[OT] bread prices and economics] [WAS] Re: Woohooo! Dell + Linux

[Celejar <celejar@gmail.com>]

On Fri, 30 Mar 2007 10:35:23 -0500
John Hasler <jhasler@debian.org> wrote:

> Celejar writes:
> > Doesn't basic economics dictate that given competition, the equilibrium
> > price is determined by both supply and demand? Even if I'm willing to pay
> > a great deal, if the cost to produce the item is low, competition should
> > drive down the price.
> 
> People who buy cheap white bread buy cheap white bread.  They just want
> something to stuff in the kids' mouths.  Price is almost all that matters.
> People who buy whole wheat bread are picky.  They want bread that they
> believe fits their notions about nutrition and are influenced by what their
> friends say and by the labeling and advertising.  Price is far from their
> sole criteria: some will deliberately avoid the cheapest brand because they
> believe that it must be inferior.  Some will buy the most expensive brand
> because "you get what you pay for" or just so they can brag.

Well, yes, much recent work on economics has apparently shown that the
old assumption of economists that people behave rationally has been
greatly exaggerated.

> > Are you implying that the market is a monopoly or oligarchy?
> 
> No.  The generic white bread market and the whole-wheat bread market are
> two different markets with different elasticities.  This results in
> different equilibrium prices even with identical costs (which they probably
> aren't).  This is basic economics.  Did you not study it at university?

The bottom line is that if the cost is the same or lower (the
assumption of the OP, because less processing is done), then given
perfect competition, the price should be, too. I'm not exactly sure
what you mean by elasticity in this context (I know a bit of economics,
but I didn't study it at university). Elasticity of demand, AFAIK,
means greater flexibility for the consumer to do without a product or
to substitute something else for it if the price increases. I don't see
how that explains a price differential not based on higher costs.

Celejar