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> The equilibrium/fair cost of a latte doesn't go up because a few millionaires move into a neighborhood, it might go up because of a barista labor-shortage, a

> The equilibrium/fair cost of a latte doesn't go up because a few millionaires move into a neighborhood, it might go up because of a barista labor-shortage, a coffee bean-tariff, or other supply-side effect. In my economics class, I remember drawing a supply curve and a demand curve, and labeling the intersection “equilibrium.” If a millionaire moves into my neighborhood and buys so many lattes on a regular basis that the coffee shops keep running out, it’s a hint that the demand curve has shifted, which has caused the equilibrium price to change. Since “equilibrium” means “balance,” I can’t see you can find the equilibrium price by looking at only one of supply or demand. What is supply balanced with at equilibrium?

thereisnospork 8y ago
We are viewing the analogy differently: a millionaire doesn't drink meaningfully more coffee1 than a normal person (perhaps better coffee) but can pay more for it, paralleling the housing needs/wants of a ""tech bro"" and a teacher. To use your version, the problem is that the coffee shops aren't allowed to make more coffee. If they could they would continue to do so (because money), at the point where they make the most total profit (not margin!) which occurs with an increase in supply. Since they now have more demand, fixed costs drop to a lower percentage and your millionaire drives down the cost of lattes, not up. Or does your neighborhood millionaire drink so much as to disrupt the global coffee bean + brewing equipment supply market?
- maxlybbert 8y ago
  I was only replying to a comment that acknowledged supply changes could affect prices, but seemed to intentionally downplay changes in demand having any effect (which is why my hypothetical millionaire has to buy so many lattes that coffee shops were running out; having people with more disposable income doesn’t change demand until they spend that income). Sadly I am not a millionaire myself, and have no firsthand knowledge about how they spend their riches.

thereisnospork 8y ago

We are viewing the analogy differently: a millionaire doesn't drink meaningfully more coffee1 than a normal person (perhaps better coffee) but can pay more for it, paralleling the housing needs/wants of a ""tech bro"" and a teacher. To use your version, the problem is that the coffee shops aren't allowed to make more coffee. If they could they would continue to do so (because money), at the point where they make the most total profit (not margin!) which occurs with an increase in supply. Since they now have more demand, fixed costs drop to a lower percentage and your millionaire drives down the cost of lattes, not up. Or does your neighborhood millionaire drink so much as to disrupt the global coffee bean + brewing equipment supply market?

maxlybbert 8y ago
I was only replying to a comment that acknowledged supply changes could affect prices, but seemed to intentionally downplay changes in demand having any effect (which is why my hypothetical millionaire has to buy so many lattes that coffee shops were running out; having people with more disposable income doesn’t change demand until they spend that income). Sadly I am not a millionaire myself, and have no firsthand knowledge about how they spend their riches.