January 22, 2014

Effect of Technology on Price

Example• Textbook prices 1990 vs 2014• Secondary market– Improved information in 2014 lower prices

• Buyback market– 1990 person selling the book was essentially a

price taker

Inflation

• Average price of college attendance ↑ by 8% per year regardless of inflation rate

Stagflation

• High inflation + high unemployment + (no economic growth or economic contraction)

• Implications for the purchase of non-necessary goods

Demand Pull

• Demand ↑↑↑• Supply is constant• Ex. baseball playoff tickets• Effect on price?

Elasticity

• How a change in one variable results in a change in another

• How responsive?• “If I lower the price of tickets, how many more

will I sell?”• “If replica jerseys are scarce, will people want

to buy them?”

Supply Shift – Elastic Demand

Supply Shift – Inelastic Demand