Skyrates Economics: Part 2

In my earlier post, I gave a brief introduction to the world of Skyrates, in which I mentioned that the inhabitants of that world all live on floating islands in the sky. Of course, no skyland is completely self-sufficient, and thus this is when the player steps in. Trading usually takes place between skylands.Theoretically, one can trade and still make a profit without ever taking off that skyland, but it takes a very long time and is dependent on the changes in quantity of that good over time.

This is the trading post of the Skyland, where you deal with the goods.
If you can see at the bottom left portion of the screenshot, they refer to the graphical representation of the quantity of goods as the "supply bar". From what we have learnt in our Econs, the game has used the general definition of supply as opposed to the economic definition of supply, probably to cater to a more general audience.

Sorry, I digress. The multicolored bars do not show the supply; rather they show the quantity, and to an extension, the equilibrium price of the good.

The market supply and demand can be broken into two portions each: The skyland's supply/demand as well as the players' supply/demand. Let's look at the market supply for a given good.
The above diagram is for the skyland supply and players' supply respectively. The skyland's supply is generally inelastic - it will continue producing that good irregardless of price. The players' supply, however, is elastic, and probably only start from "green" prices. Also, take into account that the skyland produces a much larger quantity than all the players selling that good at the skyland combined.

Thus the market supply is almost the same as the skyland's supply.

For demand, again the skyland's demand is inelastic and in large quantities. Player's demand is elastic, just like supply.
The above diagram shows the skyland's demand and players' demand respectively. The market supply will be roughly similar to the skyland's demand.

When the supply and demand curves intercept, the resulting equilibrium price will be pretty low if there is more supply than demand.

The only way for the equilibrium price to increase would be either:

• A increase in the skyland's demand
• A significant amount of quantity demanded by the players

which will result in a rightward shift of the market demand, causing a shortage and a higher equilibrium price.

Yay?
Next: some random examples :/(coming Soon™)
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Probably contains lotsa errors, please point out if you guys find any thankyouverymuch <3

Facebook

After Mr. Tan's recent explanation on the positive externalities of posting on the Econs blog, what would be more apt than...my virgin post on externalities? :D

I just got this screenshot off Facebook a little while ago:


Sooo, when someone advertises for an event by spamming wall-to-wall comments, he only considers his PMC, not the SMC, and since SMC > PMC this leads to overproduction of spam.

In this case:

PMC - Next to nothing except the few seconds needed to copy & paste the message on all his friends' Walls. Oh, and the few hundredths of a cent of bandwidth he takes up.

PMB - Increasing the chances of the recipient attending the event by approximately 3.78%, since he would feel special after receiving a heartwarming personal invitation from his friend.

SMC - The annoyance caused to other Facebook users who are already attending the event/not attending the event - which unfortunately works out to be most of the other users - from seeing their live feed clogged up by a wall of text. Also, the extra second it would take to scroll through all of that, which works out to be about 51.7 cents in lost productivity if President Nathan was surfing Facebook during office hours (why is he on Facebook in the first place?!)

Not to mention, the greater vulnerability to swine flu from the production of all that spam.

SMB - Errrr probably none, except providing the inspiration for this post, which could in turn possibly increase the chances of readers of this blog attending the event by 1.43% (because you heard about it here first!)

Therefore, we get the ever-so-dreaded case of... *drumroll*

MARKET FAILURE! Because social efficiency was not obtained, and because I am annoyed. >=[

What can Facebook do to correct this?

1. Regulation - Limit the number of characters in each, or by restricting the number of comments one can make in a certain period;


2. Taxes - Imposing a tax on the poster by spamming his wall back with the equivalent number of comments he makes;


3. Marketable Permits - Issuing a set number of posting permits, so if people feel that commenting on a friend's quiz result saying that he is in fact a Pikachu is a life-and-death matter, they can trade ingredients in Restaurant City for the permits;


4. Or better still, not update friends' live feeds with their wall-to-wall conversations, to eliminate the EMC altogether so this problem wouldn't have existed in the first place and I wouldn't have to waste 30 minutes typing out this post.

However, upon careful evaluation, Facebook might not want to impose such measures as people (mainly the spammers) would protest about their right to "free" speech ("Free", as in you don't need any sense cents to speak out on the Internet, GEDDIT?) and the uproar would generate bad publicity and be bad for business.

Furthermore, spamming blatant advertisements on Facebook might have an indirect EMB as well, in that 5.78% more people would attend CARITAS and be enlightened about international understanding, after which they would spread its joy to their just-as-enthusiastic peers.

So, do let international understanding be a greater part of your life and attend CARITAS!

Just don't spam Facebook while you're at it.