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Thinking out loud: cheap space flight
Jul. 14th, 2007 02:42 pmThe price elasticity of demand for space flight is fairly low, about 0.6. This means, for example, that if the price drops by a factor of four, the demand only goes up by about 2.4. From the point of view of the guys selling rocket services, cheap rockets might be a disaster since total revenues drop if prices go down.
This is the same kind of problem farmers face: it's possible to produce a lot more food less expensively than a century ago but past a certain point, people don't react to cheaper food prices by buying more of it in proportion to the drop in price. The effect on the farmer is that economic survival requires large enterprises. That is, Archer Daniels Midland becomes a viable model and the small family farm stops being one.
This is the same kind of problem farmers face: it's possible to produce a lot more food less expensively than a century ago but past a certain point, people don't react to cheaper food prices by buying more of it in proportion to the drop in price. The effect on the farmer is that economic survival requires large enterprises. That is, Archer Daniels Midland becomes a viable model and the small family farm stops being one.
