Posts tagged with: demand

Reading through the German economist Walter Eucken’s work The Foundation of Economics (1951), I came across one of the most helpful charts for economic analysis I have yet to find. In it, Eucken gives every possible form of market in a single table:

Eucken Chart

The Foundation of Economics, p. 158

Eucken adds four qualifications that are important to keep in mind:

  1. “These forms of market are actual forms which have been or are to be found in actual economic life (often blended with one another, and existing alongside the forms of a centrally directed economy). They are not given a priori. They are discovered with their distinguishing characteristics by studying the planning data of those taking part in the market….”
  2. “Under each particular form of market a man can act according to different principles, for example, that of maximum net receipts or that of optimum output….”
  3. “Each of these forms of market can appear in four types: both open, both closed, or closed on either side only.”
  4. “Fixing of prices by the state occupies a special position, since it can follow any form of market and has different effects accordingly…. For example, the significance of coal prices being fixed by the state varies according to whether perfectly competitive, oligopolistic, or monopolistic supply, or some other form of market, exists, or whether both sides of the market are open, or whether the supply side is closed by an investment veto. Governmental price-fixing is to be treated as a variant of the different market forms and not as a special market form of its own.”

So, what does this amount to? (more…)

cherrypieShould we always take the side of the individual consumer?

That’s the question Rod Dreher asks in a recent post on “Amazon and the Cost of Consumerism.” It’s a good question, one that people have been asking for centuries. The best answer that has been provided—as is usually the case when it comes to economic questions—was provided by the nineteenth-century French journalist Frédéric Bastiat.

Bastiat argues, rather brilliantly, that,

consumption is the great end and purpose of political economy; that good and evil, morality and immorality, harmony and discord, everything finds its meaning in the consumer, for he represents mankind.

He summarizes his argument as follows:

There is a fundamental antagonism between the seller and the buyer.

The former wants the goods on the market to be scarce, in short supply, and expensive.

The latter wants them abundant, in plentiful supply, and cheap.

Our laws, which should at least be neutral, take the side of the seller against the buyer, of the producer against the consumer, of high prices against low prices, of scarcity against abundance.

They operate, if not intentionally, at least logically, on the assumption that a nation is rich when it is lacking in everything.

Bastiat uses this as the basis of his argument that the interests of the consumer, rather than the producer, align more closely with the interests of mankind (see addendum below for more on this reasoning). Producers want scarcity since it increases their profits. If they can’t produce scarcity in the market, they’ll seek out government protections that create artificial scarcity (which is why those who are pro-business are rarely pro-market).

Book publishers don’t like the fact that Amazon is reducing the scarcity of their product, because it lowers the cost. But what is the result from the consumer side? The lower prices allow consumers to consume more books than they otherwise would be able to afford.
(more…)

“Despite the mounting cost and swelling debt,” notes Laura Prejean in this week’s Acton Commentary, “America’s demand for education, particularly higher education, has not decreased, defying typical market expectations.”

This is what economists call inelastic demand, when people continue to buy a good or service regardless of an increase in prices. Though the post-recession job market is still difficult, growing student debt ought not to lead us to forget the dignity — and responsibility — of each individual student. When prices for goods and services rise, consumers often make sacrifices and adjust their spending. For example, as gas prices rise, families use carpooling or more efficient routes to and from the grocery store. But what are students sacrificing when they join the immovable market for education? Are they considering less costly options with lower tuition, or do they unthinkingly take out student loans, falling into serious debt as they enter their twenties?

The full text of the essay can be found here. Subscribe to the free, weekly Acton News & Commentary and other publications here.

Finding the right pastor or priest for a congregation can be a trying ordeal. It is stressful for the candidates, stressful for committees, stressful for elders and bishops (where applicable).

In some cases, qualified ministers have no church, and churches have no permanent minister. What accounts for the disconnect between what sort of candidates are vying for churches and the sort for which churches are actually looking? In economic terms, why is there seemingly a dissonance between supply (ministers) and demand (congregations)?

In order to get a better look at the problem, I have designed a brief survey (1-2 minutes, just 10 questions), asking the question, “What do you look for in a pastor/priest?”

If you are interested in discovering trends that might give a better picture of the source of the problem, please consider taking this survey and passing it on to friends and fellow church members.

I’ll keep the survey open for a month and post the results after that, as well as further follow up surveys if necessary.

You can access the survey here. Thank you!

Did you wake up one morning and think, “I wish I had a phone that would not only allow me to text and call, but play games, get directions, read books, allow me access to all social media and take pictures?” Not likely. You wanted an iPhoneteens_working because Apple put it on the market.

Jim Clifton, CEO at Gallup, says this is no small point. Our economy isn’t waiting for consumers to want to start purchasing things again; it’s waiting for entrepreneurs to create demand.

Growth doesn’t just happen, and it’s not necessarily driven by demand. Growth comes from innovation and from entrepreneurs who create demand. Just look at the iPhone. Apple’s Steve Jobs didn’t create it because there was an insatiable demand for this world-changing device. People didn’t even know what an iPhone was until Apple put it on the market, and now they can’t buy enough of them — and Apple has a nearly $500 billion market capitalization. (more…)

Blog author: jsunde
Wednesday, April 17, 2013
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sale-sign1J.C. Penney recently gave up on last year’s strategy to abandon sales and coupons in favor of “everyday low pricing.” As an article in the New York Times points out, “simplifying pricing, it turns out, is not that simple”:

“It may be a decent deal to buy that item for $5,” said Ms. Fobes, who runs Penny Pinchin’ Mom, a blog about couponing strategies. “But for someone like me, who’s always looking for a sale or a coupon — seeing that something is marked down 20 percent off, then being able to hand over the coupon to save, it just entices me,” she said. “It’s a rush.”

Devoted coupon users like Ms. Fobes may be more frugal than the typical consumer. But most shoppers, coupon collectors or not, want the thrill of getting a great deal, even if it’s an illusion.

The article goes on to indicate  that this type of illusion-seeking and the corresponding “rush” are sometimes due to certain levels of conditioning:

Even Walmart, which actually does pull off the trick of “everyday low prices” in its domestic stores, is finding it hard to convert consumers to a single-price model in countries like Brazil and China, where retailers give deep discounts on a few main products, then mark up the rest, said Mark Wiltamuth, an analyst at Morgan Stanley.

The problem, economists and marketing experts say, is that consumers are conditioned to wait for deals and sales, partly because they do not have a good sense of how much an item should be worth to them and need cues to figure that out.

Just having a generically fair or low price, as Penney did, said Alexander Chernev, a marketing professor at the Kellogg School of Management at Northwestern University, assumes that consumers have some context for how much items should cost. But they don’t.

Yet as AEI’s Mark Perry notes, from a producer and seller’s perspective, such schemes come in response to the ever-evolving and unpredictable demands of the consumer—in this case, particular shopping preferences. This is “not an enviable position to be in,” Perry writes, “to be at the mercy of fickle and unpredictable consumers.” (more…)

Blog author: jballor
Wednesday, December 13, 2006
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A debate about the future of energy policy is being held over at sp!ked, sponsored by Research Councils UK. From their notice:

THE FUTURE OF ENERGY
Expanding supply or managing demand?

In the opening articles, five commentators address the question from different viewpoints.

ADAM VAUGHAN, online editor, New Consumer magazine argues that saving energy is the way forward: ‘By taking a number of simple steps, consumers can save energy and money – and help save the planet.’

JOE KAPLINSKY, science writer, spiked, believes that we need to greatly expand energy supply: ‘The best thing that we could do for future generations is to build a new energy infrastructure, bigger and better than the old one.’

MALCOLM GRIMSTON, associate fellow at Chatham House, argues that we need to embrace nuclear power: ‘Nuclear energy remains the only proven large-scale option that can deliver major saving in greenhouse gas emissions.’

MARK JACCARD, professor of resource and environmental management at Simon Fraser University, Vancouver believes that fossil fuels, particularly coal, remain central to energy supply: ‘Zero-emission fossil fuels will remain cost competitive for at least a century.’

JIM SKEA, research director, UK Energy Research Centre argues that renewables are not a panacea to all our energy problems, but ‘A variety of renewable technologies may play an important part in energy generation in the future.’

spiked is keen to find out what readers think, and you can respond to the debate here.

I would also briefly mention that you can read a related article by me here, and that in general I think the options posed in the debates subtitle (reduction of use or expansion of supply) is similar to the options posed by the problem greenhouse gas emissions (reduction of emissions or increase of sequestration).

Most of the policy recommendations I’ve seen regarding CO2 emissions have focused on reduction of emissions rather than an increases in the rate and amount of carbon sequestration (in forests and so on). There’s a lot of work to be done on that latter point, especially if largescale reduction of emissions is untenable both politically and economically for the foreseeable future.