View Full Version : Economics 101 and the record companies
12-21-2001, 01:55 PM
I took Basic Economics the first year of college ages ago. I don't remember studying the principle that if you can't sell an item at a certain price, then people will automatically buy the same item at a higher price.
A year or two ago, you could get a decent CD for $12 or $13. Now that is the discounted price at some stores. What Economic principle applies here? Has the Law of Supply and Demand taken some kind of U-TURN that I don't know about?
12-21-2001, 02:44 PM
I think there's always going to be a demand for music though. Its one of those goods that is always in demand. We may no admit it but its kind of like gas. We may try to get by by driving less, but we still need to gas up in the end. I know I can go without listening to music for maybe a month at the most, but in the end, I still want to grab the latest song out there and listen to it until I grow tired of it. Now I think the "napster generation" has kind of changed things a bit. Heehee.
12-21-2001, 02:44 PM
inflation of the price of cd's and cars...
only cd's and cars raise prices like this
12-21-2001, 03:09 PM
basically, what Jihforce is proposing is that demand for music is relatively inelastic (that is, changes in price have less of an impact on demand than it would on a good with elastic demand). i would disagree. i categorize music purchases as a variable expense for people, which means that as price changes, so will their consumption.
also, with any product, as prices rise, people begin to look for alternatives. even in the case of gas, when prices spike dramatically, people begin to carpool more and try to find other ways to consume less gas (yes, they still consume some, but not as much). in the same way, even people who really want to hear the latest songs might only buy 2 new cds per month rather than 3 or 4.
what the record companies seem to ignore is that as they push up prices, they are driving people toward alternatives. and with the advent of the internet and music-sharing services such as Napster, it is even more convenient for people to avoid paying inflated cd prices. they don't have to go without new music; they can simply download it. and when cds are $17 or $18, it's worth it, even for people with slow connections.
my point here is that i think the record companies are seriously hurting themselves by going directly against economic principles while assuming that we'll continue to buy overpriced cds from inferior artists.
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