Supply and Demand. We all learn about this tenet of the capitalist market at a rather early age. It’s a pretty simple concept really. When one increases the other decreases. As supply grows, demand diminishes. As does the price for that product. As demand grows, supply diminishes. And price goes up. It’s a function of our market. And, I think parts of it are broken.
As a frugal blogger, I’m constantly wracking my brain trying to find new ways to be more frugal, and new ways to present that information to you. Part of that includes keeping an eye on the market. And as such, I’ve come to the conclusion that the law of supply and demand has become more of a guideline than a law.
Take airfare for instance. According to this CNN Money article, airfare prices have been raised twice as many times this year as they were all of last year. And we’re only in March. What allows them to do that and get away with it? You keep paying for the tickets. Gas goes up, and we still fill up our SUVs. As long as you continue to pay the prices they are asking, the prices will continue to go up. And, recently, they’ve gone up anyways.
We all know that some of the things that we are buying are too expensive. I read several articles a day about how expensive somethings have gotten and ways to save money by making your own, or frugally using what you do buy. And, to some extent, that does work. For a select few. But, there are others who are willingly paying that price and then complain about it afterwards. Why? They’ve been conditioned to do that. When was the last time you heard of a boycott based on the price of a good, rather than something the company did to offend you? Do you think that if even half of the consumers boycotted flying for a month, that prices wouldn’t drop? They’d have to or they’d have to go out of business.
Why can I buy a ticket from Fargo, ND to Las Vegas, NV for less than $150, but it costs me 3x that much to fly to San Antonio? It’s not 3x as far. Why can I buy a bag of malt-o-meal cereal for $2 that tastes exactly the same as a name brand cereal but I can’t buy that name brand cereal for less than $3.50? The examples of this are plentiful.
We aren’t just consumers. We have brains and are capable (in most cases) of thinking with them. It’s time we used them to demand fair prices for products. We’ve forgotten that supply and demand goes both ways. We do have some small modicum of control here, but we’ve grown complacent and forgotten that we have it at all. Many of you are frugalers. But, we always say that we’re doing it to save money. And, that’s true, but maybe it’s time we also say that we’re doing it to protest the high prices that we’re being charged. Oddly, saving money isn’t always a good enough excuse for some people. Sometimes they need a moral soapbox to stand on. And, maybe that’s the way to take back supply and demand, and turn it into a working machine again rather than a pleasant theory in economics textbooks.
What say you? (So Say we All. If you’d watched BSG, you’d get that.)
I started this blog to share what I know and what I was learning about personal finance. Along the way I’ve met and found many blogging friends. Please feel free to connect with me on the Beating Broke accounts: Twitter and Facebook.
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Power to the consumer! I’m pretty sure they used to refer to this phenomenon (prices going up in spite of no apparent change in demand) “price fixing,” and I’m pretty sure it used to be illegal. I wonder what changed…
I agree with your point whole-heartedly: I’ve found the key to beating the price increases that seem so ubiquitous is to just stop buying stuff altogether, and I’d bet if everyone else joined me, high prices wouldn’t be such an issue any more. (Let’s organize a PF-blogger-run boycott of all things artificially price-inflated!)
By the way, this is my first visit to your blog and I’m already a fan. This entry is right up my alley. I’ll be back!
Follow-up comment: the fact that you’re a BSG fan only makes me like the entry more. So say we all.
I agree with you completely. The bottom line is that some people don’t want to change. They have certain products that they like, and they don’t want to change because they like the convenience, taste, etc. They would rather pay the price and complain later. Sometimes change is uncomfortable, and many people don’t like to do it until they have no other choice. Many people aren’t there yet with gas prices and other items that are going up.
Melissa, It reminds me a bit of my oldest boy. When he decides he doesn’t want what we’re having for dinner, he immediately claims that he doesn’t like it. Even if we haven’t ever had it before. I firmly believe that if people would try some of the alternatives, rather than going to that immediate claim that it’s inferior or doesn’t taste the same, that they’d find ways of saving themselves a lot of money. And helping to fix the pricing situation.
So Say we All, Justin.
Justin, I think the issue is that the size of the movement would need to be much larger than just a pf blogger movement. Take airfare for instance. Most of us don’t fly that often to begin with. In order for it to be effective, you’d have to have 50% of the flying population stop flying for at least a month (in my opinion). How do you organize that?
Regarding airline tickets, some tickets are more expensive because of supply and demand. Airlines must service some airports for a variety of reasons, but they are unprofitable for them even at these prices. The best prices are usually the most traveled locations.
B.B., if I were in all-out radical left-wing mode, I’d say:
as the top 0.1% continue hoarding wealth and restricting the access thereto for the middle and working class, they are seemingly working toward the goal of 50% of us not being able to afford flights any more…so in a way the people who do the price-fixing are the ones who will hopefully cause the entire fixed-price system to eventually implode upon itself.
…but I try to avoid all-out radical left-wing mode on PF blogs. People tend not to appreciate it too much.
Well I’d still say that the risng prices of airplane fares and as such are from supply and demand. We are demanding the product so prices are going up. As you say, people are flying no matter what. It’s tricky because we’ve made ourselves dependent on many things, such as airplanes and gas, so naturally we have to pay a heavy price for that dependency.
I completely agree with what you say about using our heads to think about what we are buying and realizing how our choices affect things. I don’t know if this sounds odd, but I’ve made a personal rule that I don’t buy anything that is advertised in a billboard, just because I don’t like billboards or how they’ve dominated the cities. So I figure that’s my small way of not supporting that.
Ken @ Spruce Up Your Finances says
Very true. Economics are always very interesting topics as it does affect our everyday life whether we like it or not. Supply and demand affect each other in so many ways, and the direction of the prices really depends on whether there is more supply than demand or vice versa.
Ash @ Sterling Effort says
Yeah, often the ‘demand’ part of supply & demand is what we need rather than what we want. If gas prices double, I still have to drive to work…Although, last time prices went up significantly, I started car sharing thus reducing my demand greatly. So maybe I’m just talking nonsense 🙂
I Fraking love Battlestar! 😀 I live in England and once I literally got on the next plane to California when I heard that Bear McCreary was doing a show with his orchestra the next day. Edward James Olmos was there too and actually had the crowd chanting “so say we all”. Best night of my life.