Nobel Prize Worthy Discovery: If You Raise Prices, the Demand Falls

The New York Times reports that young adults are leaving betterĀ suburbs and moving to cities. Why would they do a thing like that? Because on account of the soaring home prices, they can’t afford to start a household of their own in the desirable suburban areas where they grew up, so they move to cities where they can afford to join the gentrification trend, and if necessary, share an apartment with one or two roomies, saving a bundle in the process. For example, Rye, NY, a posh suburban community, “had a 63 percent decrease in 25- to 34-year-old residents and a 16 percent decrease in 35- to 44-year-olds.” Joseph Berger, Suburbs Try to Prevent an Exodus as Young Adults Move to Cities and Stay, N.Y. Times, April 16, 2014.

According to a housing maven quoted by the Times: “The greatest population losses, . . . were in ‘the least diverse communities with the most expensive housing, which happen also to be those that have almost no affordable multifamily housing.” Amazing. Don’t that beat all?

This is an important news story, but it leaves us wondering what took the Times so long to take note of it and why the tone of its coverage in one of discovery of surprising news. We were taught in Econ 101 that if you raise prices, you reduce demand. Yes? Any question about that?

Leave a Reply

Your email address will not be published. Required fields are marked *