Why do we get student discount on cinema tickets but not groceries?
Arbitrage is when a good can be bought at a cheaper price in one market and then resold for more in a different market. Arbitrage allows us to make guaranteed profits. For instance, if we were able to buy TVs from Birmingham for £300 and sell the exact same TV in London for £500, we would be able to make a guaranteed profit of £200 per TV. The economy is divided up into different types of goods. Some examples of the different types are:
• Necessities like food, water, and electricity. When our income rises we purchase more of these goods but reduce the share of our income we spend on them. (If we earn £10,000, we might spend £2,000 on necessities. If our income doubles to £20,000 we will increase our spending on necessities but not by double, maybe to around £3000.)
• Luxuries like designer clothes, sports cars, and expensive perfume. When our income rises we spend more on these types of goods. Unlike necessities, when our income increases we devote a larger share of our income towards luxury goods than before.
• Inferior goods like store-brand food, payday loans, and bus travel. As our income increases we spend less on these goods.
Why are we less likely to get student discount on everyday groceries compared to cinema tickets?
So we can't pass on our student discount to family and friends
Students like to go to the cinema more than others.
Cinema tickets aren't a necessity
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Anjali Garg is an IGGY student mentor and a final year Economics student at the University of Warwick.
She particularly enjoys industrial economics, which is the application of economics to firms, markets and industries. This is because she hopes to work in many different industries in the future before starting her own business. She's also interested in environmental economics and is writing her dissertation on the effect of temporarily legalising the ivory trade on elephant poaching.
You can message Anjali at @Anjalig and see more about the Student Mentors here.