Tuesday, May 12, 2009

Price Expectations and Gun Ammunition

One of the topics we look at in Principles of Microeconomics is the factors or variables that shift demand curves, and one of those variables is changes in consumer price expectations. Recently there has been a shift in the demand curve for ammunition (looks mainly for handguns) since many think the Obama administration will either place a tax on gun ammunition or place gun restrictions on guns. Hence there is an increase in the demand for gun ammunition given the current price (i.e. the demand curve for ammunition has shifted to the right) which is consistent with the concepts presented in Prin. of Micro for changes in consumer price expectations. Consumers believe that prices are going to rise, so they more purchase today, which shifts the demand curve to the right. Gun ammunition manufacturers are having a hard time keeping up with consumer demand, which gives them an incentive to - well raise prices on gun ammunition. Hence, we have a self-fulfilling prophecy.

1 comment:

Joshua said...

If you raise the price on gun amunition,you will have people turning thier hobbie from hunting to something like knitting.I think that if you raise the price on ammo then,depending on how much you raise it you could gain at the of just 50-500 consumers in one area.