Welcome to the Summer Blog for AP Gov/Econ. Mrs. Pondy and I are very excited to get to know you this summer. Since I am this site's admistrator, all posts will look like they are coming from me. But, rest assured- Mrs. Pondy chooses the Econ topics and I choose the Gov topics.
Before we get started on this summer's blog, let's look at a couple suggestions on how to succeed at this assingment.
Guidelines for Blogging:
Responses should be in complete sentences, no text lingo/symbols. This is not an essay, but responses should be thought out and related to the posted topic. Please keep discussion respectful, put downs, harassment or out of line comments will not be tolerated. This is a chance to have stimulating, intelligent dialog with your classmates.
Requirements:
You will have TWO days to post your initial post
Respond to at least 2 other classmates post by Friday
Please make sure your screen name identifies you in some way (this is to insure you receive credit for you post)
Now, Let's Get Started:
WEEK ONE: You paid what??? TANSTAAFL
TANSTAAFL - There ain't no such thing as a free lunch! Economics is all about choices and one of the most basic choices is how we spend our hard earned money. Each consumer makes individual choices about what is best for them (Handy Dandy Guide) and behaves in a way that may not make sense to the next guy. Would you spend more than $100 on a ticket for a sporting event? I would. Would you spend the same amount on a ticket to see you favorite band? There is no way I would! That is the beauty of economics choices, we have the freedom to choose our own foolish purchases. :)
From IPhone, IPad, fancy game systems to gourmet coffee, name brand clothing and trendy shoes consumers are willing to shell out big bucks for items that cost a fraction of the retail price to produce. What drives these prices? Supply and Demand would be the first logical response and you would be correct. The influence of each of these market forces is not always equal, however.
For this week's topic I challenge you to consider one of the products mentioned, or introduce another equally applicable item. Based on a search of information about the product such as price, resources needed, and targeted market, determine if you believe that supply or demand of the product is a bigger factor in the going retail price of the product. Is it limited supply that drives prices up? Perhaps it is the cost of a valuable resources needed in producing the good or simply a paradox of value on the part of the consumer? Or possibly it is the massive number of people needing or wanting the item that pushes the prices to crazy levels.
We are starting with an easy one so have fun. There really are no wrong answers so dig deep and make us think!
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70 comments:
The iPad. The iPad 2 comes at the exact same retail price as its predecessor, the original iPad. As with every one of Apple's product, the prices are predetermined, and generally permanent. Supply is not a factor. The iPad 2 will continued to be in high supply with high demand. As demand decreases, the iPad 3 will come out, at the same price that every purchaser already agreed to pay, and the demand will be high again. Production prices for the iPad 2 are estimated to range from $229 to $346, the retail prices ranging from $499 to $829 [http://gear.ign.com/articles/106/1068348p1.html].The production cost of the iPad 3 will presumably be greater, but based on the pattern Apple has laid out, it will cost the same. So, as far as the iPad 2, and other Apple products, it's all about the demand. I definitely demand them, haha.
I agree with Dustin on the fact that newer, more updated versions of technology would be needed after time, but I disagree with his assertion that it would be because of a drop in demand. In my mind, it seems that it is a higher demand for better features that drives the creation of better, newer technology, especially in Apple products. It is, more or less, the high demand and desire for the same product idea that spurs new versions of technology, not the other way around. It is not the case all of the time, however. In some cases, it is the desire for a technological revolution that drives the level of demand. Because of Windows' inability to adequately provide secure service (as hackers tend to target them frequently) and ever-increasing slowness, people are turning to Macs and Apple computers, as they are more user friendly and have features that Windows cannot support. This is the main draw for Macintosh users. Thus, the demand for Apple products increases dramatically, where demand for Windows computers (in this particular example--laptops) decreases. Surprisingly, the prices are relativiely the same (http://www.pcworld.com/article/148032/mac_vs_windows_laptops.html). However, it seems if the demand for Windows products continues to decrease, they will have an overwhelming supply, which will drive their prices even lower.
Dustin makes a great point. The demand for newer, better technology is constantly presenting itself. I know many individuals that readily shelled out the money to buy the first one, as well as the iPad 2 shortly after. They are easily taken wherever desired and they have apps that everyone seems to be hooked on. As long as Apple continues to add new features here and there, they will have no problem continually selling different versions of the iPad at the same price.
RE Bill:
I definitely have to agree with you, and you do drive a very good point when you mention that Windows will be so overly supplied. I therefore wonder what will happen to purchasing of Windows computers as a whole when the prices drop dramatically. If a good portion of the people make the switch, would they still buy a cheap WIndows laptop to do Windows operations such as video games and whatnot, or will they buy the combination of Parallels Desktop and a copy of Windows 7 that's going to cost over $200? (http://www.parallels.com/products/desktop/
http://www.microsoftstore.com/store/msstore/list/categoryID.50726100?WT.mc_id=pointitsem_US_Google_5-Windows7_buy&wt.term=buy%20windows%207&wt.campaign=*5+-+Windows+7&wt.content=5HrJ0VFH&wt.source=google&wt.medium=cpc&WT.srch=10)
On the topic of new technology forming because of drop in demand, that's not exactly what I meant. I see it as more of something that just happens to fall into place. Knowing Apple, the research for the iPad 3 has long been underway, and they probably have an agenda that already has release dates on it, so long as everything goes according to plan.
Concert tickets. Tickets for entertainment, such as movies, sports and concerts, have always been expensive; but concerts ticket prices have been sharply rising high above the rest. There has always been a demand for concert tickets, the demand varying slightly depending on the size of the fanbase an artist has. However, one of the largest factors in the recent spike in prices is due to the fact that fans are gradually finding themselves purchasing CDs less, and illegally downloading the music online. In turn, the artists and the teams behind them must find another way to bring in the profit that was lost from lack of CD sales. Another reason is because of the increasingly elaborate stage sets being used that not only cost a large sum of money to create, but to haul with them on the tour as well as the crew to set it all up.
[http://www2.bupipedream.com/release/economics-of-the-concert-ticket-1.2223582] As long as suppliers do no overreach their boundaries, demand will always be there and prices can steadily be increased without much problem. People may complain about the rising prices, but there will always be someone willing to pay a little extra to see their favorite acts; I know I will. haha.
In the United States, we continue to pay $4 and up for a gourmet coffee beverage from Starbucks and other coffee specialty stores. Although this is slightly influenced by the slowly rising prices of green coffee beans (unroasted coffee beans), the high price is due to the unfaltering high demand. Even with the downturn in the economy, the demands for coffee have not decreased. (http://www.konacoffeeroasting.com/coffee-prices-rise-in-2011-due-to-increased-demand-reduced-coffee-supply/). People want their coffee the way they like it and will pay outrageous prices for it because of their addiction to caffeine. Going through just one day without coffee will give a coffee drinker an unbearable headache. Due to this addiction, they will pay anything to get what they want without thinking rationally (http://addiction-dirkh.blogspot.com/2008/05/coffee-addiction.html). This behavior demonstrates why gourmet coffee companies are confident they can continue to elevate prices for coffee even in times of economic turmoil. People place value on their gourmet coffee and see it as part of an essential in the routine of their day. Since people overvalue coffee and more people demand it each day due to addiction, the prices of gourmet coffee will remain high.
RE: Dustin
Thanks for clarifying what you meant. Your comment makes more sense to me in that respect.
With the overwhelming popularity of the Mac and other products, it wouldn't surprise me to see Apple buy out Windows sometime in the future.
Dustin: in regards to your question about people buying a cheap Windows computer to do certain activities, I don't think that will be the case. I own the most recent Mac available, and it contains programs that allow Windows to run on a Mac simultaneously (VM Ware). The software that creates a Windows component is cheaper by far than a Windows computer system, at least to my knowledge. I'll see if I can find some details...
Anyway, the point I'm trying to make is with such widespread availability of such programs like the aforementioned will completely cause a phase-out of Windows. Such a possibility probably wouldn't happen for a few years yet, but who knows? Business (and people in general) are unpredictable.
RE: Taylor
The price of concert tickets has always been high, just because it's an easy way for an artist to get money. There are select places that artists travel to in order to perform, and because those are almost always big cities, those of us in small towns, like Anthem, are willing to pay for the ticket and the gas to get there, just because a concert is a rare thing that individuals get to experience. Since music is a really large part of everyone's respective culture, those that rely on music to cope and other things have no problem paying for the travel fare and the ticket prices. And because those people do that, the ticket prices will stay high, because like you said, there are always people willing to pay a little extra to see their favorite acts.
The price of a tall Starbucks frappuccino is about $3.75 and continues to increase, sometimes faster than inflation. Like most other products, coffee prices depend on supply and demand. Unfortunate weather conditions can destroy a coffee harvest and the price of beans would soar. The supply is low, but the demand remains high and coffee beans become more expensive. Overproduction of coffee beans is not unusual either and would also affect the coffee market. Materials such as dairy, sugar, and cocoa are similarly affected. [www.awpagesociety.com/images/uploads/Starbucks-Case.pdf]
While supply and demand heavily affects the cost of raw materials, I believe that the high retail price of Starbucks frappuccinos is more directly attributed to the cost of resources.
More and more nowadays, consumers are willing to pay 100 over dollars for "high-quality, designer jeans." While jeans can still be found for around $30, denim brands such as True Religion, Miss Me, Citizens of Humanity, and Seven for All Mankind, are become increasingly popular and price around $145 to $220 (http://www.forbes.com/2005/11/29/most-expensive-jeans-cx_sy_1130feat_ls.html). Some designer labels have even raised their prices to range from $300 to even $4,000. These soaring prices may be attributed to embellishments and embroidery put on the jeans, but for the most part, rely on the demand for brand-name, "look-of-the-moment" styles regardless of the price. When it comes to most jean brands, i think that the price is driven mainly by demand and the need to be a part of the newest trends. From 2007 to 2008, sales of premium denim jeans were up 16% in women's jeans, and 21% in men's (http://lifestylemonitor.cottoninc.com/Supply-Chain-Insights/Price-is-Not-Premium-in-Jeans-06-09/). However, as the price increases to include the most expensive jeans on the market, cost becomes a larger factor as more decorations and embellishments are added (gold or diamond buttons, crystal studded pockets, etc).
Gas prices are probably the most recognized issue in relation to the law of supply and demand. Recently industrialized nations are beginning to consume incredible amounts of gasoline, skyrocketing the demand, while political conflicts and environmental concerns decrease the available supply. (http://www.usatoday.com/money/perfi/columnist/krantz/2006-05-09-gasoline-prices_x.htm)
Thus prices skyrocket as the consumer must pay for the privilege of being able to use such a necessary and precious resource. When demand goes down, prices lower accordingly - last year the people of Los Angeles boycotted gasoline in protest of high prices (lowering demand) and prices lowered accordingly. Thus the more American consumers and quickly industrializing nations use gasoline, the more pricey it will become. (http://www.ftc.gov/reports/gasprices05/050705gaspricesrpt.pdf).
RE Dustin and Bill:
While I agree with almost everything that's been said, I feel that a lot of the "updates" we see in the technology world isn't always due to demand, but the drive to innovate. Being a software developer, I can attest to this personally. The day I launched my first application I released 3 new revisions of if within 2 hours, before anyone had even downloaded it yet, just because I felt the drive to release new features.
The iPad is similar. The first iPad was no slouch, and I don't believe developers were openly calling for better hardware. But Apple engineers are always looking to make their products better than they need to be (look at the new Macbook Air). While dual-core CPUs in a mobile device were a distant dream coming out of Asian manufacturers (Source Link) Apple was piecing together their new A5 core.
Apple claims 9 times better graphics performance, and while I don't think that any applications currently can approach using that amount of power, it's a wonderful world we live in to know that can be available at our fingertips.
Since the topic of the iPad and Apple devices has been brought up here, and since this week is E3 week I felt it appropriate to discuss the shrinking demand of portable game systems and increasing demand of portable "everything" devices.
Since its inception, the iPhone and iPod Touch have been ebbing into the portable gaming market. Though, for a very long time, Sony and Nintendo have been competing in this market as the two major players with their Playstation Portable and Nintendo DS systems respectively (and of course, the GameBoy years ago). As of recently though, Apple has become Nintendo's competitor as the popularity of this "do everything" device. Analytics firm Flurry has tracked the change just between 2009 and 2010 as more consumers are choosing to carry a single device, either their iPhone or Android phone, to use for games in addition to whatever other features they may use (text messaging, Facebook, email, music, etc.) rather than carry two separate devices.
Sony has identified this new consumer trend and produced a new mobile device to meet this new demand:the Xperia Play, the first smartphone designed around games. Consumer demand for dedicated portable gaming devices is growing much smaller, and this new device along with the new improvements being made to the iPad and iPhone are evidence of this.
RE Ryan:
I agree that there is a significant drive to innovate and improve, but that drive stems from the demand to have better products, especially in the case of software. More and more computer companies are able to improve their technology to the point where they can save money and later pass off the savings to the buyers. The price incentive causes the demand to skyrocket. Problem is, the companies don't have enough parts to create an adequate supply. Baltimore is a prime example of this (http://articles.baltimoresun.com/1992-11-16/business/1992321020_1_computer-merrin-short-supplies) as is the rest of New England; however, I'm sure it would be really naive to suggest such dilemmas are confined to there.
Let's also look at this from a psychological perspective. Why does mankind gravitate to new and better things? It is, in my opinion, because we become so accustomed to luxury that we demand an alternative that is just as luxurious, but more so; this would prevent boredom. Thus, mankind is forced to come up with new ideas and products because we know no other path. Demand and innovation go hand in hand. Its relationship is bigger than anyone can imagine.
Out of vain curiousity, what application did you create, and what was its purpose? Just wondering...
In regards to new technological innovations, I completely agree with most of the arguments presented. I think, however, that perhaps we have overlooked the motive of profit. Apple has extremely popular products and for good reason - by this point they have built up such a good name that they could release an iPad3 that is pretty much exactly the same as the iPad2, charge double, and get away with it because consumers will pay for the new, snazzy brand name product. As per rules of market, people and companies alike make choices that are best for them, in this case financially so. Much of the price increase in these areas could well be due to opportunity - technology companies realize that they can charge more than a product is even close to worth and because of product hype, demand will not go down. If people are willing to pay more, companies will charge more and in our technological age I think this often contributes to increases in technology pricing.
RE Ashley/Taylor:
Ashley, concert tickets haven't always been high (Maybe in our generation they are); back in the 80's, you could by tickets to see some of the most popular bands in the world for less than 20 bucks. And these are decent, front section seats we're talking about here. I just bought tickets to see those same bands, Journey and Foreigner, and paid $32 a piece, and I'm sitting on the lawn! Front and center tickets were over $200!
Also, as it's previously been stated, the ticket prices are very much affected by a person's likeness towards that band. I have no problem paying over $100 to see my favorite band, Def Leppard.
Taylor (Robinson) is also right, I think, that bands must charge so much because of lack of CD Sales. To me, this isn't so great, because the true fans that pay to see bands live, actually buy their music. The people that don't like a band enough to support them by buying their music probably aren't gonna fork over the cash to see them live either.
Brand name clothes go at excessive prices all for the sake of having the brand name stamped across a simple shirt or pair of pants(for an extreme example: Juicy Couture)that is usually less than half the retail cost to produce. Beauty in the eye of the beholder.
In general, women pay more for their clothes than men, because women's fashion has constant revamping and attention, which creates a high demand for new clothes, despite the lack of need, from season to season. Popular styles are driven by pop culture, as well as economic situations. The revival of fashions such as strong shoulders and glittering clothing, and other bold trends, come from the escapist attitudes of consumers in the face of a poor economy; also effecting the frequency of shopping trips and level of purchasing (http://weconnectfashion.com/getarticle.fcn?&type=trends&SearchString=handbag&id=737870PW0000047&start=1&tr=10). Still the social pressure of consumerism, as well as the stress of the economic climate, paradoxily combine with escapism so that many consumers gravitate towards increased online purchasing because it is less of a hassle, with lower cost, which often leads to increased spending because of the feeling of higher savings, and direct purchase with a credit card.
Also, clothing is trending to higher costs, generic or brand name, from rising fiber costs, such as cotton, because of inflation and/or production shortages. Rising demand from tentative global economic improvements further the higher costs (http://www.msnbc.msn.com/id/41581060/ns/business-consumer_news/t/after-decade-falling-cost-clothes-rise/).
Demand has the greatest impact on clothing prices, despite the influence of global supply, because of the society's dependency on consumerism, both in the mind and in economic well-being.
Re:Dustin
Despite the effects of low CD sales and personal willingness to spend, I think ticket costs are also dependent upon inflation, like most everything else, because inflation effects almost all areas of production, transportation, and the like.
Ticket costs are dependent on prices of equipment, area rental, and merchandise production (all affected by the economy), and all the other costs of being a well-liked band, as well as the desire for profit.
Concert tickets may have only cost 20 bucks in the 80s, but the band market wasn't as concentrated on iTunes sales or extra merchandise either, but about music. Also, $20 got you a lot more then than it does now.
In terms of software, I really don't think that we will keep up paying for windows and macintosh; the current freeware is becoming quite advanced. For example, why spend about $100 on Microsoft office when you can get almost the same exact thing from Open Office for free? The same goes for operating systems; while you can get a version of windows seven or apple OS on any laptop you buy, Linux and Ubuntu are free and are constantly updated by a community of people committed to making the software better, rather than just innovating to get paid.
On another topic, developers manage to keep themselves mainstream and in the public eye, they charge a lot to be able to use their gadgets. When you buy a tablet computer or a smartphone, it usually comes with a 3g service that costs about $30 a month with a 2 year contract, this keeps you hooked to one company for quite some time. But, most of the time, people don't mind this. They get their internet and move on.
As far as devices go, advancing and innovating are up to the manufacturers, while the public can certainly choose the newer options; I really think that if there were more wireless companies, our mobile technologies would be far more advanced.
Re: Taylor, what will happen when another company can create a better iPad than Apple for less money? If a company like Samsung were to offer a like product with better specifications, for less money, Apple would be in quite a pickle.
Re: Bill, Apple buying out Windows is a huge step. Bigger than when AT&T was planning on buying out T-Mobile. But I really don't think that it would happen. This would cause Apple to have a monopoly; they need the competition to keep themselves theoretically "on top". If every computer sold in the future ran Mac OS, would Apple really keep innovating? And how much would the prices in computers spike up?
RE Janeen:
I don't think a monopoly would be created. In many instances (personal experience), I've seen cases where companies don't buy out all of a company. What remains often splinters off to form a whole new company (One could compare it to the church). Also, there are cases where a company enters somewhat of a "big brother" relationship when buying out a company. Often the one who is bought out retains it's title and "self-governance" on a very small level, and the new company in charge is a parent company. The Albertsons/SuperValue relationship is much like this. In 2005-2006, Albertsons (which owned many Jewel-Osco's out east) sold a huge chunk of their stores to SuperValue. SuperValue allowed Albertsons to continue to license their "title", but SuperValue controlled the operations out there. Albertsons has since scaled back to next to nothing; in fact, the Albertsons out here are actually owned by the Cerberus led group (they bought up over 600 some locations in the West). Imagine if SuperValue were the only food retailer in the country. In such a case, the fact that Albertsons still retains its title and certain controls circumnavigates the monopoly regulations; in the case of the Albertsons buyout, other companies like CVS and others had taken part. Also, there are more grocery chains out there.
Anyway, the point I am trying to make is that a buyout of Windows wouldn't necessarily create a monopoly. If Apple were intelligent and good at business, it would be in their best interest not to buy all of Windows, but most of it, following the lead of SuperValue. The fragments of Windows would probably be bought by other computer companies or would come together and create a "New" Windows.
I do agree with you, though, on your assertion that a monopoly would destroy a reason to innovate.
http://hspm.sph.sc.edu/Courses/Econ/Classes/antitrust/antitrust.html
http://en.wikipedia.org/wiki/Albertsons_(SuperValu)#Sale_to_SuperValu.2C_CVS.2C_Cerberus
http://www.ufcw.org/your_industry/retail/buyout.cfm
RE: Janeen
The thing about Apple products is that people "Make the switch". Once they make the switch to Apple, they don't go back. So even if Samsung creates a "better tablet", the iPad users most likely will not turn to it. The whole Apple experience becomes about more than just the software once you're into it.
I do believe you're right that Apple will most definitely not buy out Windows, but it's possible that Windows may become shoved aside as just a computer gaming console, or outcast as an operating system.... that is IF the populace makes the switch.
As it is the week of WWDC, Apple began unveiling their new operating systems, Lion for the Mac, and iOS5 for the iPhone/iPad/iPod Touch. Lion will contain over 250 new features [apple.com]. It costs an amazingly low price of $30 as compared to over $150 for Windows 7. The people that have Macs, and love them, I bet, would most definitely pay $30 before turning to Linux.
Re: Dustin, to me, Apple likes being on top. Maybe it's just a personal thought, but it seems that Apple likes having the competition of Microsoft. Having Apple products sends the public a message, would that same, successful, message exist if all that existed was Apple? And, who's to say that another company would not come up and create a better system than Apple, kicking it aside? It's not a far off thought, the Motorola Xoom is said to be as fast and getting faster than the iPad. With constantly improving operating systems from open source developers, people have managed to make a viewsonic g-tablet ($300) run as fast as an iPad. The sleek design of Apple products will always turn heads, but the company will need to keep up with the amount of competition it's got coming for it. This may even mean lowering its prices.
Re: Bill, that's not exactly what I meant. CVS still has Walgreens as a competitor; Albertsons still has Safeway, Fry's, and Basha's. What I meant was that Microsoft and Apple are two huge companies that practically run a lot of the technology world, and if Apple decides to take control of Microsoft's business, what would happen to the innovation of the company? And what will Apple do when another company becomes extremely competitive and boots them out?
RE: Dustin
Well of course ticket prices were lower then. Inflation was also a lot lower and the dollar was worth more. Like in the 1920's when a Model T was only $200. The price of everything has gone up, just because of supply and demand, and the fact that overproduction of the dollar has caused the inflation we see in today's prices.
RE Janeen:
By using the comparison of Albertsons, I was only trying to point out that being bought out wouldn't create a monopoly. There are plenty of computer companies, both big and small that wouldstill survive.
RE Ashley:
I'm not denying that inflation has had a huge affect (because it has), but the US Dollar has not inflated 1000 % in the last 30 years.
Diamonds. Diamonds are the symbol of marriage, and the major diamond merchants have ingrained the phrase "diamonds are forever" into our minds. Our tradition of using a wedding ring to represent the eternity of marriage keeps the demand for gemstones such as diamonds high. Anniversaries, Valentine's day, and Christmas provide consumers and lovers with many opportunities to drive up the demand for diamonds infinitely.
The supply for diamonds is an entirely different story. The true supply of diamonds is very large, but the monopoly of the diamond industry by the DeBeers company slowly injects diamonds into the economy to create an imaginary low supply (http://pages.stern.nyu.edu/~lcabral/teaching/debeers3.pdf). This document claims, among others, that "[diamonds] are not actually scarce and would fetch a price of $2 to $30 if put to industrial use."
Supply and demand apply in an interesting way when concerning the greatly "valuable" diamonds.
RE: Janeen & Bill
Bill is right, there is still a huge company that has gone so far unmentioned here, and that is Google. Google is one thing that can bring all of these devices together, and will hold strong. Everyone of these devices is becoming more compatible with one another. As another new unveiling at WWDC, iOS5/iCloud is going to allow the iPad to be used with never being plugged into a computer, and still being able to access all of the features. They are allowing their devices to be independent. As far as technology has come with the internet, hardware is becoming a little less important. Google and Apple have before them two different methods of personal synchronization across all mediums that they must provide. This new innovation is something that will take priority over some other aspects of the technology.
Nobody is gonna make the switch back either. Apple will always come through. Whether it's speed, or memory, or graphics (iPhone has highest res display on any phone), Apple will come through. This is what the iCloud has done. It's caught up to Google which was previously ahead in that area.
RE Dustin:
I don't have any new ideas to add to the board, but this is what we call the "Post PC Era", the devices which allow us to do all the PC tasks we wish (Facebook, internet browsing, email, etc.) without the PC.
Google actually originally had the features of iCloud first. Picasa syncs your photos across Android and your computer, and they now have their own music streaming service. Google Docs has been around for a few years now as well for document syncing.
Re:mitch
So the monopoly controls the supply to drive up the commercial value of diamonds, and exploits the emotions of the public to continue to push the prices up and keep demand high. So which do you think is more compelling, the imaginary low supply, or the encouraged high demand caused by diamond branding in society?
This is a very effective marketing strategy, but how do they maintain the monopoly? I am truly curious, because I thought monopolies are illegal, even internationally.
RE Diamonds:
I believe they maintain the monopoly by buying loose diamonds from the diamond farmers that they don't already have control of. It's an apparently bloody business.
Nobody beats Mitch! ;D
Iphones have been the most popular phone all over the world.(http://www.newgadget.org/technology/top-3-reasons-why-people-choose-iphone-over-other-phones/) Why do people choose the expensive iphone instead of other cheaper phones? Not only because it is a new trend but also the interesting applications that's found in iphones. When iphone first came out, people rather spend more money on an iphone instead of spending less money on other phones that have mostly the same programs as iphone.An iphone costs $200 with a 2years contract and $800 without a contract.(http://www.businessinsider.com/how-much-does-new-iphone-4-cost-2010-6)However, other phones such as Samsung,Sony Ericsson,Android,etc. are only $30-100 with a contract and $100-400 without a contract.(http://news.cnet.com/googles-android-phone-to-go-on-sale-in-september/)As you can see, when something becomes to a new trend, everyone would rather spend more money for it.I believe that when someone is planning to purchase something, they consider the newest trend item before considering the price of it.
Re: Taylor
I agreed that there has always been a demand for concert tickets. When the artist become more popular, the artist will have more fans. Also, there are a lot of programs that you can dowload free songs/music video. In order to bring in the profit, the only way is to bring up the prices of the concert tickets. Some people might not purchase because of the prices, but thats the only way for the artists to gain the profit. So, it is understandable that artists bring up the ticket prices up to an unbelievable price.
Re: Courtney
Yes,the high retail price of Starbucks frappuccinos is attributed to the cost of resources. But other than that, i believe it is also because of the brand, Starbucks. There are a lot of different coffee shops, but people still choose Starbucks even though the coffees and beverages are more expensive. Starbucks was found in 1971, because its a trustful,traditional coffee shop,people rather spend more money than going to another coffee shop that has the cheaper coffee or other beverages.
Re: Mitch
The emotional weight of the product as well as 'limited' supply also keeps the price of diamonds up.
The jewelers try so hard to make "diamonds" synonymous with "love" in order to win the emotional appeal of the public, which turns diamonds into items of luxury that are also billed as staples in any successful relationship. This injection of pathos also helps the monopolies get away with the inflated prices.
Re: sarahwyuen
You're absolutely right, prices for designer jeans are driven by demand. But the demand isn't necessarily for the product (a pair of jeans), as it is for the brand itself.
Designer jeans are a commodity that relies on successful marketing to reel in consumers with plenty of cash to burn. The jeans themselves cost a fraction of the retail price to manufacture, even with the companies touting the make and material of the jeans.
The argument companies wish us to adapt?
"They're Marc Jacobs jeans, of course they're worth it!"
It is worth to note that this line of thinking doesn't work very well during a recession. In 2009, the denim bubble actually burst and designer jean prices actually dropped. http://www.nytimes.com/2009/10/29/fashion/29JEANS.html
This is practically unheard of amongst designer brands, but it just goes to show that when demand drops, these companies have no choice but to drop their prices.
The consumer rules the marketplace.
Designer purses. Would you pay the price of a smart car for a purse? Companies like Gucci herald their material as being the best- but it's certainty not worth $14000. Demand by the affluent for the name brand keeps the prices up. Forbes.com states that "having a signature label in the back is as much a status symbol as the hood ornament on a Mercedes." http://www.forbes.com/2005/11/29/most-expensive-jeans-cx_sy_1130feat_ls.html People don't shell out the big bucks for the purse alone- luxury items are objects that exude the aura of wealth. Saying that "I own a Gucci Purse" is synonymous to "I'm rich enough to afford nice things."
It's a "status symbol", a job well done by the luxury brand marketing world.
Practical? No. You can't drive a Gucci purse, but you sure can drive a Nissan Cube, which costs the same as a Gucci tote bag.
Kevin Kichi (cant get name on post)
The shopping for diamond rings has always been a touchy subject. When it comes to popping the question to that special someone, it has always been a special occasion. Yet as a son of a gemologist, I find that if you place two rings of equal quality as well as grade that the ring that was purchased from a higher end jeweler carries a price tag that is three to four times the price of lower named jeweler. I find that most of the time the man (in this case) shows his affection through an engagement ring to his soon to be wife. Now imagine a man giving a ring from Bluenile.com (an online jewelry store at the lower end of the spectrum in brand names) and compare it to giving a ring of equal quality that was sold by Tiffany & Co. (the higher end brand name) Both rings I had seen carried a 1 ct. round cut diamond with a I color and a SI1 clarity, that diamond goes for around $4,000 alone. The value of gold to date (June 7, 2011) is $1540.70 an ounce, and on average a ring is made from around 1 ounce of gold. I can safely say that the raw cost of the ring is worth around $5,540.70 before manufacturing. What I had found in Tiffany was at the bare minimum for a ring was sitting at $9,200 while at the same time a ring from Blue Nile was priced at $4,516. (Assuming that the gold was 18K or $1155.53) In the end the man is paying more for the Brand name then he does for the actual product. But most find that the extra cash will convey their feels far better to those they love through such brand names. In this way companies such as Tiffany & Co. can gain a larger profit through a man’s need to express his love through material value.
One could suggest that there is in reality more of an emphasis on demand in accordance to the specific consumer. As the original post stated, people are willing to dish out varying sums of money for vastly different things. Would I pay 300 bucks for a pair of On-The-Glass Blackhawks tickets? Of course I would. What about any other team? Probably not.
While supply does dictate the amount of product on hand, when push comes to shove, what ultimately determines the affordibility or the appropriateness of a price is how much the particular item is in demand by the public. If its something they want, they'll gladly pay extra so they can call it theirs'. If its something they don't want, but need, they'll shop around for the best price because they have no preference. If it something they don't really want or need at all... then they just won't buy it.
Take Denny's Restaurant for instance. I myself was just hired on as waiter, mind you after job searching for several months, but have noticed a thing or two about the menu. For the purposes of this, I'll be talking eggs. Yes, eggs. We all know what they are, and we all know how much we love (or hate) them. An egg is a simple commodity, plopped out from a chicken and shipped across the country in crates. Why then, is an egg at Safeway so much cheaper than an egg at a restaurant such as Denny's? Demand.
The consumer prefers convenience, and will always pay extra for it. The consumer DEMANDS convenience. As demand goes up but supply decreases, the business is presented with the opportunity to capitalize. Denny's would never do this, mind you all, but a smart businessman would raise his prices so as to equalize out both sides of the spectrum.
Demand controls prices, quite simply, because you can't sell goods if no one wants them.
(Not entirely sure how to quote another's post... I'll just do it the old fashioned way I guess.)
Re: Bill
Not a bad assertion there. I agree with you wholeheartedly that a consumer's demand and/or desire for new products/features inevitably results in the creation of new services and/or goods.
As you so pointed out, Macintosh Corporation churns out newer and newer versions of pre-existing products because its customer base demands it. Then again, they'd also risk losing a sizeable amount of their market share should they lag behind technologically. Regardless of Microsoft's shoddy record, many consumers would sooner defect to that company if they released a new "Microsft IPAD" than stick around with Macintosh and wait whilst they developed an upgrade. Customers do what they want, and always look out for their own best interests.
Brand loyalty seems to be about as dead as the housing market.
The Trendy Shoe:
With the media as the greatest trend setter, the public strives to have the most fashionable clothes, accessories and shoes. For this summer the trendy shoe of choice is the flat sandal (noted by People Style Watch Magazine); a shoe that is “comfy but chic.”
The flat sandal is only a broad category; each shoe has a different style and color. In order for a shoe to be labeled a flat sandal it cannot have a heel and most of the foot must be revealed, besides these requirements flat sandals are quite diverse. Since there is an assortment of styles the shoes have a wide retail price range, they can range from $15-$100. This is because of the retail mark up that occurs after the manufacturer’s price and the wholesale price. On average the retail price is “2.4 times the wholesale price” and will increase depending on the demand of the shoe (http://forums.thefashionspot.com).
Due to the media’s fixation and the plethora of designs this shoe has become the ideal summer shoe. Since there is a large consumer want for these trendy shoes, I think demand drives the price. This is because the public sees advertisements, celebrities and magazines promoting these shoes, which creates a high want for them. As more people buy the shoe, the manufacturer realizes that they can increase the price because there is a large demand for it. When a new style comes in the public will move away from the flat shoe and spend their money on the new trendy sensation. The flat shoe will then decrease in price along with assortment of designs due to the low demands of the public.
http://shoes.about.com/od/womens_shoes/tp/flat_sandals.htm
http://www.hoovers.com/industry/footwear/1164-1.html
http://forums.thefashionspot.com/f90/cost-making-high-end-shoes-article-5072.html
Re: Laura
I agree with you on the subject of gasoline. Since there is a limited supply of gasoline in the world, as we use it up prices will countinue to rise until another form of energy is easily available. After a while boycotts will stop lowering prices though because the world will have simply used up most of its supply of oil.
Re: Mitch
I agree with you that the price of diamonds is heavily dictated by the emotional value attached to the stone. This was a very smart marketing strategy by the DeBeers company. My question to you is what would happen if DeBeers was to lose control of the diamond market. Would prices lower because of the loss of the monopoly and economic competition or would prices stay high because of the emotional value of a diamond?
RE Jenn:
You make a really great point. One of the major driving forces behind what the latest trends are is what those in the limelight are wearing. If someone of status or celebrity that a lot of people admire wears something, it is not uncommon for that to become the next big thing in fashion over night.
As you mentioned, I think that advertising is another major factor. If the producers of the product know exactly what demographic they are targeting, advertising strategies can be very effective in catching that population's attention and sales will take off.
RE: Taylor
I can understand the addictiveness that coffee has over its consumers that Taylor had pointed out within her post, but at the same time I see in my own life that coffee has more to it than just an addiction that drives the cost of coffee in the economy. My father among other people says that they rather the atmosphere then the taste of the coffee is what sell the drink. My father enjoys the taste of McDonald’s coffee to that of Starbucks, yet he goes back to Starbucks because he likes the feel of the atmosphere of Starbucks more than that of McDonalds. The presentation of the product as well as the service is what sells the coffee in stores such as Starbucks. In that end I see that the show before the actual product is what brings customers back for more.
Re: Taylor
In response to your question, would prices lower due to a loss of control of the monopoly, or stay high because of emotional demand? I think that because of the diamond's presence in our society, the price would stay high. Price is an important factor when speaking about the value of the ring. For example, when you hear about celebrities proposing, oftentimes the report goes something like this, " Tom Cruise proposed at the Eiffel Tower and presented Katie Holmes a Fred Leighton designed oval shaped diamond valued at about $275,000." [http://www.diamondsourceva.com/Education/CelebrityDiamonds/celebrity-diamonds-holmes-cruise.asp] Notice, the price was mentioned. I think that although it should be the thought that counts, the higher the price, like Kevin said, the more "affection" it seems has gone into the giving of the ring. Once again, it is all about demand. People will continue to buy diamonds at a high price, and so retailers will continue to sell at a high price, because they can.
RE: Taylor
I think it would be a difficult task to break the DeBeers monopoly, as it is suspected that they have vast supplies of diamonds that they are funneling in to the market very slowly. Unless an international force united to break the monopoly (which is unlikely; organizations seem to listen to money more than market fairness) I see the company perpetuating as long as the demand for the "stone of love" perpetuates. But in the hypothetical scenario that the monopoly is broken, prices would undoubtedly lower because of the broken monopoly. The vast amount of diamonds held in store by the DeBeers corporation would be released into the market, causing an excess that would drive prices down extensively. If you look at the link I previously referenced or did some independent research I'm sure you'd agree!
RE: Bill
In your first post on this page, you stated that "...the demand for Apple products increases dramatically, where demand for Windows computers (in this particular example--laptops) decreases." based upon the premise that Apple products "are more user friendly and have features that Windows cannot support."
On this fundamental claim (concerning solely computers, as I'm not quite sure which you are arguing for, as the comparison between "Apple products" and "Windows Computers" is not balanced), I would have to disagree. Yes, perhaps certain groups who are newer to computers in general would be attracted to the user-friendliness of Macintosh (again, solely comparing computers), but being someone who has grown up using Windows products, and who knows all the "do's and don'ts" of browsing the web, I have rarely in my 10+ years of computer use had issues with "secure service," and I have been able to fix the issues that have come up in less than an hour with fixes provided at Windows' website: http://windows.microsoft.com/en-US/windows/help
While you (and many students of our age group *ahem* DUSTIN) prefer Macintosh computers to Windows, I would like to see your source proving "Windows' inability to adequately provide secure service (as hackers tend to target them frequently) and ever-increasing slowness."
Enlighten me!
RE: Taylor (concerning your original post)
It would hard to disagree with your well-developed post! Even without delving into the economics of things, it is apparent to most everyone that the pirating of music has become a monster of an issue. It seems completely reasonable to assume that concert tickets are increasing in price solely because of this. When compounded on top of the increasingly elaborate performances (with stage lights etc.) it is only logical that the ticket prices increase! Thanks for sharing.
RE: Mitch
I totally agree that there will always be a high demand for diamonds, and therefore supply and demand will continue to be a major factor in their high retail price. And there IS a large supply of diamonds. I think more specifically it is the decreasing supply of QUALITY diamonds that drives their price up. The diamonds with perfect carat, clarity, color, and cut are in the highest demand. That is why the nice diamonds we look to purchase for important occasions are so expensive. p.s. I laughed when Dustin said nobody beats Mitch haha.
RE: Jenn
Effective advertising and our obsession with having the latest styles definitely creates a high demand for cute shoes! I think it is more than just the popularity of the style though. A pair of flat sandals can be anywhere from $5 to $50 or more. The more expensive shoes are the brand name shoes, and the brand name shoes usually are the quality shoes. The quality shoes probably spend more money on durable materials to produce their product. (For example, my $8 sandals broke last weekend at the lake! However my $20 sandals have been going strong since freshman year. True story.) The extra money spent on nicer materials would force companies to raise the price of their sandal. I think the cost of raw materials has just as much of an effect has supply and demand.
The blog rejected all my HTML citations, saying they included nvalid syntax. Should someone want to view them, leave your email address, and I will email the HTML's to you. Sorry for the inconvenience.
RE Mitch:
I will admit that my word choice was not the best (who's is at 7 AM?). I meant to compare the two different types of computers in my first post. As for my citation for my assertion you mentioned, I did list it further down in my post.
The topic of computers is a very subjective field. With that said, I was trying to look at the topic from an economic point of view in terms of what drives individuals to demand and later buy Macintosh computers among other Apple products. The reason for it is, yes, fundamental and somewhat dogmatic/biased, but it's what drives the individual to make such a purchase.
In terms of a more "secure service", there is a lot of evidence pointing in the favor of the Macs. Macintosh computers were designed with security as a first priority. For example, Macs do not have backward compatibility. Windows computers have this, so the system retains similar software, passwords, and other things from previous systems. This allows hackers to break into the computer's security easier than in the case of a Mac. System 7 for Macintosh resembled Windows, and after being attacked by many viruses, Apple changed the whole software from scratch.
The reason you never have issues, Mitch, is because you are very computer savvy. You do all the work needed to keep your computer up-to-date and secure, and you practice "safe surfing". This has nothing to do with your system. In the case of fixing problems early on, Apple has designed the Mac to prevent issues before they even become problems.
It's not just newer groups who would be interested in a Mac more than a Windows based computer, but also seasoned veterans in the computer world as well. I, too, have 11+ years experience with computers, both Mac and Windows. Sure, it took a couple of months to get used to the feel of a Mac from a Windows, but after a while, I didn't see any issues whatsoever. Anyway, Macs have many features that keep them on top. The Mac has the ability to automatically reset itself in case of failure using a feature called the "Time Machine". It resets the computer settings to what they were at a specified period of time. Also, the Mac has the ability to run Windows simultaneously with its alloted RAM. If you were still unsure with the Mac, using this virtual machine would allow you to have the same features of a Windows with a Mac's speed and security. Such products that can be purchased include VMware Fusion. There are other individual mainframes, too. I would suggest looking at Apple's website to see what other special features exist.
How's that for enlightenment?
Re: Kevin
I agree with you that the "show" Starbucks puts on daily makes people wanting to come back for more. The environment is peaceful and is everything is presented clearly and the stores are always organized. This is the same marketing strategy that most stores use. For instance, if you walk into Nordstrom, soft jazz will be playing in the background and the store seems clean and organized. It is this experience that makes people want to countinue shopping there. At Starbucks, it is the experience of the great customer service and packaging that makes people want to buy their coffee from there. I think a coffee drinker's addiction leads them to demand coffee, but they choose Starbucks or other gourmet coffee establishments because of the environment and past experiences.
Re: Mitch and Sarah
I think you two both present great points. The increased amount of diamonds in the market would lower overall prices, but the demand for diamonds of perfect cut, clarity, and color would still be high. After reading both of your posts, I think that the median price of diamonds would decrease but the price of the rare, perfect diamonds would remain high.
RE: Dustin Story
To start off diamonds aren’t cultivated, they are mined from varies locations worldwide (Russia, Australia, South Africa). The blood diamonds you referred to comes out of Siri Lion, a West African country which at best produces 2-3% of the world’s annual production of diamonds. Most diamond traders avoid trading knowingly with that source of diamonds because of the political conflicts in that country.
(citied from my Father, Major in Gemology as well as a trader of precious gems)
RE: Taylor
I agree that increase prices on concert tickets are the answer to many artist recuperating money that was lost though illegal downloads there by lower CD sells. Artist need to keep the money flowing because of such a large franchise surrounding there music. If there are true fans to the artist then yes they will be more than happy to pay a little extra to go see their favorite musicians live in concert. In the end the demand is what leads to the stealing of music as well as the chance for the artist to regain some of the money they have lost.
RE: both Taylors
Although coffee and concert ticket prices are, as you point out, indeed rising because Americans have raised the demand, I don't think it can be safely assumed that prices for these particular items will always remain high. Neither of these are necessities, but rather commodities. The continuing economic recession has caused many families to cut back on commodities and focus instead on the necessary products. There are, however, different categories of both coffee and tickets that will be affected differently by price crunches. For instance expensive, whole bean imported coffee is likely to not decrease in value as quickly as the traditionally cheaper coffee due to their respective markets - the people who have always bought the finer coffee are likely to continue to do so, as they still possess enough money to afford the commodities. The lower brand coffees, however, will likely decrease faster because their principle purchasers, lower income families, are forced to limit their budget. If the recession continues, the cost of these items will likely decrease proportionally to the ability of the public to pay for that extra shot of energy or that special night on the town.
Re: Jenn
You said that the price of the flat sandal is driven by demand, and that a higher demand allows the retailer to raise the price. I just wanted to point out that while that is the case, there are still cheap versions of this flat sandal; as you said they can be found for only $15. In this case, demand is still very high but for this particular sandal, the price is low. With this in mind, I think that the price is affected not by a demand for the shoe in general, but the brand making the shoe as well. So higher quality brands making the shoe can raise the price even further, while less reliable, lower-quality brands may still make the shoe, but cannot get away with having such a steep price.
RE: Sarah
Sarah that is a good point! Yes many different companies make the same style shoe and they all have different prices.I guess it just depends on whether a person want to pay a low price for low quality or a high price for high quality. Since it depends on the person making choices I think the main driving force is still demand by the public though.
RE: Laura
Yes, gas prices continually rise as there is an increase in demand. Our culture has become so dependent upon gas;it is a necessity in our lives.In order to get to work, to school and to run errands, we automatically get in the car and go. When gas prices rise there are only small things that people can do to cut back but overall gas is our dominent way of getting around in our lives. Until there is a mass produced and affordable replacement to gas that the general public can use, gas prices will continue to rise. This is because there is no big alternative to gas, therefore the demand remains high.
RE Kevin (diamonds):
I have no doubt that your information is correct. And I was using "farming" as more of a figure of speech as opposed to directly referring to them as a fruit or something. I do however believe that as a business that originates in Africa ( which is where most come from right?), the American buyer may be not fully aware of what exactly the history of the rock on their finger is.
RE Bill/Mitch computers:
I think Bill is right that your knowledge of computers, Mitch, has played a key role in your success. I unfortunately didn't enter the Mac world until my mother's computer got a virus, and now I own 2. You really can't deny that in numerous aspects, the Mac computer is just more simple. I know how to operate Windows and maintain a PC, but we all know that downloading drivers is just a pain in the butt. I still have two PCs and must still do that, but I enjoy not having to on my Macs.
Anybody that is actually good with a computer can operate both platforms. People like my mom that are good but not great (All of us here are from a generation that grew up on them), just flow so much better on a Mac. With the Mac, my mom could finally organize her photos with one program as opposed to half a dozen. I of course could do the same things without any programs on the PC. Also, aside from the less-skilled (no offense intended), Mac has it's place on the professional scene. Macs are the preferred operating system of graphic designers. There are always exceptions, but we, as graphic designers, like to do our work on Macs. From multitasking to appearance, they just work for us.
RE: Mitch, Bill, Dustin (The computer debate)
This response is working off a summary of all of your responses, I won't address specific points here.
The security of a computer is between the chair and the keyboard. Apple knows this far more than Microsoft does, ergo, a user's security on a Mac stems almost more from their peace of mind before anything else. Apple used this marketing strategy very well a few years ago in their PC vs Mac commercials (showing the business man and the casually dressed person resembling Windows and Mac). With the amount of experience I have on the Unix backend, I'll agree that the Mac is inherently more secure (and unsecure for almost the same reasons), though Windows 7 has taken the pages from the Unix book to help prevent users from doing stupid things.
The point I'm trying to get at here (related to Econ that is) is that the security of the product is no longer an issue, it's the user-base that has been "polluted" by the marketing strategies of Apple.
In more direct acknowledgement of Dustin:
He's very correct that Mac has its place in the professional scene. While I'm not a graphic designer, the organization of the file system is so much nicer to work with as a programmer (the user folder is always ~/, so much nicer!) and the stability of applications in the Unix environment is unparalleled (no pun intended). Then there is memory management, but that's an entirely different topic. Windows has its strengths here too, but ultimately is designed for a different workload, and I think in a totally unbiased decision, workload is what it should come down to, before security, support or advertising.
RE Ryan:
I agree with you wholeheartedly that peace of mind plays a huge role, as well as the reasons I have previously mentioned. Good thought!
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