Friday, August 04, 2006

2728 Demand and Minimum wage

". . . I’ve met no one who, upon finding that he cannot sell his house at his current asking price of $250,000, reasons that he will attract more potential buyers if he raises his asking price to $260,000. I’ve never heard of a supermarket that seeks to clear out excessively large inventories of canned peas or laundry detergent by raising the prices it charges for these items. I’ve never heard of a construction contractor who believes that the higher the price he asks to do a job the more likely he is to be awarded the contract for that job. I’ve never encountered a car salesman who, upon my rejecting the price he asks for a car that I just test drove, says “Okay, okay. I’ll talk to my manager and ask if he’ll accept an even higher price for this baby.” I don’t encounter advertisements by merchants bragging that their prices are the absolute highest in town -- guaranteed!

Do any of you, Dear Readers, know of such behaviors? More importantly, do you know people who are generally more likely to purchase something as its price rises? If you do, surely you are by now a person of enormous wealth.

What is it about unskilled- and low-skilled labor that makes many people fancy that the law of demand does not apply to it? Are the greedy, profit-lusting employers of this labor so foolish that they’ll just dish out more money for the same output as before, without economizing further on labor – say, by buying less of it or by extracting more work from each man-hour hired? Or are low-skilled workers so daft or dysfunctional that they consistently refuse to respond to pre-minimum-wage-hike differences in wages and work conditions?" Don Boudreaux


Cathy said...

I have heard of people trying to sell their house - it doesn't sell, so they raise the price to see if they will attract someone who WILL buy it.

Craziest thing I have ever heard, but hear that people buy into it!

Leanne said...

I do know quite a few people who practice this. The thought behind it is that if you price how you value yourself, and the perception is that if you're cheap, your work isn't as quality as someone a little (or a lot) more expensive. It's like this in the Art world, too. The more popular the artist, the more expensive his works.

Thank you for stopping by my Thirteen!