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Most people know that Americans benefit from high taxes, powerful unions, limited consumer choice, and strong government control. But most people lack the training to fully understand why we derive benefits from these policies, and why government control over public anything results in unsurpassable quality. To remedy your "knowledge deficit" you can ask us any question you choose, and it will be explained by the legendary Professor Paul Krugman in a language that you can understand. From the evils of profiteering, corporatism, and economic exploitation to the rewards of regulation, social justice, and community/stakeholder involvement, Professor Krugman will use his agile mind to clarify the otherwise intimidating field of economics.

Economics Primer 2: Demand

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Demand refers to the relationship between price and quantities purchased. At low prices, we purchase more; at high prices, we purchase less.

Let's look at examples. In Canada, health insurance is free, so people demand lots of it -- and are therefore very healthy. In The United States, health insurance is very expensive, and so people demand very little medical care -- which is why our life expectancy is 38.

How about another example. When the New York Times raised the price for reading my columns from zero to $50 a year, how do you think that affected the size of my audience? Well, that's proprietary information that you're not allowed to know. But the truth is that my audience will increase because the product is now called "Times Select" and every common layperson knows that slogans convey value. In fact, the new slogan could probably fetch much more than $50, so in fact the value-to-price ratio increased, and so will my audience.

Demand is not without its problems, though. Most critically, low prices will sometimes stimulate too much demand, causing people to buy more than they should either have or deserve. For example, gas prices are too low, which has caused people to buy too much gas and drive too much.

So, how shall we determine the "proper" price of gas? Well, economic theory predicts that Europe is always correct -- and therefore taxes should increase the price of gas to put you in debt for a drive to the grocery store. In turn, these gas taxes can be used to subsidize other things, like corn farmers. Now, with a low price of corn, people will buy more corn. They might even buy products with corn syrup instead of refined sugar. Which means that sugar farmers need higher prices, which can be addressed by applying strict quotas on sugar imports. But the the corn farmers still need to contend with low prices, so we need to pay the farmers to not grow corn, which will raise corn prices that we initially lowered with the first set of subsidies -- and this might or might not bring us back to Square One.

Yes, demand can be a very difficult topic. For you. Not for me. The example above is a mere microcosm of how efficient an economy can be with the right experts making the big decisions.

Several new concepts have been introduced here: Debt, subsidies, tariffs, and microcosms. Do not worry if you are unable to comprehend these matters; I do not expect you to. Fortunately, you have me to think for you.


Fascist Leon
Dear Professor Kurgman,

I abase my unworthy self at the feet of your 13 PhD's. But I have a question.

During my college days a tentured professional economist told me that Demand is the word for what progressive students do when they march around the Student Union yelling slogans. Or were those demands? I can't remember.

Oh, I remember now. They were 'non-negociable demands'. What is the difference between demand and 'non-negociable demands'?

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Fascist Leon wrote:Dear Professor Kurgman,

I abase my unworthy self at the feet of your 13 PhD's. But I have a question.

During my college days a tentured professional economist told me that Demand is the word for what progressive students do when they march around the Student Union yelling slogans. Or were those demands? I can't remember.

Oh, I remember now. They were 'non-negociable demands'. What is the difference between demand and 'non-negociable demands'?

I'll field this one, Professor. You'll see I disagree with you, slightly.

Demand, my fascist Comrade (oxymoron), as in Supply and Demand, does not exist. These are merely burgeious term cooked up to hide the fact that big oil is gouging you at the pump. Any smart worker knows that gas prices are set arbitrarily high so as to enable the CEO to make his boat payment.

Demands, like those of your progressive comrades at University, are real, and yes, they are non-negotiable. Except the Demands for less government, should they ever come from University Students. That's how you end up under a tank in Tianamen Square.



 
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