Friday, March 10, 2006

Market forces

I've moved to a different part of town, and I've been noticing that coffee is 10% cheaper there. I'm trying to figure out why that is. I used to be on the fringes of the tourist district, in an area that was full of investment bankers. Now I'm closer to the shopping district, and I think the average person working there is probably paid a bit less.

So I'm trying to figure out whether it's demand or supply that's changed the price. I think it's probably demand - the investment bankers don't care how much they pay for they coffee so the demand is inelastic. But it could be supply - there are coffee shops everywhere in my new part of town, so there's usually more choice in the same block.

I know the fact that I can tell you the price of coffee in at least ten coffee shops within a block of each of my old and new offices is not something to be proud of. But at least it's got me thinking about economics.


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