Book contents
- Frontmatter
- Contents
- List of figures
- Introduction
- Acknowledgements
- Part 1 A dream of future wealth
- Part 2 The hidden art of management
- 13 The sweet spot
- 14 Elastic bands
- 15 An offer you can't refuse
- 16 The best of both worlds
- 17 Financial Perestroika on Interstate 95
- 18 Loads of money
- 19 Checkmate
- 20 Acts of God
- 21 Acts of men
- 22 Hubble, bubble, double-entry trouble
- 23 Credit crunch conclusion
- 24 Twenty-first-century accounting
- Appendix 1 Mathematical anchor
- Appendix 2 Getting to grips with cash
- Postscript
- Bibliography
- Index
14 - Elastic bands
from Part 2 - The hidden art of management
Published online by Cambridge University Press: 05 June 2014
- Frontmatter
- Contents
- List of figures
- Introduction
- Acknowledgements
- Part 1 A dream of future wealth
- Part 2 The hidden art of management
- 13 The sweet spot
- 14 Elastic bands
- 15 An offer you can't refuse
- 16 The best of both worlds
- 17 Financial Perestroika on Interstate 95
- 18 Loads of money
- 19 Checkmate
- 20 Acts of God
- 21 Acts of men
- 22 Hubble, bubble, double-entry trouble
- 23 Credit crunch conclusion
- 24 Twenty-first-century accounting
- Appendix 1 Mathematical anchor
- Appendix 2 Getting to grips with cash
- Postscript
- Bibliography
- Index
Summary
I try not to break the rules but merely to test their elasticity.
Bill VeeckIn the previous chapter you used some simulations which were based on a very simple fixed market model. This model was represented by a straight-line graph in which an increase in price always resulted in a proportionate decrease in volume. But in the real world this is very rarely the case.
Consider, for example, the market for unmetered domestic water supply, which continues to apply to many homes in the United Kingdom. In this case the price of water is fixed by calculations that are associated with the size of your property. If you now receive a notice from the water company that your water charges are going to increase, will you use less water? You will almost certainly not: if anything you may be so irritated by the increase that you decide to use more water in order to obtain better apparent value from this involuntary extra expenditure.
Or what about the price of identical oranges on sale in the local market? If they really are identical, and if you have no feelings of loyalty to any particular stand, and if the various prices on display are all immediately apparent, then the effect of one trader increasing price even a little above the market norm is likely to result in a catastrophic drop in demand. Why would you knowingly buy the same oranges at a more expensive price?
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- Information
- Financial Management for BusinessCracking the Hidden Code, pp. 93 - 102Publisher: Cambridge University PressPrint publication year: 2010