Supply and Demand and Cement

[tongodeon]

My parents are building a house. Dad went looking for a cement guy to pour the foundation and walls, and on the recommendation of their contractor he talked to the best cement guy in town. Unfortunately, Cement Guy's bid was pretty high. Cement Guy told him that he'd love to give him a better price but business hasn't been good lately

Comments

[crisper]

One other factor, of course, is the danger of anecdotal data. This is your dad and one contractor. The law of supply and demand isn't the least bit interested in the anecdotal experience of two dudes; it wants to know what is happening with all house-building people and all cement-pouring contractors.

[tongodeon]

That's a good point. Technically it ought to go into the last paragraph, I guess. Dad's also confusing a general principle - "what is happening with all house-building people and all cement-pouring contractors" - and what this particular guy chooses to do with this particular house.

[jmason]

anecdotally: I've heard the same thing from a FOAF who's a plasterer here in Ireland; business is slow, so he put up his prices. I have no idea if it worked for him; I just thought it funny.

[mister_borogove]

Cement guy took the risk that Dad would take his business elsewhere. Did Dad talk to second best cement guy in town and try to get a lower bid?

[tongodeon]

He didn't. Dad is the kind of guy who, if he had gone to Second Best Cement Guy, would be haunted for the rest of his life about living in a house with a substandard foundation.

[crisper]

The laws of supply and demand are only as powerful as those everyday joes who enforce it!

[mister_borogove]

Well, I know very little about economics, but I'm pretty sure a simple supply/demand/price relationship only holds in a market where multiple providers offer the same product etc etc

Categorization, err, or...

[earthlien]

Where do statutory and natural laws link to:

1 - the law of unintended consequences

2 - the laws of chaos vs human expectations of cause/effect (probably the same as #1)

I tend to look at any laws (rules really; ok more of a guideline; well, perhaps a hopeful dream) that plug in to the global economy as ... "you may expect sympathy when expectations fail."

[steeltoe]

What are the words to describe the effects of supply and demand on premium goods? Your dad took the best guy in town because the best guy isn't desperate - he just knows how his business works, causing the second best guy to have to lower his prices even more to compensate. Could he also have paid a premium to know he's getting the best guys' best work? The cash acting as a filter, the premium goods don't have to deal with the things that take up time and don't make money - like quoting work he won't get or listening to a customer complain?

Maybe thats the reason he's the best - he's been around long enough to know what to do (and what not to do).

[mcfnord]

If all cement contractors have a fixed yearly overhead, fewer customers could drive up the cost, but labor costs should be down, and Cement Guy's business should scale reasonably with the market. (It's not like he's running a particle accelerator.) It's more likely that Cement Guy just found a guy who agreed to his price.

I had a sleazy agent who was trying to grab a big slice, so he told a client a line about how he charges "market rates" for my labor. I knew the "market rate" is made up of more than his one datapoint. If you just have one datapoint, you're not really studying a market. I imagine supply and demand remain intact.