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

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Celejar wrote:
On Fri, 30 Mar 2007 10:35:23 -0500
John Hasler <jhasler@xxxxxxxxxx> 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


Since we're now off topic and discussing the price of bread, I will
point out that where I live, the cost of a loaf of whole-wheat bread is
the same as a loaf of white. Why is that so? Probably because they are
are equally popular.

Note however, there is one type of bread, which is about the third of
the price of a normal loaf. That is sold from the bottom shelf of the
bread area, and targeted at I believe the less fortunate. I have tried
that bread; it is not poor quality.

Thus, laws of economics fail in this instance because it costs the
factories roughly the same to produce the "cheap" bread and the "normal"
bread, yet the normal bread is 3 times the price.

I will admit however the "normal" bread tastes "normal" when thawed
after being frozen for a week, but the "cheap" bread does not take well
to freezing. Perhaps it is because the "cheap" bread has been
previously frozen and that is why it is cheap in the first place.

In any event, the economics of bread compared to the economics of
computers is a poor analogy.

Joe

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