(Picture courtesy of Nikos T.)
First and foremost, a little background information: I’ve been in Graphic Design classes for the entirety of my college career up until now. Having already gained, in my personal opinion, the experiences needed to not only thrive in the design community but to come out on top I felt as though a business degree would help round out my skills. Nothing better than a designer that knows his way around some numbers and business activities huh?
Well one of the first classes I sat down in since changing my course of study was Micro Economics. Couldn’t have asked for a better professor as everything we’re studying is related to various real world applications. We started out by getting three basic facts hammered into our brains:
1. To ask questions and get answers
2. Economics deals with incentives
3. You must learn to make your choices under constraints
Quickly changing pace and taking a real world angle the professor then gave us the example of how certain politicians are planning to lower the cost of gasoline at the pump. Without passing judgment he created a possibility curve to show why this is completely impossible.
Now hang in there, because this is all leading up to my final point. We show that, through the model above, the two variables of Price and Quantity are explicitly stated. Everything else such as wages, interest, taxes, and many other things are implicit and fixed so as to not affect the curve.
As you can see, there is NO WAY that the price of gasoline can drop without the quantity of gasoline becoming larger. And you and I both know full well that we have already reached peak oil. There will never be a larger quantity to pull from. What does this mean? Well, we can look at the curve to find out. As the quantity is lowered the price can only go up, not down.
Now I didn’t mention this previously, but I purposefully left out the 4th basic fact that we had hammered into our brains at the beginning of class: “Think for yourself.” We can quickly see that this curve of Price vs. Quantity does not account for the human element in any way. It’s simply a way of expressing data. What if we broke the data? What if we didn’t play into what the curve had already figured out?
The reason the gas prices will never return to what they were, or even lowered more than a miniscule amount, is because every time the price is lowered we immediately run to the pump to gas-up. We all figure it’s a good idea to take advantage of the cheap gas since it won’t be that way for very long. This in tern then uses more of the gas, lowering the quantity and raising the price once again.
So next time the price of gas drops make sure to think for yourself. We are living on a planet with finite resources. The less we consume of a certain good, the less it will cost, and in this case may even help save us from ourselves. Apply this technique to various other situations, in particular art & design, and you’ll make for a better person.
Subscribe to my blog to get email updates when a new post is out as well as using the buttons below to share AND comment on this post to let me know what YOU think!