Bad advice?
Many people in government, who have not worked in the private sector, do not understand the mechanics of economics. They have heard that ‘higher demand and lowered supplies’ creates ‘high prices,’ yet think it serves only the greed of the party selling.
In fact a that is a belief so common, that gas station owners are often accused of ‘gouging’ when world events, or regional disasters create short or long term deficiencies in supply of fuel. The term is used to demonize those business owners, and often that demonizing is accompanied by threats of suits brought about by attorney’s general or other government characters, who because of their ignorance do not understand the truth of the events.
That higher prices do us all a great service.
At least in those situations. And perhaps not the higher price itself, but the ability to check consumption by raising the threshold of desire to a point where it is the necessary that gets the product over the discretionary.
In my own business, It seems almost daily that the products I sell have a reduced value. I have equipment on the shelf that I am now moving or attempting to move at 50% of what I paid. Why? Because there is little demand for the equipment, and in reality the particular equipment that I am talking about is not needed by anyone anymore. What I am doing by lowering the prices to (seemingly) ridiculous levels is making incentive for folks to buy, even when they don’t need it.
“For THAT price, I’ll FIND a use!”
Bingo.
Strangely however, there is equipment that I sell where the price has had to go up. A perfect example is this $199 B&W 9″ CCTV monitor. Amazingly, two years ago it could have been found for $99. In fact, few people would have thought such a thing as a low tech 9″ CRT black and white TV monitor would demand as much coin as it does now. What makes it so valuable?
Perhaps the fact it is no longer made.
No longer made, with no substitute, and the fact that CRT monitors have a very limited production throughout the world at this point. LCD and other technology has overtaken the monitor markets, yet LCDs have a problem in some areas. Primarily the fact that intensely hot environments will destroy an LCD monitor in short order. CRT monitors can withstand heat far beyond that of an LCD. So some purchasers who need the CRT monitors for the extreme environments are scrambling to find them.
As are many other buyers who are simply replacing components. When faced with the higher cost of the same components they reassess their need to buy the ‘old part’ or simply upgrade if possible. They go away or buy something entirely different to suit their needs, leaving the parts to be available to the user who truly MUST HAVE them.
The higher price because of demand served its purpose.
And in services, it can so do as well.
Imagine the anxiety of a customer who has a pipe filling the basement of his or her home. What happens if this person cannot even find a plumber because all of them are busy changing out faucets. In fact it seems they are back to the same homes nearly daily because plumbing is so cheap. All the while, the flooding basement customer is on a waiting list.
OK.. Plumbers get it already. And they will make those emergency calls. They are in business, they understand demand, and many might even charge an emergency rate. They might actually charge a higher rate to drop everything and be available to the person who really needs their services.
THOSE GOUGERS!
Seems an odd thing to call a hero in my opinion.
And so we now must return to the gas pump. When the fuel runs out due to prices kept artificially lower because of government threats over gouging, what might your neighborhood ambulance run on? The Police cars in smaller communities with no separate fueling station? The fire trucks? What if you MUST make that drive to go see that dying relative but your tank is dry?
Will you simply fill it with the empty promise of a low price?
