We are told the value of an object relates to the law of supply and demand. If three people want an object and there are only two available, it should command a higher price than if there were only two people and three were available.
Giffen’s ParadoxBut now, say you have a new hand-held device. Sales are not the best, even though you offer a low, get-acquainted price. What do you do as a businessman to increase sales? You apply Giffen’s Paradox. You raise the price! You heard me right. Believe it or not, there’s a good chance the product will exhibit improved sales.
Science or Abnormal Psychology?Does such an event suggest economics obeys scientific principles? But, there’s more. Colleges and after-college technical publications are frequently exorbitantly expensive. One organic chemistry book on synthesis I located online was priced at $2,875.67. Now what book do you know is worth that much? What gives? It is the limited market for such a work.
Only a relatively small handful of patrons will purchase that book. In effect, it is a very limited demand. Instead of the price dropping, the price must rise, or the author will never write such a book and a publishing firm will not enthusiastically put it on the market. The price goes up with decreasing demand, not down. Surely Giffen’s Paradox and the other example of a limited market aptly demonstrate economics is by no means a science.
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