Matt and I have had a four year argument that I want to settle right now. Matt contends that a consumer is NOT constrained to the demand curve. My argument, which still might be ineffective, goes like this. Suppose that 10 billion shoe laces are sold at $1 in a perfectly competitive market. Now Matt goes to school in high-top basketball shoes and kids tease him. Matt desperately wants shoe strings so he goes to the Dollar Store and buys a pair of shoe strings for $50. Has Matt changed equilibrium? NO. Let's look at the margin.
There are now 10,000,000,001 transactions for a total market value of $10,000,000,050. If I divide total market value by transactions, the average amount paid for shoe laces is $1.000000005. Matt's transaction has not changed equilibrium. I conclude that Matt indeed was not constrained by the demand curve, but is irrational behavior didn't materially effect the market. Matt will go back to school and still be the object of teasing.
Haha...i should have known it would be about this subject. Finally you admit that I'm right! Irrationality may occur but irrationality is not the subject of the debate. I contend that if the consumer is motivated enough, he will never ever be constrained by demand. However, I think that our original argument was not whether the consumer was constrained but rather if the supplier was held back from charging the price he wants (specifically in a Monopoly). I would be interested to see a blog on that one...
ReplyDeleteI would like to open with matt probably was the object of teasing regardless of his shoes...haha just kidding paulsen. Anyway i stumbled upon this and acutally had some input. Though since i don't know the original argument, i have a question. Is it matt saying that regardless of what the demand curve says if a single consumer wants something enough it is futile? Or is it that if someone wants something bad enough it can altogether alter the demand curve? Because I don't see how the two correlate in comparison otherwise. Maybe i'm just a failure, haha.
ReplyDeleteJustin Honeyman
thanks guys...
ReplyDelete