in your mouth. And as you move on to the second slice, it’s still heavenly. The third slice is great. The fourth slice is still fine, the fifth slice starts to get tasteless, the sixth slice is meh, and at the seventh slice you’d start wishing the salmon population goes extinct.

How does this apply to relationships? You do sweet stuff for your lover. You give flowers every time you date and you fetch her home from work. It’s so romantic and great at first. Sparks fly, hearts flutter. You keep doing the same thing. Over time, it’s still sweet.. but you keep doing it for the tenth, the twentieth time, and your lover gets used to this, eventually treating it like a normal routine. It’s not the same feeling as when you first did it. Bad relationships actually take a sour twist here when one party starts taking advantage of the others’ kindness.

If you ask me, true relationships still have diminishing returns, but the negative part won’t be applicable.

3. The Long Run Production Function

prod-func

The long run production function shows what happens to companies over a long period of time when they keep producing goods, tagged against how much capital and labour (input) they give in to producing.

In relationships, this curve shows what happens to couples over a long period of time in terms of their affection levels for each other (y-axis) and how much effort cum labour (input) they give into the relationship.

Most relationships start off super sweet on what we call the honeymoon period. Congratulations! You just got attached! You go on dates, hug, kiss, spend quality time together and feel like the both of you can conquer anything. You just have to put in some effort and the level of affection will rise higher than you’d imagined.

After some time, of course, relationships start to slow down. You reap what you sow. If you put in this amount of effort, the affection level mirrors your effort and everything still goes smooth-sailing.

The relationships starts to get boring (Award-winning and most commonly-used excuse for 90% of breakups that occur). You put in great amounts of effort but the affection levels aren’t giving you good returns on your effort investment.

And after a long period of time, cracks start to appear in relationships. This is where you’d quarrel with your lover, start to snuff out bad habits, jerk-type personality traits, jealousy and what-not. You could try putting in a lot of effort to keep the relationship going, but the level of affection is starting to work against your favour. It’s probably time to sit down and have a good pep talk if you want to continue on the long-term relationship.

Refer to the graph to know what I mean.

4. Giffen Goods

Giffen Good: The more expensive it is, the more you demand of it. The less expensive it is, the less you demand of it.

Expensive meaning how valuable and hard-to-get you are (read point number 1), not in terms of price. Everyone loves the chase in dating. Everyone also wants that one person who is always in high demand, attractive and hard to get. Psychology also agrees that as humans, we always want what we cannot have. And what we can have, we take it for granted.

We are all, unfortunately, Giffen Goods. If you were to make yourself so cheap, lower your standards and show that you are so easily available to anyone who will take you off the shelf, this comes off as desperate, and no one likes desperate. shrug

5. Comparing Short-run Relationships to Long-run Relationships

fig8-7b

Why do most relationships fail in the short-run? See the economic diagram above. It happens because only one input is fixed, meaning only one person in the relationship is putting in effort to make it work. If the other party is not giving any effort at all, the line K0 (SR Expansion path) remains straight throughout, forcing the relationship satisfaction to come to an eventual standstill. It cannot go any further, it will die under that line. The line of the-other-person-not-giving-a-damn.

Expansion Curve, LR & SR

Comparing that short-run relationship to a long-run relationship, the reason why relationships can go on for years up till marriage, is because both partners are putting in effort to keep the relationship going, and the combined satisfaction and happiness will keep increasing (that is, until it gets subjected to diminishing returns).

Do I make sense or what?

Writer’s Note: Life is short. It’s fun to poke fun at economics

Jackie Loh

Writer

The Influencer Media

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