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From: raphael@fx.com (Glen Raphael)
Newsgroups: misc.consumers,comp.org.eff.talk
Subject: Re: Advertising is bad
Keywords: DMA Suppression junk-mail recycling activism
Message-ID: <1991Feb6.214220.26996@fxgrp.fx.com>
Date: 6 Feb 91 21:42:20 GMT
References: <156215@felix.UUCP> <1991Feb1.054640.1441@cs.ucla.edu> <156606@felix.UUCP> <1991Feb5.192632.20536@murdoch.acc.Virginia.EDU> <1991Feb6.021812.14291@csrd.uiuc.edu>
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midkiff@sp66.csrd.uiuc.edu (Sam Midkiff) writes:
>spm2d@newton.acc.Virginia.EDU (Steven P. Miale) writes:

>>In article <156606@felix.UUCP> asylvain@felix.UUCP (Alvin "the Chipmunk" Sylvain) writes:
>... lots of stuff deleted ...
>>>
>>>(I say "if it's a good idea", because people are often surprised to find
>>>out that it's not always a good idea.  It frequently happens that reducing
>>>the price of an item also reduces demand.)

>>Reducing price reduces demand. Contrary to what EVERY SINGLE ECONOMICS
>>TEXTBOOK IN THE HISTORY OF MANKIND HAS SAID, you have just really stuck
>>your foot in your mouth. OK, if this is true, then raising prices increases
>>demand, eh? DUMB, DUMB, DUMB.

>Actually, for some "luxury" items, price decreases can lead to decreased
>demand, since part of the reason of owning the item is to show that you
>can afford such an expensive thing.   Also, some people with more money than
>time will buy the most expensive item under the assumption that it is the
>best, or at least good enough.  And finally, when the price of silver 
>skyrocketed some years ago, demand for silver bullion increased as people
>tried to get in on a "good thing."  When the price began to plummet, demand
>dropped accordingly - so much so that silver now only sells for about 10% of 
>its peak price.

There is also the phenomenon of "inferior goods". Suppose Susan would
like to buy steak but can only afford hamburger and therefore eats
hamburger 7 nights a week. If you lower the cost of hamburger, with the
money Susan saves on hamburger 6 nights a week she can afford to buy
steak or lobster on the seventh night. So by lowering the price of
hamburger you have lowered the demand for hamburger. 

Glen Raphael
raphael@fx.com