Examining Economic Enigmas Enigma – a puzzling problem or mystery

#1 - Why do people pay for bottled water when it is so much more expensive than tap water? Why do people choose bottled water? What are the BENEFITS and how do they outweigh the COSTS? What are incentives for buying water? Do consumers still want bottled water, or have people switched to filter and Sigg bottles? Do consumers consider the environmental impact of plastic water bottles, even if they are recycled?

#2: Why are there so many Starbucks so close together? - Why do people choose Starbucks? - Why are the stores profitable? - What is the incentive to having so many stores in so many locations? - How does Starbucks decide when/where to open a new store? - How far would people drive for Starbucks? Would they pass a Wawa and Dunkin to purchase the more expensive coffee?

Bottled Water People Choose – Consumers are willing to pay more for “clean” water All Choices involve Costs – the benefits of clean/healthy water outweigh costs People respond to incentives – its is portable and healthy unlike soda/juice Voluntary Trade Creates Wealth – Consumers continue to buy it! Markets Coordinate Trade – businesses provide convenient places to purchase bottled water in response to consumer demand Consequences of Choices Lie in Future – environmental impact of the bottle

Starbucks- http://www.youtube.com/watch?v=wfHpU2DMNOU People Choose – People like the taste of Starbucks coffee & their specialty drinks Ex: Chestnut Praline Latte All Choices involve Costs – So many different people of all ages buy Starbucks the benefits outweigh costs People respond to incentives – Time savings and product consistency are major incentives! Markets Coordinate Trade – Starbucks adds one store at a time in response to demand Voluntary Trade Creates Wealth – Consumers want convenient locations to purchase coffee

Now – think of your own Enigma! Why don’t more people carpool? Why do people pay to have their bags checked at the airport? Why do people boy the new iphone 6 when their phone still works? Why do people buy video games/movie when they can rent them? Why do people buy items in store when they can get them cheaper on-line?