In economics, we are often presented with the benchmark of a perfectly competitive market, in which a large number of buyers and sellers trade homogenous products with perfect knowledge regarding price and utility. The only feature Camberwell Sunday Market shares with this benchmark is a large number of buyers and sellers.
Every Sunday from 7.30 am to 1 pm, over 400 casual stallholders will cart out an array of second hand items. For the most part, these consist of designer labels that were deemed ‘out of season’ by Vogue a month after they were purchased, much-bought-rarely-read Booker prize winning novels, and antiques salvaged from retired or deceased relatives.
A large proportion of the stall holders are one-off vendors who come to the market with the misguided notion that the goods they purchased at a premium with their hard earned salaries should be worth something.
Last week, the author became one such vendor and was quickly disabused of these notions. However interesting and important economic phenomena were observed, giving rise to the following hypothesis: the utility profile of the typical shopper at the Camberwell Sunday Market is dynamic, occurring in three phases.
The utility profile of the typical shopper at each phase, namely the ‘Fashionista,’ the ‘Browsing Bruncher’ and the ‘Scavenger,’ will be discussed in turn.
Utility, the idea that individuals seek to maximise their benefits and minimise their costs, is largely grounded in choice theory.
Utility is a representation of preferences over some set of goods and services. Graphically these preferences are used to create an ‘indifference curve’ of combinations of goods and services from which an individual derives the same satisfaction, or utility level.
Axiomatically, more is always better. Hence the further a particular curve is from the origin, the greater the satisfaction level achieved.
For example, Figure 1 graphs an individual’s indifference curves for comedy festival tickets against other goods and services.
This individual is equally happy with any combination of Comedy Festival tickets and other goods that appear along the green line (eg points A, B and C). This has a utility level of 2.
The individual receives a lower utility than 2 at any point along the blue line (eg point E) which only has a utility level of 1. Meanwhile the individual receives a higher utility than 2 at any point along the red line (eg point D).
In most cases, the indifference curves are bowed inwards as the marginal rate of substitution (MRS)—the rate at which you are willing to give up one good in exchange for another while maintaining the same happiness level—decreases as one moves down the curve.