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by ben0x539
5095 days ago
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> Since the market price is higher, this guarantees shortages. I don't really understand this. There's obviously more people who want to see the event than there's room, so isn't that what guarantees the shortage? Raising the price just artificially moves the point where you say "welp, can't go" from not being able to find a ticket to not being able to afford one. It doesn't really improve availability? |
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There's a shortage of a good when the price is set lower than what the market is willing to pay. The economist's solution is to set the price higher (this may also encourage means of increasing supply, depending on price elasticity of supply).
There's an excess of a good when the price is set higher than what the market is willing to pay. The economist's solution is to set the price lower (which may also result in some producers exiting the market and/or reducing output).
There are problems in this theory where it intersects with social / political / physical production. Food, for example, is relatively price-inelastic: there's a certain amount of calories people require to survive on a daily basis, and all the price pressure you can apply isn't going to move mere calories by more than a relatively small amount up or down (people will either starve or become obese). Though you can manipulate food quality: meat (more resource-intensive than vegetarian diets), nutritional quality, freshness, organic vs. artificial / technologically intensive agricultural methods.