Apples and Halibut

The law of supply and demand is a basic principle of economics: if demand exceeds supply, prices go up; if supply exceeds demand, prices go down. There is another basic principle of economics: if prices go up, demand goes down. This is called price elasticity of demand.

It can be confusing. Demand goes up and prices go up. Prices go up and demand goes down. Demand goes down and prices go down. Prices go down and demand goes up. Prices go up…

Round and round we go. Where we stop is called equilibrium.

I bring up the concept of elasticity because my discussion of paper prices elicited some comments that higher paper prices will result in higher print prices, and ultimately less print. This is particularly relevant because three mills have filed an anti-dumping suit charging Indonesia and China with illegal subsides and dumping “certain coated papers” at less than market price. If the suit is successful, we will likely see higher prices and fewer imports. This will save jobs in the mills, but it has been argued that the higher prices will result in less print, and more jobs will be lost in print than saved in the mills.

Elasticity. But how much elasticity is there?

There has been a perception that there is very little elasticity: if paper prices go down, people don’t print more; if paper prices go up, people don’t print less. Pricing may impact market share, but not total market demand. But this isn’t quite true. According to Margie Dana, Founder of Print Buyers International, an increase in the cost of printing eventually leads to less printing.

This suggests that there is elasticity. But how much elasticity is there?

Does print lose to electronic media when the price of print goes up? Or is this driven by other forces? To my knowledge, this has never been studied in depth. However, economist John Maine, Vice President World Graphic Papers for RISI, believes there is little elasticity between print and other media. Ron Davis, chief economist for PIA agrees, but notes that there is significant elasticity between printers.