Skip to content

Instantly share code, notes, and snippets.

@chunhualiao

chunhualiao/products and services with low marginal costs.md

Last active December 23, 2024 06:57
Show Gist options
  • Save chunhualiao/464bc11167e8e37002902435385445fe to your computer and use it in GitHub Desktop.
Save chunhualiao/464bc11167e8e37002902435385445fe to your computer and use it in GitHub Desktop.
Download ZIP
products and services with low marginal costs
Raw
products and services with low marginal costs.md

what products and services have marginal costs close to zero today?

Several products and services today have marginal costs close to zero, primarily in the digital and information technology sectors:

  1. Digital content: E-books, digital music, streaming videos, and software have near-zero marginal costs for distribution once created[1][5].

  2. Cloud-based services: Software-as-a-Service (SaaS) platforms, cloud storage, and online productivity tools[4].

  3. Social media platforms: Services like Facebook and other social networking sites[1].

  4. Digital marketplaces: Platforms like Uber and Airbnb that connect service providers with consumers[1].

  5. Online education: Massive Open Online Courses (MOOCs) and other digital learning platforms[3].

  6. Cryptocurrencies and blockchain-based services[3].

  7. AI-powered services: Chatbots, virtual assistants, and other AI-driven applications[7].

  8. Digital advertising: Online ad networks and programmatic advertising platforms[2].

  9. Open-source software: Freely distributed and replicated software projects[5].

  10. Data and information services: Once collected and stored, data can be replicated and distributed at near-zero cost[6].

These products and services benefit from the digital economy's ability to replicate and distribute information at virtually no additional cost, leading to business models that can scale rapidly and efficiently[2][9].

Citations: [1] https://us.arvato-systems.com/blog/zero-marginal-cost-business-models [2] https://www.tekedia.com/marginal-cost-and-how-to-price-digital-products/ [3] https://www.cambridge.org/core/books/legacy/public-goods-and-zero-marginal-costs/1DC4DFF3EA42F6C1171BFD7F1C36A04B [4] https://lifesight.io/glossary/zero-marginal-cost/ [5] https://jefftowson.com/membership_content/an-introduction-to-the-sexy-but-dangerous-economics-of-digital-pt-1-of-3/ [6] https://homework.study.com/explanation/what-goods-products-have-a-marginal-cost-of-almost-zero-looking-for-costly-and-maybe-niche-products-such-as-software.html [7] https://ipcarrier.blogspot.com/2024/07/near-zero-marginal-cost-for-knowledge.html [8] https://www.heurekalabs.org/zero-marginal-effort/ [9] https://worldaftercapital.gitbook.io/worldaftercapital/digital [10] https://www.reddit.com/r/AskEconomics/comments/ha01bu/what_does_one_mean_by_zero_marginal_cost/ [11] https://www.aurecongroup.com/-/media/files/downloads-library/thought-leadership/aurecon-digital-futures-zero-marginal-cost-economics.pdf

@chunhualiao
Copy link
Author

chunhualiao commented Dec 23, 2024 •
edited
Loading

What products and services have seen their costs outpace overall inflation by a significant margin in the past 10 years?

Several products and services have seen their costs outpace overall inflation by a significant margin in recent years:

Food and Beverages

  • Food services inflation has outpaced other nonhousing core services inflation by an average of almost 3 percentage points since the end of the COVID-19 recession[1].
  • Food from vending machines and mobile vendors has seen a five-year price change of +46.1%[2].
  • Overall food and beverages have experienced a five-year price change of +29.3%[2].

Housing and Utilities

  • Housing costs have increased by 29.3% over the past five years[2].
  • Fuels and utilities have seen a five-year price increase of 28.5%[2].

Transportation

  • Motor vehicle insurance has experienced a five-year price change of +51.2%[2].
  • Motor vehicle repair costs have increased by 51.6% over five years[2].

Tobacco Products

  • Tobacco and smoking products have seen a five-year price increase of 46.8%[2].
  • Cigarettes specifically have experienced a 49.9% price increase over five years[2].

Services

  • Overall services have seen a five-year price change of +27.4%[2].
  • Services inflation in the United States averaged 4.45% from 1950 until 2024, reaching an all-time high of 18.09% in June 1980[4].

Medical Care

  • While not as dramatic as other sectors, medical care prices have generally grown faster than overall consumer prices since 2000, increasing by 121.3% compared to 86.1% for all consumer goods and services[3].
  • In June 2024, medical inflation (3.3%) outpaced inflation in the overall economy (3.0%) for the first time since the beginning of 2021[3].

These figures demonstrate that various sectors have experienced price increases significantly above the overall inflation rate, with some categories seeing price changes of over 40% in just five years.

Citations:

  1. [1] https://www.kansascityfed.org/research/economic-bulletin/labor-constraints-and-strong-demand-are-driving-robust-food-services-inflation/
  2. [2] https://www.experian.com/blogs/ask-experian/which-items-has-inflation-impact-the-most/
  3. [3] https://www.healthsystemtracker.org/brief/how-does-medical-inflation-compare-to-inflation-in-the-rest-of-the-economy/
  4. [4] https://tradingeconomics.com/united-states/services-inflation
  5. [5] https://www.cbo.gov/sites/default/files/113th-congress-2013-2014/reports/45653-outlookupdate2014aug.pdf

Over the past decade, several products and services have experienced price increases that significantly outpaced overall inflation, primarily due to factors like constrained supply, rising demand, regulatory pressures, and structural inefficiencies. Here's a breakdown of the key categories:

1. Healthcare

  • Medical Services: Costs for hospital services, surgeries, and routine care have risen sharply due to administrative costs, expensive technologies, and higher demand from aging populations.
  • Prescription Drugs: Prices for brand-name drugs have increased substantially due to patent protections, supply chain issues, and limited competition in certain markets.
  • Health Insurance Premiums: Insurance premiums have outpaced inflation, driven by rising healthcare costs passed on to consumers.

2. Housing

  • Home Prices: Real estate values, especially in urban and high-demand areas, have surged far above inflation due to limited supply, low interest rates (earlier in the decade), and increased investor activity.
  • Rent: Rental costs have spiked, particularly in cities with housing shortages and strong demand for urban living.
  • Construction Materials: Lumber, steel, and other materials saw massive price spikes, especially during and after the pandemic, due to supply chain disruptions and high demand.

3. Education

  • Tuition: College tuition costs have consistently outpaced inflation, driven by administrative expansion, reduced public funding, and increased demand for higher education.
  • Student Loans: Interest rates and overall loan burdens have grown as tuition costs rise, making education more expensive in real terms.

4. Childcare

  • Childcare costs, including daycare and after-school programs, have skyrocketed due to higher staffing costs, regulatory requirements, and increased demand in dual-income households.

5. Food

  • Groceries: Specific categories like eggs, meat, and fresh produce have seen prices spike due to climate change, supply chain disruptions, and increased global demand.
  • Dining Out: Restaurant prices have outpaced inflation due to higher labor costs, rent, and supply chain challenges.

6. Transportation

  • New Vehicles: The cost of new cars and trucks has risen, driven by semiconductor shortages, supply chain disruptions, and the transition to electric vehicles.
  • Used Cars: Used vehicle prices saw unprecedented spikes, especially during the COVID-19 pandemic, due to limited new car production.
  • Car Insurance: Insurance premiums have increased due to higher repair costs, medical expenses, and weather-related claims.

7. Technology Services

  • Subscription Services: Prices for streaming services (e.g., Netflix, Spotify), cloud storage, and software subscriptions have steadily increased, often surpassing inflation rates.
  • Smartphones and Electronics: While entry-level models remain affordable, flagship devices and advanced technologies have become increasingly expensive.

8. Utilities and Energy

  • Electricity: Rising costs for renewable energy infrastructure, grid maintenance, and fuel prices have pushed up electricity bills in many regions.
  • Natural Gas: Price volatility has led to periods of rapid cost increases, especially during geopolitical events or supply shortages.

9. Insurance

  • Homeowners Insurance: Premiums have climbed due to extreme weather events, higher rebuilding costs, and inflation adjustments.
  • Auto Insurance: Increased repair costs, vehicle prices, and accident rates have driven up premiums.

10. Travel

  • Airline Tickets: Post-pandemic recovery saw airfare costs skyrocket due to increased demand, fuel prices, and staffing shortages.
  • Hotels: Accommodation costs in popular destinations have risen sharply, driven by increased travel demand and limited availability.

Factors Driving These Trends

  1. Supply Chain Disruptions: Global supply chain issues, particularly during and after COVID-19, raised costs in sectors like food, vehicles, and electronics.
  2. Labor Shortages: Widespread labor shortages, especially in childcare, healthcare, and hospitality, increased wages and service costs.
  3. Geopolitical Events: Trade tensions and conflicts (e.g., Ukraine war) disrupted energy and food markets.
  4. Regulation: Increased regulatory requirements in sectors like housing, healthcare, and education contributed to cost growth.

These trends reflect a mix of structural inefficiencies and global challenges, making certain goods and services disproportionately expensive compared to overall inflation.

Sign up for free to join this conversation on GitHub. Already have an account? Sign in to comment