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96 CHAPTER 3 CONSUMER PREFERENCES AND THE CONCEPT OF UTILITY

the fad spread to Europe and Japan. By the end of Fads change consumer preferences. For example,
1958, the fad had subsided, and Wham-O moved on suppose a consumer purchases only two goods,
to its next major product, the Frisbee. Beanie Babies and food. During the fad, as shown in
Of course, there have been many fads over time. panel (a) of Figure 3.16, when the consumer increases
In 1993 Ty Incorporated introduced Beanie Babies, his utility significantly by purchasing more Beanie
small stuffed animals. The line of toys became per- Babies (e.g., by changing his consumption from bas-
haps the biggest fad of all time, with Ty’s revenue ket A to basket B), indifference curves are relatively
topping $6 billion. While Beanie Babies sold for about flat. After the fad, as shown in panel (b) of Figure 3.16,
$6 at stores, their resale value on the secondary market when the consumer gains little extra utility by purchas-
was often $100 or more, especially for rare varieties. ing more Beanie Babies, indifference curves are much
People often waited in line to purchase new designs. steeper (i.e., the marginal rate of substitution of food
However, by 1999 the craze for Beanie Babies was for Beanie Babies has increased). Note that in panel
subsiding, and Ty announced the end of the product (b) the consumer still has some interest in Beanie
line by releasing a bear named “The End.” Ty later Babies; if he entirely stopped caring about them, the
brought back Beanie Babies, and in 2008 released a indifference curves would become vertical, with
new line called Beanie Babies 2.0, but the product higher indifference curves located farther to the right.
never again became the fad it had been in the 1990s.

R, number of Beanie Babies R 2 1 A B U = 50

4
U = 40
3
R
U = 30
2
1
F U = 20
1
F, units of food
(a)

FIGURE 3.16 Fads and Preferences U = 40
During the Beanie Baby fad, as shown in panel R, number of Beanie Babies R B 4
(a), the consumer can achieve much added sat- 2 U = 30
3
isfaction (moving from indifference curve U 1 to
U 4 ) by purchasing more Beanie Babies (moving R U = 20
from basket A to basket B). When the fad is 1 A 2
over, as shown in panel (b), the move from bas-
ket A to basket B generates much less addi- U = 10
1
tional satisfaction (the utility increases from U 1 F
to only U 2 ); the consumer now has less interest 1
in Beanie Babies. The indifference curves be- F, units of food
come steeper as his interest in Beanie Babies (b)
fades.