"Quantum Economics"

Sigh, been slacking too much over hols and past few months of this year...trying to get microeconomics back into my head is kinda proving to be quite a handful, and driving me crazy...all those concepts seem so distant... :(

Perhaps I've been addled by the attempt, but some phenomenon in the economy that I shall term "quantum economics" suddenly popped into my mind...so I shall briefly discuss it for fun. Prices, unlike that espoused within standard economic theory, be it the demand-supply model, AE-Y model et cetera, are not continuous. They are, I theorise, discrete, and come in 'quanta'.

A good example of this phenonemon would be that of hawkers (those at hawker centres, not just any hawker on the street). Over the years, even as general price level (and thus their costs of operation) rose, their prices tend to remain stable. However, once the government made the decision to increase GST, one finds that the prices that they charge immediately jump a notch up by 50 cents typically eg. from $2.50 to $3.00. Did the 2% increase in GST warrant such an increase? One could argue on the grounds of consumer exploitation, but given the wide availability of close substitutes (unless the food is like exceptionally good), this is unlikely to be the case. What of inflation over the years - why have they not taken it into account in their pricing? The answer would be that the mindsets of individuals are inevitably wired up by the notions of 'round figures' and convenience. It would be unduly troublesome for both the hawkers and consumers to deal with small denominations of money eg. a rise of 12 cents. Thus, only a sufficient increase in costs would precipitate an increase in price, somewhat analogous to the photoelectric effect whereby only a photon of sufficient energy would be able to liberate an electron.

Similarly, when pay rises are sought, they are usually in multiples of $100s - no one requests for a $63 increment for example; they would perhaps wait a few more months or so and then request for a $100 increment instead.

What impacts would the 'round figures' mindset of individuals, and consequently the quantisation of prices have on economic analysis? That, I leave to the readers to develop. That being said, it appears to be time to get back to trying to recall my microeconomics concepts...

~Fight