Chapter 6: Competitive Markets,opportunity costs, and the production possibility curve
Updated: Feb 26, 2019
In the economy of Maplestory, most items are not solely owned by a single person, in other words, even though monopolies can be seen at times, most sellers face competition from other sellers as they aim to lower their prices in order to attract more buyers. An example would be the angelic blessing market, where the recipes are easily available from the hackers, who right now seemingly act as NPCs for such goods. Let’s take the market situation before the justice patch into account, where the price of an angelic blessing recipe (ABR) is worth 200m. The amount of capital needed to make an angelic blessing ring would be approximately 217m, that would mean that in order to make minimal profit from selling a crafted Angelic Blessing ring, one must sell it for at least 230m due to the 6% tax.
As sellers, the one most important thing would be profit, therefore one definitely would not sell his items at a loss, unless the item had a sudden drop in value, and its value will only decrease over time. So, how should a seller price his item, such that the buyers will be willing to buy it, and that he will be making a profit too? For such a situation, one has to look at the market price, which is determined by both the buyers and sellers. We all know that demand and supply curves are hardly ever linear in real life, but let’s take it at face value in order to make my explanation easier. Let’s say that the selling price of an Angelic blessing ring would be at 230m (Point X), where marginal cost is just a little bit lower than marginal revenue, this would result in sellers wanting to sell extremely little amount of angelic blessing rings, as the total profit he gets is definitely not worth the time and energy spent making the ring, and he would be earn much more by mining ores. And of course the demand will be relatively high as the price is low. The imbalance will give sellers an incentive to raise their prices and give some buyers an incentive to offer more money.
Now let’s say that the selling price of an angelic blessing ring were to be at 250m (Point Y). Sellers will be extremely happy, as they will be able to sell their rings at a reasonable profit of 20m, and thus more people will enter the market looking at how lucrative it is. Buyers however, will demand much less as they feel that the prices are overly high, and that they would be better off going for a substitute, or simply just by making the ring for themselves. This imbalance will give sellers an incentive to lower their prices and give buyers an incentive to bargain.
Ultimately, the supply and demand curve will meet at a point at about 240m (Point Z), where the supply equals the demand, and that will become the market price. Only at the market equilibrium price is the amount that sellers want to sell equal to the amount that buyers want to buy.
If there were to be a sudden increase in the number of recipes supplied, the supply curve will shift towards the right as the sellers will constantly compete with each other in order to attract more buyers due to there being more sellers than buyers, thus reducing their prices by more.
On the other hand, if there were to be an event that resulted in the sudden decrease in supply of ABRs (aka hacker and botter crackdown by GM), one should take note of such an event, and immediately capitalize on the situation by stocking up on ABRs, this will result in the supply curve shifting to the left, and thus the price of ABRs will increase. As Angelic blessing rings were trendy, it became quite a trend to possess one, and there is hardly any substitute for it at that point of time, thus the demand curve remained inelastic. With an inelastic demand curve and a shift of supply curve towards the left, he who possesses a huge amount of ABRs will benefit the most from this event. Normally, the effects of market forces are not immediate, and thus it would take quite some time before the equilibrium price changes, therefore by analyzing the market and capitalizing on the situation, the profits will start rolling in.
The next part of this essay will be talking about opportunity costs. To get something that we want, we usually have to give up another thing that we like/already have, therefore making decisions require trading off one goal against another.
Let’s take an example; Person X must decide how to allocate his most valuable resource – his time. He can either spend all his time studying economics, or spend all of his time playing Maplestory, thus, for every hour he studies economics, he gives up an hour of playing Maplestory. This can be depicted by a Production possibility frontier(PPF) curve, which shows the combinations of two or more goods services that can be produced whilst using all the available factor resources efficiently.
As we move down the PPF curve, more time is allocated towards playing Maplestory, and less time is allocated to studying economics. Unless there is an increase in productivity or efficiency, person X will never hit point A.
However, what if this person is special, and applies whatever he learns in economics into Maplestory, and in the process learns examples from Maplestory that will help in his economics? This can be depicted in the PPF curve drawn below. So, presuming that this guy has 2 hours, by allocating one hour to Maplestory and one hour to studying economics, he obtains the optimum benefit (He gets happy by playing Maplestory and smarter by studying economics). By increasing his efficiency and productivity, he is finally able to hit point A.
Bringing it back to the technical terms, the production possibility frontier will shift outwards only when:
1) There are improvements in productivity and efficiency (perhaps because of the introduction of new technology or advances in the techniques of production)
2) More factor resources are exploited perhaps due to an increase in the size of the workforce or a rise in the amount of capital equipment available for businesses.
There is another scenario, in which person X does not fully utilize his time, and thus obtaining less knowledge and deriving less happiness, thus reaching point X on the PPF curve.
An example in Maplestory would be in the crafting industry, where one could choose between crafting earrings or belts. Let’s presume that the earring takes 4 bronze plates to be crafted, and the belt takes 8 bronze plates to be crafted. If you have 40 bronze plates, therefore you have to make a choice when allocating your resources, you can either have 10 earrings 0 belts, 8 earrings 1 belt and the list goes on. When crafting accessories in Maplestory, one usually does so for the hidden potential it has, and there is a chance that it will give a % stat upon reveal. The dominant strategy in this gamble would be to craft earrings instead of belts, because for every belt you craft, you can craft 2 earrings, giving you double the chance of getting a good potential.
However, one must not neglect the fact that since belts cost more to make than earrings, the cost of belts will definitely be much higher than that of earrings. And since each person can only equip one belt and one earring at a time, the demand curve for belt and earrings will approximately be the same.
A 6% (any stat) belt is worth approximately 200m, while a 6% (any stat) earring is worth approximately 70m, so wouldn’t it be obvious to craft belts instead of earrings? However, this isn’t the case in Maplestory. Let me give you an example, would you rather have a 100% chance for 1 million, or a 50% chance for 2.5 million? Most people would choose the 100% chance because when participating in crafting gambles like these, they are not as objective, and thus prefer to have double the chance at winning something small, than half the chance of winning something bigger. Besides, they derive greater satisfaction from getting something epic/unique upon reveal, and thus more people continue to craft earrings instead of belts.
In the future during RED patch (1st impact); there will be much less people entering the flame market simply because the production cost is approximately that of cubes. However, the demand for flames will still be existent due to the release of season 1 items which can be resurrected, so perhaps allocating your resources to flames instead of cubes would be profitable. Besides, cube fragments will be pretty hard to get after the market has been bought out.
End of Chapter 6
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