Will Bury’s Price Elasticity Scenario

Introduction

A brief mention of the Will Bury case is provided before the actual price elasticity scenario is discussed. As per the scenario of Will Bury, a factor of labor has to be taken into account when manufacturing a product and when the wages rise, the cost of the product would rise. Will Bury had to digitize 500 pages and he took one hour. If he hired a high school graduate, the cost would be 10 USD per hour but if outsourced the work to an overseas worker, then the cost would be 2 USD per hour. If Bury decides to use the high school grad, then the cost of the product would increase and lesser people would buy the product. The price elasticity of demand is used to measure the demand for products when the price for the same product is changed. It helps to understand how customers would react when the price is changed (Douglas, 2003).

Main body

As per McConnell (2004), the farmers producing a bumper crop could best be associated with the Will Bury scenario. The analogy though is not a perfect representation of the demand and price elasticity, an attempt would be made to link the two. As per the author, when a single farmer has raised a bumper crop, the supply and demand dynamics are not changed since the harvest of a single farmer is a very small percentage of the overall market. Consequently, with supply not changing, the demand would remain the same. With demand remaining the same, prices would not rise and it could be stated that the same amount of grain would be bought by the customers. Also, the farmer would get the same prices as before and whether he decides to give a bonus to the workers, is entirely up to him and not driven by the market.

Again McConnell (2004) points out that if all the farmers in the area had a bumper crop, then the economic and market dynamics would have changed. There would a glut in the grain harvest and this would create an imbalance as the supply would be much higher than the demand. With supply being greater than demand, then the prices would be reduced and the farmer would see a reduction in the revenue. This would force the farmer to probably reduce the wages of his workers. The above reasoning departs from the scenario of Will Bury as we see that wages are being reduced but the prices of the grains have also reduced. However, as per the argument of Will Bury, with a reduction in prices, consumption should increase, and when consumption increases demand would be more and the prices would again rise.

McConnell (2004) cautions about using such wrong logic when addressing problems in economics. According to the author, the market is affected by several variables and mere generalization would be improper. The author cautions about confusing correlation with causation. Correlation between two events or two sets of data would indicate only that they are associated in some systematic and dependable way. Causation is when an event is presumed to have occurred to another event. Though an event like the sun rising when the rooster crows is true, this does not mean that the sun is rising because of the rooster and that if the rooster failed to crow one day, the sun would not rise. Economics is based on careful analysis of data and identifying variables that can have an impact on an event.

References

Douglas McTaggart, Christopher Findlay, & Michael Parkin. 2003. Microeconomics (4th ed.) Addison Wesley.

McConnell−Brue, 2004. An introduction to economics and the economy. The McGraw Hill Companies.

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NerdyRoo. (2021, November 17). Will Bury’s Price Elasticity Scenario. Retrieved from https://nerdyroo.com/will-burys-price-elasticity-scenario/

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"Will Bury’s Price Elasticity Scenario." NerdyRoo, 17 Nov. 2021, nerdyroo.com/will-burys-price-elasticity-scenario/.

1. NerdyRoo. "Will Bury’s Price Elasticity Scenario." November 17, 2021. https://nerdyroo.com/will-burys-price-elasticity-scenario/.


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NerdyRoo. "Will Bury’s Price Elasticity Scenario." November 17, 2021. https://nerdyroo.com/will-burys-price-elasticity-scenario/.

References

NerdyRoo. 2021. "Will Bury’s Price Elasticity Scenario." November 17, 2021. https://nerdyroo.com/will-burys-price-elasticity-scenario/.

References

NerdyRoo. (2021) 'Will Bury’s Price Elasticity Scenario'. 17 November.

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