Comment is Free Commenters.

Quite glorious. Bannedbycastro at CiF:

Can you name a product, that is made, whose price goes up as demand increases?

Errm, pretty much all of them I would have thought.

9 comments on “Comment is Free Commenters.

  1. Um,

    With the exception of processing capability? Demand is huge, and as a result the price goes down year on year?

    Communications bandwidth? Ditto

    Loads of other stuff. Cars? Audio equipment? Drugs? Food? Anything subject to technological development?

  2. Having spent most of my career in the semiconductor industry, I think I can safely say that increasing demand, other than in the very short term, has nearly always been accompanied by falling prices. Think computer memory.

    Of course, we can discuss all day whether falling prices increase demand or whether it’s the other way around.

  3. I dimly remember from my O Level Economics that supply of a product interacts with demand for it in some mysterious way to establish a price for a given quantity brought to market. I think Tim can explain this better. My head hurts.

  4. With the exception of processing capability? Demand is huge, and as a result the price goes down year on year?

    No. Price goes down year after year because of improvements in technology (Moore’s Law). The demand may incentivise the improvement, but it does not directly reduce the price. Think of commodities, ie things where technology cannot make steady improvements: does the price of oil go down as demand increases? Price goes up because in the short term oil is a scarce resource, so if more people want it, the producers can charge more for it. In the long term the high price may incentivise more expensive prospecting and extractive measures, so expanding production and easing price pressure. But short term the behaviour is clear: increase demand, increased price.

  5. Yes, I think it’s easy to confuse the causality with increased demand being associated with economies of scale and technological progress – certainly selling higher volumes of product can cut costs, but if you’re going to sell that product then it’s the lower prices that increase demand, not vice versa.

    As Stephen says, demand provides incentive for tech progress, but that’s true if demand is stable or falling; an increase in demand does not equate to an increase in tech progress.

    If demand for microprocessors were to suddenly double, prices would rise – and it’s an open question whether additional investment in the industry stimulated by that demand would cause prices to fall over the long term any further than they would have done without that increase in demand.

  6. Remember the massive hike in the price of RAM chips after the Kobe earthquake? Where they became valuable enough to be selectively stolen in ram-raid (pun apologies) attacks?

    That, admittedly, was static (ish) demand and falling supply (and a hell of a lot of panic, but that’s the ‘free market’ for you.)

  7. I’m pretty sure that from my experience delving into the bowels of CiF that BannedByCastro is usually one of the better commentators. It might be misprint.

  8. What about babies – and the cost of getting one goes up even though the population increases
    I’m sure they were a lot cheaper back in the good old days.

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