As a fashion major, I was wondering how in the world a class like mocroeconomics could relate and have any relevance to what i needed to know for my career path. As class went on, there were several examples that actually could relate to the fashion world. As a standard rule in micro, quantity supplied equals quantity demanded. In ready-to-wear fashion, the goal is to avoid the amout of time a product spends in inventory. Therefore, the amount the producer supplies will be relative to the amount the consumer demands. Because the quantity demanded responds strongly to a change in the price ready-to-wear fashions are elastic. If forever21 decides to jack up their prices, there are still a large variety of substitutes to RTW fashion.
In a couture world where products are custom made, the story is a little different. Couture pieces can be considered a luxury good, however, are inelastic. They don't have a large number of substitutes and quantity demanded doesn't respond strongly to the changes in price. If person can afford a $700 garment in the first place, raising the price to $800 shouldn't change the quantity demanded especially if there are little or no substitutes.
I have a little bit disagreement with the part of luxury part. As mentioned in the textbook, necessities tend to have inelastic demands, whereas luxuries have elastic demands. Take jewelry as an example, when the price of pearls rises, people will switch from pearls to platinum jewelry. Same in the fashion industry, if the price of Dior rises, people will probably buy some more Chanel or GUCCI instead. Of course there is some consumers who are loyal to some brands, but in general, most of the luxuries have elastic demand.
ReplyDelete(Reference:Principles of Microeconomics, Fourth Edition, Chapter 5, N.Gregory Mankiw)