Thursday, October 18, 2007

Economics and Pop Culture: The Music Man, #3

This one is a little less obvious, but I think you will see where I'm going. Professor Harold Hill's "Seventy-six Trombones" is his attempt to shift the demand curve.

In basic economics, there a number of important, basic ideas. The law of supply states that there is a direct relationship between the price of a good or service, and the quantity or amount of the good or service that will be offered. Essentially, the higher the price, the more producers will bring to the market. The lower the price, the less producers will bring to the market.

A important corollary is the law of demand. This states that there is an inverse (declining) relationship between the price of a good or service, and the quantity of that product that is demanded. Again, the essential point is that as price rises consumers demand less, and as price falls, consumers will demand more.

We also learn that the market price is the point where a supply curve intersects a demand curve. This price represents the point where the quantity demanded balances the quantity supplied. However, we also learn that both supply and demand can change. This means the curve must move to the right on the graph.

In the Music Man, the market is in River City, the supply is supposedly brought by Professor Hill. The demand is the town's desire to have a Boy's Band. (Please note this has a somewhat different meaning from "Boy Band" in current usage.)

From what has happened up to this point in the musical, one can presume that the demand for a band in River City, and for the equipment and frills that accompany the band, has been fairly low. But Professor Hill (the supplier), needs to change that in order to establish a market with a price to his liking. He goes about changing the demand (shifting the demand curve to the right) by painting a truly awe-inspiring picture of a parade, led by a band that would do any Division Icollege football program proud. In doing so, the resultant market price is higher than the original market price - which we get the impression may have been close to zero.

One could even make the case that he was not only creating greater demand; he was trying to change the elasticity of demand. Price elasticity refers to the amount of change in the quantity that is the result of a change in price. Generally, an item that sees a large fall in the quantity supplied or demanded with a small change in price is deemed to be elastic, and would be represented by a curve with a fairly shallow slope. (One might infer-although we have no real evidence-that demand for a band in River City has been relatively elastic until the moment of this song.) An item that sees no change or a relatively small change in the quantity supplied or demanded even when there is a large change in price is said to be inelastic. Items that have inelastic demand, have demand curves with steeper slopes. Items with inelastic demand are also generally things that we deem as necessities. (Gasoline in the United States is frequently used as an example of an item with inelastic demand.)

Hill not only manages to create demand where there was little or no demand before; he sets about convincing the good people of River City that a band is not only a good thing, but something they absolutely must have. He not only shifts the demand curve to the right, he manages to make it steeper.

Please share your thoughts.

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