Zoolinomics The Economics of Zoo Keeping. Discussion Question: Did every animal make it into your zoo? Why or why not?. Scarcity necessitates choices
Scarcity necessitates choices
Because the amount of space in the zoo is scarce, choices had to be made about which animals would bring the most visitors and highest profits to the zoo.
If scarcity were not an issue, then of course we would want all the animals in the world in our zoo. But given limited land resources, choices had to be made to maximize the value per acre of land.
Benefits vs. costs
Every economic decision involves both costs and benefits. Even if the turkeys were ‘free’ there is still a cost associated with putting them in our zoo. Each turkey ‘costs’ a tenth of an acre, which is land that we could use for more exotic animals that would attract more visitors. The benefit of having a turkey in your zoo does not outweight the ‘cost’, which is the land that could have been used for exotic animals
In economics, a common saying is, ‘There's no such thing as a free turkey (or lunch, whatever...)’
Diminishing marginal utility
Let's admit it, everyone loves monkeys. But there can be too much of a good thing. In economics we recognize that the more a person consumes of a particular good or service, the less each additional unit is worth to him. In other words, while a few monkeys might please our visitors, not many people would be willing to pay to get into a zoo with 50 monkeys and nothing else.
The law of diminishing marginal utility is a basic economic concept that says that the more a consumer has of a particular product, the less each additional unit is worth.
Benefits vs. Costs, again...
Just like with the turkey, except this time elephants are exotic and do attract visitors. So when deciding whether to include Asian or African elephants, we had to weigh the ‘cost’ and the ‘benefit’ of each.
An Asian elephant only costs us one acre, while and African elephant costs us three acres. For each acre we allocate for elephants, we'll be able to provide much more satisfaction to our visitors by choosing Asian elephants, because we have to give up less of our scarce land resources for each Asian elephant than for the African elephant. Asian elephants are ‘cheaper’ in this regard.
Economic decisions are marginal decisions. When deciding what to do after school, you weight the benefits and the costs of each additional hour you spend doing something. For example, you may play Xbox for two hours, then decide to study for an hour. At the end of two hours, you weighed the marginal benefit of an additional hour of gaming with the marginal cost (which in this case is the study time you'd miss out on).
In your zoo, you probably first selected the animals you thought would create the most marginal benefit, added more of them until you thought the additional benefit of one more was low enough, then added a different animal. The last animal to make the cut represents the animal with the lowest marginal benefit, yet it is still higher than you thought the marginal benefit would have been for the animals that did not make the cut.
The opportunity cost is the opportunity lost. The opportunity cost of the last animal you put in the zoo is the benefit you could have enjoyed from choosing some other animal.
Say you added a seal last, but if you had just a little more space you would have added a kangaroo too. The ‘cost’ of the seal is the kangaroo you could have chosen instead.
Opportunity cost of anything is what you give up to have it. The opportunity cost of studying economics for two years is the benefit you could have earned from studying a different subject instead.
Discussion Question:Did everyone in your group agree to include the same animals?Would everyone in your group have made the same choices if they had built the zoo alone?
Social benefits versus individual benefits
Not everyone has the same preferences. Some members of your group may really love turkeys, yet had to sacrifice this preference to satisfy the desires of the group. What's best for the individual is not always best for society.
In economics terms, the private benefit of certain behaviours sometimes differs from the social benefit. This may lead to what are known as market failures in economics, which arise when the private behavior of individual consumers or producers leads to socially undesirable outcomes. Second hand smoke, air pollution, traffic, and even global warming are examples of such market failures.