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Old 08-11-2018, 12:06 AM
 
1,461 posts, read 332,233 times
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Quote:
Originally Posted by galaxyhi View Post
I work in a hotel.

Illustrated, yet most still don't understand supply/demand when they pay the bill.

Average room rate is $125/night during weekday nites. Supply ( number of rooms available) is higher, demand is lower. Price is lower.

Average room rate friday and saturday nites: average $165.00/nite; demand is higher due to weekend travelers who stay Friday and Saturday nites, so supply is tight and lower, so price goes up.

Average room rate when an event is taking place and there isn't a room available in a 50 mile radius: average $275.00/nite. Supply :none, demand: extremely high, price goes way up.

Simple to see. (Should be) easy to understand.

People still grumble under their breath, or out loud when they cough up the money to pay the bill.

What gets complicated is:

They think it's greed, but when the hotel is completely booked, or now with so many third party options for booking that overbooking happens, supply is non-existent. So price is high. It actually could be higher.

Of course, they also figure it should be $25/nite average on week day nites when there are some empty rooms.
Enter then, into the mix, the basic cost to offer such rooms, as setting the price, even with vacancies. So on weekday nites it is really cost-driven pricing that sets a basic price, for cost plus appropriate profit margin.
Reenter demand. Because demand is higher than giving rooms away, price is stable at the $125/nite rate.

Enter also in, the business man or company that fill a a room or rooms every weeknite, guaranteeing a certain profitable price point at $85/nite for 4 nites per week, every week of the year, including the event weeks ( if such rates are allowed during events at the bargained rate.)

But that price point IS, however, accounted in the weeknite AVERAGE rate.

Supply and demand is simple, but often the waters are muddied by other factors affecting supply and demand...

Thats where people have misunderstandings of the basis of supply/demand.

Verizon found it worthwhile to build their own hotel in the city where their headquarters is located. Don't know what the ROI is but I'm sure it made sense to someone.

I try to avoid traveling for big events when I'd have to worry about lodging, parking being a cluster----, etc. Also don't care too much to vacation in NYC or SFO, so leaving those price points off the table, I like to see how good I can get for $199 a night. If you catch the W in Atlanta at the right time, you can get in for $149. Full menu room service and their breakfast service is quite good. They'll make that $50 right back, lol. Once saw the Ritz-Carlton go for $199 a night this past year, and $749 a few weeks later.

-----------------------------------------

I read in a previous post about the alternative to the free market being a lottery system. That's one possible outcome, but not the only one. No matter how many people line up outside an Apple store or any cell phone store on launch day for the new iPhone, the STORE price stays the same. It's first come, first served. I think that's a good system. It's only when the phones make it to eBay that prices go crazy. (Tickle Me Elmo, anyone?)

Some prices are set and merchants stick to them (iPhone, Xbox and PS4 on launch day are the same price at the register no matter how long the line gets, most grocery stores don't change their prices right before a storm is predicted to hit). The price is set by the supplier or manufacturer. Prices are discounted below MSRP when demand cools, but as a rule, retailers never list above MSRP.
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Old 08-11-2018, 08:35 AM
 
5,221 posts, read 2,378,942 times
Reputation: 5111
Quote:
Originally Posted by verybadgnome View Post
Sorry the price a buyer is willing to pay is the value of a home. You are confusing what you personally would pay for a particular home and assuming no one should pay more than that. You are inserting your own personal preferences and budget limitations into a decision that you are not a party to. The fact that I would not pay extra for a home on a corner lot does not mean others will not and there are hundreds of other examples I could bring up.

So, if you are only willing to pay $1,000 for a Beverly Hills mansion, does that become its value?
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Old 08-11-2018, 11:00 AM
 
Location: Holly Neighborhood, AUSTINtx
3,456 posts, read 5,091,915 times
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Quote:
Originally Posted by TaxPhd View Post
So, if you are only willing to pay $1,000 for a Beverly Hills mansion, does that become its value?
I would think the seller would take other offers that were much higher. Maybe I should have been more explicit in that the value is equivalent to what the market will provide and that most sellers want the highest price possible and also that the market is open to the point that sellers will have the most exposure, e.g. MLS, and buyers will compete with each other.

A house in a blighted neighborhood in Detroit may be on the MLS for six months and only have one offer of $1000, so that is where your analogy could work.

Last edited by verybadgnome; 08-11-2018 at 11:11 AM..
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Old 08-11-2018, 12:46 PM
 
Location: Ohio
18,014 posts, read 13,243,316 times
Reputation: 13822
Quote:
Originally Posted by ddm2k View Post
Strike 1: Red herring
Strike 2: Projection
Strike 3: Trolling

Case closed.

You didn't provide any evidence. Your lack of understanding is not a Red Herring. I actually have a BA in Economics (and a BA in Political Science), so I'm not projecting anything, except knowledge. And your definition of "trolling" is apparently one you've invented.


Supply & Demand is a straight-forward concept, and it is very real, which is why you no longer produce buggy-whips or 8-Track tapes.
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Old 08-11-2018, 02:01 PM
 
5,221 posts, read 2,378,942 times
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Quote:
Originally Posted by verybadgnome View Post
I would think the seller would take other offers that were much higher.
Yes they would, but that isnít the point.

You made the following claim:

Quote:
Originally Posted by verybadgnome View Post
Sorry the price a buyer is willing to pay is the value of a home.
The value is most certainly not determined by what a buyer is willing to pay. The value is the price at which the home actually sells. Big difference.
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Old 08-11-2018, 07:12 PM
 
Location: Holly Neighborhood, AUSTINtx
3,456 posts, read 5,091,915 times
Reputation: 2048
Quote:
Originally Posted by TaxPhd View Post
Yes they would, but that isn’t the point.

You made the following claim:



The value is most certainly not determined by what a buyer is willing to pay. The value is the price at which the home actually sells. Big difference.
For the sake of brevity I did not include "and follows through on the actual transaction thereby purchasing the house." Happy now?

And yes it is the point when we make the assumption (which is correct except for weird exceptions) that both buyers and sellers are rational actors. Buyers want higher transaction prices still owing to other considerations, e.g. time it takes to sell, and buyers want the lowest possible price, also with other considerations.

And now that I've looked up your other argumentative posts I feel no need to respond to you any longer.
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Old 08-11-2018, 08:52 PM
 
5,221 posts, read 2,378,942 times
Reputation: 5111
Quote:
Originally Posted by verybadgnome View Post
For the sake of brevity I did not include "and follows through on the actual transaction thereby purchasing the house." Happy now?

And yes it is the point when we make the assumption (which is correct except for weird exceptions) that both buyers and sellers are rational actors. Buyers want higher transaction prices still owing to other considerations, e.g. time it takes to sell, and buyers want the lowest possible price, also with other considerations.

And now that I've looked up your other argumentative posts I feel no need to respond to you any longer.
When you say something that is incorrect, and I correct you, donít get mad at me. The error is entirely yours.
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Old 08-12-2018, 10:24 AM
 
17,749 posts, read 15,029,293 times
Reputation: 6377
Quote:
Originally Posted by Mircea View Post
You didn't provide any evidence. Your lack of understanding is not a Red Herring. I actually have a BA in Economics (and a BA in Political Science), so I'm not projecting anything, except knowledge. And your definition of "trolling" is apparently one you've invented.


Supply & Demand is a straight-forward concept, and it is very real, which is why you no longer produce buggy-whips or 8-Track tapes.

Supply and demand is a very real main effect when one isolates its influence. Most people are not trained in research for multivariate analysis, hence the problem. its influences is abused in both directions.
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Old 08-12-2018, 08:43 PM
 
5,221 posts, read 2,378,942 times
Reputation: 5111
Quote:
Originally Posted by gwynedd1 View Post
Supply and demand is a very real main effect when one isolates its influence. Most people are not trained in research for multivariate analysis, hence the problem. its influences is abused in both directions.
Im curious about what you mean here. Care to elaborate?
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Old 08-13-2018, 01:24 AM
 
Location: Sandpoint, Idaho
2,880 posts, read 5,072,582 times
Reputation: 3020
Quote:
Originally Posted by ddm2k View Post
Knee jerk bandwagon behavior can supersede ivory tower logic. Curriculum economics, while likely correct in the classical sense, fails to account for impulsivity in consumers, FOMO, and other behaviors more likely found in the DSM than Econ books.
Do not understand the acronyms. Please clarify.

You are incorrect on "failing to account.."

A first undergrad course in economics starts with very basic concepts, applies to basic scenarios, and makes certain simplifying assumptions.

As one advances their study of economics, the concepts get more complex, more complex scenarios are introduced, and assumptions get relaxed. Interpretations and assumptions must then be revisited.

Economic analysis models human behavior via decisions, i.e. it is a decision science.

The models are abstractions and must stay that way.

They are refined through fairly sophisticated econometric analyses with the goal of having reasonable predictability out of sample.

Think of it this way.

Buy a $2 toy car in Walmart. It is the most basic of models.

Buy a $10 toy car and a few things get added. Perhaps a spinning axel. Maybe the appearance of front wheel drive.

Buy a $50 remote control car off of Amazon and the car can do a number of things that are steps toward realism.

...

Buy a high end $2000 R/C car from a hobby shop for enthusiasts, maybe one with a fuel system, four wheel drive, independent suspension, etc.

They are models. To the young auto engineer, those high end models are fantastic labs to experiment on stuff they will face when working on bigger cars. To the 2 year old infant, all three models are the same: they are cars.

Most people take Econ 1 to fill some requirement. If they take it in high school, JC, or as a non-major freshman, you are looking at toy cars in Walmart. They leave with the illusion that they know economics. While I won't denigrate their experience, I would just want to challenge them to take more advanced courses to push them out of the simplistic world of the $2 Walmart toy cars and toward the world of the R/C enthusiast.

BTW, law faces a similar thing. After all, as in economics, everyone claims they have expertise. For those folks, watch the classroom scenes in The Paper Chase (1973). An outstanding movie that gives a glimpse of the Socratic Method used at Harvard Law for first years. There, the Socratic Method is a direct challenge to get students to think through the subtleties of law rather than dwell with the Neanderthals and their $2 toy cars.

S.
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