Like Stefan, I too dropped out of economics 101.

My marketing professor gave numerous examples of how he, as an advertising guy had increased prices of quite a few items and that cause an increase in sales. His point was it was about perception.

Somewhere during the first week of my economics class I was shown a curve that proved my advertising professor was wrong… As price goes down demand goes up. I argued with the professor that curve wasn't reality. He showed me reality… The door

Years later Jack Kemp summed it up best one day when we were talking, during his campaign in the middle of Iowa, about economics and he said just substitute the word incentive for the word economics and you'll understand it a whole lot better.

I have learned the more people talk about economics the more confusing it becomes, yet, it is easier to understand than understanding women is for me.

anonymous writes: 

One of the simplifying assumptions often made in basic economics is perfect information. That of course differs from reality. The basic curve assumes such perfect knowledge and that the product is the same regardless of the price. But with some items, like cosmetics, the price itself becomes a proxy for the assumed quality of the product. So a price increase leads enough consumers to believe they are buying a higher quality product, increasing sales. In essence in those cases the assumed product across different price ranges is no longer the same product in the eyes of the consumer.





Speak your mind


Resources & Links