Voodoo Economics

Hi Everyone,

Way back when, while I was in college, I took 3 economic courses. During my freshman year, the first course that I took was economics 101. It was during that course that I learned about the fundamental concept of supply and demand. It is a relatively easy concept to understand.

Demand: refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price. The relationship between price and quantity demanded is known as the demand relationship.

Supply: represents how much the market can offer. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. The correlation between price and how much a good or service is supplied to the market is known as the supply relationship. Price therefore is a reflection of supply and demand.

So that is what I learned so long ago; about supply and demand and how this fundamental concept has been around for a very long time. Until now that is. Over the last decade, orange juice consumption has dropped a whopping 40%. So you would think that since demand has fallen and supplies increased, the price would drop. Not so fast. When was the last time OJ prices dropped? The prices have not fallen, but have actually risen. So what do you do in this day and age if demand is down and supplies are up? In this day and age, that means charging more for the product. Isn't it obvious that the higher prices of OJ is more about greed than about supply and demand. I am not surprised about this turning against a fundamental concept in order to make more money. Greed certainly rules here and common sense is again either tossed out the window or is totally ignored, which hurts us the consumer.

So today's supply and demand concept no longer means what it used to.

Til next week.

Peter