Last week any land along a strip
about seventy-miles wide from
Oregon to South Carolina suddenly
became extremely valuable. As
noted earlier, the exact time and
location of the total solar eclipse
can be predicted with extreme
accuracy many years in advance.
Economic predictions are usually
not very accurate, but in this
case the idea of supply and demand
explains what happened. A lot of
people wanted to be within the
track of totality, so any type of
land where people could camp or
park went up in price.
Often, a high price for a product
acts as a signal: produce more
of this product. When additional
production of the product is available,
that additional supply often tends
to moderate the initial price
increase. A crucial issue here
is timing. For example, farmers
have no way to increse the amount
they supply if it is currently harvest
time, but if the price stays high they
can plant more and therefore there will
be greater supply at the time of the next
harvest.
In other situations, there is no way to increase
the supply. That is the case with land
in the path of eclipse totality. However,
timing is crucial in economics. This week
the prices of camping and parking along
that cross-country seventy mile strip are
probably back to normal.
Whenever you see a price increase dramatically,
this is the question you should ask: is this
a situation where suppliers will now have
an incentive to produce more? Or is this
a situation where the supply is fixed?
……………..
–Douglas Downing
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……………..
douglasadowning 