Supermarkets disprove law of supply and demand?

[The_Great_Unwashed]

*Originally posted by hansel *
**Lumpy does have this much of a point: a supermarket (any retailer, really) has limited shelf space and a motive for increasing the profit margin on any item it can. Retailers will swap item A for item B on their shelves, if they expect the B will sell as well as A, and B is cheaper for them to buy, thus increasing their margins. Heinz Tomato Paste may be replaced with Hunt’s Tomato Paste since Hunt’s is a little cheaper, and the buyer for the supermarket doesn’t really expect anyone to buy the Heinz but not the Hunt’s.

To that extent, the law of supply and demand doesn’t apply; in other words, it doesn’t apply in this case to specific brands, only to types of products. This doesn’t make a mockery of free markets, only limits its application to more general cases. **

So, you’re saying that because suppliers are often only prepared to supply in “blocks” (in this case the block size being determined by “shelf space”) that this somehow contradicts the laws of supply and demand? How so? Is this any thing different than a grocer’s insistence in supplying only whole numbers of tins of beans (here the block size being one tin)? Just because the supply curve is discrete and not continuous contradicts nothing. Why is it surprising that at a given price a retailer elects to supply no units?

[hansel]

*Originally posted by The Great Unwashed *
**So, you’re saying that because suppliers are often only prepared to supply in “blocks” (in this case the block size being determined by “shelf space”) that this somehow contradicts the laws of supply and demand? How so? Is this any thing different than a grocer’s insistence in supplying only whole numbers of tins of beans (here the block size being one tin)? Just because the supply curve is discrete and not continuous contradicts nothing. Why is it surprising that at a given price a retailer elects to supply no units? **

You’ve misinterpretted me. My point was that the law of supply and demand is not contradicted, only mitigated in the specific instance of brands by a practicality of the retail business. Your example shows the same thing–the law of supply and demand doesn’t go cleanly all the way down to the single bean, only to the tin. The mistake is Lumpy’s, insofar as he assumes that the law of supply and demand should go cleanly all the way down, irrespective of the incidentals involved in retailing.