Opportunity Cost 1B: Illustrated

Hello! Happy Wednesday, and welcome to another blog post!

Today’s a two-fer, since that last post was a bit…wordy, and a friend suggested a helpful illustration. As such, here we go:

• pictured, we have a plot that tells you whether or not to dump a beer you have on for another one you have waiting in the wings, assuming all of your lines have beers

• the x axis is pints per day of your current beer (the max, 60, being roughly equal to our most popular; 20 is the average for the non-standard beers, which I lovingly call the “freaks”), and the y axis is the number of extra pints you’d sell by swapping

• if your two beers put you into the shaded zone, you’d make money by swapping, and vice versa

  • thus, if you have a popular beer, it’s not likely a swap is smart

  • and if you’re selling no beer, swap (i.e. if you have an empty line, use it! There may be limits to that related to an overload of consumer choice, but through various analyses it seems like we haven’t reached that point)

• the other line, the dotted line, describes the number of extra pints we’d sell by swapping to an average freak beer; thus, at 0 we’d sell 20, and at 20 we’d sell 0; connect the dots and you have your line

  • so, on average, if you’re to the right of the intersection of these lines (i.e. sell less than 17.4 pints per day), you should swap! How’s that for concise?

  • this number should be smaller than 20, because it costs money to dump beer, which indeed is true

So, without further ado: