#inelastic demand

50 Things That Made the Modern Economy: Prohibition https://t.co/RRzI5cU9lh pic.twitter.com/rSCU7obRVI

(via Learn prices and competitive advantage from a drug dealer : Planet Money : NPR)

Now that you understand supply and demand and markets, let's put that knowledge to the test. We go out on the streets of Los Angeles to learn about the crack cocaine trade from a man who learned economics the hard way: Freeway Ricky Ross.

Freeway Rick became the equivalent of a CEO in the drug business, mastering the art of pricing and competitive advantage. He did it all without learning to read or write.

After we hear Freeway Rick's story, we bring in our resident economists, Justin Wolfers and Betsey Stevenson from the University of Michigan, and they show us that the lessons from Freeway Rick apply to all businesses. First, find a product with no substitutes where you have control over the price. Second, keep out competitors. Freeway Rick used guns, but lawyers and lobbyists are just as effective at creating a barrier to entry.

Concepts:

Elastic demand

Inelastic demand

Drug legalization

Barriers to entry

Assignment:

Economics MCQs (English) 401 to 405 (Demand, Price Elasticity & Income Elasticity of Demand)

[HDquiz quiz = “544”]

My first visit was to the urgent care section of this facility on Saturday. I came out with a prescription for capsaicin (which did nothing but ruin what would otherwise have been perfectly therapeutic showers) and cyclobenzaprene. I had already been taking ibuprofen and was encouraged to continue to do so.

Saturday and Sunday passed, and I woke early Monday morning and could not stop screaming from the pain. Being in bed was agony. Standing was agony. In the time it took to walk to the bathroom, it became so intense that I thought I would pass out. My wife called 911 because I couldn't stop screaming. Walking was agony. Getting into the car was torture. Riding in the car was more torture, but I elected to do those things because we can't afford an ambulance ride on top of everything else we are accruing here.

I feel like each time I get here, I have yelled it all out. I don't know if that's shock or some psychosomatic miracle, but in the time it takes to be seen, the cycle of pain has hit a lull and I can't make anyone understand what I am going through.

We came to the emergency room early Monday morning (around 1 am) and waited as one does through all of the people one sees at the ER. I received a narcotic injection and held for what was supposed to be 20 minutes. We were alone in the exam room for 45 minutes and eventually discharged. By the time I reached the car, I was screaming in pain again and could barely get into the back seat. I had come to the ER lying in the back of the car with the seats down, due to the severe pain with sitting and the bending needed to get into a car like a human. The drug made me woozy, but only briefly did anything for my pain. 

For as much as I have had to recite the nature of the pain I am in and the way it occurs to one professional after another, I think that key elements have been missed. The pain in and around my hip joint and flowing down the side of my leg have not been acknowledged, let alone addressed. The severity of the pain was not clear to anyone here until the end of the third visit on Tuesday. We were told to come in when my wife called to follow up on the last visit and my screaming was audible over the phone from two rooms away. I got here and painfully limped to the front door and elevator. I refused a wheelchair twice because of the additional pain of sitting. I leaned over a bench by the elevator and waited for my wife to check in. I was discovered by some very kind staff who encouraged me to get a chair and I did so. But by that time again I was in a pain lull (maybe the nurses absorbed it into their own kindness) so again I was describing pain to yet another person, the PA who saw us. After seeing the nurse and the PA and getting an anti-inflammatory shot I was sent for x-rays "on my way out" with no further instruction.. Between getting the shot and going in for the x-rays, my pain returned full on and I screamed in pain the entire time pictures were taken, and everyone in the place now knew my pain was serious. I caused a scene and this amplified my anxiety, which is certainly factors into my pain and can actually trigger it. Several other staff came to my aid, insisting that more needed to be done for my obvious pain. My PA said that nothing else could be done, and I was wheeled out the door screaming, despite everyone's kindness. The shot did kick in and there was near total relief for about 12 hours. It was supposed to be effective for three days. I still woke up in the middle of the night with severe pain and have continued this way since then. Following the PA's recommendation not to use an additional NSAID for 72 hours means I am left with little to no relief for now.

 I need to underscore that overall, I have been treated with care and kindness here. I just don't feel that I have been heard, due to an inability to advocate for myself stemming from anxiety, politeness, and the exhaustion that comes with an ongoing trauma that prevents me and my wife from getting any rest.

So, to make it as clear as I can:

There is an entire set of pains running down the side of my right leg, with an epicenter at the hip joint. Most of what I am saying here was written overnight when sleep was impossible due to this pain. I didn't yell out as I do every time I start walking, but it was enough to keep me awake, moaning, trembling and hyperventilating in fits. The outside of the lower leg and foot become alternately tingly and slightly numb. These symptoms have not been acknowledged and the NSAID shot, while improving the back pain generally, has made no difference in these other areas. The ice and heat that have helped with the other pains are also ineffective. I have been seen for IT band pain previously, and this feels like an amplified version of that. Perhaps it's possible that there are two problems at work. Perhaps the disc damage is not the only thing happening here.

There is a spectrum of physiological and psychological pain going on in me and each feeds the other. I have panic attacks regularly, and though I don't currently use medication to mitigate them, I could use some help with the particular incidents in this situation that both are triggered by and triggers of the physical pain I am experiencing.

On Wednesday gas was at 157.9 (that’s $1.58/liter, in Canada gas prices are weird). On Friday it was 139.9 ($1.40/liter). Now we had been warned by the media that significant price increases were expected this summer driving season – I had no idea summer started in late March!

The media is an either unwitting or willing accomplice to the psychological game around gas prices. With prices rarely varying much between companies they are the classic example of tacit collusion in Economics. The gas companies might not be coordinating their prices (although I suspect they are) but if one gas station grabs a pair of binoculars and looks at the price of gas down the street and adjusts their price accordingly, is that tacit collusion or are they reacting to market forces? A debate for another time.

The media would have us believe that gas prices are tied to international conflict, supply chain problems, changes in taxation, and refinery problems or upgrades but to anyone who watches carefully this relationship is tenuous at best. It’s hardly one-to-one. For example, when a global conflict ends do we see prices come down? It seems prices go up for a grab-bag of reasons, but they only come down when people drive less. When the price of crude goes up so do gas prices but when the price of crude goes down gas prices stay the same.

I call shenanigans and I’m not the only one. Prices that never vary from company to company and fluctuate without consistent logic makes us all understandably suspicious. Plus, gas is a product with what economists call “inelastic demand” which means demand doesn’t respond strongly to price. When prices go up or down people drive about the same amount. Products with inelastic demand also have a tendency toward monopolistic practices. A monopoly is when there is only one supplier in the marketplace and no competition. Well we have multiple suppliers, but I don’t see much competition between them, do you? Remember the last gas price war? Me neither.

If you want another example of a product with inelastic demand leading to illegal monopolistic practices look no further than the price fixing of bread in Canada that ended up in court and every Canadian getting a $25 gift card for groceries. Good luck having that outcome with gas companies.

So, when I see a price increase of 13% in 5 days I ask myself why people put up with it. What other product in the world would you accept an increase like that? Habitually! If Netflix behaved this way we’d have a digital entertainment revolution. Cable companies do this just annually and look at how they’ve been punished for it.

If this is just the beginning of the price increase, if there’s more to come which there probably is, at what point is there a run on Teslas? At what point will people get sick of this rollercoaster ride?

Think about the impact on road trips. I’ve got an epic trip coming up this summer but how could I possibly budget for the fuel costs when it fluctuates this much? Could you imagine booking an all-inclusive vacation only to show up to the airport and have them demand an extra 13% before they let you on the plane?

It’s amazing our economy has tolerated this for as long as it has. Capitalism prefers predictably. At the macro level economies that fluctuate 13% in less than a week are normally in chaos and governmental and potentially societal collapse is often not far behind. I don’t want to overstate it but I’m curious how we’ll react. I say watch the Tesla sales and inventories if this will finally wake people up to a more predictable future.