Government policies sometimes ignore the law of demand outright.
Consider minimum wages. When the government mandates a higher price for labor, employers reduce the quantity of labor they demand and search for substitutes. Employers might cut back on hiring. They might cut back on employees’ hours (and according to the law of supply, workers will be willing to supply more hours at the higher wage), or they might substitute capital for labor (such as self-checkouts at grocery stores). Other effects might be difficult to see, and the effect of a minimum wage may not show up in a higher unemployment rate. Firms that used to offer paid training may stop doing so. Firms that used to provide uniforms might start making employees pay for them. And so on. In response to a higher price, firms reduce the amount of labor they demand.
Governments also impose price controls on things like rental apartments. After natural disasters, nebulous laws against “price gouging” might go into effect that limit suppliers’ ability to raise prices during emergency conditions. In emergencies people want more ice, flashlights, batteries, plywood, bread, milk, and gasoline at any given price. If the price is allowed to increase, people will get the signal that they need to think twice about some of their purchases. In response to price controls, firms are not as willing to bring more ice, flashlights, batteries, and the rest to the market. People still pay higher prices for goods that are in short supply. They may not hand over much cash, but they will find themselves “paying” by standing in longer lines.
The law of demand is one of the most important ideas in the social sciences. It is a deceptively simple principle with a wide range of applications. It helps us understand markets for goods like tomatoes, services like plumbing and landscaping, and even things that aren’t straightforwardly “economic” like law enforcement and risk-taking. It is also a law that we ignore at our peril: By making policies that do not acknowledge the law of demand, politicians often enact political “cures,” like minimum-wage laws and price controls, that are worse than the problems they are intended to address.
sábado, novembro 10, 2012
Preços e temperaturas (3)
No seguimento de Preços e temperaturas (2), The Law of Demand: