There can be many relationships drawn between individual demand curves and collective market demand curves, but Professor Oskar Morgenstern says that in some cases the market demand curve is not the lateral summation of the individual demand curves. This is because an individual's demand is so variable based on several different factors and effects: the bandwagon effect, snob effect, veblen effect, speculative demand, and irrational demand.
The bandwagon effect is when people are buying things because they see other people buying them. For example, with Johnny Manziel going to the Cleveland Browns in the NFL draft, people will buy Manziel jerseys just to jump on his bandwagon. The snob effect is when the demand for a consumers' good is decreased because others are also consuming that good. It represents the desire of people to be different. So, given the same Manziel scenario, people would buy someone else's jersey instead of Manziel's because of the snob effect. The veblen effect is when the desire for a good is increased because of the price of that good. A real Manziel jersey would be preferable to a fake Manziel jersey in this case. Speculative demand is when people invest in a commodity because they expect the price to rise. Irrational demand is when people buy things off of sudden urges and its neither planned or calculated.
My question in all of this is, which effect do you think effects consumers' demand the most? Also, which of these curves can be added together in order to produce a market demand curve and which ones aren't able to do that?
An interesting point, I would have to say that no single effect has more impact on consumer demand than others. It would also be difficult to directly measure and compare each effect's effect on the demand curve. However, what I do believe would have a strong effect on the demand curve would be any combination of the mentioned effects. For example, the bandwagon effect working with the veblen effect. In the Johnny Manziel scenario, many people may purchase a Manziel jersey to jump on the bandwagon but they may have also had increased demand for the jersey due to its likely higher price. This would have a stronger effect on the demand curve than either any of the effects working by themselves. What is also going to happen is that the combination of these various effect is going to make finding the market demand extremely difficult, as it is going to be in a constant state of fluctuation.
ReplyDeleteI am leaning toward believing that the bandwagon effect affects consumers' demand the most because I think there are more people that would rather "fit in" than stand out. This can be proven by looking at the many trends, specifically in fashion. A few people start a trend and once it is started so many others jump on the bandwagon and purchase the specific shirt, pants, etc. The driving factor for me believing the bandwagon effect has the most influence is because a lot of people want to have the same things or do the same things as others as a way to be liked by others. In addition to what Kyle stated previously, I think that the bandwagon effect and irrational demand could definitely work together to produce a market demand curve. When there is a trend going on for any specific good, a lot of people will purchase it on the spot regardless of the price because they want it at that moment to fit in with everybody else.
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