Monday, April 25, 2005

Sure as hell...

If you ever watched cowboy movies of the old west you're probably familiar with the poker scene of the good ole' boys sitting at the table with their guns at their waist. A bet "sure as hell" one of them often brags; saying in essence that their wager can't fail them. Now if you play poker yourself you know that there is no bet "sure as hell". Often what looks like a certain win turns into a upset in seconds.

Not so in economics; the free market has principles that are "sure as hell" every time. One is:
when the cost goes up people want less, and when the cost goes down people want more. That applies to everything from cigarettes, cars, food, and medicine. For instance, if I am a smoker I will get pleasure from smoking cigarettes to get through my work day. But even if the price of cigarettes stays the same, if I lose my job I will probably cut back on the cigarettes because to me the cost of cigarettes has gone up. Likewise if I get a higher paying job, I will probably buy cigarettes more often because to me the cost of cigarettes has gone down.