Got Market: Supply and Demand and the Price of Milk
Had an interesting experience which appeared to be an insight into supply and demand at work. We buy 4-5 gallons of organic milk a week to support our latte and smoothie habits. A while back there was a shortage of Organic Valley milk at the distributor level and our "Alternative Foods" healthfood store could not keep a dependable supply. In shopping for options, we found that United Supermarkets' MarketStreet carried 1 gallon bottles for $5 vs Alternative Foods $3 for cardboard 1/2 gallons, so we changed suppliers. Within 6 weeks MarketStreet upped their price to $6.50 a gallon. We grumbled but continued to shop there, thinking perhaps organic milk prices went up. A while later, when back at alternative foods, we noticed their prices were unchanged, and were now .50 a gallon less than MarketStreet. They said they now had a dependable supply so we switched back. Within 3 weeks we noticed that MarketStreet had lowered their prices to $5.50 a gallon.
I think a 5 gallon a week swing in a specialty product like one brand of organic milk was probably a fair market change and I wondered if our moving our business had caused MarketStreet to think demand had changed and change their prices. As I said, this might have been an insight into the invisible hand of the market at work or it might just be early symptoms of megalomania.