Thursday, April 8, 2010

Economics fail: NYT credits demand for driving price down

In an article on induction cooking, the New York Times brings us this priceless gem:
Induction cooking has been around for decades, but only recently has demand driven prices down and selection up. In the last two years, Viking, GE, Samsung and Kenmore have begun selling induction ranges.
Well then, it's of course supply that's driving the price down, not demand.  For a given level of supply, more demand will increase price.  For a given level of demand, more supply will decrease it.  I know I'm being petty, but come on NYT.


  1. This comment has been removed by the author.

  2. Hey come on, if there's a big increase in demand that drives up manufacturing volumes, then economies of scale kick in & prices _can_ go down. It sounds like the NYT folks just weren't clear on what they were saying.

  3. Hey Karen, you're definitely right, but the point is, it's only when the supply increases that the price can fall. They meant that increased interest had caused new players to get into the market, which meant more supply which meant lower prices. Unfortunately, they said the opposite! I know, I'm a nitpicker :)

  4. Ok, but "increased interest" (an exogenous shock to demand) is what led to the supply-side response, which is what led to the fall in prices. Saying "demand [drove] prices down" isn't a complete description of the implicit model, but I don't think it's horribly inaccurate or "the exact opposite."

    Can you think of a better description of this model that only uses a couple more words? Right now I can't.

    Furthermore, I'll apply your language critique to the sentence "division of labor is limited by the extent of the market" --- "Well of course it's not the demand for final goods that limits the division of labor. It's workers' supply of the various tasks of production. Come on Adam Smith!!!" :P ;)


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