Cattle Prices Rising

Cattle future prices were on the rise in late 2011 even with a decline in US beef consumption (demand). Why? Because US cattle supply was decreasing more than the decline in US beef demand.

Gas Prices and Car Buying

One of the early topics in Prin. of Microeconomics is about consumer behavior and specifically about how the prices of other goods affect consumer behavior. If prices of other goods do impact the demand for another good, then they are either a substitute or a complement. Here is a New York Times article that has both and fits with the theory of consumer behavior quite well.

First, let's note that gasoline and automobiles are complements - you need gasoline (ignoring diesel and electric) to power your car and thus are used together, which is a complement. As gas prices increase, the demand for gas powered cars decreases. Problem is that most people do not have great alternatives to a gas powered car in the short-run, so they are substituting smaller cars (using less gasoline) for larger cars, exactly what we see in the NY Times article linked above.

CEO Interview with Hertz's Mark Frissora

CNBC interview with Hertz CEO Mark Frissora. Topics include demand, pricing and obstacles to revenue growth.

Increased Demand for Elevators

The Financial Times reports that the demand for lifts (elevators) is increasing.

Peach Preferences?

The New York Times has an article on the rivalry between South Carolina and Georgia peach producers. South Carolina produces more peaches but Georgia producers say their peaches are better tasting. Here is a good example of the difference between producer and consumer preferences. While Georgia producers feel that their produce is better tasting than South Carolina peaches, economically it does not matter. What matters is how consumers view the two states produce. If they view them differently, economists call this product differentiation, if not then the two regions produce is homogeneous.

As stated in the article, “I honestly don’t think you can taste a difference”, which means in economic terms that from the consumers perspective that peaches are homogeneous or there is no preference for one over the other. If consumers cannot tell the difference in taste and do not respond to marketing differences by geographic region or branding, peach prices in each state will tend to converge toward each other as predicted by the competitive market model.

KFC & Japan

One of the most popular items sold in Japan at "Christmas" time is Kentucky Fried Chicken - I'm not making this up. Here is another example of how changes in preferences (KFC in Japan) can be modeled using a demand curve to analyze market behavior. Note that their is an increase in the popularity of fried chicken by Japanese consumers, and as such economists would model this as the demand curve (which represents consumer behavior in a very simplified manner) shifts to the right. As you will note in the article linked at the beginning of the blog, Japanese consumers are standing in line waiting for their chicken and this is exactly what a rightward shift of the demand curve is representing. In other words, if the price remains the same, then there is an increase in quantity demanded due to the change (in this case) in Japanese consumer preferences for chicken.

Consumer Behavior and Gas Prices

In economics, one of the fundamental concepts is consumer theory or consumer behavior. The basic idea is that as the price of a good (say gasoline) changes that the amount a typical consumer purchases changes in the opposite direction. This is what we refer to as the law of demand. Not only that but depending on the choices that consumers have in the marketplace, theory predicts that if there are acceptable substitutes, over time consumers will switch to lower priced goods.

Here is a great article from the New York Times that shows both of these effects. Consumers are driving less and also choosing other transportation options (public transportation).