Pur Autre Vie

I'm not wrong, I'm just an asshole

Tuesday, March 13, 2012

Curves and Sexiness

This is a quick note on the plausibility that a decrease in demand for men on the LTCR market might actually increase the price for men on that market. It is a response to Sarang's comment to the previous post.

Let's start with a traditional supply/demand model. Take apples. Farmers grow apples and supply them to the market. Consumers buy apples for food. For our purposes, it doesn't matter how the apples move from orchard to table.

So we have a supply curve and a demand curve. The supply curve ordinarily slopes upward with price (a higher price induces an increase in the quantity of apples supplied). The demand curve slopes downward with price (a higher price induces a decrease in the quantity of apples demanded). One can work this out with varying degrees of rigor, but the basic logic should be easy to grasp. Note that the slopes of the curves depend on a number of factors, and may be different over different time intervals. On any one day, a farmer may simply sell all of his ripe apples, regardless of the price. So on any given day, the supply curve may be flat. However, over a longer time horizon, farmers will enter or exit the market depending on the expected price of apples, and so the curve will be upward sloping. (This can get very complicated, but for our purposes it doesn't matter.)

Now, as Sarang has noted, in very rare circumstances you could have an upward-sloping demand curve. A good with an upward-sloping demand curve is called a Giffen good. I'll just let Wikipedia do the explaining.

An important concept is that the supply curve and the demand curve shift independently. This is not always strictly true - one can imagine exotic circumstances in which that is not the case - but generally one thinks of a shift in one curve as constituting a shift along the other curve, which itself does not shift. This is almost universally the assumption in introductory economic courses, and I think it is the default assumption generally. So you can see why Sarang calls foul when I violate it, or when I try to invoke a Giffen good (the existence of which has never been confirmed, to my knowledge).

The LTCR market is not like the market for apples described above. That's because the LTCR market interacts dynamically with the sex market. A "price change" in the sex market will induce shifts in curves in the LTCR market, but "prices" are likely to change whenever there is a move into or out of the LTCR market. That means that it is not exotic for a shift in one curve to induce a shift in the other - it is, in fact, highly likely.

So I am not just invoking Giffen goods here. I am not just raising rare hypothetical cases. The curves in the LTCR market do not function the way they do in the apple market.


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