Substitution Effect: Thawing Ice Other Ways…

This from The Wall Street Journal:

“Soaring rock-salt prices are prompting communities across the U.S. to try novel alternatives for clearing snow and ice, including molasses, garlic salt and a rum-production byproduct that smells like soy sauce.

Rock-salt prices normally surge in January and February, when communities running low on salt resort to buying the de-icing compound on the open market. But after last year’s fierce winter taxed supplies, state and local government officials ordered tens of thousands of tons more salt ahead of this season. The high demand pushed salt prices to $60 to $120 per ton in many places, from last year’s range of $30 to $50 a ton.

The jump in prices comes as communities are struggling with budgets tightened by shrinking tax revenue, thanks to the recession. The current bout of winter weather, which already has battered cities and states nationwide, threatens to strain budgets even more.”

This is a perfect example of how prices work in an market. This may be simple to some but there will always been substitution when prices are high. Another example is oil and alternative energies. As most people noticed as the price raised so did talk of alternative energy. This is because there was more of an incentive to substitute something cheaper. This is where the entrepreneur comes in.

The rest is here.

~PCCapitalist

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Published in: on January 2, 2009 at 2:46 pm  Leave a Comment  

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