Quote:
|
Originally Posted by zulu_principle
Im with Kyle on this one.
It would be extremely difficult to find a correlation, at least statisticly significant with respect to the price of corals and the median income.
Sam:
What specific economic priciple are you referring to ? I looked back in the thread but cant find one that is suggested that Vancouver does not follow.
Wendell
|
Quote:
|
Originally Posted by samw
Rather, Economic Principles state that changes in income shifts the demand curve.
http://ecedweb.unomaha.edu/DEm_Sup/shifts.htm
Simply said, the more money you earn, the more you are willing to spend on the same item. With increased demand, the price of the item also increases. The diagram above shows the effects of the prices on a good as income increases. |
http://ecedweb.unomaha.edu/DEm_Sup/shifts.htm
"
In other words, at higher incomes for the buyers in this market, the whole demand curve would lie to the right of the original demand curve. This we call a "shift in demand" cause by an increase in the income level. It is shown in the next diagram. According to this diagram, what happens to the equilibruim price P and quantity Q when the income rises? Yep, more folks want the product so the price will go up! "
This type of demand curve applies to all non-giffin goods. Coral is a non-giffin good. Therefore, there is a correlation between price of corals and median income.
What I'm saying is that Vancouver, Toronto, etc all follow this principle. Prices might be higher in TO because the demand curve is higher (ie. higher median income. See the URL to see the effect of income on the demand curve.). There is nothing at all that is special or abnormal about Vancouver. The prices in Vancouver and Toronto and everywhere else are the way they are because of market conditions. Prices in Vancouver are not artificially low and prices in Toronto are not artificially high in my opinion. Income isn't the only factor but its something that definitely does make a difference, given all else equal (similar markets). Its just common sense that the more money someone has, the more they can afford to spend.
Wendell, in this thread there had been suggestions that geography and cut-throat pricing are the reasons that prices in Vancouver are low. That suggests Vancouver prices are below equilibrium. What I'm saying is that I don't believe that to be true. I believe that the prices in Vancouver ARE at equilibrium because I believe prices in Vancouver (like everywhere else) are set by the market (where the demand curve is a function of income and other variables), not by firms undercutting each other (below equilibrium).