There is a reason we should care - at least a little bit. That reason is that the behaviors of our culture, other cultures, businesses and organizations can affect how much we pay for those super cute boots. Really. It also affects how much our homes are worth, if that hot tub adds value to our home and our ability to get those tdf jobs to pay for our tdf boots. Oh - and our hair color.
Supply & demand...
Suppose everyone wanted to be the same adorable shade of blonde as you, but only ONE colorist in the whole country could get the right shade. How easy do you think it would be for someone to get an appointment with that colorist? If you're like me, you guard the name and number of your hairdresser with your life! Why? Because if everyone goes there, it will be more difficult for you to get an appointment, right? See? You've used an economic principle right there. Supply and demand. If the supply is low - one colorist - and the demand is high - everyone wants your hair - then the price for that service will go up. The market (all those people wanting your hair color) will bear (pay) the higher price. This is great news for the colorist, because their resources (money) will increase. This is bad news for you - well, not you specifically because you already have the hair, but you know what I mean - because your ability to get an appointment for a touch-up will decrease.
There are also external factors that can cause differences in price. This high-demand colorist (oh yeah, he's THAT good), uses a specific brand of color. That brand of color just happens to be shipped in from just one location. Well, there's a tornado that hit that location and the delivery trucks can't get out. Yes. The guys in the cute brown shorts are stuck in their trucks with the hair color we need in the back. Short of being mobbed by women in desperate need of a root touch-up, what could happen here? The supply of color has just been dramatically decreased by something that no one could control and the demand has remained the same. The price will go up even more due to the scarcity of the commodity. (There is not enough hair color for everyone who wants it. )
Now, what if that hair color came from another country and that country decides to charge a higher tax on goods being exported (going out of the country to be sold or used in another country)? That's right! The price will go up. That's another external force.
Ok, let's go for one more. You decide to color your lovely golden locks a stunning auburn color. (It brings out your eyes and you really just needed a change.) Suddenly, no one wants to be blonde any longer. Everyone wants that exact shade of auburn that you're rocking. What is going to happen to the price of the blonde hair color and the rates that colorist is charging for the blonde do? They will decrease. Demand has decreased, supply has remained the same. The market (all those wannabe yous) will no longer bear the higher price for the blonde because the wannabes don't wanna be blonde any more.
Now, if the colorist is just as skilled in the red transformation (which, of course is true, because that colorist did your hair and you don't let just anyone mess with your color), the colorist can still charge a higher price for the auburn color service. This happens a lot. Think iPhones. The iPhone6 is now much less expensive than the iPhone8s, because consumers want the newest features.
Back to those tdf boots. (For the non-blondes: tdf means "to die for"). The boots for the newest season are priced at around $375 - some higher, some lower, depending on the style. The boots from last season are priced at 40% off. Why? Seriously? Are you going to wear last season's boots? Ok, so some people will (I admit that I am one of them) and scoop them up at the discounted price. (We will go back to this later when we discuss consumer behavior and allocation of resources.) This is how the supplier (and the stores that sell the boots) get rid of the boots that didn't sell (Shocking, I know. I mean, who wouldn't want the newest boots?) This allows the seller to still make some money on the boots, although it isn't as much. (Return on investment - we'll talk about that later, too). The demand for the new season boots is high. We want the newest boots and are willing to pay a higher price to have them. The seller knows this from the study of - gasp - economics and prices the boots based on this.
Let's throw in another factor that can affect price. The colorist hires an apprentice. This person is working under direct supervision of the amazing colorist, but is not that amazing colorist. This is a substitution. A similar product, but not the same, and that apprentice is less expensive than the colorist. Will demand shift or will this increase demand overall for the salon? A less expensive option that is very similar to the awesome colorist could attract a new market - or a group of people that wouldn't pay the awesome colorist's prices, but now that the apprentice is there with a lower price, will seek to copy your hair. This is a job for Super Marketing. We'll talk about that later as well. This will further drive up the demand for the hair color from the supplier of the chemical and could cause the price to increase more - or the supplier could take a different approach and make more to sell to the colorist at a discount. Economics studies this and makes predictions based on past behaviors.
