Thursday, February 6, 2014

Supply and Demand

Economists tell us that the economy follows the simple rules of supply and demand.  Namely, when demand increases, prices increase.  When demand decreases, prices decrease.

That sounds good on paper, but in real life, I don't see it happen that way.  Companies like to fix minimum prices, and no matter how much supply/demand changes, they don't decrease the price past a certain point.  Take Nintendo for an example.  They're still selling 2004's Super Mario 64 DS for $30.  I seriously doubt demand for that game is high enough to warrant such prices.

Let's not forget businesses which have regular price increases.  Gasoline, college admissions and ticket prices seem to go up by a steady rate every year, no matter what the changes in demand are.

Companies also like to increase prices, when demand goes down.  That happened when the economy died.  Every single place increased their prices, to make up for lost profits.  To use my made-up statistic, Taco Bell had a 40% decrease in customers, so they compensated by upping prices by 40%.

So, here's how supply and demand works, according to my observations:

When demand goes up, the price goes up.
When demand goes down, the price goes up.

2 comments:

Anonymous said...

It seems like with time, the price of everything goes up. Good observations, Michael.:) God Bless, Michael.:)

Justin said...

Michael! I have not posted for a while. I have gotten busier but you are most amazing. If Taco Bell gets fewer customers and they raise prices, they should get fewer prices. This means that Pizza Hut and KFC will both increase their prices to compensate for the companies losses from Taco Bell. This means that people will eat more tacos because they look nicer than overpriced pizzas. i think this is how the world works