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Friday, November 30, 2007

Station wagon anyone?

Whenever I tell someone that my major is economics, they give me this crazy look. Many people assume that it‘s an extensive and complicated subject, which it is. But even when you understand just the basic concepts of economics it’s obvious how prevalent these concepts are in all arenas of society. Economics can be applied to just about everything. While browsing the Internet on Friday I came across an article on the MSNBC website entitled, The American wagon beats a retreat: Crossover growth killed anticipated wagon renaissance.(http://www.msnbc.msn.com/id/21903490/) This article addressed the issues surrounding the desire for Americans to get from under the rock of high gas prices and do their part to help with the environment. Automakers thought that the new and improved station wagon would solve all these problems, but they where wrong. Station wagons have been given a brand new exterior, and even experienced an upgrade under the hood. Yet the American public has not taken to them like they have take to their crossover SUV counter parts. The economics in this is evident. It starts with supply and demand. Carmakers anticipated and extreme demand for the new wagons. The Dodge Magnum for example, when first introduced sold 250,000. Then only sold 120,000 this past year. These dwindling numbers make it clear that the supply out ways the demand, and automakers may end up with a surplus on their hands if they continue production at the current rate. Another aspect of economics that is relevant to this article is choice. People are rational beings who are going to way their options when making such large decisions such as purchasing a car. Popularity of new models are not going to encourage people to go out of their comfort zones to make purchases, because cars are seen as an elastic good consumers are going to stick with what they know.

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